A new recourse against abuse of dominance

It isn't easy to thrive when the mighty are trying to crush you. It's why we design laws to maintain market competition and regulate predatory business practices, in some areas more successfully than others. In Canada, our competition authorities rarely prosecute abuse of dominance cases — what's known under U.S. law as monopolization, which involves activities that substantially reduce competition in a market. So what are firms to do when their more dominant brethren harm them illegally? 

Don't bet on taking legal action — not in Canada, at least. The only hope is to file a complaint with the under-resourced Competition Bureau, which will decide whether to litigate the case before the Competition Tribunal. 

Good luck on getting that game to launch. Since 1986, only 14 abuse of dominance proceedings have made it that far.

"Ultimately, when the Bureau makes a decision that it is not going to proceed with an abuse of dominance matter under the current regime, that's the end of the story," David Vaillancourt, a partner at Affleck Green McMurtry LLP, said during a CBA panel discussion on expanding private rights of action for reviewable practices. "The harmed competitor has no practical recourse."

That could change soon. Proposed amendments to the Competition Act introduced in April contemplate much higher penalties for anti-competitive conduct – possibly up to 3% of worldwide gross turnover – and, significantly, a private right of action to enforce abuse of dominance provisions, something the Bureau has been advocating for.

Vaillancourt and his co-panellist Ben Hackett of Goodmans LLP also support private enforcement. "I think there's something to the concept of a party that has been wronged through anti-competitive conduct, having the option of controlling its own destiny and controlling its own prosecution of that anti-competitive conduct against a dominant firm," said Hackett.

Niki Iatrou, a partner at McCarthy Tétrault LLP, is less confident it will help, though he acknowledges that the Bureau's record in bringing forward abuse of dominance cases is "underwhelming."

"I don't know how a private party who has fewer investigative resources […] than Her Majesty or the Competition Bureau is going to have any better luck in advancing these sorts of cases," he said. "They might be more motivated."

But then what harm is there in expanding a private right to access the Tribunal, asked Vaillancourt. If anything, more frequent hearings before the Tribunal — or for that matter, other civil courts — would foster more "meaningful development in the case law," he said. "We can have more robust jurisprudence around this area."

Another concern raised by the session's moderator, Gajan Sathananthan of Blakes LLP, was whether private action could open the floodgates to frivolous claims.

"I don't expect a proliferation of abuse of dominance cases by private litigants in Canada," Vaillancourt answered. "The cost of litigating an abuse of dominance matter through to trial would be quite expensive."

What's more, parties must seek leave or authorization from the Tribunal to sue for other reviewable matters, such as preventing a customer from selling a product below a minimum price or refusing to supply a product to a buyer. In those cases, parties must show that their business is "directly and substantially affected" by the offending conduct, which serves as a filter against unmeritorious claims. The same would apply to abuse of dominance cases.

"I don't see the upside in there being leave," says Hackett, who says that the goal should be to expand rights and access to justice with fewer barriers for those with fewer means, rather than fret over "misusing tribunal resources." 

Iatrou rejects that premise. "What we're trying to do under the Competition Act is protect competition," he said. "We're not trying to protect competitors. We're not trying to expand the possibility of having case law for the sake of having case law."

He argued that the leave function remains vital as it gives the Tribunal "a quick peek at the case to make sure this isn't just a basic commercial dispute that should proceed in the commercial courts by some aggrieved competitor."

Under the proposed amendments, private parties cannot sue for damages. However, they can request that the Tribunal order monetary penalties against the offending party, which would end up in the government's purse. "It's not like there's a right of recovery at the end of the tunnel, like there might be in a civil claim," Hackett said. "It's only to remedy the conduct issue or whatever other orders may ensue."

Hackett favours instead a civil right of action that involves "some sort of smell test," but not one as stringent as applying for leave which makes it too onerous for a struggling firm to move its case forward.

If everyone agrees that cases will be so expensive to litigate, why isn't there the possibility for private parties to recover damages? Particularly when the aggrieved party is facing financial ruin and unable to raise the necessary funds to prosecute its case against a deeper-pocketed competitor. "Litigation funding is probably going to be a necessary reality in order to have any kind of serious activity in this area," said Vaillancourt. "And you're not going to see litigation funders be interested in just bankrolling something where the remedy is a behavioural solution, which is going to help the competitor long term. It's just not going to happen."

But litigation being what it is, incentivizing monetary reward tends to move matters quickly towards settlement mode, said Iatrou — even where administrative monetary penalties are the only financial ones available under the Act, said Iatrou. Noting the massive increases contemplated under the proposed amendments, he predicts we'll see a lot more "horse-trading going on for the discontinuance of the case on behalf of this aggrieved party."

"As part of that settlement agreement, perhaps the alleged wrongdoer will pay some form of monetary penalty, but perhaps that alleged wrongdoer will also be sending some money over to the complainant in order to get rid of the case," he said. "The setup is already there for damages to be awarded."

Perhaps more thought is needed about how to motivate parties to bring these abuse of dominance cases forward. Part of the answer may lie in figuring out what the Bureau's role should be moving forward. Vaillancourt said he hopes it will remain active to run investigations and gather documents, especially when private litigants are unable to do so. "There are going to be some cases that are more well suited for the Bureau and the Commissioner [of Competition] to advance and others that private litigant will decide, 'You know what, I want to take a run at this myself.'"