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Court offers guidance on abuse of dominance

|Written By Julius Melnitzer

Historically, Canadian courts have taken the position that abuse of dominance wasn’t an unlawful act that could form the basis of a common law tort claim.

Anita Banicevic believes the business community will welcome the Novus decision.

But in March 2009, Parliament amended the Competition Act by allowing the Competition Tribunal to impose administrative monetary penalties of up to $15 million for abuse-of-dominance violations.

Previously, the tribunal only had the power to issue injunctions to prohibit the continuation of the conduct and make orders to restore competition in the future.

“The amendments stirred up arguments that the large fines now associated for past instances of abuse of dominance made such behaviour unlawful when it occurred and not just going forward,” says Anita Banicevic of Davies Ward Phillips & Vineberg LLP.

“It caused some concern in the business community for whom it is important to know what the consequences are, whether it’s the imposition of [the administrative penalties] or civil liability or both.”

On July 22, Justice Bruce Greyell of the Supreme Court of British Columbia dealt with the issue in Novus Entertainment Inc. v. Shaw Cablesystems Ltd.

“Novus Entertainment v. Shaw is the first case to consider the nature of the amendment and whether it can form the basis of a civil claim,” Banicevic says.

The case arose from an advertising campaign Shaw conducted in 2009. Novus claimed the promotional pricing offered by Shaw was below cost and amounted to anti-competitive behaviour. It followed up with a claim founded on the tort of unlawful interference with business and economic interests.

“Novus argued that the amendments to the act permitting [penalties] for past conduct constituting an abuse of dominance meant that Parliament had changed the fundamental nature of such conduct so that it became unlawful when it occurred,” Banicevic says.

But the court rejected Novus’ argument.

“In my view, the amendments to the act do not change the rationale underlying the [precedents],” Greyell wrote.

“While the amendments have the effect of allowing the tribunal to consider a respondent’s prior conduct in the determination of any monetary penalty it might impose under the act, the tribunal must first make an order under s. 79(1) that a respondent has engaged or is engaging in anti-competitive acts.”

In other words, the lawfulness or unlawfulness of a defendant’s conduct was subject to a finding by the tribunal.

“Greyell also pointed out that the tribunal could impose an [administrative penalty] only if it also issues a remedial order but that it has a discretion not to issue such an order even where the conduct amounts to abuse of dominance,” Banicevic notes.

Accordingly, the court struck the portion of Novus’ pleadings based on the abuse-of-dominance claim.

Banicevic believes the business community will welcome the decision.

“In many cases, particularly where allegations of low pricing are raised, it can be difficult to distinguish acceptable vigorous competition from conduct that is abusive,” she says.

“A reduced prospect of civil actions will help provide Canadian businesses with greater confidence to compete vigorously in their markets.”

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