Commissioner of Competition v. Canada Pipe Co., 2006 FCA 233

JudgeDesjardins, Létourneau and Pelletier, JJ.A.
CourtFederal Court of Appeal (Canada)
Case DateJune 23, 2006
JurisdictionCanada (Federal)
Citations2006 FCA 233;(2006), 350 N.R. 291 (FCA)

Competition Commr. v. Can. Pipe Co. (2006), 350 N.R. 291 (FCA)

MLB headnote and full text

Temp. Cite: [2006] N.R. TBEd. JL.023

Commissioner of Competition (appellant) v. Canada Pipe Company Ltd./Tuyauteries Canada ltée (respondent)

(A-106-05; 2006 FCA 233)

Indexed As: Commissioner of Competition v. Canada Pipe Co.

Federal Court of Appeal

Desjardins, Létourneau and Pelletier, JJ.A.

June 23, 2006.

Summary:

The Competition Commissioner sought an or­der against Canada Pipe Company Ltd. (Can­ada Pipe), a supplier of cast iron drain, waste and vent products, under ss. 77 (exclu­sive dealing) and 79 (abuse of dominant posi­tion) of the Competition Act to prohibit Canada Pipe from engaging in a marketing strategy known as the Stocking Distribution Program.

The Competition Tribunal dismissed the ap­plication. The Commissioner appealed.

The Federal Court of Appeal allowed the ap­peal, referring the matter back to the Tri­bunal for redetermination in accordance with the Court of Appeal's reasons.

Trade Regulation - Topic 503

Competition - General - Interpretation of Competition Act - The Competition Tribu­nal dismissed the Competition Commis­sion­er's application for an order prohibit­ing Canada Pipe Company Ltd. from en­gag­ing in a marketing strategy which the Commissioner alleged was an abuse of the company's dominant position - On the Com­missioner's appeal, the Federal Court of Appeal considered the correct interpreta­tion of s. 79(1)(c) of the Competition Act (abuse of dominant position) - The analysis required by s. 79(1)(c) was equivalent to a "but for" test - The Tribunal had to com­pare the level of competitiveness in the presence of the impugned practice with that which would exist in the absence of the practice and then determine whether the preventing or lessening of competition, if any, was "substantial" - The comparison had to be done with reference to actual ef­fects in the past and present, as well as likely future effects - As the "but for" test described an approach that corresponded to the requirements mandated by s. 79(1)(c), it was one that the Tribunal had to con­sid­er in all cases, although it was not neces­sarily the only correct approach - See para­graphs 35 to 44.

Trade Regulation - Topic 503

Competition - General - Interpretation of Competition Act - The Competition Tribu­nal dismissed the Competition Commis­sion­er's application for an order prohibit­ing Canada Pipe Company Ltd. from en­gag­ing in a marketing strategy which the Commissioner alleged was an abuse of the company's dominant position - On the Com­missioner's appeal, the Federal Court of Appeal considered the correct interpreta­tion of "anti-competitive act" in s. 79(1)(b) of the Competition Act (abuse of dominant position) - An anti-competitive act was one that had an intended negative effect on a com­petitor that was predatory, exclusionary or disciplinary - Proof of the intended nature of the negative effect could be es­tablished directly through evidence of sub­jective intent or indirectly by reference to the reasonably foreseeable consequences of the acts - In appropriate circumstances, proof of a valid business justification could overcome the deemed intention by showing that anti-competitive effects were not the overriding purpose - To be relevant, a busi­ness justification had to be a credible efficiency or pro-competitive rationale which related to and counterbalanced the anti-competitive effects and/or subjective intent - See paragraphs 63 to 73.

Trade Regulation - Topic 503

Competition - General - Interpretation of Competition Act - The Competition Tri­bu­nal dismissed the Competition Commis­sion­er's application for an order prohibit­ing Canada Pipe Company Ltd. from en­gag­ing in a marketing strategy which the Commissioner alleged was exclusive deal­ing (s. 77(2)) and an abuse of the com­pany's dominant position (s. 79(1)) - On the Commissioner's appeal, the Federal Court of Appeal discussed the relationship be­tween ss. 77(2) and 79(1) - A parallel structure and logic was readily apparent - Both provisions required an initial deter­mination that the company occupied a domi­nant position - Both called for the iden­tification of a particular type of con­duct, either exclusive dealing with an ex­clusionary effect (s. 77(2)) or anti-com­petitive acts (s. 79(1)) - Both provisions required a finding of actual or likely sub­stantial lessening of competition - While the tests would not necessarily produce iden­tical results in all cases, an overlapping analysis was to be expected - However, un­like s. 79(1), s. 77(2) set out three dis­tinct elements, each of which had to be es­tablished before an order prohibiting exclu­sive dealing could issue - See para­graphs 20 to 22 and 99.

Trade Regulation - Topic 724

Competition - Unfair competition - Restric­tive trade practices - Abuse of dominant po­sition - Canada Pipe Company Ltd. (Can­ada Pipe) sold cast iron drain, waste and vent products - The Competition Com­missioner sought an order prohibiting Can­ada Pipe from engaging in a marketing stra­tegy known as the Stocking Distributor Program (SDP), a loyalty rebate program that the Commissioner alleged was an abuse of Canada Pipe's dominant market position - The Competition Tribunal dis­missed the application, finding, inter alia, that while Canada Pipe had market power, the SDP had not substantially lessened or prevented competition as required by s. 79(1)(c) of the Competition Act - The Com­missioner appealed - The Federal Court of Appeal allowed the appeal - The Tribunal erred in failing to consider whether, without the SDP, the relevant product market would have been substan­tially more competitive - The Tribunal's identification of evidence of competition subsisting in the presence of the SDP was insufficient - Proper examination of the question might include whether (i) entry or expansion might be substantially faster, more frequent or more significant without the SDP; (ii) switching between products and suppliers might be more frequent; (iii) prices might be lower and (iv) product qual­ity might be greater - See paragraphs 45 to 58.

Trade Regulation - Topic 724

Competition - Unfair competition - Restric­tive trade practices - Abuse of dominant position - Canada Pipe Company Ltd. (Can­ada Pipe) sold cast iron drain, waste and vent products - The Competition Com­missioner sought an order prohibiting Can­ada Pipe from engaging in a marketing stra­tegy known as the Stocking Distributor Program (SDP), a loyalty rebate program that the Commissioner alleged was an abuse of Canada Pipe's dominant market position - The Competition Tribunal dis­missed the application, finding, inter alia, that while Canada Pipe had market power, the SDP was not an anti-competitive act because it had not prevented entry or com­petition in certain regions - The Com­mis­sioner appealed - The Federal Court of Ap­peal allowed the appeal - Rather than ask­ing whether the SDP's purpose was an in­tend­ed negative effect on competitors, as required by s. 79(1)(b) of the Competition Act, the Tribunal had examined whether there was evidence of a decrease in com­pe­tition - This approach implied that unless an impugned act prevented entry of com­peti­tors or competition or unless it was the predominant cause of uncompetitive mar­ket attributes, the act could not be con­sidered anti-competitive - This was an un­warrantedly and incorrectly narrow test - See paragraphs 74 to 83.

Trade Regulation - Topic 724

Competition - Unfair competition - Restric­tive trade practices - Abuse of dominant position - Canada Pipe Company Ltd. (Can­ada Pipe) sold cast iron drain, waste and vent products - The Competition Com­missioner sought an order prohibiting Can­ada Pipe from engaging in a marketing stra­tegy known as the Stocking Distributor Program (SDP), a loyalty rebate program that the Commissioner alleged was an abuse of Canada Pipe's dominant market posi­tion - Before the Competition Tribunal, Canada Pipe suggested two business jus­ti­fi­ca­tions for the SDP: (i) its uniform rebate structure encouraged competition by creat­ing a level playing field and (ii) it made possible high-volume sales necessary to main­tain a full product line - In dismiss­ing the Commissioner's application, the Tribu­nal accepted the second justification - The Commissioner appealed, submitting, inter alia, that the second business jus­tification was actually a self-interest argu­ment - The Federal Court of Appeal al­lowed the ap­peal - Improved consumer welfare on its own was insufficient to establish a business justification under s. 79(1)(b) of the Com­petition Act - There had to be a credible efficiency or pro-competitive explanation attributable to the company - Without such an explanation, self-interest remained the only justification for the SDP - See para­graphs 84 to 91.

Trade Regulation - Topic 727

Competition - Unfair competition - Restric­tive trade practices - Exclusive dealing - Canada Pipe Company Ltd. (Canada Pipe) sold cast iron drain, waste and vent pro­ducts - The Competition Commissioner sought an order prohibiting Canada Pipe from engaging in a marketing strategy known as the Stocking Distributor Program (SDP), a loyalty rebate program that the Commissioner alleged constituted exclusive dealing - The Competition Tribunal dis­missed the application, finding, inter alia, that while the SDP was a practice of ex­clu­sive dealing according to s. 77(1)(b) of the Competition Act, an exclusionary effect had not been established - The Commis­sion­er appealed - The Federal Court of Ap­peal allowed the appeal - The Tribu­nal's analysis of the evidence of barriers to entry and the SDP's effect was conducted from the narrow perspective of whether the SDP had actually prevented entry or had an anti-competitive effect and not the broader per­spective required by s. 77(2) of whether the SDP was likely to impede entry or ex­pansion or have any other ex­clusionary ef­fect - This unduly narrow perspective con­stituted reversible error - See para­graphs 96 to 99.

Words and Phrases

Anti-competitive - The Federal Court of Appeal discussed the definition of the phrase "anti-competitive" as found in s. 79(1)(b) of the Competition Act, R.S.C. 1985, c. C-34 - See paragraphs 63 to 73.

Cases Noticed:

R. v. Proulx (J.K.D.), [2000] 1 S.C.R. 61; 249 N.R. 201; 142 Man.R.(2d) 161; 212 W.A.C. 161, refd to. [para. 26].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 26].

Director of Investigation and Research v. Nutra Sweet Co. (1990), 32 C.P.R.(3d) 1 (Comp. Trib.), appld. [para. 27].

Gravel and Lake Services Ltd. v. Bay Ocean Management Inc. et al. (2002), 298 N.R. 369; 2002 FCA 465, refd to. [para. 31].

SMX Shopping Centre Ltd. v. Minister of National Revenue (2003), 314 N.R. 365; 2003 FCA 479, refd to. [para. 31].

Naguib v. Minister of National Revenue (2004), 317 N.R. 88; 2004 FCA 40, refd to. [para. 31].

Ship Tordenskjold v. Ship Euphemia (1908), 41 S.C.R. 154, refd to. [para. 33].

R. v. Perka, Nelson, Hines and Johnson, [1984] 2 S.C.R. 232; 55 N.R. 1, refd to. [para. 33].

R. v. Keegstra (J.), [1995] 2 S.C.R. 381; 180 N.R. 120; 169 A.R. 50; 97 W.A.C. 50, refd to. [para. 33].

Bell ExpressVu Limited Partnership v. Rex et al., [2002] 2 S.C.R. 559; 287 N.R. 248; 166 B.C.A.C. 1; 271 W.A.C. 1, refd to. [para. 33].

Director of Investigation and Research, Competition Act v. Southam Inc. et al. (No. 1), [1997] 1 S.C.R. 748; 209 N.R. 20, refd to. [para. 34].

Commissioner of Competition v. Superior Propane Inc. et al., [2001] 3 F.C. 185; 269 N.R. 109 (F.C.A.), folld. [para. 34].

Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039 (8th Cir. 2000), refd to. [para. 40].

Canada (Director of Investigation and Research) v. Laidlaw Waste Systems Ltd. (1992), 40 C.P.R.(3d) 289 (Comp. Trib.), agreed with [para. 42].

Canada (Director of Investigation and Research) v. D&B Companies of Canada Ltd. (1995), 64 C.P.R.(3d) 216 (Comp. Trib.), refd to. [para. 42].

Canada (Director of Investigation and Research) v. Tele-Direct (Publications) Inc. (1997), 73 C.P.R.(3d) 1 (Comp. Trib.), refd to. [para. 63].

Statutes Noticed:

Competition Act, R.S.C. 1985, c. C-34, sect. 77(1) [para. 19]; sect. 77(2) [para. 20]; sect. 78(1) [para. 18]; sect. 79(1) [para. 16]; sect. 79(4) [para. 17].

Authors and Works Noticed:

Canada, Minutes of Proceedings and Evi­dence of the Legislative Committee on Bill C-91, 1st sess., 33rd Parliament (1986), pp. 2:8-9, 3:7-9, 3-17, 4:55-56, 5:13, 5:15, 5:63-64, 6:9-10, 6:57-58, 7:55-57, 7:60-63, 9:20-21, 11:3, 11:32-33 [para. 70].

Competition Bureau, Enforcement Guide­lines on the Abuse of Dominance Provis­ions (2001), generally [para. 33]; pp. 5, 19 [para. 39].

Counsel:

Randall Hofley and Leslie Milton, for the appellant;

Kent Thomson, James Doris and Charles Tingley, for the respondent.

Solicitors of Record:

Johnston & Buchan LLP, Ottawa, Ontario, and John H. Sims, Q.C., Deputy Attor­ney General of Canada, Gatineau, Que­bec, for the appellant;

Davies Ward Phillips & Vineberg LLP, Toronto, Ontario, for the respondent.

This appeal was heard on February 7 and 8, 2006, at Ottawa, Ontario, by Desjardins, Létourneau and Pelletier, JJ.A., of the Fed­eral Court of Appeal. Desjardins, J.A., deliv­ered the following judgment for the Court on June 23, 2006.

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    • Canada (Federal) Supreme Court (Canada)
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    ...4 F.C. 598 ; 288 N.R. 113 ; 2002 FCA 121 , refd to. [para. 36]. Commissioner of Competition v. Canada Pipe Co., [2007] 2 F.C.R. 3 ; 350 N.R. 291; 2006 FCA 233 , refd to. [paras. 36, Commissioner of Competition v. Labatt Brewing Co. et al. (2008), 372 N.R. 305 ; 64 C.P.R.(4th) 181 ; 2......
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    • Irwin Books Canadian Competition Law and Policy
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    ...33 CPR (3d) 83 (CCT) at para 92. 197 Ducci & Trebilcock, above note 156 at 96. 198 Canada (Commissioner of Competition) v Canada Pipe , 2006 FCA 233 at para 284 [emphasis added]. 199 See Chapter 7, Section C(b)(ii)(b). Canadian Competition Law Objectives and Foundational Economic Concepts 1......
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  • Tervita Corp. et al. v. Commissioner of Competition et al., (2015) 467 N.R. 97 (SCC)
    • Canada
    • Canada (Federal) Supreme Court (Canada)
    • March 27, 2014
    ...4 F.C. 598 ; 288 N.R. 113 ; 2002 FCA 121 , refd to. [para. 36]. Commissioner of Competition v. Canada Pipe Co., [2007] 2 F.C.R. 3 ; 350 N.R. 291; 2006 FCA 233 , refd to. [paras. 36, Commissioner of Competition v. Labatt Brewing Co. et al. (2008), 372 N.R. 305 ; 64 C.P.R.(4th) 181 ; 2......
  • Tervita Corporation c. Canada (Commissaire de la concurrence),
    • Canada
    • Court of Appeal (Canada)
    • February 11, 2013
    ...v. Canada (Commissioner of Competition), 2002 FCA 121 , [2002] 4 F.C. 598 ; Canada (Commissioner of Competition) v. Canada Pipe Co., 2006 FCA 233, [2007] 2 F.C.R. 3 ; Canada (Commissioner of Competition) v. Labatt Brewing Co. Ltd., 2008 FCA 22; Nadeau Poultry Farm Ltd. v. Groupe Westco I......
  • Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2018 ABQB 482
    • Canada
    • Court of Queen's Bench of Alberta (Canada)
    • June 20, 2018
    ...and will offset the anti-competitive effects resulting from the merger”: Canada (Commissioner of Competition) v Canada Pipe Company Ltd, 2006 FCA 233 at para 38; Tervita at paras 48, 2. Application to the Joint Venture Restrictions Pre-March 2010 [1361] Dow submits that the acts of agreeing......
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    • Irwin Books Canadian Competition Law and Policy
    • June 23, 2021
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