Pricing Practices: Predatory Pricing, Price Maintenance, and Price Discrimination

AuthorJohn S. Tyhurst
C H A P T E R 9
Predatory pr icing is rare and ve ry dicult to ident ify in pract ice
because low price s are what competition is al l about.
House of Commons, Stand ing Committee on Indust ry,
Interim Report o n the Competition Act
(Ottawa: House of Commons, 2000), ch 3
By 2009, the criminal laws against predatory pricing, price discr imina-
tion, and price maintena nce had not been enforced for some time. These
practices were regarded by many economist s as often benign or even
benef‌icial. The Competition Bureau had issued en forcement guidelines
for price discrimi nation and predatory pricing wh ich reduced their
scope.1 Criminal law enforcement was recognized a s an ineective
method for addressing such conduct and had created concern s about
1 Canada, Comp etition Bureau, Price Discrimin ation Enforcement Guidelines
(Ottawa: Consumer a nd Corporate Aairs Can ada, 1992); Canada, Comp etition
Bureau, Predator y Pricing Enforcement Guidelines (Ottawa: Consu mer and Cor-
porate Aair s Canada, 1992) [Predatory Pricing Enforcement Guidelines 1 992].
the risk of a “chill” over pro-competitive pricing.2 To make matters
worse, the law carried with it the potential for statutory civ il damage
actions,3 making an often costly and time-consuming legal ri sk assess-
ment necessary for some competitive busines s conduct.
That year, the criminal prov isions were repealed. The law again st
price maintenance wa s retained, but revised as a civilly rev iewable
practice. Predatory prici ng and price discr imination were left to be
addressed under the abuse of domin ance provision. All of these prac-
tices are now subject to civil enforcement before the Competition Tri-
bunal. These changes ref‌lect the increased focus in the legislation on
the protection of competition and eciency as the prim ary goals of
Canad ian competition l aw.
The treatment of these practices i n this separate chapter has more to
do with their common historical evolution than their economic charac-
ter. Under the current law, predatory pricing and price discr imination
are practices which may fal l within abuse of domin ance and the frame-
work set out in Chapter 7. Resale price mai ntenance, now dealt with
separately as a civil ly reviewable practice, shares many characterist ics
with the vertica l restraints discusse d in Chapter 8. Given the foregoing,
what follows draws on the discus sion in earlier chapters and focuses on
the distinct or unique elements of th is conduct.
1) Price Discrimination and Predatory Pricing
a) Or ig in s
As noted in Chapter 3,4 the crimina l price discrimination and preda-
tory pricing provisions were both part of a legislative react ion to the
eects of the Great Depression of the early 1930s. In 1934, Parliament
appointed a Special Committee of members of t he House “to inquire
into and investigate the cause s of the large spread between the prices
received for commodities by the producer thereof, and the price paid by
2 See, e.g., Canadia n Bar Association, Compet ition Law Section, “Submis sion
to the Competition Polic y Review Panel” (Januar y 2008): “It is harmful to the
competitivenes s of the Canadian economy to cont inue to have criminal prov i-
sions prohibitin g such conduct.” See also Lawson A Hunter & Susa n M Hutton,
“Is the Price R ight?: Comments on the Predatory Pricing Enforceme nt Guidelines
and Price Discr imination Enforcement Guidelines of the Bure au of Competition
Policy” (1993) 38 McGill Law Journal 830 at 847 [Hunter & Hutton].
3 Section 36 of the Competition Act, RSC 1985, c C-34 [Competition Act or Act].
4 See Chapter 3, Sect ion C(3)(a).
Pricing P ractices 451
the consumers therefor.”5 Its mandate was also to examine “the eect
of mass buying by department and chain store organi zations upon the
regular retail t rade of the country, as well as upon the business of manu-
facturers and producers,”6 ref‌lecting concerns with the plight of small
businesses. The Committee wa s unable to complete its work by the
deadline, and its mandate was rolled into that of a Royal Commi ssion
on Price Spreads. The Commissioners were member s of Parliament, and
thus their recommendations ref‌lected a political and populist focus.
The Report of the Royal Commission on Price Spreads was rele ased in
1935. It recommended that a Federal Trade and Industry Commission
be appointed with the power to prohibit certai n “unfair competitive
practices,” including “discriminator y discounts, rebates and allowances,
territorial pr ice discrimination and predator y price-cutting.7 While the
Report recogni zed that many of its concerns with indiv idual businesses’
competitive survival were t he product of the forces at play during the
Great Depression, the authors held fast to the need for remedies for
the fut ure.8 The House of Commons debate on the draft legislation
f‌lowing from these recommendations has been described as showing
“confusion . . . as to what were its objectives.” 9 Some legislator s viewed
the legislation as promoting competition, others as a way of protecting
both labour and small business interest s.10 The provisions themselves,
enacted as section 498A of the Criminal Code, ref‌lected these dier ing
objectives, creati ng, inter alia, criminal prohibitions (a) against dis-
criminating between competitors of a purchaser, and (b) against low
5 Figu re 9.1, Canada, Repor t of the Royal Commission on Price Spreads (Ottawa:
King’s Pri nter, 1935) at xxvi.
6 Ibid.
7 Ibid at xxiv–xxv.
8 Ibid at 8:
It is not enough to say, as many contend, t hat these problems are the r esult
of depression and w ill vanish with the de pression. It may be true th at when
recovery is ach ieved, competition will become le ss predatory, discrim ination
less general, a nd exploitation less obvious. But it i s equally true that, wh ile
unfair compet ition and unequal bargai ning are intensif‌ied by depre ssion,
they will not b e absent in prosperity, especi ally in a prosperity ch aracterized
by the increa sing substitution of imperfe ct for free competition.
9 See Pau l Gorecki & William T Sta nbury, The Objectives of Canadian Competitio n
Policy 1888-1983 (Montreal: IRPP, 1984) at 123–26.
10 Ibid. See al so Bruce Dunlop, “Price Dis crimination, Pred atory Pricing and Sys-
tematic Deliver ed Pricing,” ch 17 in J Robert S Pritchard , William T Stanbur y &
Thomas A Wilson , eds, Canadian Competition L aw, Essays in Law and Economics
(Toronto: Butterworths, 1979) at 406–7 [Dunlop].

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