Optimal enforcement of abuse of dominance: the case for a private cause of action

tags

Competition

Notes

Introduction

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Canada, unlike almost all other developed2 coun- tries—the United States,3 the United Kingdom,4 every member state of the European Union,5 Australia,6 New Zealand,7 Japan,8 South Korea,9 and Taiwan10—has no private right of action for abuse of dominance.

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I. Abuse of Dominance is Under-Enforced

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A) Current Enforcement Mechanisms Are Inadequate

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had the power to apply to the Tribunal for orders stopping companies from engaging in conduct that contravenes the abuse of dominance provisions.12 Despite the Commissioner’s statutory mandate to enforce the Act,13 such proceedings have been few and far between. The Commissioner has only brought 14 applications,14 of which only 7 have been litigated to a decision,15 in almost 40 years.

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Throughout the history of the Act, through times of governmental belt-tightening and times when the spending taps were opened, the flow of cases brought before the Tribunal has remained a slow trickle—only one every 2-3 years.

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perhaps the Bureau’s reluctance to bring cases forward is more a reflection of an institutional bias against the adversarial process and in favour of other, less coercive means

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2022 amendments to the Act which allow private parties to seek leave to apply to the Tribunal for remedies.

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access to section 103.1 is restricted such that the right to seek leave is extended only to competitors of the respondent. Claims cannot be brought by consumers or other parties who might be harmed

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the test for leave under section 103.1, viewed as a whole, is far too onerous.

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few litigants have the necessary resources to pursue such a claim. Establishing abuse of dominance almost invariably requires expert evi- dence

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In civil litigation, a funder or law firm may be enticed to act on contingency. But here, that option is not available because it is impossible to obtain damages and any AMP obtained is paid to the government.

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without the prospect of compensatory damages, a putative appli- cant has little incentive to commence a proceeding.

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litigant will likely face a strong incen- tive to settle with the respondent and, in particular, to do so in a manner that benefits themselves (and the respondent) at the expense of competition more generally.

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seems highly unlikely that the expanded section 103.1 will meaningfully increase enforcement

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B) Misleading Counterargument That No Abuse of Dominance Escapes Enforcement

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in 2019-2020, the Bureau received 467 complaints but only opened 11 inves- tigations.28 While it stands to reason that some—perhaps even most—of the complaints received lack merit, it is more difficult to accept that 97% of the complaints were so wholly without merit that they did not even merit inves- tigation.

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House of Commons Standing Committee on Agri- culture and Agri-Food has raised concerns about conduct that it thought could constitute an abuse of dominance and even went so far as to direct the Bureau to investigate.29 However, no enforcement proceedings were ever brought.

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disparity between the enforcement activities of the Bureau as compared to those of analogous public enforcement agencies in other major jurisdictions,

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In several cases, regulatory agencies in other jurisdictions have obtained judicial findings of misconduct and billion-dollar fines, and yet no analogous investigation was opened in Canada.

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II. Jurisprudential Problems of Under-Enforcement

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37 years of abuse of dominance litigation has yielded almost nothing. In contrast to the rich tapestry that comprises Canadian constitutional law, our competition law is threadbare in the extreme.

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guidance is a poor substitute for Tribunal decisions in actual cases.

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second and more fundamental limitation of the Bureau’s guidance documents: they are not binding. They do not bind the Tribunal. Indeed, they do not even bind the Commissioner.

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the guidance documents do not, in fact, provide meaningful guidance— certainly nothing close to the level of guidance that is provided by decided cases—to economic actors or their legal advisors as to whether any given conduct is lawful or not.

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III. Private Parties Are Best-Placed to Increase Enforcement

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reasons to believe that private enforcers are more likely to achieve the desired result of increasing the level of enforcement and increasing the volume of jurisprudence.

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Bureau’s lack of resources is a strong argument for allowing private parties to fill the gap.

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private parties are frequently better placed to identify abusive conduct,

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“Private enforcers often possess more information than public officials.”

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empirical evidence from both Canada and other jurisdictions suggest that private parties will energetically exercise the

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significant body of jurisprudence that has developed through private claims for damages arising from breach of the price fixing provisions of the Act.

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IV. The Optimal Structure of a Private Cause of Action

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A) Compensatory Damages Are Necessary and Desirable

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private parties must be incentivized to commit significant resources to the litigation.

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remedies available to a success- ful plaintiff must be of sufficient value to offset the cost of the litigation.

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com- pensatory damages are available for conduct that attracts criminal sanction, but not for conduct that is civilly reviewable. We do not see any compelling policy reason to justify this distinction.

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B) Leave Should Not Be Required

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the leave requirement would undermine the goal of increasing enforce- ment.

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C) The Courts Should Have Concurrent Jurisdiction

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the Competition Tribunal has no procedural mechanism by which a class action or representative action could be brought before it.

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the Tribunal cannot hear common law or provincial statutory claims. It is likely that claims for abuse of dominance will be brought con- currently with other claims,

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limiting the voices who can contribute to that dialogue to fewer than half a dozen would seem counter-productive.

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includes economists whose expertise is particularly valuable in abuse of dominance cases.

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Expert economic evidence is almost always required in price-fixing claims under section 36.

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judges in both the superior courts and the Federal Court are routinely called upon to consider complex expert evidence from a wide range of disciplines, including economics.

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Conclusion

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