The Competition Bureau (the "Bureau") issued draft Enforcement Guidelines – Price Maintenance (the "Guidelines") for review and public consultation. The goal of the Guidelines is to provide businesses with some clarity as to the Bureau's enforcement approach in this area.
Since 2009, price maintenance has been dealt with under the civil provisions of the Competition Act (previously, it was a per se criminal offence). Accordingly, price maintenance is now only caught under the Competition Act where:
i. a supplier attempts to influence a reseller to charge higher prices or refrain from discounting prices by threat, promise or agreement or refuses to supply or otherwise discriminates against a reseller due to its low pricing policy; AND
ii. the conduct has an adverse effect on competition.
Where a supplier has engaged in price maintenance, either the Commissioner of Competition (the "Commissioner") or a private party can seek an order prohibiting the conduct at issue. There are no monetary penalties or damages available under the civil price maintenance provision.
Since the law was changed, many businesses have implemented minimum price policies, published manufacturer's suggested retail price ("MSRP") lists and initiated minimum advertised price ("MAP") policies. These practices are often used by suppliers as part of their brand management/positioning strategy. The Guidelines acknowledge that price maintenance is generally legitimate business conduct that can have pro-competitive effects (e.g., by facilitating entry, as well as encouraging retailers to stock and aggressively promote competing products).
The Guidelines represent the Bureau's attempt to provide guidance to businesses as to how it will apply the price maintenance provision to the marketplace. Usefully, the Guidelines clearly indicate that the Bureau will take enforcement action only where the conduct is likely to "create, preserve or enhance market power." Typically, to have "market power," a firm must have a share of 50% or more of the relevant market. Practically this means that most businesses can take steps to manage the resale pricing of their products with minimal compliance risk. However, businesses with a significant presence within a market will need to conduct a more fulsome risk assessment before engaging in this type of conduct.
Broadly speaking, the Guidelines, while non-binding, appear to take a reasonable enforcement approach. Usefully, the Guidelines contain some hypothetical scenarios that will likely help businesses better understand how the price maintenance provision applies to their operations. While these hypothetical scenarios may be somewhat simplistic, they do provide an overview of the factors that the Bureau considers in its analysis.
Interested parties are invited to provide comments no later than June 2, 2014, and the final Guidelines will be issued some time after the consultation process.
For a copy of the Bureau press release, please click here.
For a copy of the draft Enforcement Guidelines – Price Maintenance (Section 76 of the Competition Act), please click here.