Refusals to Deal A Canadian Perspective

Transcription

1 Refusals to Deal A Canadian Perspective ICN Unilateral Conduct Workshop November 13, 2015 Adam Fanaki

2 Agenda Canadian Experience With Refusals to Deal Enforcement History How Would the Canadian Competition Act Address the Complaint Against GloboMine Canadian Approach to IP Issues in Refusal to Deal Cases Looking Forward 2

3 Introduction Canada is among a small group of jurisdictions that have a specific statutory provision covering refusals to deal; Indeed, a refusal to deal provision has been part of the Canadian Competition Act for almost 40 years (since 1976); The provision was prompted by complaints from both new entrants to a market that could not obtain supplies of a product and established market participants whose supply had been disrupted; Refusals to deal may also be addressed in certain circumstances under the general provision for abuse of dominance; Refusal to deal cases are brought before the Canadian Competition Tribunal, an independent adjudicative body; Since 1976, the Tribunal has considered a wide variety of refusal to deal cases covering various products, ranging from Harley- Davidson motorcycles to La-Z-Boy furniture; 3

4 Introduction To obtain a remedy for a refusal to deal, the applicant has to prove five elements: The customer or proposed customer is substantially affected as a result of the refusal (significant and serious financial harm); The customer is willing and able to meet the usual trade terms for the supply of the product; The product refused is in ample supply; The customer cannot obtain adequate quantities of the product because of insufficient competition among suppliers; and The refusal to deal is having or is likely to have an adverse effect on competition; 4

5 Levels of Enforcement Enforcement history should be divided into two different periods: the first 25 years (1976 to 2001) and the last 14 years (2002 to 2015); 5

6 Private Applications for Leave In 2002, the Canadian refusal to deal provision was amended to allow private applicants (customers or potential customers) to bring refusal to deal cases; To avoid unmeritorious or strategic cases, private parties must obtain leave from the Competition Tribunal before proceeding with a private application for refusal to deal; Since the amendment in 2002, the Competition Bureau has not brought a case for refusal to deal and has left enforcement almost exclusively in the hands of private parties; This has led to some unusual cases, such as a reporter who wanted access to Canadian Parliament and a chicken processor who was refused a supply of live chickens; 6

7 Discussion of Globomine Hypothetical But, private refusal to deal cases are difficult to prove: 22 Private Applications for Leave Since 2002 Leave Granted In 7 Cases No Remedies Issued 7

8 Discussion of GloboMine Hypothetical Overall, unlikely that the Canadian Competition Bureau would prioritize this complaint given the ability of the complainants to bring the matter before the Competition Tribunal through a private application; Significant challenges exist with respect to the application of the refusal to deal provision to intellectual property rights, such as those sought by FourthEstate Inc.; Competition Tribunal has recognized that allowing competitors or other third parties to access innovative products through a compulsory license runs counter to the exclusive and proprietary nature of IP rights; Recognizing these issues, numerous jurisdictions have found that even a dominant firm s refusal to license intellectual property rights will only warrant a remedy in exceptional circumstances; 8

9 Discussion of Globomine Hypothetical Similar issues arise with respect to refusals to supply technical information or to take steps to ensure interoperability with rivals; Although not yet addressed in Canada, this issue has received attention in both the United States and the European Community; For example, in Intergraph Corp. v. Intel Corp., a U.S. court rejected a claim by a manufacturer of workstations seeking to require Intel to continue to provide it with technical information that the manufacturer claimed was necessary to be able to compete; Contrast that result with the decision of the European Commission in Microsoft (Case COMP/C-3/37.792) finding that Microsoft was required to provide interoperability information to allow competitors to compete in downstream markets; 9

10 Canadian Approach to IP Issues in Refusal to Deal Cases In Canada, the issue of refusals to license intellectual property rights was addressed in a 1997 case against Warner Music Canada; The case concerned whether Warner Music Canada should be required to license its master music recordings to a record club (BMG Direct) that wanted to sell records based on these recordings; Warner Music Canada s recordings were subject to a valid and existing copyright; Although it was accepted that BMG Direct was substantially affected by the refusal to license, the Competition Tribunal struck out the claim on the basis that the refusal to deal provisions could not be used to grant a compulsory license to intellectual property rights; 10

11 My Great Grandfather Notes: IP rights are exclusive by their very nature and there cannot be usual trade terms when licences may be withheld there cannot be an ample supply of legal rights over intellectual property it would be wrong to conclude that the Tribunal has been given the power to ignore intellectual property rights and order the respondents to grant what are, in effect, compulsory licences 11

12 Looking Forward Unilateral refusal to deal cases will continue to raise significant policy challenges for competition agencies: Consumers may be better off (at least in the short term) when rivals are able to access the inputs they require to produce or improve products on reasonable terms; BUT, forcing firms to deal with rivals diminishes incentives to spend the necessary time and resources required to innovate in the first place; Expect more cases when the product at issue is an intellectual property right or information: Firms require access to greater amounts of IP and information to ensure interoperability within the digital economy; These issues are exacerbated by the non-rivalrous nature of IP and information (the use by one firm does not reduce the amount available to others); In fact, many types of IP and information become more valuable as more people rely on these rights; 12

13 Questions