4. Business Legislation in Canada
The Competition Act (https://laws.justice.gc.ca/eng/acts/C-34/index.html)provides for the general regulation of trade and commerce in respect of conspiracies, trade practices and mergers affecting competition. The purpose of the Act is to maintain and encourage competition in Canada. It promotes the efficiency and adaptability of the Canadian economy, in order to expand opportunities in world markets while at the same time recognizing the role of foreign competition in Canada. Regulations are included to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy in addition to providing consumers with competitive prices and product choices.
Agreements Between Competitors
The Competition Act prevents people or organizations from working with a competitor of that person or organization with the goal to conspire, agree or arrange activities that prevent competition. Specifically:
- to fix, maintain, increase or control the price for the supply of the product;
- to allocate sales, territories, customers or markets for the production or supply of the product; or
- to fix, maintain, control, prevent, lessen or eliminate the production or supply of the product.
Bid-rigging means an agreement or arrangement between or among two or more persons or organizations whereby one or more of those persons agrees or undertakes not to submit a bid or tender in response to a call or request for bids or tenders or agrees or undertakes to withdraw a bid or tender submitted in response to such a call or request. Persons convicted of bid-rigging may face up to 14 years in prison and Corporations can also face legal penalties.
False or misleading representations
No person shall, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, knowingly or recklessly make a representation to the public that is false or misleading in a material respect.
Telemarketing means the practice of communicating orally by any means of telecommunication for the purpose of promoting, directly or indirectly, any business interest or the supply or use of a product. No person shall engage in telemarketing unless
- disclosure is made, in a fair and reasonable manner at the beginning of each communication, of the identity of the person on behalf of whom the communication is made, the nature of the business interest or product being promoted and the purposes of the communication;
- disclosure is made, in a fair, reasonable and timely manner, of the price of any product whose supply or use is being promoted and any material restrictions, terms or conditions applicable to its delivery; and
- disclosure is made, in a fair, reasonable and timely manner, of such other information in relation to the product as may be prescribed by the regulations.
No person who engages in telemarketing shall make a representation that is false or misleading in a material respect; conduct or purport to conduct a contest, lottery or game of chance, skill or mixed chance and skill; offer a product at no cost, or at a price less than the fair market value of the product, in consideration of the supply or use of another product, unless fair, reasonable and timely disclosure is made of the fair market value of the first product and of any restrictions, terms or conditions applicable to its supply to the purchaser; or offer a product for sale at a price grossly in excess of its fair market value, where delivery of the product is, or is represented to be, conditional on prior payment by the purchaser.
Deceptive notice of winning a prize
No person shall, for the purpose of promoting, directly or indirectly, any business interest or the supply or use of a product, send or cause to be sent by electronic or regular mail or by any other means a document or notice in any form, if the document or notice gives the general impression that the recipient has won, will win, or will on doing a particular act win, a prize or other benefit, and if the recipient is asked or given the option to pay money, incur a cost or do anything that will incur a cost.
Scheme of pyramid selling
Scheme of pyramid selling means a multi-level marketing plan whereby a participant in the plan gives consideration (Money) for the right to receive compensation by reason of the recruitment into the plan of another participant in the plan who gives consideration (Money) for the same right. Pyramid selling is punishable by fines and imprisonment.
Any person who has reasonable grounds to believe that a person or organization has committed or intends to commit an offence under this Act, may notify the Commissioner of the particulars of the matter and may request that his or her identity be kept confidential with respect to the notification.
In the event of a whistleblower, no employer shall dismiss, suspend, demote, discipline, harass or otherwise disadvantage an employee, or deny an employee a benefit of employment, by reason that the employee, acting in good faith and on the basis of reasonable belief, has disclosed to the Commissioner that the employer or any other person has committed or intends to commit an offence under the Competition Act;
Bait and switch selling
Bait and switch occurs when a person or a company advertises a product for a price and then indicates that the product is not available and then the consumer is encouraged to purchase a higher priced product. This approach to selling is prohibited.
Sale above advertised price
A person engages in reviewable conduct who advertises a product for sale or rent in a market and, during the period and in the market to which the advertisement relates, supplies the product at a price that is higher than the price advertised.
Restrictive Trade Practices
This act prevents people or businesses from any activity that restricts commerce. Specifically, preventing another business from obtaining adequate supplies of a product anywhere in a market on usual trade terms. Effectively, businesses cannot prevent selling their products to companies if they want to prevent that business from being successful.
Exclusive dealing means any practice whereby a supplier of a product, as a condition of supplying the product to a customer, requires that customer to deal only or primarily in products supplied by or designated by the supplier or the supplier’s nominee. Any practice whereby a supplier of a product induces a customer to have an exclusive relationship by offering to supply the product to the customer on more favourable terms or conditions if the customer agrees is unlawful.
Market restriction means any practice whereby a supplier of a product, as a condition of supplying the product to a customer, requires that customer to supply any product only in a defined market, or exacts a penalty of any kind from the customer if he supplies any product outside a defined market. Businesses cannot prevent other businesses from acting in a specific way under threat of preventing supplier of a product required for that business to operate.
Abuse of Dominant Position
In some industries there is a dominate supplier which many businesses rely on for success. Any abuse of that dominant position of that supplier to its customers is classified as an anti-competitive act. Suppliers cannot use their position to act in any way intended to have a predatory, exclusionary or disciplinary negative effect on a competitor, or to have an adverse effect on competition. Abuse of dominance occurs when a dominant business (or group of businesses) engages in activity that eliminates or restricts competition in a market. Anti-competitive activities may be:
- predatory (incurring short-term losses to force a competitor out of the market and/or gain future market power);
- exclusionary (seeking to prevent a business from operating in a market);
- disciplinary (enacted to punish a business); or
- intended to adversely affect competition (seeking to diminish or erode competition and denying consumers the benefits of competition)
Mergers refer to the acquisition or establishment, direct or indirect, by one or more persons, whether by purchase or lease of shares or assets, by amalgamation or by combination or otherwise, of control over or significant interest in the whole or a part of a business of a competitor, supplier, customer or other person. Under the Competition Act, any merger can be reviewed by the Commissioner of Competition to ensure that the merger will not result in anti-competitive situation for the Canadian economy. In the event that the merger could harm competition within the Canadian economy, the Commissioner of Competition can stop the merger from happening.