product distribution in the united states and canada – the same
TRANSCRIPT
Product Distribution in the United Statesand Canada – The Same but Different
March 10, 2011
John RobertiPartner, Mayer Brown LLP
Jay HolstenPartner, Torys LLP
© 2011 Mayer Brown LLP and Torys LLP. All rights reserved.
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Introduction and Overview
Antitrust/competition laws in the United States and Canada affordcompanies broad discretion in how they distribute their products
However, there are limits to what is and is not allowed, which differby jurisdiction
Recent changes in Canadian law effectively remove prohibitions ona number of distribution practices
Businesses distributing products on both sides of the U.S.–Canadaborder must understand the rules so they can both spot legalissues and adopt appropriate and compliant cross-borderdistribution strategies
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Introduction and Overview, continued…
Today’s webinar will begin with an overview of the relevant U.S.and Canadian law - with particular emphasis on recentdevelopments that have “liberalized” the product distributionregimes in both countries
We then compare and contrast the law in the two jurisdictions
The session will conclude with a Q & A
To ask a question during the presentation, please use the Q&Apanel on the lower right side of your screen.
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United States
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United States
Distribution restrictions imposed by suppliers - referred to as“vertical restraints” - are typically evaluated using a “rule ofreason” analysis
They are problematic only where the resulting harm tocompetition outweighs their pro-competitive benefits (subjectto one exception, discussed below)
This will usually be the case only if a supplier imposing avertical restraint has a large market share or some otherability to exercise power in the marketplace
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United States, continued…
Vertical restraints subject to a “rule of reason” analysis include
Exclusive dealing and distribution
Marketing/market restrictions
Tied-selling
Refusals to deal
Bundled discounting is only problematic if
One of the products in the bundle is considered to be a “musthave” product
The discount is large enough that other suppliers cannotmatch it without selling below cost
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United States, continued…
Price Discrimination (Robinson-Patman Act)
Unlawful to discriminate on price, or on services connectedwith resale, to competing customers
Bases on which different prices can be charged
Lack of competition between customers
Cost savings (e.g., shipping savings)
Resale services provided by the customer
Meeting a competitive offer
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United States, continued…
Resale Price Maintenance (RPM)
A requirement by a supplier that a purchaser of its productsresell them at or above - or not below - a specified price
Used to be illegal per se - that is, RPM was condemnedwithout assessing whether the party imposing it had marketpower
2007 US Supreme Court decision changed the law - RPM isnow analyzed on a rule of reason basis
However, several states - including New York and California -treat RPM as illegal per se under state antitrust laws
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Canada
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Canada
Prior to March 2009, it was illegal in Canada for a product supplier to
Price discriminate (through the granting of discounts, rebates or
other price concessions) against competing purchasers of its
products
Price discriminate on a geographic basis
Engage in predatory (i.e., below-cost) pricing
Grant promotional allowances (i.e., rebates or other price
concessions granted for advertising or display purposes and
collateral to a sale of products) to competing purchasers on other
than “proportionate terms”
Maintain, or to attempt to maintain, resale prices
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Canada, continued…
The 2009 amendments repealed the price discrimination, geographic
price discrimination, promotional allowances and predatory pricing
offence provisions of the Competition Act (Canada)
While these practices may still be reviewable if engaged in by a
person with a dominant market position, they are generally not an
issue for non-dominant firms
The amendments also repealed the criminal price maintenance
provision - but price maintenance remains a reviewable matter
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Canada, continued…
What’s left:
Price maintenance
Refusals to deal
Exclusive dealing
Tied selling
Market restrictions
All are reviewable matters - which means they are only problematic if
they have a negative impact on competition
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Canada, continued…
Reviewable matters:
Civil (i.e., non-criminal)
Challenges are brought by the Commissioner of Competition
Limited private right of access to the Competition Tribunal, but
only with leave
Damage awards are not available
No private right of action
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Implications
Different systems in the United States and Canada for the
development of product distribution laws
U.S. - largely driven by private litigation and resulting case law
Canada - largely driven by specific legislative prohibitions and
regulatory enforcement
Many shared principles, but a few key differences
Price discrimination
Resale price maintenance
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Implications, continued…
As a result of recent changes, certain vertical restraints are no
longer problematic in Canada
Do your distribution practices and policies reflect these
changes?
Are there distribution practices available today that your
company is not considering
If not, a compliance update may be appropriate
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Questions
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Contact Information
John Roberti, Partner – Mayer Brown LLP
+1 202 263 3428
Jay Holsten, Partner – Torys LLP
+1 416 865 7523