CHAPTER Microsoft PowerPoint Presentation Prepared By Gail McKay, LLB, Thompson Rivers University 2008 McGraw-Hill Ryerson Ltd., All Rights Reserved. 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 15 Competition Law and Environmental Law Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.15-1 OBJECTIVES 1.To examine government regulation of business competition 2.To appreciate the increasing legal responsibility of business operations to the natural environment Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.15-2 INTRODUCTION TO COMPETITION LAW Historically, governments have gradually made their presence felt in the world of business first in terms of overseeing the general working conditions which employers might impose on employees, and then in terms of inroads into the regulation of child labour During the 20 th century, consumer protection legislation was enacted to provide implied warranties and conditions regarding the sale of goods for personal use Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.15-3 INTRODUCTION, continued The federal government next authored an initiative to curb the anticompetitive practices and unfair business tactics of some large corporations by enacting the Competition Act Further, the Food and Drug Act now regulates the safety of food, and the Hazardous Products Act governs the handling of hazardous products, setting minimum safety standards for certain products Interprovincial and international regulation of business activity is also a federal responsibility Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.15-4 INTRODUCTION, continued Most business laws are provincial or territorial, including The Sale of Goods Act The Labour Relations Act The Employment Standards Act The Partnership Act The Business Corporations Act The Consumer Protection Act The Business Practices Act and human rights and insurance legislation Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.15-5 COMPETITION LAW The goal of the Competition Act is to maintain and encourage business competition in keeping with the belief that free enterprise and competition should regulate industry and will best serve the public interest Abuse of a dominant market position through mergers, secret combinations or conspiracies to raise prices and profits, and misleading product promotion are all activities regarded as anticompetitive behaviours Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.15-6 COMPETITION LAW, continued The following unfair trade practices have been made criminal offences under the Competition Act: 1.Resale price maintenance 2.Price discrimination 3.Discriminatory promotional allowances 4.False advertising 5.Bid rigging Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.15-7 NATURE OF THE LEGISLATION The Competition Act brings criminal law, administrative law and civil law perspectives and approaches to regulating the restraint of trade, including the array of remedies from each although in business, bad publicity may be the most condign punishment Powers of search and seizure and the right to compel directors and officers to give evidence are part of the investigative authority invested in the Commissioner of Competition Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.15-8 Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.15-9 THE COMPETITION TRIBUNAL After complaints of violations from six or more residents of Canada and the attaining of a search warrant, if the Commissioner finds evidence of a violation he or she may deliver it to the Attorney General or the Competition Tribunal The Competition Tribunal may examine reviewable practices - such as market restriction, exclusive dealing, tied selling, consignment selling, refusal to supply goods, abuse of dominant position and mergers Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.15-10 Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved RESTRICTIVE TRADE PRACTICES There are three categories of restrictive trade practices: 1.Practices that are related to the nature of the firm itself (dominance and mergers) 2.Practices that arise from dealings between a firm and its competitors (conspiracies) 3.Practices that arise from dealings between a firm and its customers (discrimination) Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved MERGERS AND DOMINANT FIRMS When a companys assumption of a dominant position in the market is determined to be a detriment to the public, the Competition Act may be used to review and intervene If a merger has resulted in one business having more than half of the market share, it might be subject to scrutiny from the Commissioner Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved DEALINGS BETWEEN COMPETITORS Conspiracies and combinations (dealings between firms) which lessen competition unduly may amount to indictable offences under section 45 of the Competition Act If the Crown can show beyond a reasonable doubt that firms intentionally engaged in activity to unduly restrict competition, or had the effect of unduly restricting competition, they may be subject to up to five years in prison, fines of up to $10,000,000, or both Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved CONSPIRACY LIABILITY: EXEMPTIONS 1.Exchange of statistics 2.Defining product standards 3.Exchange of credit information 4.Definition of terms in a trade or industry 5.Co-operation in research and development 6.Restriction of advertising or promotion 7.Container sizes or shapes for packaging 8.Adoption of metric system 9.Measures to protect the environment If only one of these subjects is discussed, an exemption to a finding of conspiracy is granted Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved OTHER EXEMPTIONS The Competition Act applies only to domestic conspiracies or combinations, and not to the export of goods from Canada If the arrangement relates only to standards of competency and integrity in the practice of professional services or a trade, or to the negotiation of a contract for professional sport, an exemption is again created Parent corporations which are affiliated with a subsidiary are exempt from these restrictions Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved DEALINGS WITH CUSTOMERS The Competition Act creates offences related to the distribution of goods such as: Granting special concessions to large buyers Granting special rebates or promotional allowances unless done proportionally Offering reduced prices in some geographical areas Attempting to influence the price of goods when they will be resold by the purchaser When a purchaser, however, consistently engages in loss leader selling of the goods, the seller may legally refuse to sell to him or her Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved REVIEWABLE ACTIVITIES Reviewable activities include methods of selling such as tied selling, exclusive dealing, consignment selling, abuse of dominant position, refusal to supply goods, and market restriction or foreign directives Foreign directives in restraint of trade include: Impeding entry or expansion of a firm Impeding the production of a product Impeding the expansion of sales of a product Having any other exclusionary market effect Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved PROMOTION & ADVERTISING: OFFENCES Misleading advertising is any material misrepresentation to the public that is false or misleading about products or prices A seller in a specific region is expected to sell to everyone in the region at the advertised price, and if there is more than one ticket on an item, at the lowest of the prices Bait and switch involves advertising goods at a bargain price to attract customers but without sufficient quantities to sell, and then urging the customer to buy a more expensive model Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved CIVIL ACTIONS: THE COMPETITION ACT A civil lawsuit for restraint of trade may be brought under the common law for activities not covered by the Competition Act, for a plaintiff who had been injured as a result of the defendants breach of the Competition Act, or for a plaintiff injured because of a defendants violation of a Competition Tribunal order The victim of a common law breach may receive damages for actual loss if he or she is able to meet the civil standard of proof on a balance of probabilities Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved ENVIRONMENTAL LAW Environmental law attempts to create a balance between individual or business rights to the use of the environment and the general need to protect it The 1997 Kyoto Protocol is a commitment by Canada to reduce greenhouse gas emissions by six percent below 1990 levels between 2008 and 2012 In 2007, the federal government refocused spending on domestic projects; the Clean Air Act is presently at the stage of first reading Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved THE COMMON LAW The perspective of the common law in the environmental realm provides that the conduct of one person or business may not significantly interfere with anothers right to use and enjoy his or her own property A claim in the tort of nuisance allows an individual to seek an award of damages for interference such as pollution of a stream or river causing injury to a downstream user, contamination of soil or groundwater, contamination of property from particles in smoke, and sometimes for excessive noise Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved WEAKNESSES IN THE COMMON LAW Nuisance law is geared toward the protection of private property rights rather than toward public protection of the environment itself Further problems include the fact that environmental groups often cannot establish standing before the courts because they have not personally suffered injury, that it is often difficult to pinpoint the actual source of ongoing environmental degradation, and that the common law scope of remedies does not include cleanup of the source of the pollution on the polluters own property Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved ENVIRONMENTAL LEGISLATION Legislation regulates conduct that has a negative impact on the environment Federal, provincial and territorial governments have enacted environmental protection legislation which regulates business activities respecting the discharge of harmful substances into the air and water often specifying the exact quantity (parts per million in a specific volume) of a pollutant that can be discharged during a particular period of time Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved ENFORCEMENT Some legislation requires a business to monitor itself and record its discharge, making sure its allowable limits are not exceeded; otherwise, its licence may be revoked Enforcement officers have the authority to inspect and monitor businesses for compliance and can issue an order to cease operations until serious pollution problems are corrected; however, when the polluter is the major or sole employer in a town, such a decision is laden with all manner of complexity Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved ENVIRONMENTAL ASSESSMENTS If a planned government undertaking could cause a serious change to the environment, a formal approval process must be engaged Technical studies regarding the impact of the project on the environment must be shared with the public, and the approval of interested parties must be sought Examples of such projects include the building of dams, the flooding or drainage of wetlands and the construction of waste disposal sites Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved STORAGE AND SPILLS The transportation or handling of hazardous products is governed by the Transportation of Dangerous Goods Act and the Hazardous Products Act, and if a contaminant is spilled, the polluter is generally either directly or indirectly responsible for the cost of cleanup Corporate directors and officers can be found personally liable under the Canadian Environmental Protection Act unless they can demonstrate due diligence including inspection for risky situations, trained staff and follow up Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved ENVIRONMENTAL RESPONSIBILITY The business or person who caused environmental damage may be long gone, and often the current owner is found liable Purchasers of property are well advised to require that a clean environmental audit of the land is a condition precedent to the purchase, since the cost of cleanup may well exceed the value of the real estate Mortgagees taking possession of land after a default may find themselves defined as owners, and may be subject to cleanup costs too, unless they have insisted on an audit Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved ENVIRONMENTAL RESPONSIBILITY An acceleration of a commitment toward environmental responsibility and accountability seems to have occurred recently, perhaps precipitated by Al Gores documentary An Inconvenient Truth In their practices and procedures, businesses should therefore not ignore the more responsive and proactive attitudes and behaviours now emerging toward the protection of the environment Fundamentals of Canadian Business Law, Second Edition 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved SUMMARY The Competition Act encourages and protects competition in the free market The statute provides criminal, administrative and civil sanctions for restrictive trade practices, abuse of a dominant position, conspiracies and combinations, and false advertising or promotion Environmental protection is governed by legislation and by nuisance law, with increasing liability for corporate directors and officers and higher expectations as to the meaning of due diligence