Product Distribution in the United States and Canada The Same but Different

Transcription

1 Product Distribution in the United States and Canada The Same but Different John Roberti Partner, Mayer Brown LLP Jay Holsten Partner, Torys LLP March 10, Mayer Brown LLP and Torys LLP. All rights reserved.

2 Introduction and Overview Antitrust/competition laws in the United States and Canada afford companies broad discretion in how they distribute their products However, there are limits to what is and is not allowed, which differ by jurisdiction Recent changes in Canadian law effectively remove prohibitions on a number of distribution practices Businesses distributing products on both sides of the U.S. Canada border must understand the rules so they can both spot legal issues and adopt appropriate and compliant cross-border distribution strategies 1

3 Introduction and Overview, continued Today s webinar will begin with an overview of the relevant U.S. and Canadian law - with particular emphasis on recent developments that have liberalized the product distribution regimes 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&A panel on the lower right side of your screen. 2

4 3 United States

5 United States Distribution restrictions imposed by suppliers - referred to as vertical restraints - are typically evaluated using a rule of reason analysis They are problematic only where the resulting harm to competition outweighs their pro-competitive benefits (subject to one exception, discussed below) This will usually be the case only if a supplier imposing a vertical restraint has a large market share or some other ability to exercise power in the marketplace 4

6 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 must have product The discount is large enough that other suppliers cannot match it without selling below cost 5

7 United States, continued Price Discrimination (Robinson-Patman Act) Unlawful to discriminate on price, or on services connected with 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 6

8 United States, continued Resale Price Maintenance (RPM) A requirement by a supplier that a purchaser of its products resell them at or above - or not below - a specified price Used to be illegal per se - that is, RPM was condemned without assessing whether the party imposing it had market power 2007 US Supreme Court decision changed the law - RPM is now 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 7

9 8 Canada

10 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 9

11 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 10

12 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 11

13 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 12

14 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 13

15 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 14

16 Questions 15

17 Contact Information John Roberti, Partner Mayer Brown LLP Jay Holsten, Partner Torys LLP