Thursday, July 25, 2013
The Economic Consequences and Constitutionality of Administrative Monetary Penalties for Abuse of Dominance
Posted by D. Daniel Sokol
Grant Bishop, University of Toronto - Faculty of Law discusses The Economic Consequences and Constitutionality of Administrative Monetary Penalties for Abuse of Dominance.
ABSTRACT: The 2009 amendments to the Competition Act introduced administrative monetary penalties ("AMPs") for a finding of abuse of dominant position of up to $10 million for the first order, and a $15 million for each subsequent order. The quantum of such an AMP is to be determined according to a list of "aggravating or mitigating factors,” including gross revenue and profits affected by the practice, the party's financial position, the history of compliance with the Act and "any other relevant factor."
The author argues that this provision is both inefficient and potentially unconstitutional (following from the Supreme Court of Canada's holding in Wigglesworth), because, 1) the Act does not explicitly constrain the AMP quantum to a level that internalizes the economic impacts of the anti-competitive conduct; and, 2) some of the aggravating factors lack a coherent connection to the economic impact of anti-competitive conduct.
The author concludes that the Commissioner should clarify the circumstances under which AMPs for abuse of dominance will be sought. AMPs should be calibrated to market impacts based on evidence of estimated deadweight loss and economic profits, in order to ensure that AMPs remain purely deterrent and do not reach a denunciatory magnitude.