CANADA'S COMMISSIONER OF COMPETITION RULES AGAINST FBN'S ANTI-TRUST SUIT
Mar. 18, 2022
Source: Commissioner of Competition news release
GATINEAU - Today, the Commissioner of Competition announced that he has concluded an investigation into allegations related to the supply of crop inputs such as seeds, fertilizer and crop protection products (crop inputs).
These allegations concerned whether certain wholesalers and manufacturers of crop inputs (the Targets of the investigation) engaged in conduct contrary to Part VIII of the Competition Act (Act), specifically whether the Targets worked together, or on their own, to disadvantage, restrict or block the supply of crop inputs to Farmers Business Network Canada Inc. (FBN). The Commissioner's decision in this case follows an extensive investigation conducted by the Competition Bureau. This statement summarizes the investigation and the reasons it was concluded.
The Bureau's investigation primarily examined the conduct under two relevant provisions of the Act:
*civilly reviewable competitor collaborations (section 90.1); and
*abuse of dominant position (section 79).
First, the Bureau investigated whether an agreement or arrangement existed in relation to FBN between any of the Targets (at least two of which are competitors to one another), contrary to section 90.1 of the Act. Second, the Bureau examined whether the Targets abused a dominant position by acting with anti-competitive intent toward FBN, causing a market effect contrary to section 79 of the Act.
The evidence gathered and analyzed by the Bureau does not establish that competitors had an agreement or arrangement in relation to FBN; however, the investigation uncovered communications by certain market participants with the goal of influencing suppliers of crop inputs with respect to FBN. Firms should be aware that these types of communications can result in an agreement or arrangement, which may contravene section 90.1 of the Act, or, depending on the terms, the criminal conspiracy provision of the Act (section 45).
The evidence gathered and analyzed by the Bureau also failed to meet the threshold to establish that dominant Targets acted with anti-competitive intent toward FBN and that competition was substantially lessened or prevented in the markets for crop inputs in western Canada. For these reasons, the Commissioner elected to end the investigation. The Bureau will continue to monitor the crop input industry for any anti-competitive conduct that seeks to restrict new entrants and has the potential to substantially lessen or prevent competition in any relevant market.
The Canadian Agriculture Industry
The agricultural industry is a sector of strategic importance to the Canadian economy and consequently a critical sector for the protection of innovation and competition. According to an overview prepared by Agriculture and Agri-food Canada, the Canadian agriculture and agri-food industry accounted for 7.4% of the national GDP in 2020 and generated an estimated $139.3 billion for the Canadian economy. A Canadian seed sector profile shows that Canadian crop inputs are a critical part of the agriculture supply chain in Canada and abroad, with Canada exporting an estimated $646 million of seeds in 2018. Further, Statistics Canada data reveals that Canadian exports of pesticides, fertilizers and other agricultural chemicals reached approximately $1.5 billion in 2020.
The investigation examined crop input firms operating at three levels of production and distribution -manufacturing, wholesaling, and retailing:
*Manufacturers develop and produce crop inputs.
*Wholesalers purchase crop inputs from manufacturers and distribute these products to retailers.
*Retailers sell crop inputs to growers, and may offer other types of support such as providing agronomic counselling or advice.
In certain cases, firms are vertically integrated across these levels. For example, large retailers may be integrated at the wholesale and retail level, or manufacturers may have integrated wholesale operations. In cases where manufacturers do not sell directly to independent retailers (i.e., retailers that are not vertically integrated), manufacturers and retailers may enter into contractual relationships in relation to the sale of certain products, to access rebate programs or for the purposes of licensing intellectual property incorporated into crop inputs.
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