Private Actions: Federal Court Rejects Predatory Pricing Claim

June 1, 2004

The Federal Court of Canada, in Michael J. Culhane v. ATP Aero Training Products Inc., Reilly James Burke, recently rejected a private-action claim for damages under s.36 of the Competition Act in relation to alleged predatory pricing contrary to s.50(1)(c) of the Act. The alleged conduct involved the defendants making available, on-line and at no charge, certain Canadian aviation exam guides, which according to the plaintiff reduced sales of his competing publications.

In its analysis of the claim, the Court first determined that the defendants, by providing their publications at no cost, were nevertheless engaged in a policy of "selling" products. The Court also concluded that they were doing so at "unreasonably low prices," taking into consideration such factors as the discrepancy between the defendants' costs and the price charged, the "indefinite period" for which the defendants intended to make the publications available at no charge, the offensive (rather than defensive) nature of the price reduction and the absence of evidence that the "free giveaways" had increased sales of the defendants' other products (or would do so in the future). However, the Court was not satisfied that the defendants' conduct had the effect or tendency of substantially lessening competition or that they had intended such an effect or to eliminate the plaintiff as a competitor. With this essential element of the offence absent, the Court rejected the plaintiff's claim.

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