Luca Davini
Lawyer in Milan and Turin
As examined previously on this blog, when we prepare to do business with Canadian partners is first of all essential to consider that Canada is a federal state mad up of ten provinces and three territories.
It derives that legislative competency is divided between federal jurisdiction and provincial/territorial. Contracts usually fall within provincial/territorial legislative competency, which in turn is different from province to province (remember that nine of the ten provinces have adopted the common law system, following United Kingdom model, except for Qubec province).
In general, however, it comes to light that none of the Canadia province provides for a regulation specific for international agency and distribution contracts. For this reason, the principles of reference in the discipline of such contracts are found inside the judgements of the Canadian provincial courts and, in a limited number of cases, inside federal laws.
As for what concerns specifically the antitrust regulation in force in Canada, it is contained inside the Competition Act, regulation of federal rank, which governs the price, territory, and online sale restrictions.
In particular, according to such regulation, the non-compete clauses must have a well-defined scope of application about their duration, geographical area and involved activities. On the contrary, such clauses may be declared inapplicable.
About the price restrictions, under the Competition Act, the imposition of resell price by the supplier is a legitimate conduct. However, it is provided the application of sanctions by the competition’s authority in cases of vertical price fixation by the supplier and where the behaviour engaged by the supplier is harmful to the competitor.
Price discriminations and other promotional strategies (such as sales, reduced rates. Etc.) are subject to revision by the Canadian competition authority and are still considered ‘problematic’ only when they considerably reduce competition.
Other restriction forms concern then the geographic position in which the activity is carried out. Specifically, the prevision, in agency and distribution contracts, of a territorial exclusivity which is not regarded as illegal in Canada, but that can be subject of control by the authority.
In the same way, possible territorial restrictions on the sales made online are not, in principle, prohibited, except for the case in which these latter do not determine a substantial limitation to the competition.
It still stays, in any case, the need to pay particular attention to the province in which the business is being established, because according to this, to the applicable law and the possible pronouncements of the courts on the subject, there will be a different approach on the interpretation of the contract and it will be therefore necessary to adopt the appropriate caution in the finalised agreement with their own partner.
