Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Canada Competition Bureau discontinues Canadian National Railway investigation, (May 12, 2014)

The Canada Competition Bureau announced today that it has discontinued its investigation into alleged anti-competitive conduct by Canadian National Railway Company (CN) concerning rail transportation and transloading of lumber products in Western Canada.

The Bureau investigated whether CN possesses market power in the transportation of lumber from certain lumber mills in Western Canada to Vancouver, and whether CN leveraged any such market position to gain market power in lumber transloading in Vancouver. Allegations were made that CN implemented a rail pricing strategy that would effectively price its transloading competitors out of the marketplace.

Lumber is an important component of the Canadian economy and accounts for a significant share of Canada’s international exports. Access to affordable and efficient lumber transportation and transloading services is integral to maintaining the competitiveness of Canada’s lumber exports in international markets.

Western Canadian lumber destined for overseas export through Greater Vancouver is shipped by rail or truck to a transloading facility in Vancouver where it is “transloaded” into ocean shipping containers. The loaded container is taken to one of the four container terminals in Vancouver by truck, from where it is shipped overseas on a container ship. In addition to container loading, transloads may provide inventory management and lumber storage services. Transload facilities generally compete on price and service quality.

In certain circumstances, it may be profitable for a firm with market power in one market to leverage that power and exclude competitors in another market to obtain market power in that second market. During its inquiry, the Competition Bureau considered allegations that CN had excluded transload competitors and obtained market power in transloading in Vancouver by leveraging its market position in the transportation of lumber from certain lumber mills in Western Canada to Vancouver.

In its position statement, the Bureau concluded that CN’s conduct did not contravene the civil provisions of the Competition Act, because the conduct has not resulted in a substantial lessening or prevention of competition in lumber transloading in Vancouver. Specifically, the conduct has not resulted in a prolonged shift in lumber railcar traffic away from competing transloads to CN-owned transloads. CN’s conduct has not foreclosed competing transload facilities from accessing lumber shippers. In addition, the investigation did not identify price or non-price effects in lumber transloading in Vancouver. As such, there was insufficient evidence to support further investigation and the inquiry was discontinued. To ensure compliance with the law, the Bureau will continue to monitor the market and will consider any additional information that may be brought to its attention.

Companies: Canadian National Railway Company

News: Antitrust