Predatory Pricing Claim Does Not Fly With Federal Court in Case Involving Free Online Aviation Exam Guides

1
PREDATORYPRICINGCLAIMDOESNOTFLYWITHFEDERALCOURTINCASE
INVOLVINGFREEONLINEAVIATIONEXAMGUIDES

AdamMizera*
LEGERROBICRICHARD,Lawyers
ROBIC,Patent&TrademarkAgents
CentreCDPCapital
1001Square-Victoria–BlocE–8
thFloor
Montreal,Québec,CanadaH2Z2B7
Tel.:(514)987-6242-Fax(514)845-7874
E-mail:info@robic.com–WebSite:www.robic.ca
Canada’sFederalCourtrecentlyruledthatofferingfreeon-lineCanadian
aviationexamguidesdidnotconstituteanactofpredatorypricingunder
Canada’sCompetitionAct,R.S.C.,1985,c.C-34.(Culhanev.ATPAero
TrainingProducts,2004FC535(April6,2004,O’Keefe,J.;appealfiledonJune
28,2004)).
Facts
Theplaintiff,MichaelCulhane,isanauthorandapublisherofagroupof
aviationpublications,includingpracticeexamguidesavailableforsaleon
theplaintiff’swebsite,inpaperorelectronicformat.
Thedefendant,ATPAeroTrainingProducts(hereinafter“ATP”)isalsoa
publisheranddistributorofaviationbooksandexamguides.Theguideswere
soldforapriceuntil1997.However,intheearly1990s,someguideswere
givenawaywithorders.After1997,ATPbeganofferingfreeon-lineguideson
theinternetinexchangeofthee-mailaddressofthewebsitevisitor.
Theplaintiffclaimedthattheavailabilityoffreeon-lineexaminationswasthe
causeofadecreaseinsalesoftheplaintiff’scompetingpublications.For
example,theplaintiffwasofferingonlineexamsforpricesrangingbetween
$19.95and$24.95andincludingtheprovisionofexamresultstotheuser
within48hours.Arequiredtextbookwasalsomadeavailableatanadditional
cost.Ontheotherhand,thedefendant’son-lineexamsweregraded
automaticallyforfreewithresultssenttotheuserinstantly,withsuggestionsof
otherusefulpublicationstoconsult.

LEGERROBICRICHARD,2004*LawyerandEngineerofthelawfirmLEGERROBICRICHARD,g.p.andofthepatentand
trademarkagencyfirmROBIC,g.p.Publishedat[2004]WorldInternetLawReport.Publication
274.18.

2
Issues
Didtheconductofthedefendantamounttopredatorypricingunderthe
CompetitionAct?
Didthedefendantunlawfullyinterferewiththeplaintiff’seconomicinterests?
Findings
Inorderforthedefendanttobeheldliableforpredatorypricing,theplaintiff
hadtoestablishthat:
1)thedefendantisengagedinabusiness;
2)thedefendantisengagedinapolicyofsellingproducts;
3)pursuanttothepolicy,theproductsarebeingsoldatpriceswhichare
unreasonablylow;
4)thepolicyhastheeffectortendencyofsubstantiallylesseningcompetition
oreliminatingacompetitor;and
5)thedefendant’sunreasonablylowpricingcauseslossordamagetothe
plaintiff.
Sincetheexamguideshadbeenpreviouslysoldforaprice,theCourtfound
thatATPengagedinapolicyofsellingproducts,eventhoughtheywere
beingprovidedfreeofchargesince1998.Furthermore,giventhatthereare
certaincostsassociatedwiththeproductionandplacementoftheproducts
onawebsite,providingthemanualsfreeofchargesuggeststhatthesale
price(atnocost)isanunreasonablylowone.Sincethisfreeofferwastobe
maintainedforanindefiniteamountoftime,theCourtstatedthatthelonger
thepricedecreaselasts,themoresuspectitbecomes.ATP’spricereduction
wasalsosuspectsinceitwasoffensiveinnature,andnotinreactiontoa
pricedecreaseimplementedbytheplaintiff.
However,theCourtfoundthattherewasnoevidencethatthedefendants
hadadesigntosubstantiallylessencompetitionortoeliminatetheplaintiff.
Amongotherarguments,thedefendanttestifiedthatthefreeon-lineguides
wereusedasamarketingtooltoincreasethesaleofotherproducts.
Furthermore,intheCourt’sopinion,theplaintiffdidnotclearlyestablishthat
theATP’sactionscausedlossordamagestotheplaintiff,asthedropinsales
appearedtobeinfluencedbyanumberofotherexternalfactorsnot
imputabletothedefendant.

3
Inordertoestablishaclaimofunlawfulinterferencewiththeeconomic
interestsoftheplaintiff,thelatteralsohadtoestablish:(1)interferencewith
theplaintiff’stradeorbusiness;(2)unlawfulmeans;(3)intenttoinjurethe
plaintiff;and(4)actualinjury.Thecourtfoundthatnoneoftherequirements
ofthistortweremet.
Comment
Thecourt’sdecisionillustratestherisksassociatedwiththeuseoffreeon-line
promotionalmaterialsinmarketingstrategies.Althoughthepredatorypricing
claimwasrejectedinthepresentcaseduetolackofevidenceofintentof
lesseningcompetition,onecanconsideralternatescenariosinwhich
sufficientevidencecouldbeproducedtomaintaintheclaim.Insituations
involvingproductsthathavebeenpreviouslysoldforaprice,thedecision
showsthatgivingawaythesameproductsasinternetfreebiescouldbe
construedassellingatanunreasonablelowpriceandpossiblybecomean
actofpredatorypricingundertheCompetitionAct.

ROBIC,ungrouped’avocatsetd’agentsdebrevetsetdemarquesde

4

ROBIC,ungrouped’avocatsetd’agentsdebrevetsetdemarquesdecommercevoué
depuis1892àlaprotectionetàlavalorisationdelapropriétéintellectuelledanstousles
domaines:brevets,dessinsindustrielsetmodèlesutilitaires;marquesdecommerce,marques
decertificationetappellationsd’origine;droitsd’auteur,propriétélittéraireetartistique,droits
voisinsetdel’artisteinterprète;informatique,logicielsetcircuitsintégrés;biotechnologies,
pharmaceutiquesetobtentionsvégétales;secretsdecommerce,know-howetconcurrence;
licences,franchisesettransfertsdetechnologies;commerceélectronique,distributionetdroit
desaffaires;marquage,publicitéetétiquetage;poursuite,litigeetarbitrage;vérification
diligenteetaudit;etce,tantauCanadaqu’ailleursdanslemonde.Lamaîtrisedes
intangibles.
ROBIC,agroupoflawyersandofpatentandtrademarkagentsdedicatedsince1892tothe
protectionandthevalorizationofallfieldsofintellectualproperty:patents,industrialdesigns
andutilitypatents;trademarks,certificationmarksandindicationsoforigin;copyrightand
entertainmentlaw,artistsandperformers,neighbouringrights;computer,softwareand
integratedcircuits;biotechnologies,pharmaceuticalsandplantbreeders;tradesecrets,
know-how,competitionandanti-trust;licensing,franchisingandtechnologytransfers;e-
commerce,distributionandbusinesslaw;marketing,publicityandlabelling;prosecution
litigationandarbitration;duediligence;inCanadaandthroughouttheworld.Ideaslivehere.

COPYRIGHTER
IDEASLIVEHERE
ILATOUTDEMÊMEFALLUL’INVENTER!
LAMAÎTRISEDESINTANGIBLES
LEGERROBICRICHARD
NOSFENÊTRESGRANDESOUVERTESSURLEMONDEDESAFFAIRES
PATENTER
R
ROBIC
ROBIC+DROIT+AFFAIRES+SCIENCES+ARTS
ROBIC++++
ROBIC+LAW+BUSINESS+SCIENCE+ART
THETRADEMARKERGROUP
TRADEMARKER
VOSIDÉESÀLAPORTÉEDUMONDE,DESAFFAIRESÀLAGRANDEURDELAPLANÈTE
YOURBUSINESSISTHEWORLDOFIDEAS;OURBUSINESSBRINGSYOURIDEASTOTHEWORLD