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McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
28) Helena is president and the sole director of a small garment-making company in
Markham, Ontario, that specializes in preliminary assembly of garments such as underwear,
blouses, jackets, and suits. To cut costs, one way in which many clothing companies are
putting together clothes these days is “fusion,” a process that involves the use of glue.
Helena’s company uses fusion techniques and therefore stores a considerable amount of
glue on site. Helena wonders what her duties as president and director are with respect to
the glue and its storage and use. Her lawyer should advise her that under Ontario law
a. her responsibility will not be an issue.
b. she has a responsibility to take all reasonable care to ensure that the corporation complies
with the law. What is reasonable will be determined by reference to the position that she
holds.
c. she has a responsibility to take the degree of care that any reasonable person would take.
d. she can avoid liability by ensuring that she does not find out about any violation of the
law.
e. she must do everything possible to ensure that no employee violates the law.
29) In some provinces, due diligence is
a. never a defence.
b. a duty but not a defence.
c. a defence and a duty.
d. a defence or a duty—that is, if it is claimed as a defence, it cannot then be asserted as a
duty.
e. not something that corporations need to worry about.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
30) A comfort or no-action letter
a. is a document, written by a government official, assuring two or more businesses that
their proposed merger is lawful.
b. is a formal document written by one level of government to another that provides an
assurance that the constitutional validity of a piece of legislation will not be questioned on
the grounds of ultra vires.
c. is a document, usually illegal or unenforceable, that is written by a consumer and that
assures a retailer or manufacturer that a product that caused an injury or loss will not be the
subject of a claim in tort or contract.
d. is a document that is written by a government official and that assures the parties to a
proposed sale of land that the land will not be the subject of environmental litigation.
e. a letter from a judge saying the company is not guilty of any offence.
31) The Constitution’s “trade and commerce” clause
a. gives jurisdiction over commercial matters to the provinces.
b. gives jurisdiction over “property and civil rights” to the federal government.
c. allows the federal government to legislate certain national standards.
d. prevents provinces from regulating business at the local level.
e. gives jurisdiction to the federal government over all business activities in Canada.
32) Which of the following statements is TRUE with respect to the relationship between
federal and provincial jurisdiction under the Constitution?
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
a. The division of powers in the Constitution means that there are never conflicts or
overlaps in authority.
b. The federal and provincial governments never have concurrent jurisdiction over an area.
c. The doctrine of paramountcy says that, if validly enacted federal and provincial statutes
conflict, the federal law prevails.
d. The doctrine of paramountcy says that, if validly enacted federal and provincial statutes
conflict, the provincial law prevails.
e. A law enacted by one level of government may not incidentally regulate a matter that is
under a head of power allocated to another level of government.
33) A business may NOT be able to challenge an action by a regulatory body that adversely
affects the business on the basis that
a. it violates the Charter.
b. the affected business did not have an opportunity to respond to the concerns that resulted
in the action.
c. the action was taken without notice to the affected business.
d. the action was outside the jurisdiction of the regulatory body.
e. the actions of the regulatory body are unpopular.
34) There are several types of offences under the Competition Act. Which of the following
statements is TRUE?
a. Every type of offence can lead to an award of damages.
b. It sometimes is possible to appeal a decision of the Competition Tribunal to the Federal
Court.
c. A reviewable matter is a type of offence that can only trigger an investigation by the
Competition Bureau, and cannot result in any relief.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
d. Dual matters involve the commission of more than one offence by a single offender.
e. The Competition Act does not allow for private actions.
35) Excise taxes are taxes on
a. exported goods.
b. non-essential goods, such as cigarettes and alcohol.
c. essential goods, such as food.
d. exercise products.
e. imported goods
36) Low-Valu Inc owns and operates a number of discount mega-stores. Because of
increasing competition, it has engaged in a number of improper business practices. It was
recently accused of a “bait and switch” practice in one of its stores. Which of the following
statements is TRUE?
a. The alleged practice occurs when a store places two price tags on one item, and then
charges the customer the higher amount.
b. “Bait and switch” is expressly prohibited by the Sale of Goods Act.
c. The phrase “bait and switch” refers to the fact that the alleged offence originally arose in
connection with general stores in the nineteenth century, who sold, among other things,
hunting supplies.
d. The alleged practice is a criminal matter under the Competition Act.
e. Low-Valu engaged in a bait and switch if it advertised a product at a very low price but
told customers who came to its stores to buy it that none of the product was available but a
higher priced alternative was available instead.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
37) The Ether Store Inc is trying to break into the potentially lucrative world of online
retailing. Given the competitive nature of the field, it believes that the key to success is
advertising and promotion. It therefore has asked you to review and assess several
proposals that it has developed. Which of the following statements is TRUE?
a. Because it is considered relatively less harmful than other sorts of offences, misleading
advertising is always treated as a civilly reviewable matter under the Competition Act
b. Misleading advertising is not committed under the Competition Act unless the court is
satisfied that at least one customer was actually misled.
c. Although there have been calls for reform, the Competition Act does not yet regulate
telemarketing.
d. Deceptive telemarketing is an offence.
e. A due diligence defence is never available in connection with advertising offences.
38) The Competition Bureau has long suspected HAL Corp of abuse of dominant position.
After a recent investigation, the Bureau commenced proceedings against the company.
Which of the following statements is most likely to be TRUE?
a. The Bureau may rely on the concept of “superior competitive performance” to prove that,
as a result of committing a practice of engaging in anti-competitive acts, HAL has
increased its market share.
b. HAL has engaged in an anti-competitive act if it sells its products for a price that is lower
than its cost for the purpose of eliminating a competitor.
c. The Bureau will be concerned about anti-competitive acts by HAL if HAL has more than
20 percent of the relevant market.
d. HAL cannot be held liable for abuse of dominant position unless it enjoys a monopoly
with respect to at least a part of the market.
e. Because of the need to promote healthy competition, HAL would not be engaged in an
anti-competitive act if it was buying up products to prevent the erosion of price levels.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
39) Alpha Corp and Beta Inc recently merged. Prior to the merger, both companies
manufactured tools. The merged company continued to do so after the merger. Technically
speaking, the parties were involved in a
a. fusion merger.
b. diversification merger.
c. vertical merger.
d. parallel merger.
e. horizontal merger.
40) Nefarious Inc and Jaffar together control 90 percent of the market for artificial hearts.
Nefarious and Jaffar have NOT committed an offence under the Competition Act if they
a. agree on the prices that they will charge their customers.
b. agree to limit their production of artificial hearts for the purpose of driving up prices of
their products.
c. agree in advance on the bids each will submit for a contract to supply artificial hearts to a
hospital.
d. agree to limit their sales of artificial hearts for the purpose of driving up prices for their
products.
e. agree to collaborate on research regarding new artificial hearts
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
Essay Questions
1) Government’s role in the regulation of business in Canada is limited by key legal
principles. Discuss with reference to three principles encountered in Chapter 25.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
2) Both the federal and provincial governments have powers over business regulation in
Canada. Explain how conflicts between these powers are resolved and which level of
government takes precedence.
3) Tesco Inc is a large British supermarket chain that is considering entering the Canadian
grocery market. The industry is characterized by high-quality service, entrenched
competitors, and razor-thin profit margins. Tesco knows that in order to successfully
compete it will have to offer a level of service superior to that of existing grocery retailers.
It will also have to differentiate its services to a considerable degree in order to distinguish
the company in the Canadian consumers’ mind. From previous experience in other markets
Tesco knows that it will have a maximum of two years to begin making a profit. Otherwise,
its investment will be lost. Tesco management notices that Sunday closing legislation is
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
still in effect in the Maritime provinces and, by opening a flagship store in Halifax,
wonders whether it can use the Canadian Charter of Rights and Freedoms to contest this
measure, perhaps gain publicity, and have an extra day to make money each week. A
successful challenge could be the difference between profit and loss. It plans to argue that
Sunday closing is discriminatory to its non-Christian workers, many of whom would prefer
to work on Sundays and have other days off for rest and worship. Discuss the chances of its
success.
4) Joe Fortino wants to open a large nightclub on the waterfront in Windsor, Ontario, which
he calls The Evil Eye. It is supposed to have a large terraced area for drinks, beach
volleyball in the summer, a skating rink in winter, and an indoor stage that will feature the
hottest bands around. The club opens and is immediately successful, but two weeks later
Joe learns that Windsor City Council has recently passed a by-law prohibiting the operation
of clubs on the waterfront. The Council is allegedly concerned about noise, but Joe suspects
that some other club owners are jealous of his success and “leaned” on Council to close The
Evil Eye down. Joe comes to you, his lawyer, claiming that the by-law is a deprivation of
private property under the Canadian Charter of Rights and Freedoms and that its operation
impinges on his and the club’s “freedom of association.” Will Joe prevail?
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
5) One of the key elements of consumer protection under provincial laws is mandatory
disclosure of contractual terms. Describe the main features of provincial laws requiring
disclosure to consumers.
6) Copyright includes the right to make copies of some particular form of expression,
usually in the form of written work (ie a book or article), musical recording, film, or
software program. In Canada, copyright is expressly protected by laws and users must pay
royalties for use of a copyrighted work. Because paying for individual use of copyrighted
works would in many instances be cumbersome and inefficient, copyright often is entrusted
to collective-administration societies in Canada that look after the collection and payment
of revenues. Thus, every time you listen to a song on the radio a small tariff is paid by the
radio station, which ultimately makes its way back to the artist through the collective
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
7) Seva Inc is a pharmaceutical manufacturer in Montreal which is about to launch a new
cancer-fighting drug, Floror. The drug works by inhibiting the growth of new cells at
specific body sites. Clinical trials and careful economic analysis have convinced Seva that
Floror will be a hit in the therapeutic market. Nevertheless, Seva officials learn that two
other rival pharmaceutical makers have their own cancer inhibitors in the works. Seva
officials worry that if these drugs hit the market at the same time as Floror they will eat into
Seva profits. After some deliberation over the matter, Seva’s Chief Financial Officer
decides to open secret discussions with the two rivals that confirm his fears and prompt him
to enter into a market-sharing arrangement in which the competitors will delay their
products’ entry into the market for the first five years of Floror’s life in the Canadian
market. In exchange, Seva will share some of its profits with its competitors, which they
can use to further refine and improve their drugs. In so doing, would Seva’s CFO have done
anything wrong?
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
8) Why are mergers reviewed by the Competition Bureau?
9) Ultra-Brite is a new brand of clothing detergent introduced in the Canadian market in the
past year following heavy promotion and advertising. It is specially formulated to take
heavy dirt out of white and other light-coloured clothing. Sales have climbed substantially
with the catchy new slogan “Ultra-Brite, Always White!” However, recently a small, but
growing, number of complaints have been received by the Competition Bureau alleging
that Ultra-Brite is in fact engaged in deceptive advertising: the use of Ultra-Brite on clothes
does not always return them to a pristine, white condition like the advertising and slogan
suggest. Instead, clothes washed with Ultra-Brite often have a used, faded look about them.
Discuss what action could be taken against the company, and what defences would it have?
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
10) For years, Mandy has owned a chain of six delicatessens in and around Calgary. She is
very proud of the products her stores carry, but she has always wanted to get Pantry Pride
Meats, Snacks, and Fruits as part of her line. This has been difficult because, as she learned
early on, Pantry Pride products are sold only through authorized dealers who follow Pantry
Pride’s “pricing guidelines.” These are meant to reinforce consumer perceptions of Pantry
Pride’s superiority over other brands. Mandy wonders whether there is anything under the
Competition Act that would help her get Pantry Pride items.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
11) Flower Inc produces a brand of energy drink originally developed in Japan that has
been introduced in Canada in the past two years. It is aimed at the youth market and has
several Canadian and international competitors. Flower’s traditional retailers are health food
and sporting good stores, but Flower’s supplier is anxious to build market share and so
provides hefty “slotting allowances” to larger stores that carry the brand and not its
competitors’ brands. Several chains then introduce Flower at heavily discounted prices to
attract a younger crowd into their aisles. What competition offence might this constitute,
and what can be done about it?
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
12) Who regulates the environment in Canada?
13) Zetra Inc is a packaging company that manufacturers a wide range of bins, boxes, and
coverage materials for use in industry. It has developed a distinct box-style shape for
beverages that permits it to save weight and space over traditional packaging. Walking
through a wilderness area near London, Ontario, one day, an Ontario provincial
environmental officer comes upon a stash of used Zetra beverage packages that he
immediately recognizes because of their distinctive shape. He wants to charge Zetra with
pollution or improper waste disposal under s 14 of the Ontario Environmental Protection
Act. Would he be successful in securing a conviction?
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
14) Terrecore is an oil extraction company based in Fort McMurray, Alberta. It is
contemplating the purchase of a property in downtown Calgary to house its local office and
a showroom of its oil extraction equipment. The Calgary site it is most interested in is an
old building dating from the 1950s that Terrecore would have to tear down and rebuild
according to modern design and specifications. What environmental aspects of the potential
purchase should it be concerned about?
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
15) In the context of environmental offences, what has to be established for a corporation to
rely on a “due diligence” defence?
