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McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
True/False Questions
1) Federal legislation always prevails over provincial legislation.
a. True
b. False
2) Manitoba decides that it would like to levy a charge on all telephone calls that traverse
its provincial boundaries. Thus, a call from Kenora, Ontario, to Prince Albert,
Saskatchewan, crossing Manitoba would incur a levy to be paid to the provincial
government. The measure is likely to be struck down in court as an infringement of federal
jurisdiction.
a. True
b. False
3) Xorox Inc is a pharmaceutical manufacturer in Sillery, Quebec. Its management learns
that the federal government is granting low-interest loans to pharmaceutical companies that
establish operations in the Maritime provinces. Xorox mounts a legal challenge to the loan
program claiming that it violates Xorox’s equality rights under s 15(1) of the Canadian
Charter of Rights and Freedoms. Xorox’s claim will be successful in court.
a. True
b. False
4) The Canadian Radio-television and Telecommunications Commission (CRTC) revoked
the licence of CBA Broadcasting based on allegations from a competitor that CBA had
breached the terms of its licence. CBA received no notice of the hearing on this allegation
and had no opportunity to respond to the allegations. CBA can challenge the CRTC
decision in the Federal Court.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
5) Daphne runs a foodservice company, Le Monde Café, and believes that key suppliers are
refusing to deal with her on critical items she needs for the business. Assuming that the
requirements for the reviewable practice of refusal to deal under the Competition Act are
satisfied, she can obtain a cease-and-desist order against the suppliers through a private
action before the Competition Tribunal with leave of the Tribunal.
a. True
b. False
6) Broadly speaking, under the Competition Act, some matters are criminal offences, others
are reviewable practices that may be the subject of an application to the Competition
Tribunal by the Commissioner and misleading advertising may be dealt with as a criminal
offence or a reviewable practice.
a. True
b. False
7) In Canadian law, an abuse of dominant position requires a firm to have a monopoly in
some class or species of business.
a. True
b. False
8) Arturo Inc recently began to manufacture canned curry sauces at a factory in Toronto to
compete against some of the more expensive imported curry sauces that Canadian
consumers traditionally buy. However, Arturo Inc’s products do not contain ingredients on
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
their labels and do not state a “best before” date. As a result, Arturo Inc may be in violation
of the federal Food and Drugs Act.
a. True
b. False
9) Individuals and businesses can bring action against discriminatory government practices
under the Agreement on Internal Trade, but the results of this process are non-binding.
a. True
b. False
10) Silverdome Plating Co runs a silver plating operation in Sarnia, Ontario. An employee
of the company accidentally spills several hundred litres of plating fluid containing high
concentrations of dangerous chemicals into the St Clair River. If the provincial authorities
decide to prosecute this act as a strict liability offence, Silverdome will be able to invoke
the defence of due diligence.
a. True
b. False
11) To protect against potential environmental liability that may be incurred from the site
they are buying, Trees Inc, a Miramichi, New Brunswick-based greenhouse operation
should negotiate a lender liability agreement with its bankers.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
12) Zoë receives a set of knives in the mail from Grandsoirée Inc. She did not order the
knives and has never heard of Grandsoirée. Zoë is obliged to pay for the knives.
a. True
b. False
13) The Charter protects property rights.
a. True
b. False
14) H2O Canada Inc is a Burnaby-based water company that seeks to export water from
Canada in bottled form. To do so it will most likely have to comply only with federal
legislation since the water is for export alone.
a. True
b. False
15) Only the federal government is entitled to impose income taxes.
a. True
b. False
1) Which of the following statements is TRUE?
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
a. The federal government has power to legislate in relation to transactions in real property.
b. The provincial governments have power to legislate in relation to international trade.
c. The provincial governments have power to legislate in relation to coinage and currency.
d. The federal government has power to legislate in relation to trade and commerce.
e. The federal government has power to legislate in relation to property and civil rights.
2) Government regulation of business involves recognition of the fact that
a. federal laws are always preferable to provincial regulation.
b. cost-effectiveness is the sole goal of regulation.
c. regulation should take into account the burden of regulation on the businesses that must
comply.
d. unlimited competition is necessary for markets to function effectively.
e. government power to regulate is unlimited by any law.
3) The federal government does NOT have responsibility for
a. banking, interprovincial commerce, and coinage.
b. criminal law.
c. aviation and telecommunications.
d. interprovincial transport.
e. property and civil rights in the provinces.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
4) It can be said that the “trade and commerce” power of the federal government
a. allows the federal government to regulate any area of business activity.
b. never permits the federal government to regulate transactions taking place exclusively
within a province.
c. permits the federal government to regulate all insurance contracts.
d. potentially conflicts with the provincial power over “property and civil rights.”
e. permits the federal government to regulate local works and undertakings.
5) Which statement is MOST accurate?
a. Businesses in Canada are not protected by the Canadian Charter of Rights and
Freedoms.
b. The Canadian Charter of Rights and Freedoms protects natural persons alone.
c. The Canadian Charter of Rights and Freedoms protects private property and, to that
extent, offers limited protections to business.
d. The Canadian Charter of Rights and Freedoms offers limited protections for
corporations where corporations fall within the defined class of protected persons and the
purpose of the constitutional protection includes the protection of corporations.
e. The Canadian Charter of Rights and Freedoms gives businesses unlimited rights to
advertise and say whatever they want in their advertisements because they enjoy the right
of free speech.
6) Cavannelle Ltd is a new entrant in the smokeless cigarette market. It believes that its
smokeless cigarette product, “Cavan A+,” will do well in Canada given smoking bans
enacted recently by many municipalities and growing public awareness about the health
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
effects of regular smoking. The company therefore plots a pan-Canadian advertising
campaign to promote its product. Just before the rollout date, however, Health and Welfare
Canada announces a prohibition on new cigarette advertising. Cavanelle will
a. be able to rely on the Canadian Charter of Rights and Freedoms to argue that its
freedom of expression has been curtailed.
b. be able to rely on the Canadian Charter of Rights and Freedoms to argue that its
property has been taken.
c. be able to rely on the Canadian Charter of Rights and Freedoms to argue that the
advertising ban is discriminatory contrary to its equality rights.
d. be able to rely on the Canadian Charter of Rights and Freedoms to argue that its
advertising must be permitted in a free and democratic society.
e. not be able to rely on the Canadian Charter of Rights and Freedoms at all.
7) Mergers that are most likely to reduce competition are
a. vertical mergers.
b. horizontal mergers.
c. diversification mergers.
d. mergers between suppliers and their customers.
e. mergers between firms of the same size.
8) Under Canadian competition law, a private person can complain to the Competition
Tribunal regarding conduct of a business that violates the Competition Act
a. only when the conduct is a criminal offence.
b. any time the conduct is a criminal offence or a reviewable matter.
c. any time the conduct is a criminal offence, a reviewable matter or a dual category matter.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
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d. any time the conduct is a criminal offence, a violation of an order of the Competition
Tribunal, or constitutes certain reviewable practices.
e. in no circumstances can a private person ever make a complaint to this tribunal.
9) Demita Inc runs a bakery in La Ronge, Saskatchewan that sells bread, rolls, cakes, and
pastries. Demita bought the bakery from King’s Bakery Inc. In the sale agreement, Demita
agreed not to sell bakery products outside La Ronge. Business is good and Demita wants to
expand. Demita is not interested in competing with King’s, which now sells its products
exclusively in Regina, Saskatchewan. It wants to sell in other markets. Demita wants to
know if there is any way that she can successfully challenge the restriction on selling
outside La Ronge as a restraint on trade.
a. Probably. Restraints on trade are permissible, but they are scrutinized by the courts to
ensure that they do not unduly restrict competition. Here, restricting Demita to selling
bakery products in La Ronge is more restrictive than necessary to protect the commercial
interests of King’s.
b. Probably not. Restraints of trade are dealt with exclusively as criminal matters by the
Commissioner of Competition under the Competition Act.
c. Probably. The requirement is not linked to any valid public purpose but only the private
benefit of King’s.
d. Probably. The requirement constitutes a deprivation of property contrary to the Canadian
Charter of Rights and Freedoms.
e. Probably. The requirement is a regulatory offence.
10) Under the Competition Act, reference to “dual” category matters is taken to mean
a. matters that are criminal in nature but subject to civil penalties.
b. matters that are civil in nature but subject to criminal penalties.
c. purely regulatory offences.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
d. matters involving a combination of either criminal or civil offences and an alleged
violation of the Canadian Charter of Rights and Freedoms.
e. matters that may be pursued criminally or civilly at the discretion of the Commissioner of
Competition.
11) Edgardo runs a fish store in Toronto’s Kensington Market that purchases its products
from a wholesaler and sells to the public. Edgardo knows the market well and offers low
prices. Consequently, his store is always full of clients. Lately, he has been having
difficulty getting wild, as opposed to farmed, salmon. His wholesaler tells him that he will
not sell to him because his low prices are making other retailers look bad. In other words,
Edgardo is too much of a competitive threat to the industry. Under the circumstances, it is
MOST likely that Edgardo could complain to the Competition Bureau about
a. the reviewable practice of refusal to deal, whereby other fish retailers are trying to match
his prices so that they can drive him out of the market.
b. a criminal conspiracy to drive him out of the market.
c. the reviewable practice of market restriction
d. the reviewable practice of price maintenance because the wholesaler is trying to
influence upward the price at which Edgardo sells his fish, but only if the actions of the
wholesaler are having an adverse effect on competition in the market.
e. the criminal offence of price maintenance.
12) Marissa is the CEO of Motormax Inc, a generic auto parts manufacturer that does
business with several large auto manufacturers. Parts manufacturing is a highly competitive
business. Several years ago she was contacted by the CEO of a competitor who asked
whether Motormax would like to “go in with them.” Marissa did not understand what he
meant at the time and replied in the negative, but the more she thought about the incident
over the years she realized that the rival’s CEO was proposing a conspiracy to reduce
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
competition. She has begun to notice that the pricing of her competitors’ products is always
suspiciously the same as hers. Which of the following is TRUE?
a. Conscious parallel pricing by parts manufacturers is a criminal offence.
b. The actions of the other parts manufacturers is a criminal office only if an agreement to
lessen competition unduly can be proven.
c. Any agreement to intentionally fix prices is a criminal offence.
d. Any agreement to fix prices is a reviewable practice but not a criminal offence.
e. Agreements to fix prices are only reviewable if the price is lower than the cost of
production and the intention of the parties to the agreement is to drive competitors out of
the market.
13) Kimo runs a chain of health food supermarkets in Victoria, British Columbia. His
stores offer a number of products that other major grocery retailers have not stocked in the
past, meaning that Kimo has enjoyed a loyal and steadily growing clientele. Recently,
however, he has noticed that the major grocery retailer in Victoria, Global Foods, is
offering several of his products, such as dried rice snacks, organic herbs, and shiatsu oils, at
cut-rate prices that he cannot possibly match without losing money. Kimo suspects that
Global is selling these items below their cost in order to drive him out of business. What
kind of anti-competitive behaviour might Global be engaged in?
a. the reviewable practice of abuse of dominance
b. the criminal offence of bid-rigging
c. the reviewable practice of price maintenance
d. the criminal offence of misleading advertising
e. the criminal offence of conspiring to reduce competition
14) The Merex 200E is a new sports coupe designed to appeal to the highest bracket of
consumer. Each coupe costs at least $100 000. Mitch is a young stockbroker in Toronto
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
who notices the Merex 200E in an ad in the subway. It says, “0 to 60 in 2 seconds.” Mitch
sees the Toronto Merex dealer, takes the car out for a test spin, but does not have an
opportunity to test the acceleration. The sales representative assures him that the
acceleration promised in the advertisement has been verified by an independent testing
agency. Mitch, relying on the representative’s pitch, buys a hot red 200E and tries several
times to take the car up to 60 mph in 2 seconds, but with no success. Moreover, he
discovers that the engine stalls dangerously when accelerating rapidly. Which of the
following is most likely TRUE?
a. Merex could not be prosecuted for the offence of misleading advertising.
b. If Merex were prosecuted for the offence of misleading advertising, it could rely on a
defence of due diligence since it had retained an independent testing agency that had
verified the promised acceleration.
c. Merex could not be prosecuted for misleading advertising because accelerating so
quickly is dangerous.
d. Merex could be prosecuted for the offence of misleading advertising, but only by the
Commissioner of Competition.
e. Merex could not be prosecuted because the statement it made in the advertisement is
mere puffery.
15) Janelle Inc is an importer of luxury European fabrics based in Montreal. Because it
must fill containers with fabric in order to make them worthwhile to import, Janelle
requires that all of its retail customers buy two fabrics: one that they choose and one chosen
by Janelle. If Janelle is a major supplier in the market and its practice has an adverse effect
on competition, under the Competition Act, the practice may constitute
a. exclusive dealing.
b. market restriction.
c. a conspiracy to reduce competition unduly.
d. multi-level marketing.
e. tied selling.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
16) Monopoly is related to abuse of dominant position
a. because monopolization requires conspiracy and an intent to monopolize.
b. because for an abuse of dominance to occur, a firm must have substantial control over a
class or species of business and monopoly is one example of such control.
c. because abuse of dominant position occurs when conduct results in even a minor
reduction in competition.
d. because both are considered criminal matters under the Competition Act and are referred
to the Attorney General for prosecution.
e. because both are subject to the defence of due diligence.
17) Primex is a discount broker with offices across Canada. In recent years it has grabbed
more than 90 percent of the market for discount brokerage services through a number of
innovative practices. Its online services are second to none. The company also has a policy
of filling orders almost instantly. Other discount brokers are irked by what they see as
Primex’s abuse of its dominant position. They are worried Primex is grabbing more and
more market share by taking advantage of its presence in every significant town across
Canada. If a complaint was made that Primex was engaged in an abuse of dominance,
Primex could potentially rely on
a. the defence of due diligence.
b. no defences, and Primex’s behaviour would be considered an abuse of dominant position.
c. the defence of superior competitive performance.
d. the defence of vicarious liability.
e. the defence that it does not control the market because it does not have 100 percent of the
discount brokerage business.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
18) The threshold for pre-merger notification in Canada for certain transactions is met if
a. the value of the target firm or the assets being acquired exceeds $40 million or where the
combined revenues of the entities involved exceed $400 million per year.
b. the entities involved are engaged in bid-rigging and their combined revenues exceed
$400 million per year.
c. the entities involved are worth more than $100 million or their combined revenues
exceed $400 million per year.
d. the value of the target firm or the assets being acquired exceeds $73 million and the
combined assets or revenues of the entities involved and their affiliates exceed $400 million
per year.
e. there is an abuse of dominant position and the combined revenues of the entities involved
exceed $400 million per year.
19) What do the following business sectors have in common: investment, government
procurement, labour mobility, consumer-related measures and standards, agricultural and
food products, alcoholic beverages, natural resource processing, energy, communications,
transportation, and environmental protection?
a. They are immune from liability under the Competition Act.
b. These are all potential matters of both federal and provincial constitutional jurisdiction
for the regulation of business.
c. They are all areas in which Canada has a competitive advantage.
d. They are all areas of exclusive federal jurisdiction.
e. They are all areas of provincial jurisdiction.
20) Marianne Menzies, president of MenzTel Inc, fears that her principal supplier may be
up to no good in denying her access to its latest hot telecommunications technology. She
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
notices a number of new models available through her supplier’s retailer arm that are not
available to her and that are depriving her of business opportunities because there are no
suppliers of competing products with the same features. The supplier has told Menzies that
it will not sell to MenzTel. Menzies may
a. commence a court action against the supplier for damages related to lost sales.
b. commence a court action seeking immediate injunctive relief that compels her supplier to
sell her the new models.
c. apply directly to the Competition Tribunal to address the supplier’s refusal to deal, if
MenzTel is directly and substantially affected in its business due to its inability to obtain
supply of the product.
d. not apply directly either to the Competition Tribunal or a court concerning the matter.
e. pursue arbitration.
21) A key element of provincial consumer protection law across Canada is that
a. decisions under their administrative dispute settlement mechanism are not legally
binding.
b. all of those laws completely replace the common law relating to the sale of goods and
services to consumers.
c. the laws only prohibit uniformly pyramid selling.
d. generally, those consumer protection laws require disclosure of terms of credit and
prohibition of requiring consumers to pay for unsolicited goods.
e. all consumer contracts are required to be in writing.
22) Old West Inc exports Texan chili mix and other southwestern food products into
Canada from its manufacturing plant in San Antonio, Texas. Canada is its only foreign (ie
non-US) export market because Canadian tastes are similar to those of Texans and because
marketing and distribution practices are the same. Old West does not modify its design or
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
packaging for the Canadian market and does a thriving business. Nevertheless, it one day
finds itself the subject of a complaint from Ontario consumers who notice that Old West
products do not contain bilingual labelling. Old West is potentially in contravention of the
a. Consumer Labelling and Packaging Act.
b. Textile Labelling Act.
c. Hazardous Products Act.
d. Food and Drug Act.
e. Canadian Charter of Rights and Freedoms.
23) Horst Koehler is a German citizen who, like many Germans recently, has purchased
cottage property in the Annapolis Valley of central Nova Scotia. He is keen to enjoy the
unspoiled nature of the environment far from noisy, crowded Europe. The property he
purchases features some streams that run onto his land from adjacent properties that are
farms. Unfortunately, after the purchase, Horst finds that the streams are heavily
contaminated by pesticide usage at nearby farms and by progressive pollution of the water
table by a hog-farming operation. He may
a. not sue in tort because it is not likely that pesticide or other agricultural usage on the
adjacent properties would lower the value of his property.
b. not sue in tort because environmental damage may only be pursued under environmental
legislation.
c. not sue in nuisance because he does not drink the water from the streams.
d. sue in nuisance.
e. sue under federal environmental law.
24) Common law approaches to environmental protection are often inappropriate because
a. they are prohibited.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
b. they do not protect the rights of property owners.
c. they require court action, they do not account for damage to public property, and it is
often difficult to prove causation.
d. proving foreseeability is frequently problematic.
e. they are permitted only with prior authorization from the provincial or federal
governments.
25) Andy owns a chain of dry-cleaning stores in the Toronto area. Business is good and
continues to grow, but Andy is concerned about holding costs down. The Environmental
Protection Act makes it an offence to knowingly release a contaminant, such as dry-
cleaning fluid, which contains dangerous cancer-causing polychloral biphenals (PCBs), into
the environment. Instead, all used dry-cleaning fluid must be stored and recycled in a
provincially monitored “closed system” of disposal. Andy contravenes the law by flushing
several hundred litres of used fluid down the drain, causing death to hundreds of waterfowl
that nest near Toronto municipal reservoirs. Andy becomes subject to investigation after
provincial officials correlate the mysterious bird deaths with his underreporting of deposits
to the provincially monitored disposal scheme. A prosecution under the law ensues. Which
of the following is TRUE?
a. Andy is liable only if he knowingly violated the law.
b. Andy is liable even if he was careful to avoid the release of the contaminant.
c. Andy is not liable if the release of the contaminant was by one of his employees and not
him personally.
d. Andy is not liable if the birds would have died even if the contaminant had not been
released.
e. Andy is not liable unless it is proved that he knew of all the harm that could be caused by
his actions.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 25: Government Regulation of Business
26) Lincoln is thinking of building a new warehouse for his shipping company near the
airport in St. John’s, Newfoundland, on a site that he suspects was previously the location
of a paint factory. Lincoln believes this because a preliminary survey of the property
revealed moderate concentrations of lead and other chemicals in the soil as well as a
number of old paint bottles and jars. The site is attractively located close to the main
shipping terminal and Lincoln would like to buy the property and build. However, he is
worried about potential environmental liability. His best bet is probably
a. to complain to federal and provincial authorities.
b. to have a full environmental survey and impact study done, and to seek comfort letters
from federal and provincial environmental authorities before buying the property.
c. to have a full environmental survey and impact study done, and then if the risk of
liability is small, buy the property.
d. to buy the property, and then locate and sue the owners of the paint company.
e. buy the property and clean it up.
27) Lucinda is the sole shareholder and president of NailCo, a corporation that owns a
chain of manicure and pedicure salons in the lower mainland of British Columbia. She
visits most of NailCo’s outlets weekly. She comes to you, her lawyer, to confess that over
the past few months she has witnessed several of NailCo’s employees dump nail polish
down the drain on a number of occasions. Lucinda is now concerned that she and NailCo
may be liable for the environmental consequences of these actions even though she
personally did nothing. You would most likely advise Lucinda that
a. Lucinda should sue her employees.
b. she will have to comply with provincial legislation in future.
c. the corporation may be held liable for the environmental damage caused by its agents and
employees in the course of their duties and that the corporation only has a due diligence
defence if someone, like Lucinda, who is a directing mind and will of the corporation took
reasonable steps to avoid the offence.
d. the company is not vicariously liable for the environmental damage caused by its agents
and employees.
e. she should do nothing. Lucinda is not answerable for the independent actions of her staff.
