Digital Copyright Canada

  I am sending a copy of this letter directly to Compbureau@ic.gc.ca to
hopefully speed up this investigation.

  I also sent in a complaint (Dated Aug 10 with text posted at
http://www.flora.org/dmca/forum/42 ) which includes my full contact
information (Also available at http://www.flora.ca/ ).

  I would like to be advised if a sufficient number of complaints has been
sent in to start the investigation.  I have contemplated setting up an
online petition to collect large numbers of Canadian consumer signatures
to a complaint as part of a (just being created) "Canada high-tech
Competition" site <http://www.flora.org/competition/> , but would delay
this if the Competition Bureau is already investigating this problem.

On Fri, 28 Sep 2001, Tom A. Trottier wrote:

> Hi all,
> 
> A fellow at the Competition bureau phoned me back asking for specific 
> examples where the DVD cartel is restricting competition.
> 
> I imagine it impedes businesses from importing DVDs from other 
> countries and selling or playing them in Canada.
> 
> Does anyone have some specific instances?

  While the regional encoding is itself a restriction worthy of
investigation and prosecution, the most critical problem in my mind is the
'tied selling' aspect which is part of section 77 of the competition act.

   "(a) any practice whereby a supplier of a product, as a condition of
   supplying the product (the "tying" product) to a customer, requires
   that customer to

   (i) acquire any other product from the supplier or the supplier's 
   nominee, or "

  In this case, viewing the content of an already-purchased CSS encoded
DVD is tied to the purchase (directly or indirectly) of a license to the
CSS system.  Consumers should be able to purchase a DVD video without
needing to purchase a CSS license, and this is what is being disallowed by
the DVD-CCA cartel.

  The requirement for a CSS license, and the claim the software to
implement the license needs to be kept secret
<http://www.eff.org/IP/Video/MPAA_DVD_cases/>, effectively creates an
insurmountable barrier to entry into the DVD-player market any purely Open
Source or Free-software based player.  This licence requirement would also
remove from entry into the market any "format conversion" devices (DVD-CSS
to NTSC-tape, DVD-CSS to DVD-unscrambled, DVD to MPEG for home-viewing,
etc) or any other technologies that would protect consumer "fair dealings"
rights as they relate to any copyright content encoded in the CSS format.
There may also be other restrictions the cartel could place on the
purchase of a DVD-CSS license, and any of those restrictions will restrict
entry to the player market.

  With the vast majority of CD's being encoded in the DVD-CSS system, and
with this insurmountable barrier to entry into the DVD player market by
any DVD-player not licensed by the DVD-CCA, you can not see any 'examples'
given that an alternative DVD player market simply cannot exist.

  The regional-encoding is a secondary issue, but the one that has most
bothered Australia given that it effectively kills the trade in
CSS-encoded DVD's cross regions.

  The NTSC/PAL conversion issue was one barrier they have had to face in
the past that made trade inconvenient.  In this case it was a legitimate
technology standard difference that could be handled with copyright "fair
dealings" which would allow a consumer to purchase an NTSC movie and
legally convert it to PAL for home-viewing.  PAL is also the video
standard for considerably large parts of the world, and thus this format
difference only inconvenienced trade with one region (Primarily North
America which uses NTSC).

  In the case of DVD-CSS regional codes it is an arbitrary barrier to
trade created by the DVD-CCA cartel.  With the USA's DMCA law, and the
extra-jurisdictional prosecution of foreign citizens for violation of this
highly controversial foreign law, the "fair dealings" rights necessary to
allow home conversions of DVD-CSS CD's to other formats has been
effectively circumvented by the cartel.

  It is important to note that the DVD-CCA needs to be correctly
understood not as a "Copy Control Association" as their name incorrectly
implies, but a "DVD player Control Association" which is in fact what the
cartel does.  The DVD-CSS technology does not in any way restrict the
bit-for-bit copying of DVD CD's.

  As a reminder to those reading this message in the public forum, here is
the text of section 77 of the competition act:  
http://laws.justice.gc.ca/en/C-34/

---cut---

   77. (1) For the purposes of this section,

   "exclusive dealing" «exclusivité»

   "exclusive dealing" means

   (a) any practice whereby a supplier of a product, as a condition of
   supplying the product to a customer, requires that customer to

   (i) deal only or primarily in products supplied by or designated by
   the supplier or the supplier's nominee, or

   (ii) refrain from dealing in a specified class or kind of product
   except as supplied by the supplier or the nominee, and

   (b) any practice whereby a supplier of a product induces a customer to
   meet a condition set out in subparagraph (a)(i) or (ii) by offering to
   supply the product to the customer on more favourable terms or
   conditions if the customer agrees to meet the condition set out in
   either of those subparagraphs;

   "market restriction" «limitation du marché»

   "market restriction" means any practice whereby a supplier of a
   product, as a condition of supplying the product to a customer,
   requires that customer to supply any product only in a defined market,
   or exacts a penalty of any kind from the customer if he supplies any
   product outside a defined market;

   "tied selling" «ventes liées»

   "tied selling" means

   (a) any practice whereby a supplier of a product, as a condition of
   supplying the product (the "tying" product) to a customer, requires
   that customer to

   (i) acquire any other product from the supplier or the supplier's
   nominee, or

   (ii) refrain from using or distributing, in conjunction with the tying
   product, another product that is not of a brand or manufacture
   designated by the supplier or the nominee, and

   (b) any practice whereby a supplier of a product induces a customer to
   meet a condition set out in subparagraph (a)(i) or (ii) by offering to
   supply the tying product to the customer on more favourable terms or
   conditions if the customer agrees to meet the condition set out in
   either of those subparagraphs.

   Exclusive dealing and tied selling

   (2) Where, on application by the Commissioner, the Tribunal finds that
   exclusive dealing or tied selling, because it is engaged in by a major
   supplier of a product in a market or because it is widespread in a
   market, is likely to

   (a) impede entry into or expansion of a firm in a market,

   (b) impede introduction of a product into or expansion of sales of a
   product in a market, or

   (c) have any other exclusionary effect in a market,

   with the result that competition is or is likely to be lessened
   substantially, the Tribunal may make an order directed to all or any
   of the suppliers against whom an order is sought prohibiting them from
   continuing to engage in that exclusive dealing or tied selling and
   containing any other requirement that, in its opinion, is necessary to
   overcome the effects thereof in the market or to restore or stimulate
   competition in the market.

   Market restriction

   (3) Where, on application by the Commissioner, the Tribunal finds that
   market restriction, because it is engaged in by a major supplier of a
   product or because it is widespread in relation to a product, is
   likely to substantially lessen competition in relation to the product,
   the Tribunal may make an order directed to all or any of the suppliers
   against whom an order is sought prohibiting them from continuing to
   engage in market restriction and containing any other requirement
   that, in its opinion, is necessary to restore or stimulate competition
   in relation to the product.

   Where no order to be made and limitation on application of order

   (4) The Tribunal shall not make an order under this section where, in
   its opinion,

   (a) exclusive dealing or market restriction is or will be engaged in
   only for a reasonable period of time to facilitate entry of a new
   supplier of a product into a market or of a new product into a market,

   (b) tied selling that is engaged in is reasonable having regard to the
   technological relationship between or among the products to which it
   applies, or

   (c) tied selling that is engaged in by a person in the business of
   lending money is for the purpose of better securing loans made by that
   person and is reasonably necessary for that purpose,

   and no order made under this section applies in respect of exclusive
   dealing, market restriction or tied selling between or among
   companies, partnerships and sole proprietorships that are affiliated.

   Where company, partnership or sole proprietorship affiliated

   (5) For the purposes of subsection (4),

   (a) one company is affiliated with another company if one of them is
   the subsidiary of the other or both are the subsidiaries of the same
   company or each of them is controlled by the same person;

   (b) if two companies are affiliated with the same company at the same
   time, they are deemed to be affiliated with each other;

   (c) a partnership or sole proprietorship is affiliated with another
   partnership, sole proprietorship or a company if both are controlled
   by the same person; and

   (d) a company, partnership or sole proprietorship is affiliated with
   another company, partnership or sole proprietorship in respect of any
   agreement between them whereby one party grants to the other party the
   right to use a trade-mark or trade-name to identify the business of
   the grantee, if

   (i) the business is related to the sale or distribution, pursuant to a
   marketing plan or system prescribed substantially by the grantor, of a
   multiplicity of products obtained from competing sources of supply and
   a multiplicity of suppliers, and

   (ii) no one product dominates the business.

   When persons deemed to be affiliated

   (6) For the purposes of subsection (4) in its application to market
   restriction, where there is an agreement whereby one person (the
   "first" person) supplies or causes to be supplied to another person
   (the "second" person) an ingredient or ingredients that the second
   person processes by the addition of labour and material into an
   article of food or drink that he then sells in association with a
   trade-mark that the first person owns or in respect of which the first
   person is a registered user, the first person and the second person
   are deemed, in respect of the agreement, to be affiliated.

   R.S., 1985, c. C-34, s. 77; R.S., 1985, c. 19 (2nd Supp.), s. 45;
   1999, c. 2, ss. 23, 37, c. 31, s. 52(F).

---
 Russell McOrmond, Internet Consultant: <http://www.flora.ca/>
 See http://weblog.flora.org/ for announcements, activities, and opinions
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Re: [Cdn-DMCA] DVD cartel examples sought

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