Thursday, December 20, 2007

Kraft #2 - Richard Gold's Op-Ed

With the author's blessing, here's the whole piece. And it's very good indeed. Bravo, Richard!
How the Grinch stole chocolate

E. Richard Gold
Globe and Mail (Toronto)
December 19, 2007, p. A25

E. RICHARD GOLD Director, Centre for Intellectual Property Policy,
McGill Faculty of Law

Who's the Holiday Grinch? I nominate Kraft Canada for trying to
deprive Canadian children of chocolate bars.

This month, Kraft Canada sued a small Montreal company, Euro-
Excellence, for the second time after having lost its first case last
summer before the Supreme Court of Canada. The Competition Bureau needs to stop this abuse.

Euro-Excellence imports Toblerone and Cote d'Or chocolate bars from Europe. It pays full price to Kraft Canada's European parent company, the manufacturer of the bars. Kraft wants to stop the importation of its bars into Canada to keep prices here high. Cote d'Or bars sell for about half the price in France than they do in Canada.

Kraft is also trying to keep the Canadian market starved for chocolate by reducing the flavours it allows into the country, again leading to higher prices from Canadian consumers. At a time when Canadians are already paying too much for imports due to the high Canadian dollar, this smacks of exploitation.

Kraft is relying on a section of Canada's Copyright Act that has nothing to do with chocolate. The section aims at preventing the importation of illicit copies of books, CDs and other creative works into Canada from countries where musicians and authors receive no payment. Kraft says Euro-Excellence is violating Kraft's copyright in its logo when Euro-Excellence imports chocolate bars into Canada.

Kraft lost this case after having dragged Euro-Excellence through the courts for the past five years. Not satisfied with a ruling against it from the nation's highest court, Kraft has started another suit, presumably knowing that Euro-Excellence probably does not have the resources for another fight. This is exactly the kind of misuse of the law that judges say is undermining the public's respect for the justice system.

Kraft is trying to get around the Supreme Court's decision through a technical legal change in the relationship between Kraft's parent company in Europe and itself. The only reason for this change - from an exclusive licence to an outright sale of the Canadian rights in the logo - was to sue Euro-Excellence. What is particularly offensive is that the Federal Court of Appeal indicated only a few years ago that this sort of manoeuvre could well violate Canada's competition laws. When the only reason behind the transfer of copyright is to prevent competition from other importers, the transfer is suspect.

Nonetheless, Kraft did exactly this.

While Euro-Excellence could fight the case and, given the law, win, it is unfair to make this company pay all the expenses of a second long court battle to protect Canadian consumers. And make no mistake: It is Canadian consumers who lose when international companies such as Kraft prevent the importation of perfectly legitimate, fully paid products available on the international market. Free trade was designed to bring more competition and better value to consumers. Kraft's action seeks to prevent this.

If Kraft succeeds, customs officials will have to add chocolate bars to the list of items that cannot be brought into Canada. I must admit to a personal interest: Last month, I imported four Cote d'Or chocolate bars from France. If Kraft is right in its argument, then I have breached copyright law and customs officials should have seized them. Absurd.

While access to chocolate bars at reasonable prices may not be Canada's highest priority, the precedent Kraft is setting is deeply worrisome. Kraft and other international corporations are large and profitable because of the openness of world markets. It undermines public confidence in trade and in the fairness of the market when these same companies bully small competitors out of the market to maintain artificially high prices. The Competition Bureau needs to send a message to Kraft and other international companies contemplating similar anti-competitive practices that their conduct is not welcome here.


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