The Application for Inquiry was filed with the Competition Bureau in mid Sept of 1999. A copy of this letter of support, containing the full text of the Application, was sent to over 150 Canadian card companies for them, their artists and suppliers to sign and send to the then Minister of Industry Canada, John Manley.
Konrad von Finckenstein
50 Victoria St
Hull, QC K1A 0C9
Dear Mr. von Finckenstein
As someone with a stake in the greeting card industry in Canada, I would like to support the recently filed application for inquiry into the business dealings of two US subsidiaries, Carlton Cards and Hallmark Cards Canada (hereafter, Carlton & Hallmark). These two companies control approximately 75% of the Canadian greeting card market. Over 150 Canadian card publishers and distributors compete for the remaining 25% of this 600 million dollar market.
Referring to Restrictive Trade Practices, part VIII, section 77. (2) of the Competition Act,
I believe grounds exist for the making of an order under Part VIII because both Carlton & Hallmark engage in "exclusive dealing" and Hallmark engages in "tied selling", and because these practices are widespread in the market, they are likely to (a) impede entry into or expansion of a firm in the market, (b) impede introduction of a product into or expansion of sales of a product in the market, and (c) have other exclusionary effects in the market.
With regard to the alleged "exclusive dealing", as defined in section 77. (a) (i); any practice whereby a supplier of a product, as a condition of supplying the product to a customer, requires that customer to deal only or primarily in products supplied by or designated by the supplier or the supplier's nominee:
Both Carlton & Hallmark routinely sign exclusive contracts with retail chain stores across Canada. In a recent random sampling of major chain stores, every one said that they had an exclusive contract with Carlton Cards or Hallmark Cards and would not stock other products. A list is supplied of 40 companies with a total of about 10,000 retail outlets which most Canadian card companies are unlikely to gain access to.
With regard to the alleged "tied-selling", as defined in section 77. (a) (ii); 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 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:
Hallmark is in the process of pressuring independently owned Hallmark Card shops to cut back the amount of space that they have traditionally used for independent card lines. The stores are told that if they do not do so they will not be able to continue buying Hallmark products at preferred rates. In 1998, Canadian Greeting Card Corp, one of Canada's largest distributors, lost much of their space in Hallmark stores. They went bankrupt early this year. Everyone who has been selling to Hallmark shops has been adversely effected.
Referring to Abuse of Dominant Position, part VIII, section 79. (1) of the Competition Act,
I believe grounds exist for the making of an order under Part VIII because Carlton & Hallmark, with about 75% of greeting card sales in Canada, (a) do substantially or completely control, throughout Canada, a class or species of business, and because (b) Hallmark has engaged in or is engaging in a practice of anti-competitive acts, and (c) the practice has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market.
With regard to "anti-competitive act", as defined in section 78. (b); acquisition by a customer of a supplier who would otherwise be available to a competitor of the customer, for the purpose of impeding or preventing the competitor's entry into, or eliminating the competitor from, a market:
The Canadian company, Diversified International, pioneered the sale of the British card lines Andrew Brownsword and Gordon Fraser in Canada and did a lot of business with Hallmark stores. Five years ago Hallmark bought Andrew Brownsword and Gordon Fraser. In Nov of 1998, Hallmark took the distribution of the two lines away from Diversified International. In Feb of 1999, Diversified International, another important Canadian distributor, went bankrupt.
Hallmark has also recently acquired Sunrise Greetings, out of the US, a very successful publisher and distributor. Out of this company they have formed InterArt Holding Corp. Through this arm, they are acquiring and/or distributing other successful independent brands; selling them into the market niches that smaller publishers and distributors have developed over the years.
The domination of the Canadian card market by Carlton & Hallmark is having a limiting and often fatal effect on hundreds of small and medium sized Canadian companies; publishers, distributors, printers, envelope makers and rack makers. It is not acceptable that we are relegated to the margins of the marketplace. Thank you for your attention to this important matter.
Signed the_____ day of__________, 1999.