Canadian COMPETITION LAW

On November 10, 2011 the C.D. Howe Institute issued a report reviewing the Competition Bureau’s (the “Bureau”) enforcement of the criminal conspiracy offences of the Competition Act, its enforcement in relation to strategic alliances and policies regarding the issuance of binding advisory opinions.

The C.D. Howe Institute’s Competition Policy Council (the “Competition Council”), which held its second meeting on November 3, 2011 and provides “analysis of emerging competition policy issues, including those potentially faced by the federal Competition Bureau”, addressed the following questions:

1.  How can competition policy legislation and enforcement discourage truly anti-competitive agreements without discouraging healthy cooperation?

2.   What guidance should the Bureau provide to better define when a [competitor-competitor] agreement is likely to be subject to criminal prosecution?

3.  Are severe potential criminal sanctions for competitor agreements warranted?

The Competition Council generally concluded that the Bureau should better define and clarify its legal view on when ordinary business practices or strategic alliances will be treated as offences under the conspiracy provisions of the Competition Act.  In this regard, the Competition Council concluded that otherwise, businesses may be inhibited in their ordinary activities (or inclined to avoid entering into strategic alliances altogether that may benefit Canadian consumers).

Some of the key observations made by the Competition Council include:

– The possibility of severe criminal penalties, and the potential for damages and other costs associated with private actions, make clarity essential on what is considered to be an offence under section 45 of the Competition Act (criminal conspiracy agreements).

– The recently increased criminal penalties and civil damages under the Competition Act, and related uncertainty surrounding their potential application, increase the likelihood that legal chill will forestall socially beneficial business choices.

– Canadian firms currently lack a clear understanding of the circumstances under which competitor agreements will be subject to criminal penalties under the amended conspiracy provisions of the Competition Act.

– In the absence of active participation by the Bureau in conspiracy/cartel litigation there is a “greater risk that case law may develop that sets precedents that are not in the public interest.”

– Price-fixing and other cartel-like behaviour should remain subject to criminal prosecution; similarly, the activities prohibited under section 45 (price-fixing, market allocation and output restriction agreements between competitors or potential competitors) should be considered to be automatically illegal.

– However, to avoid deterring legitimate and potentially beneficial agreements, Canadian companies need to have a clearer understanding of when competitor-competitor agreements will be subject to criminal sanctions under the amended conspiracy provisions.

In summary, the Competition Council concluded that the Bureau should:

1.  Reinstate its practice of providing binding advisory opinions, when firms seek them, to confirm whether proposed conduct or an agreement among competitors would contravene the Competition Act and whether proceedings would take place under section 90.1.

(This recommendation is based on a shift in the Bureau’s policy regarding the issuance of binding advisory opinions earlier this year: “In May 2011, the Commissioner of Competition announced that while, ‘(i)n the past, the Bureau has issued written opinions that make a determination of whether or not sufficient information exists to initiate an investigation,’ in future the Bureau would announce only, ‘a determination of whether or not a provision of the Act is applicable to the proposed conduct.’”)

2.  Initiate criminal proceedings, where appropriate, and intervene in private actions to ensure that sound jurisprudence emerges to guide future firm behaviour.

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