Canadian COMPETITION LAW

June 12, 2014

Several days ago I posted the first of a series of short notes discussing some of the more interesting, frequent and important competition and advertising law questions I’ve received over the past few years (for the first post see: here).

Today I thought I would post a few more “real life” competition/advertising law FAQs – i.e., not some hypotheticals worked up by a lawyer, but a few more questions from actual files, seminars/conferences and my “preliminary” file folder (anonymized of course with the questions tidied up a little).

Like my first post, these questions reflect a number of different aspects of Canadian competition and advertising laws and the types of files I tend to work on.

A Few Interesting, Frequent and Important
Competition and Advertising Law Questions – Part II

Q:  COMPETITION LAW & JOINT VENTURES: “I understand that ‘cartels’ (e.g, price-fixing agreements) between competing companies are illegal, but what about ‘joint ventures’?”  A: I get this question a few times a year on average. It’s an excellent question and, like other major jurisdictions such as the United States, European Union, etc., determining whether or not a “joint venture” or other strategic alliance among competing companies is likely or not to raise any serious/credible competition law issues can be a bit of a complex and nuanced exercise. In general, this is because many countries, including Canada, make certain categories of “hard core” or “naked” agreements between competitors illegal (such as bare price-fixing, market division or bid-rigging agreements), while recognizing that many other types of commercial agreements among competitors can be, and often are, pro-competitive and should be encouraged and not penalized. The devil, of course, tends to be in the detail and the line between “per se” illegal and potentially pro-competitive commercial agreements and arrangements involving competitors (or potential competitors, such as in dual distribution arrangements) can be a challenging task.

In Canada, with the exception of several specific merger control exemptions, there are no standalone joint venture provisions under the Competition Act.  In general, joint ventures (i.e., collaborations between competitors or companies at different levels of a supply chain) may require a review or trigger issues under several criminal or civil provisions of the Act. These include: (i) the criminal conspiracy or civil agreements provisions of the Act (sections 45 or 90.1), where a joint venture involves an agreement among competitors (or potential competitors); (ii) the civil abuse of dominance provision of the Act (section 79), where a joint venture involves a firm or firms with market power and may prevent or lessen competition substantially; or (iii) the merger provisions of the Act (under Parts VIII and IX), where a joint venture constitutes a merger that may raise substantive market effects issues or require pre-merger notification. Joint ventures are, therefore, fact specific, can be complex and require a consideration of the potential application of several different provisions of the Act depending on the facts.

For the Competition Bureau’s key guidelines addressing agreements among competitors see: Competitor Collaboration Guidelines. For some other key points about competition law and joint ventures in Canada, as well as a few best practices to minimize risk, see: here.

Q:  CONTEST LAW: “Will one set of contest rules (e.g., a set of Canadian rules) work for a global promotion? For a North America wide promotion?”  A: No. This is a question I receive quite frequently given that I work on quite a few contests and other similar promotions. The short answer here is that contest law, in fact advertising law generally, is “jurisdiction specific” (i.e., laws of different countries and/or provinces or states apply to promotions). For this reason, it is important to first ask “where do you want to run the promotion” (and often as well on what media / channels) before deciding what laws may apply. Generally speaking, when I prepare terms and conditions and other materials for a promotion I will begin with Canadian rules (excluding Quebec), add Quebec if desired by the promoter/agency and then add the United States and potentially other jurisdictions if needed. And, to dispel a bit of a myth, adding Quebec and/or the United States to a promotion really isn’t very difficult (though there are some additional requirements, such as language additions to terms and conditions, translation and a very basic filing requirement in Quebec, etc.).

What happens if you use one set of contest rules for a purportedly global contest? I commonly tell clients that one or more of a few things might happen: first, nothing; second, a legal challenge in a country (or state/province) where the law has not been complied with; third, an investigation or inquiry by a regulator (that may involve fines or penalties); and/or some potential related embarrassment and bad will for the brand.

Note to contest sponsors and promoters (and their agencies): it is very prudent to get some legal advice in the places where you want to run a promotion from qualified counsel.

Q:  COMPETITION LAW & CARTELS: “You talk about avoiding discussing “competitively sensitive information” with competitors. But isn’t that just ‘water cooler’ talk? Another way to gather competitive intel?”  A: In Canada, with one exception (the potential application of section 90.1 of the Competition Act, the Act’s “civil agreements” section) discussing or exchanging competitively sensitive information with competitors, whether in a social setting, association, board meeting or otherwise, is not in itself illegal. As I often tell clients in all industries, however, like competition counsel around the world, offhand chats with competitors about things like pricing, markets, customers, market shares, future pricing and marketing strategies, output, etc. is generally considered a very poor decision and potentially very high risk. Why? Because Canadian competition laws, like many other countries, make it a criminal offence for competitors to agree to fix prices, divide/allocate markets, restrict supply/output or coordinate bids. Discussing competitively sensitive topics can either lead to an arrangement that violates the competition laws or make it easier to challenge and alleged improper arrangements involving competitors.

Note to companies and associations: Competition compliance programs commonly do, and should, include “conduct of meeting” and “information exchange” guidelines to minimize cartel/conspiracy risk. Another common area to adopt some basic compliance precautions is around surveys and benchmarking (particularly in the association context) to avoid collecting and distributing competitively sensitive information among competitors.

Q:  ANTI-SPAM LAW (CASL): “Can we send e-mails (commercial electronic messages) to people or companies if it’s relevant to their business?”  A:There is a category of implied consent for business-to-business (B2B) communications under Canada’s impending CASL where a person has conspicuously published their electronic address without a statement that they do not want to receive unsolicited commercial electronic messages and the message is “relevant to their business, role, functions or duties in a business or official capacity.” As such, to meet this category of implied consent, one needs to make sure that e-mail addresses on the web are conspicuously published, do not indicate that recipients do not wish to receive unsolicited commercial messages (CEMs) and that communications are relevant to the recipient’s work (i.e., relevant to their “business, role, functions or duties in a business or official capacity”).

More specifically, subsection 10(9)(b) of CASL, which is one category of implied consent under the new legislation, provides: “(9) Consent is implied for the purpose of section 6 only if … (b) the person to whom the message is sent has conspicuously published, or has caused to be conspicuously published, the electronic address to which the message is sent, the publication is not accompanied by a statement that the person does not wish to receive unsolicited commercial electronic messages at the electronic address and the message is relevant to the person’s business, role, functions or duties in a business or official capacity”.

Industry Canada’s Regulatory Impact Analysis Statement, which is not law but comments on the law, states: “Some stakeholders were also concerned that they would be unable to contact former business clients outside the 24 month period for existing business relationships.  If your former business or non-business contact disclosed their e-mail address or other electronic address to you, or they conspicuously published their address, then you may have implied consent to contact them as long as the message is relevant to their work, and they did not indicate that they don’t want to receive commercial electronic messages at that address.”

The Federal Government’s CASL FAQs further state: “You may have their implied consent to send them CEMs, as long as: the message relates to the recipient’s role, functions or duties in an official or business capacity; and the recipient has not made a statement … that they do not wish to receive promotional or marketing messages (CEMs) at that address”.

It is important, however, to point out that the scope and meaning of “relevant to their business” is not defined or settled yet (i.e., the line between B2B communications and electronic marketing to consumers) and the CRTC has indicated that it will take a “case-by-case” approach to this category of implied consent.  For example, in the CRTC’s CASL FAQs, under its discussion of one of the B2B categories of implied consent it states: “compliance will be examined on a case-by-case basis in light of the specific circumstances of a given situation”.

Categories of implied consent aside (including the B2B category discussed above), electronic messages unless completely exempt from the new law must nevertheless comply with the prescribed “form” and unsubscribe requirements for CEMs that are set out in sections 6 and 11 of CASL and the CRTC’s regulations. In addition, there is also a general requirement (i.e., onus) to document and prove (if necessary) consent and recipients, including B2B recipients, may still unsubscribe following the receipt of a CEM.

Note to electronic marketers: The above “question” that I received recently illustrates how detailed Canada’s upcoming CASL is to apply and interpret (as well as one, of many, uncertainties regarding its scope at this stage). As such, it is important to review electronic marketing in detail, including electronic newsletters, e-mail solicitations, online subscriptions and social media marketing. Also, one should not assume that one category of implied consent or another exception will remove all CASL compliance obligations.

Q:  MISLEADING ADVERTISING: “Misleading advertising can be criminal? You’re kidding right?” [Or something to that effect]  A: Over the past few years I’ve met with some surprise when I tell people, including clients and opposing counsel, that misleading advertising in Canada can be a criminal offence. In several cases, somewhat surprisingly, I’ve had opposing counsel strenuously question whether this was the case and express significant disbelief. In fact, Canada’s Competition Act includes a number of civil and criminal misleading advertising and deceptive marketing related provisions, the breach of which are potentially subject to civil fines, criminal fines, imprisonment and other court ordered and negotiated remedies. Somewhat unusually in Canada, as I tell clients and others that ask, you’re more likely to be convicted and go to jail in Canada for deceptive or fraudulent advertising than for participating in a criminal price-fixing agreement or other cartel arrangement (though this is changing with several recent changes to the law and a heightened desire by the Competition Bureau to seek individual liability for cartel conduct).

Q:  MISLEADING ADVERTISING: “Can I sue for misleading advertising?”  A: Yes. I have a bit of a soft spot for this question given that, while some litigators know this very well, many don’t (and many commercial lawyers and clients don’t either). While there are a number of provisions of Canada’s federal Competition Act that cannot be the basis for civil actions (e.g., the civil abuse of dominance provisions of the Act, Canada’s equivalent to the U.S. monopolization), misleading advertising is not one of them. Based on the combination of sections 36 and 52 of the Competition Act (the civil actions provision and criminal misleading advertising offence), or section 36 in combination with any other criminal offence under Part VI of the Act, persons that have suffered actual loss or damage as a result of false or misleading representations can sue and seek to recover damages for their loss.

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