Canadian COMPETITION LAW

In the most noteworthy Canadian competition/antitrust law development today, the Competition Bureau announced that a settlement (consent agreement) had been reached in this case, one of two contested mergers in the past few years in Canada (together with the recent CCS hazardous landfill case which was recently decided by the Competition Tribunal and is currently on appeal).

This case, which was to scheduled to be heard in early November before the Competition Tribunal (see: here and here) was noteworthy for being one of only two contested mergers currently underway in Canada and for representing the first challenge, if it had proceeded, of agreements (in this case joint venture agreements between Air Canada and Continental) under Canada’s recently enacted civil agreements provision of the Competition Act (section 90.1 – which, together with section 45, comprises Canada’s new two-track conspiracy/cartel regime).

The Bureau had been challenging three existing Air Canada / Continental “coordination agreements” under section 90.1 of the Competition Act, under which the Bureau can apply to the Competition Tribunal for remedial orders where agreements between competitors prevent or lessen (or are likely to prevent or lessen) competition substantially in one or more relevant markets.

There has not yet been a contested section 90.1 case since this new “civil agreements” provision came into force (which is thought may apply to a range of commercial agreements that, while they may not constitute “hard core” cartel type agreements under section 45 of the Act – i.e., price-fixing, market division/allocation and output restriction agreements – may nevertheless prevent or lessen competition substantially in some cases).

While it is thought that the new section 90.1 may apply, in some instances, to joint venture, franchise, licensing, information exchange and research and development agreements, among others, where competition is substantially impacted, the boundaries of section 90.1 now remain as yet unknown and untested.

In making the announcement the acting Commissioner of Competition, John Pecman (who has stepped in as interim Commissioner following Melanie Aitken’s resignation earlier this fall), said:

“The Competition Bureau announced today that it has reached an agreement with Air Canada and United Continental Holdings, Inc. that will protect consumers and preserve competition on 14 key, high-demand air passenger routes between Canada and the United States. Air Canada and United Continental currently coordinate certain key aspects of competition via three existing agreements and intend to enter into a joint venture that will, in effect, merge their flight operations on routes between Canada and the U.S.  ‘The Consent Agreement the Bureau reached with Air Canada and United Continental will ensure that passengers do not face higher prices and less choice on high-demand routes between Canada and the U.S. resulting from the airlines’ proposed joint venture and coordination agreements,’ said John Pecman, Interim Commissioner of Competition.”

According to the Bureau, the consent agreement negotiated with Air Canada and Continental addresses potential competition concerns in 14 Canada/U.S. city pair routes, including addressing coordination on prices, seats, pooled revenues and the exchange of competitively sensitive information.

Also consistent with the Bureau’s recently stepped up monitoring of negotiated consent agreements, an independent monitor is to be appointed to monitor the merging parties’ compliance with the consent agreement.

For the Bureau’s backgrounder and the consent agreement in this case see: Competition Bureau Reaches Agreement with Air Canada and United Continental and Consent Agreement.

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