Canadian COMPETITION LAW

SWEEPING CANADIAN COMPETITION ACT
AMENDMENTS (BILL C-59) PASSED JUNE 20, 2024

On June 20, 2024, Bill C-59 was passed (the Fall Economic Statement Implementation Act, 2023), which introduced the third of three significant rounds of amendments to Canada’s federal Competition Act in two years (together with Bill C-19 and Bill C-56). This new round of amendments to the Competition Act completes a sweeping overhaul of the Competition Act across virtually all key provisions of Canada’s competition legislation. These amendments are also the most significant changes to Canadian competition law since the modern Competition Act came into effect in 1986 replacing the former Combines Investigation Act.

The Bill C-59 amendments, among other things, strengthen the Competition Bureau’s powers to enforce key deceptive marketing provisions of the Competition Act (e.g., relating to drip pricing, performance claims and ordinary selling price (OSP) claims), strengthen private party rights to seek Competition Tribunal remedies (e.g., for civil deceptive marketing and violations of the civil agreements provisions of the Act), introduce new penalties (e.g., administrative monetary penalties for violating the civil agreements provisions of the Act and for reprisal actions penalizing individuals for complying with the Act) and introduce a new clearance regime for environmental protection related agreements. Canada’s Competition Act merger review regime was also substantially overhauled, eliminating the efficiency defence, introducing market share presumptions and a more restrictive remedial test for restoring competition.

These amendments, together with those enacted in June 2022 and December 2023 (Bill C-19 and Bill C-56), increase the potential competition law risk for companies, trade and professional associations and other entities, particularly those without credible and effective competition law compliance programs and that have not reviewed their business practices to reflect Canada’s new competition laws. For the Competition Bureau’s summary of the June 20, 2024 Bill C-59 amendments to the Competition Act, see: Guide to the June 2024 amendments to the Competition Act (June 25, 2024).

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Competition Bureau Preliminary Guidance on the Mergers
and Restrictive Trade Practices Provisions of the Competition Act

On November 7, 2024, the Competition Bureau issued preliminary guidance relating to the recent changes to the provisions on mergers and restrictive trade practices under the Competition Act – see:  here.

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OVERVIEW OF CANADIAN COMPETITION LAW
COMPLIANCE FOR TRADE/PROFESSIONAL ASSOCIATIONS

“A credible and effective compliance program also plays a crucial role for trade associations because they face unique compliance issues. Given that an association provides a forum where competitors collaborate on association activities, trade associations are exposed to greater risks of anti-competitive conduct. A number of past Bureau cases have involved trade associations that were engaged in agreements to harm competition. It is critical that trade associations implement credible and effective programs with strict codes of ethics and conduct and appropriate procedures and compliance steps to prevent improper conduct and to protect the trade association and its members from being used as a conduit for illegal activities.”

(Canadian Competition Bureau)

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Canada’s federal Competition Act can apply to many trade and professional association activities, including board of director and membership meetings, membership criteria and member discipline, member related industry surveys and benchmarking exercises, trade/professional association codes of conduct and dealings with suppliers and customers.

While trade and professional associations can, and frequently do, serve many legitimate industry-related purposes, because association activities typically involve direct interaction between competitors it is prudent for association executives, members and their advisors to take basic steps to proactively reduce potential competition law risk.

The federal Competition Bureau has commenced many civil and criminal trade and professional association related enforcement matters, including in the areas of conspiracy (cartels), bid-rigging and abuse of dominance.

The Bureau also regularly reminds associations and their leadership of the types of activities that can raise potential competition law concerns and the importance of Canadian competition law compliance for associations.

These include the Competition Bureau’s Trade Associations and the Competition Act (which sets its compliance recommendations relating to key types of association activities), Competitor Collaboration Guidelines (which sets out its general position for enforcing the criminal conspiracy and civil agreements provisions of the Competition Act under sections 45 and 90.1) and its Compliance Hub (which sets out its position relating to Canadian competition law compliance programs and policies).

For example, in the Competition Bureau’s Compliance Hub it recommends to only “participate in trade association activities if the association implements a credible and effective compliance program”.

The Competition Bureau also makes a number of competition law compliance recommendations for trade and professional associations in its Trade Associations and the Competition Act online resource, including recommending that associations “establish an effective [competition law] compliance program to ensure the association and its members comply with the Competition Act.”

For more general information about key provisions of the Competition Act that can apply to trade and professional association activities, see: Associations, Abuse of Dominance, Bid-Rigging, Conspiracy (Cartels), Misleading Advertising, Price Maintenance and Refusal to Deal.

CANADIAN COMPETITION LAW COMPLIANCE TIPS
FOR TRADE AND PROFESSIONAL ASSOCIATIONS

The following are some key tips for trade and professional associations to comply with Canadian competition law:

Adopt a Credible and Effective
Competition Law Compliance Program

Trade and professional associations should adopt a credible and effective competition law compliance program.

Compliance programs are both part of the obligations owed by directors and officers to their corporations and, if adopted and followed, play an important role for associations to mitigate potential competition law risk.

Implementing a credible and effective competition law compliance program should be at the top of the compliance list for all trade and professional associations.

Competition compliance program options for trade and professional associations range from formal compliance programs, which encompass all association activities to compliance guidelines for key activities based on the potential competition law risk (e.g., board of director and other meetings, industry surveys and benchmarking, information exchange exercises and specific initiatives that may raise competition law issues, such as joint negotiations with suppliers or customers and proposed member-related joint ventures).

Some of the key benefits for an association of a competition law compliance program include reducing the risk of violating the Competition Act, reducing the costs of investigations and proceedings should they occur and potentially mitigating penalties.

Association members (e.g., companies and their personnel) may also consider requiring that any association have a credible and effective competition law compliance program to participate in association activities.

For more information about competition law compliance programs, see: Compliance.

Prepare Written Agendas and Meeting Minutes
For Trade and Professional Association Meetings

Trade and professional associations should prepare written agendas for all meetings involving competitors (including board of director meetings) and meeting minutes.

Discussions at meetings should also stay within the boundaries of legitimate meeting agenda items and discussions or exchanges of competitively sensitive information should be avoided, including discussions of current or future member pricing, costs, individual customers and suppliers, markets, market shares, output, competitive bidding and business or strategic plans.

Where some potentially competitively sensitive information may be required to be exchanged among competitors (e.g., in relation to legitimate industry surveys or benchmarking exercises), appropriate precautions should be taken to minimize potential competition law risk, such as adopting and following information exchange guidelines.

The Competition Bureau recommends that trade and professional associations provide a clear copy of the agenda to participants before meetings.

For more information, see: Information Exchanges. See also: Competition Bureau, Trade Associations and the Competition Act and Competition Bureau, Compliance Hub.

Adopt Conduct of Meeting Guidelines
For Trade and Professional Association Meetings

Adopting and strictly following conduct of meeting guidelines is an important and key proactive step to reduce potential competition law risks for trade and professional associations.

Such guidelines commonly include restrictions on the exchange of competitively sensitive information and topics that may lead to criminal conspiracy risks under section 45 of the Competition Act (e.g., discussions relating to member pricing, markets, concerted refusals to deal or limiting the production or supply of goods or services).

For more information, see: Information Exchanges, Conspiracy (Cartels), Conspiracy FAQs and Refusal to Deal.

Conduct of meeting guidelines should also address steps to take if inappropriate discussions or activities arise during board of director, conference or other association meetings or events, including when attendees should leave meetings, report incidents to association executives and/or legal counsel and record efforts to prevent anti-competitive discussions from continuing.

For more information, see: Competition Bureau, Trade Associations and the Competition Act and Competition Bureau, Compliance Hub.

Conduct Competition Law Compliance Audits
and Appoint a Compliance Officer

One practical way for trade and professional associations to monitor compliance is to conduct periodic audits of association activities.

Competition law compliance audits can be performed on an association-wide, activity-specific or spot basis.

Appointing a compliance officer to monitor, audit and assist with compliance can also help ensure that association members understand and comply with the Competition Act.

There are no formal requirements for a compliance officer under the Competition Act and such officers may be an association executive or employee that has received competition law compliance training.

For more information, see: Compliance.

For more information, see: Competition Bureau, Trade Associations and the Competition Act and Competition Bureau, Compliance Hub.

Conduct Competition Law Compliance Orientations
for New Executives and Personnel

Another practical step trade and professional associations can take to assist with competition law compliance is to conduct compliance orientations for new board directors, executives and other key personnel (e.g., staffers who are involved in association activities that may raise competition law risk, such as industry surveys or benchmarking).

While new association leadership may be experts in their field, they may know little or nothing about competition law and the risks to their association of violating the Competition Act.

The Competition Bureau has recommended requiring company/member representatives to complete competition law compliance training before joining trade associations and participating in association activities.

Obtain Competition Law Advice
for Association Activities
That May Raise Competition Law Risk

Care should be taken in relation to specific types of trade and professional association activities where there is increased potential competition law risk.

In general, associations should obtain advice from qualified legal counsel for key activities that may raise competition law concerns, including industry surveys and benchmarking, standard setting exercises, member discipline or termination and some joint member initiatives (e.g., joint marketing, purchasing or negotiations with significant purchasers).

In practice, competition law risk may arise in relation to, among other things, member pressure relating to discount firms or maverick member activities, where members face pricing pressure from suppliers or customers or shifts in business models or technology that threaten incumbent members and cause them to ask their association “to do something”.

For more information about some of the types of association activities that can raise competition law risk, see: Associations and Association Activities.

See also: Competition Bureau, Trade Associations and the Competition Act and Competition Bureau, Compliance Hub.

Do Not Hold or Facilitate
“Off the Record” Member Meetings

Trade and professional associations should discourage informal or “off the record” meetings between their members, particularly on the fringes of association meetings or using association facilities.

Private meetings between competitors under the pretext of association meetings should also be discouraged.

The Competition Bureau and private plaintiffs can, depending on the circumstances, use such “circumstantial evidence” to establish a price-fixing or other criminal conspiracy agreement under section 45 of the Competition Act (e.g., meetings between competitors followed by uniform pricing).

Associations and their members should also be aware that merely because a meeting is held “off the record” or “in camera” (i.e., a discussion is not recorded in meeting minutes) does not mean that discussions (which may be recorded in other ways, such as attendee notes, e-mails, texts, etc.) or the fact of the meeting itself cannot be used as evidence in competition law enforcement or proceedings.

For more information, see: Conspiracy (Cartels) and Information Exchanges.

See also: Competition Bureau, Trade Associations and the Competition Act.

Regularly Review Association Activities and Rules

Trade and professional associations should generally review their initiatives and activities through a “competition lens” for compliance with the Competition Act.

For example, if a particular association activity may lead to higher prices, less quality or choice, increase barriers for some members or competitors to compete or generally reduce competition, this may well raise competition law concerns (or at minimum the need to consult competent legal counsel).

It is also prudent for associations to ensure open consultations among members when developing or reviewing existing rules, codes of conduct and standards and include a clear statement of objectives, expectations and responsibilities that comply with the Competition Act.

For example, associations should avoid rules (e.g., in association codes of conduct) that establish prices, mandate levels or types of services, restrict advertising or exclude some competitors from the market or make it more difficult for them to compete.

For more information, see: Competition Bureau, Trade Associations and the Competition Act.

Members Should Require Trade and Professional Associations
to Adopt Credible and Effective Compliance Programs
as a Condition of Membership

A credible and effective competition law compliance program is an essential element of any trade or professional association that includes competitors.

Participating in an association’s activities that has not adopted a competition law compliance program may lead to potential criminal or civil risk for individual members as well as their companies/firms.

As such, before permitting a company’s personnel to participate in trade or professional association activities, it is prudent to ensure that the association has adopted and follows a credible and effective competition law compliance program.

For more information, see: Compliance.

See also: Competition Bureau, Trade Associations and the Competition Act and Competition Bureau, Compliance Hub.

Use a Third Party for Industry Surveys,
Benchmarking Exercises and
Other Types of Information Exchanges
Between Members

Trade and professional associations may collect and circulate competitively sensitive information, with the appropriate safeguards in place, for a variety of legitimate purposes.

Such purposes may include efforts to reduce prices or costs, research ways that members can more effectively compete in a market or developing more innovative products or services.

However, based on the potential criminal and civil competition law risks, before collecting and sharing competitively sensitive information gathered from association members, associations should consider using a third party to collect the information and distribute it with precautions to minimize potential competition law risk.

Such competition law compliance precautions may include adopting information exchange guidelines, only circulating information gathered in aggregated and anonymized form and not distributing raw competitively sensitive data to competing board or other members.

For more information, see: Information Exchanges.

See also: Competition Bureau, Trade Associations and the Competition Act and Competition Bureau, Compliance Hub.

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SERVICES AND CONTACT

We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

Our experience includes advising clients in Toronto, Canada and the United States on the application of Canadian competition and regulatory laws and we have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.

To contact us about a potential legal matter, see: contact

For more information about our firm, visit our website: Competitionlawyer.ca