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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“Cartel agreements often involve the exchange of competitively sensitive information between competitors. Indeed, activities that assist competitors in monitoring one another’s prices or conduct otherwise consistent with the existence of an agreement may be sufficient to prove that an agreement was concluded between the parties for the purpose of subsection 45(1) of the [Competition Act]. Accordingly, information sharing agreements between competitors should be structured carefully to ensure that they do not raise concerns under the criminal prohibitions in subsection 45(1) of the Act.”

(Competition Bureau,
Competitor Collaboration Guidelines)

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Competitively Sensitive Information Exchanges
and Canadian Competition Law

Companies and other organizations, such as trade and professional associations, may exchange information for a wide range of legitimate and pro-competitive purposes. These may include industry research, benchmarking, joint ventures or other business or strategic alliances or in the context of merger negotiations.

The exchange of information between companies or association members can have many pro-competitive purposes and effects – for example, facilitating research or production initiatives that would be impossible without cooperation, increasing market transparency and consumer knowledge, leading to enhanced products and services or supporting lobbying and industry advocacy efforts.

In this regard, competition enforcement officials, both in Canada and other major jurisdictions, generally acknowledge that markets operate more efficiently when information is relatively free and openly available to industry members.

Having said that, information exchanges – that is the exchange of certain types of competitively sensitive information between competitors, such as price, cost, market, market share, customer, supplier or business or strategic plan information – can represent a significant risk for companies, trade or professional association members (as well as their management and boards) and merging or joint venture partners.

Generally speaking, the exchange of competitively sensitive information between competitors can dampen competitive rivalry by reducing competitors’ uncertainty about their rivals’ competitive and commercial responses.  More specifically, the exchange of competitively sensitive information between competitors can raise significant competition law risk under the Competition Act.

In Canada, the principal risk of information exchanges between competitors is that they can lead to agreements that violate section 45 of the Competition Act, which makes it a criminal offence for competitors (or potential competitors) to enter into agreements to fix prices, divide markets or restrict output. For more information, see: Conspiracy (Cartels).

The potential penalties under section 45 of the Competition Act can be severe and include criminal fines without limit (i.e., set in the discretion of a court without prescribed legislative limit), imprisonment for up to 14 years, or both. Civil actions and class actions can also be commenced under the criminal offences of the Competition Act, including under section 45.

While section 45 of the Competition Act does not criminalize information exchanges themselves, the risk of such exchanges between competitors, without appropriate safeguards, is two-fold: first, exchanging (or discussing) competitively sensitive information may result in an agreement that contravenes section 45 (e.g., a price-fixing agreement); and second, an information exchange may be used by a court, the Competition Bureau or a private plaintiff to infer the existence of an agreement that violates section 45 (i.e., be used as “circumstantial” evidence of the existence of an agreement).

Canadian courts have relied on evidence of information exchanges as one basis to conclude that an illegal conspiracy existed and such exchanges are commonly relied on in criminal and civil proceedings in Canada under section 45.

Information exchanges have sometimes involved conduct as seemingly straightforward as the discussion of prices at association meetings and in one older, but noteworthy, case, an attempt by industry members to adopt an “open pricing” policy (by exchanging price information with no express agreement to follow the exchanged rates) without contravening section 45 of the Competition Act.

Agreements to exchange competitively sensitive information may also raise issues under section 90.1 of the Competition Act, the civil agreements provision that was introduced in 2010, where they prevent or lessen competition substantially.

Some of the relevant factors for assessing whether an information exchange between competitors may raise competition law concerns include:

The type of information. Price, cost, market, capacity/production, customer and supplier information is generally considered to be some of the higher risk categories.

The currency of the information. Current competitively sensitive information is generally riskier to exchange with competitors than historical and public information.

The frequency of exchange. Frequent and systematic information exchanges with competitors are more likely to raise competition law concerns.

The level of detail and aggregation. Exchanging sufficiently aggregated information with competitors (e.g., that has been appropriately collected and anonymized) is generally safer than raw, unaggregated company-specific information.

Whether the information is public or private. Information that is potentially competitively sensitive that is disseminated publicly is generally less risky than direct exchanges of such information among competitors.

Who has access to the information. The exchange of raw, unaggregated information between competitors is generally riskier than if non-competitor third parties (e.g., association staff personnel, survey firms, etc.) collect the information and sufficiently aggregate and distribute aggregated results.

Market characteristics. For example, in considering whether an information exchange arrangement between competitors could raise issues under section 90.1 of the Competition Act, the civil agreements provision of the Act, market effects are relevant.

Based on the potential risk of information exchanges between competitors, including in the context of trade or professional association activities, merger negotiations, joint ventures or benchmarking or industry research exercises, it is prudent to both assess the potential risk under the Competition Act and, if necessary, adopt basic safeguards for such information exchanges.

Compliance Steps to Minimize
Competition Risk of Information Exchanges
with Competitors

Some safeguards to minimize the potential competition law risk under the Competition Act associated with information exchanges with competitors include:

1. Using a third party to collect and aggregate information.

2. Adopting conduct of meeting or other guidelines to govern discussions or information exchanges.

3. Ensuring that merger negotiations implement “gun-jumping” memoranda.

4. Structuring joint venture negotiations or operations to minimize the potential competition risk (e.g., by adopting “clean team” or “black box” mechanisms to limit who has access to competitively sensitive information and control the use and distribution of information exchanged between joint venture members).

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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, across 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.

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