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 JOINT VENTURES
UNDER THE COMPETITION ACT

With the exception of several specific merger control exemptions, there are no standalone joint venture provisions in the Competition Act.

Joint ventures and strategic alliances (i.e., collaborations between either 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 Competition Act depending on their structure and purposes.

Some of the provisions of the Competition Act that can potentially apply to joint ventures and strategic alliances include the following: (i) criminal conspiracy and civil agreements provisions (sections 45 and 90.1); civil abuse of dominance provisions (sections 78 and 79); and (iii) merger provisions (under Parts VIII and IX), where a joint venture may constitute a merger that may raise substantive market effects issues or require pre-merger notification.

For more information, see: Abuse of Dominance and Conspiracy.

Joint ventures and strategic alliances are, therefore, highly fact specific, can be complex and require a consideration of the potential application of several different provisions of the Competition Act.

Joint Ventures and Trade
and Professional Associations

Joint ventures and other types of strategic alliances also commonly arise in the context of trade and professional associations, for example where an association is formed for the express purpose of a specific type of joint venture or when association members want to collaborate on a specific type of initiative (e.g., developing a new product or standard).

Given that trade and professional associations commonly involve activities between direct competitors and in some cases an association may also possess market power, it is important that associations comply with competition laws before commencing joint ventures or strategic alliances that may adversely impact competition (e.g., that may violate the criminal conspiracy or abuse of dominance provisions of the Competition Act).

For more information, see: Associations and Association Compliance.

Canadian Competition Law & Joint Ventures:
Key Points to Minimize Risk

The following are some general key competition law points regarding joint ventures in Canada, which focus on the criminal conspiracy and civil agreements provisions of the Competition Act (sections 45 and 90.1) and best practices to minimize risk.

Every joint venture and strategic alliance, however, is different and fact specific and competent legal advice should be obtained for JVs involving competitors or that may potentially have significant effects on competition.

1. Merely referring to a competitor collaboration as a “joint venture” will not necessarily mean there is no competition law risk nor remove the collaboration from challenge or enforcement scrutiny. Joint ventures are fact specific and can take many forms and require consideration of several criminal and civil provisions of the Competition Act.

2. Joint ventures may be pro-competitive or anti-competitive (or partially pro- and anti-competitive, which may mean that analyzing the JV may require a consideration, among other things, of the primary purpose of the JV and whether the ancillary restraints defence under section 45 of the Competition Act may apply. For more information, see: Conspiracy (Cartels).

3. The federal Competition Act includes both: (i) criminal conspiracy offences that prohibit, among other things, agreements between competitors to fix prices or restrict output (under section 45); and (ii) a civil agreements provision (section 90.1) under which some types of competitor agreements (as well as vertical agreements after December 15, 2024 once 2023 amendments come into force), that are not “bare” or “naked” agreements to fix prices, divide markets or restrict output, may be challenged where they prevent or lessen competition substantially. For more information, see: Conspiracy (Cartels).

4. Joint ventures and other types of collaborations between competitors are much more likely to attract liability where they are in essence merely agreements to fix prices, not compete or restrict output (i.e., there are few or no pro-competitive rationales for the joint venture other than to reduce some key aspect of competition). In this regard, there are many examples of companies being investigated, convicted or other penalties imposed where a purported “joint venture” was in essence a sham and the substance of the agreement was to fix prices, divide markets or otherwise reduce competition.

5. Since the Competition Act was amended in 2009, creating a two-track regime for competitor collaborations under sections 45 and 90.1, the Competition Bureau has indicated that it is more likely to review legitimate competitor-competitor joint ventures under the civil agreements provision (section 90.1) or other civil sections. One notable example was the Competition Bureau’s challenge of certain JV agreements between Air Canada and United, in which it brought a section 90.1 application before the Competition Tribunal. This case was ultimately settled under a consent agreement reached between the Competition Bureau and Air Canada / United.

6. Where there are legitimate pro-competitive justifications for a competitor collaboration, and it is not merely a bare agreement to fix prices, divide markets, restrict output or otherwise limit competition, the joint venture is much less likely to attract liability under the criminal conspiracy provisions of the Competition Act (section 45). In this respect, it is generally prudent, among other things, to internally document the pro-competitive justifications for any joint initiative or strategic alliance with a competitor and restrict its activities to the pro-competitive purpose(s).

7. Some of the types of pro-competitive purposes that may mean that a joint venture between competitors is less likely to be exposed to competition law risk include: (i) an inability to complete a project(s) individually; (ii) complementary resources (e.g., one party has marketing capabilities, another access to capital, technical expertise, etc.); (iii) efficiencies likely to be achieved through the joint venture; and (iv) scale required to complete a project (e.g., an exploration, manufacturing or distribution related venture where scale is required to be cost effective and compete).

8. When entering into a joint venture with a competitor(s), the following are several key best practices to limit competition law risk: (i) limit coordination to the JV (i.e., keep the collaboration as narrow as necessary to achieve the pro-competitive objectives of the project); (ii) restrict / limit the flow of competitively sensitive information relating to non-JV activities; (iii) internally document the pro-competitive rationales for cooperation and reflect the pro-competitive rationales in public announcements, updates, etc.; and (iv) keep marketing / sales personnel in non-JV activities apart (i.e., where JV partners compete in another market(s)).

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