While it is generally recognized that associations can serve many pro-competitive purposes, they can also, in some cases, serve as a forum for anti-competitive activity. Most recently, in 2010, Canada's Commissioner of Competition settled a case with the Canadian Real Estate Association regarding alleged anti-competitive practices by the association that were considered to be limiting consumer choice and preventing innovation in residential real estate services.1
At a high level, competition laws attempt to define rules that establish the limits of legitimate business conduct, and set out penalties that apply when those limits are crossed. In view of recent amendments that introduced significantly higher fines and prison terms for violations of Canada's Competition Act (the Act), it is more important than ever for associations to consider proactive measures to ensure compliance. The following sample list of "do's and don'ts" offers tips regarding typical association activities that have the potential to raise concerns under the Act:
Do Review Association Policies: Associations maintain a certain level of discretion in determining which firms to admit as members. However, membership criteria, rules, policies, by-laws or other conduct that serve to exclude firms from the association and place that firm at a competitive disadvantage may raise concerns under the Act. Membership should be available to any party in the industry who is interested in joining the association, and associations should ensure that membership criteria and any related policies and rules are based on transparent, objective criteria and enforced in a nondiscriminatory manner.
Do Not Stray From Approved Meeting Agendas: Meetings among members of an association are often viewed as fertile ground for anti-competitive conduct because they involve gatherings of competitors. In this regard, the Act includes, among other things, a provision that prescribes criminal sanctions, including steep fines and/or prison terms for competitors who agree to fix prices, allocate markets or restrict output for the goods or services they offer. Accordingly, meetings should be conducted pursuant to clear and unambiguous agendas, ideally that have been approved in advance by legal counsel, and that refrain from discussing competitively sensitive issues or information (such as individual sales, production volumes or capacity; pricing data and price-related information, including planned promotional discounts or rebates; the identities of customers and the specific geographic markets in which the firm operates; future business strategies; and information about upcoming bids or how a firm determines its bid). Detailed minutes should be recorded that list not only the names of those in attendance, but also the issues discussed. If a member insists on discussing matters outside of the confines of the agenda that could lead to violations of the Act, the meeting should be stopped. Members should refuse to participate further in the meeting and ensure that their departure – and the reason for the departure – is noted in the meeting minutes.
Do Place Strict Limitations on Exchange of Information: Among the services that associations typically provide to their members is the compilation of certain data from each of its members to perform, for example, benchmarking exercises or identify industry trends. However, associations must be careful not to be used as a forum for the exchange of competitively sensitive information. In such cases, if the information exchange amounts to an explicit or tacit agreement to fix prices, allocate markets or restrict output, the activity could constitute a criminal offence. The exchange could also, for example, raise issues under the bid-rigging provisions of the Act if competitors use the information to collaborate in preparing bids. Associations must consider any exchanges of information very carefully and may wish to involve an independent third party who could receive and aggregate the data so that individual submissions are not identifiable by other members or attributable to any particular member.
Do Not Encourage Informal Interactions: While formal, scheduled association meetings take place in a manner that can usually be controlled and supervised, associations also provide a forum for unstructured, informal interactions among members. Whether these gatherings take place in conjunction with regular meetings or otherwise, they must be treated with a degree of caution similar to that of regular meetings if there is a risk of exchange of competitively sensitive information. The association should be vocal in dissuading members from engaging in these types of informal meetings, and must be prepared to report this conduct to the appropriate representative. Given the possibility that reference to the informal meeting could become part of the record through, for example, an email between members, the association should also maintain its own record of the conduct and the actions taken to report and address it.
Do Establish a Compliance Program: Associations should invest the time and effort required to prepare comprehensive policies that ensure compliance with the Act, and these should be disseminated throughout the association and to association members. A good compliance program also helps to avoid other issues associated with violations of the Act, including the negative publicity that can be generated by an investigation by the Competition Bureau, which can impact the association's ability to attract and retain new members.
Footnote
1. http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03196.html
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