Effective March 12, 2010, Canada's new dual-track regime – comprised of a criminal track and an administrative civil track – for conspiracies and collaborations between competitors comes into force. The new regime was enacted (along with other significant changes to the Competition Act) on March 12, 2009, through Bill C-10; the regime's coming into force was delayed by one year to facilitate a transition to the new regime.1
The new regime replaces the previous s. 45 of the Competition Act (the "Act"), which criminally prohibited persons from conspiring or agreeing to "unduly" harm competition. The "undue" standard effectively imposed a competitive-effects test that had to be established for there to be a criminal offence. Under the new s. 45 (i.e. the criminal track), there is no competitive-effects test; hence, in this regard, its application has been broadened. At the same time, however, the new s. 45 is also narrower than the previous s. 45 in that the new provision applies only to agreements with competitors (i.e. it does not apply to agreements between customers and suppliers) and it is intended to apply only to so-called "hardcore" cartel-type activity.2 The new s. 45 establishes an offence for conspiracies, agreements or arrangements among competitors (or potential competitors) that:
- fix, maintain, increase or control prices for the supply of a product;
- allocate sales, territories, customers or markets for the production or supply of a product; or
- fix, maintain, control, prevent, lessen or eliminate the production or supply of a product.
The removal of the competitive-effects test could have the unintended consequence of making certain potentially pro-competitive arrangements between competitors criminal. To address this possibility, the new s. 45 contains an "ancillary restraints defence", which provides that there will be no offence if the anticompetitive restraint is ancillary to a broader or separate agreement, and directly related to and reasonably necessary for giving effect to the objective of the broader or separate agreement, and the broader or separate agreement on its own would not violate s. 45. For example, the ancillary restraints defence may apply to a legitimate joint venture where certain competitive restraints are necessary to make the joint venture effective.
Under the civil track, s. 90.1, agreements among competitors that are not hardcore cartels may be, on application by the Commissioner of Competition (but not by private parties), subject to civil administrative review by Competition Tribunal. If the Tribunal finds that an agreement between competitors substantially lessens or prevents competition (applying similar assessment criteria as that applicable to mergers), it can issue a prohibition order or order a party, with such party's consent, to take any other action. The Tribunal cannot award damages or impose fines under s. 90.1.
As parties can no longer disregard s. 45 merely because their agreement had no serious anti-competitive effect (e.g. where the parties did not possess market power), all competitor interactions should be screened for compliance, including:
- joint ventures
- strategic alliances
- dual distribution agreements
- franchise agreements
- joint selling arrangements
- joint bidding arrangements
- joint production or development arrangements
- product swaps or exchange arrangements
- licensing arrangements
- reverse payment agreements
- trade association activities
Importantly, in December 2009, the Competition Bureau issued its comprehensive Competitor Collaboration Guidelines,3 which outline the Bureau's enforcement policy with respect to the new ss. 45 and 90.1. However, judicial consideration of the new dual-track regime will be important in setting the parameters for both Bureau enforcement and private enforcement through s. 36 of the Act (which provides a private right of action for damages for violations of the Act's criminal provisions, e.g. s. 45).
Footnotes
1 The amendments brought about by Bill C-10 have been discussed in our previous bulletins, including "Dramatic Changes to Canada's Competition and Foreign Investment Review Laws Proposed in Bill C-10" (February 2009), online: http://www.fasken.com/acm_bulletin_february2009/ and "Substantial Changes to the Competition Act and Investment Canada Act Enacted – Businesses Must React" (March 2009), online: http://www.fasken.com/acm_march2009/ .
2 Also, the penalties for a s. 45 offence will increase – the maximum fine will be C $25 million (up from C $10 million) and the maximum term of imprisonment will be 14 years (up from 5 years).
3 (23 December 2009), online: Competition Bureau, http://competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03177.html.
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