Canada: Competition Bureau Publishes Revised Bulletins on "Regulated" Conduct and Corporate Compliance

Copyright 2010, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Competition, Antitrust & Foreign Investment, September 2010

On September 27, 2010, the Competition Bureau (the Bureau) published revised versions of its Bulletins on "Regulated" Conduct and Corporate Compliance Programs . The revised Bulletins reflect changes to the conspiracy provisions of the Competition Act that came into force in March 2010 (see our March 2010 Blakes Bulletin on Competition, Antitrust & Foreign Investment).

"Regulated" Conduct Bulletin

The Bulletin sets out the Bureau's general approach to the enforcement of the Competition Act when certain conduct appears on the one hand to contravene a provision of the Act, but on the other hand appears to be regulated by another federal, provincial or municipal law or legislative scheme. The Bulletin also specifically addresses the Bureau's approach to the "Regulated Conduct Doctrine" (RCD) – also known as, amongst other titles, the Regulated Conduct Defence – which immunizes certain conduct from review on the basis that it was authorized by, or carried out pursuant to, another legislative scheme. The Bureau cautions, however, that the RCD has an uncertain application, and that other defences or exemptions will be considered first.

Following the amendments that came into force in March 2010, the RCD is now addressed specifically in the section of the Competition Act dealing with criminal liability for conspiracy, at subsection 45(7). Despite the creation of a per se criminal offence for conspiracy and the elimination of the "undueness" requirement, the section also specifically preserves the RCD as a defence to these charges by allowing defendants to rely on the case law under the previous law regarding the RCD to seek immunity from prosecution. In the Bulletin, as in its December 2009 Competitor Collaboration Guidelines, the Bureau clarifies that the RCD set out in the statute applies in the same manner as it did prior to the amendments.

The Bulletin also discusses the Bureau's approach regarding the application of the RCD to conduct regulated by provincial laws. In particular, the RCD is an exception to the general rule that, in a conflict between federal and provincial laws, the federal law will prevail. The Bulletin provides that the Bureau will not pursue criminal conspiracy cases under section 45 of the Competition Act where a valid provincial law authorizes or requires the impugned conduct. When conduct is regulated by a federal law other than the Competition Act, the Bureau will apply the Act, unless it can determine clearly that Parliament intended for the other federal statute to prevail.

While the RCD does not apply directly to reviewable matters, the regulatory context will nevertheless be a factor in the Bureau's analysis. Parties that have or might obtain market power might not be able to raise prices or reduce supply of a product in light of a federal or provincial regulatory scheme (e.g., the Ontario Drug Benefit Program).

All businesses, and particularly those in regulated industries, should consider carefully how the Bureau's enforcement approach, as articulated in the Bulletin, could affect them.

Corporate Compliance Bulletin

The changes to the conspiracy provisions of the Competition Act that came into force in March 2010 included the introduction of a per se criminal offence for hard-core cartel conduct (e.g., fixing prices, allocating markets or reducing supply) that carries a penalty of up to a C$25-million fine (per count) and 14 years in prison. While this and other changes have not resulted in major substantive revisions to the Corporate Compliance Bulletin, they have increased the need for businesses to maintain an effective and up-to-date compliance program.

The revised Bulletin provides a framework within which businesses can develop compliance programs tailored to their particular needs. A compliance program minimizes the risk that business will contravene the Competition Act and assists in detecting contraventions, should they occur. The Bureau identifies five elements that are essential to any compliance program:

  1. clear and unequivocal support from senior management;
  2. written policies or procedures that set out the compliance requirements;
  3. ongoing training and education for all relevant staff;
  4. mechanisms to monitor ongoing compliance, audit potential contraventions, and report contraventions either internally or externally; and
  5. a consistent policy to discipline non-compliance and incentives to promote compliance.

As noted in the Bulletin, failure to comply with the Competition Act can create significant legal, economic and reputational risks for companies and their directors and officers, including exposure to fines, lawsuits by private parties (including class action lawsuits), and the possibility of imprisonment. Non-compliance with the Competition Act can also result in negative publicity, loss of management time and the need to incur significant legal costs.

The Bulletin is a timely reminder to all businesses to adopt or update their compliance programs to reflect the recent amendments to the Competition Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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