Copyright 2010, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on Competition, Antitrust & Foreign Investment, March 2010
As previously reported in our January 2010 Blakes Bulletin on Competition, Antitrust & Foreign Investment, (http://tinyurl.com/ye9yj52) the 2009 Competition Act amendments governing collaborations between competitors came into force today, March 12, 2010. The following provides key points to remember regarding the differences between the former and current criminal provisions, the distinction between criminal and civil review of competitor agreements, and the Competition Bureau's enforcement policy as outlined in its Competitor Collaboration Guidelines (http://tinyurl.com/yac4y8f) issued in December 2009.
SECTION 45 (CRIMINAL CONSPIRACIES)
Former Conspiracy Offence
- Prohibited only those conspiracies or agreements "unduly" restricting competition.
- C$10-million maximum fine (per count) for corporations and individuals, up to five years in prison, and private actions for damages.
- "Unduly" element required government to prove beyond a reasonable doubt the anticompetitive effects of any agreement, even if hard-core cartel conduct. Effects element was out of step with the U.S. and other major jurisdictions.
New Conspiracy Offence
- Prohibits only the most egregious cartel behaviour including price fixing, allocation of sales, territories, customers or markets and fixing production or supply, however, it imposes a per se ban rather than requiring the government to prove beyond a reasonable doubt the anticompetitive economic effects of an agreement.
- Fines for corporations and individuals are increased to up to C$25-million (per count); the potential prison term is increased to up to 14 years.
- The new rule is both narrower (in that it only covers hard-core cartel agreements between competitors) and broader (in that covered agreements constitute criminal conduct regardless of whether they result in anticompetitive effects).
- Courts may still infer the existence of a conspiracy or agreement from circumstantial evidence, with or without direct evidence of communication between or among the parties.
- Premature Merger Integration/Gun Jumping: whether pre-merger co-ordination and information exchange could be prosecuted criminally is not specifically addressed in the statute or the Guidelines. Because the Guidelines represent that the Bureau considers merger-related non-compete clauses in the context of the overall competitive effects of a merger rather than an agreement among competitors, it is unlikely that parties could face criminal exposure through imprudent merger co-ordination.
New Defence
Defendants have complete defence if they can prove, on the balance of probabilities, the challenged agreement is "ancillary" to another otherwise lawful agreement and "reasonably necessary" for implementing the lawful agreement.
Remaining Defences
The new provision continues to recognize other exemptions to the scope of the criminal conspiracy offence, including exemptions for agreements between affiliates, certain export agreements and regulated conduct.
SECTION 90.1 (CIVIL REVIEW OF AGREEMENTS IN RESTRAINT OF TRADE)
Civil Track
- Competitor collaborations can also be addressed by a new civil provision that includes a competitive effects test and the availability of an efficiencies defence.
- Vertical supplier/distributor and franchisor/franchisee agreements are not subject to civil review so long as they do not involve agreements between "competitors".
- Dual distribution restrictions between suppliers and distributors are subject to civil review when the supplier is also a competitor of its distributor in the distribution market.
Sanctions
Only the Commissioner of Competition can bring enforcement proceedings before the Competition Tribunal. The Bureau can only seek remedial cease-and-desist orders (not fines or imprisonment). Private enforcement and damage awards not permitted.
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.