Canada: New Criminal Cartel And Civil Competitor Agreement Provisions Under The "Competition Act" Come Into Force*

Last Updated: March 23 2010
Article by Anti-trust/Competition Department

Most Read Contributor in Canada, September 2018

When significant changes to the Competition Act were adopted in March 2009 as part of Bill C-10, the Budget Implementation Act, 2009,1 a one-year transitional period was provided before the coming into force of the amendments to the conspiracy provisions. This transitional period ended on March 12, 2010. The new per se criminal conspiracy offence and associated increased penalties, as well as the new civil provision for agreements between competitors, are now in force.

Per Se Conspiracy Offence

Under the new Section 45, agreements among competitors and potential competitors to fix prices, allocate markets or restrict output are per se illegal. This means that the prosecution no longer has to demonstrate beyond a reasonable doubt that such agreements unduly lessen competition. The amendments therefore make it easier for the prosecution (and civil plaintiffs) to prove so-called "hard core" cartels.

The new provision provides a defence for ancillary restraints: parties to agreements may defend a charge if they can establish on a balance of probabilities that the agreement is ancillary and reasonably necessary to a broader agreement that is not within an impugned "hard core" category. The regulated conduct defence, which exempts conduct prescribed or authorized by a regulatory scheme, has also been expressly preserved.

The maximum fine for conspiracy has now been increased to $25 million (from $10 million), and the maximum prison term has been increased to 14 years (from five years).

Civil Competitor Agreement Provision

The Competition Act now provides a dual-track approach to competitor agreements. Agreements or arrangements among competitors and potential competitors other than agreements to fix prices, allocate markets or restrict output (such as joint ventures and strategic alliances) may be subject to review, but only if they substantially prevent or lessen competition. Under this new civil provision, the Commissioner of Competition may bring an application to the Competition Tribunal for an order prohibiting any person from doing anything under the agreement, but the conduct is not subject to criminal sanction or monetary penalties. The new civil regime provides for treatment similar to merger review, including an efficiencies defence that allows the parties to argue that the pro-competitive efficiencies resulting from the agreement outweigh its anti-competitive effects and would not be attained if the Competition Tribunal were to issue a prohibition order.

Competition Bureau's Guidelines

The Competition Bureau (the "Bureau") recently issued Competitor Collaboration Guidelines2 that describe the approach it will take in applying the new dual-track regime to agreements between competitors. The Guidelines indicate that the criminal conspiracy offence will apply only to agreements between competitors to fix prices, allocate markets and restrict output that constitute "naked restraints" on competition, i.e., restraints that are not implemented in furtherance of a legitimate collaboration between competitors such as a strategic alliance or a joint venture.

As indicated above, both the criminal and the civil provisions apply to agreements among competitors and "potential competitors". The Guidelines include a discussion on factors that the Bureau will consider in order to determine whether parties to an agreement are potential competitors, i.e., whether they are likely to compete with respect to a product in the absence of the agreement under consideration.

The Guidelines adopt a strict interpretation of the ancillary restraints defence. The Bureau states that it will conclude that a restraint on competition (i.e., price fixing, market allocation and output restriction) is not reasonably necessary to a broader agreement, for example a joint venture, "[i]f the parties could have achieved an equivalent or comparable arrangement through practical, significantly less restrictive means that were reasonably available to the parties at the time when the agreement was entered into". While the Bureau indicates that it will not second-guess the parties with potentially less restrictive alternatives, the scope of the defence will inevitably be subject to interpretation.

The Guidelines also clarify some areas of uncertainty, for example by stating that vertical agreements between suppliers and customers, as well as dual-distribution agreements and franchise agreements, will be assessed under the civil, rather than criminal, provisions (except where such agreements are used to cover agreements among distributors or franchisees to fix prices or allocate markets). The Guidelines also confirm that the criminal price-fixing provision will only apply to agreements between sellers, and not to agreements between buyers.

Finally, the Guidelines discuss the potential application of the new civil regime to different types of agreements between competitors including: commercialization and joint selling agreements, information sharing agreements, research and development agreements, joint production agreements, and joint purchasing agreements and buying groups.

McCarthy Tétrault Notes

While the intent of the new dual-track approach is to restrict application of the criminal provisions to "hard core cartels", questions remain as to how the new civil competitor agreement provisions will be applied.

If such exercise has not been completed during the one-year transitional period, all businesses operating in Canada should review their competition law compliance programs to prevent and detect potential violation of the new per se criminal conspiracy offence. Companies should also review their existing agreements with competitors and potential competitors, including strategic alliances and joint ventures, to determine whether they raise issues under the new civil provision, and carefully consider these issues before entering into future agreements with competitors. The McCarthy Tétrault National Competition/Antitrust Group can assist businesses in conducting these reviews.

Footnotes

* Prepared by the McCarthy Tétrault LLP National Competition/Antitrust Group.

1. For further information, please see the following McCarthy Tétrault LLP publication, "Government Enacts Sweeping Changes to Canada's Competition and Foreign Investment Laws". (http://tinyurl.com/ye36qxp)

2. Available online: http://competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03177.html.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions