Amidst news of COVID-19 case counts, shuttered shops and volatile markets, competition law compliance may not necessarily be the most pressing issue that comes to mind. While “this too shall pass,” it remains important in the meantime that businesses avoid the unique competition-related risks and challenges posed by the COVID-19 pandemic.
In particular, efforts by Canadian businesses to collaborate with their competitors to protect stakeholders and their families from COVID-19 risks—however laudable or socially beneficial—remain subject to the Competition Act (Act) and associated compliance risks. In its recent communications, the Competition Bureau (Bureau) has indicated an intent to prioritize collusion, deceptive marketing, and other “urgent marketplace issues” during the pandemic. For transacting parties or parties subject to current Bureau investigations, it is also important to note that the Bureau has warned of the potential for COVID-19 to delay its processes.
Competition compliance risks of industry “common fronts”
There are legitimate reasons for businesses to collaborate and coordinate in responding to the COVID-19 threat, whether on their own initiative or through trade associations. Sharing best practices or policies can be an important tool in protecting the well-being of employees, customers and other stakeholders, as well as in ensuring business survival in the face of an unprecedented and uncertain economic downturn. Indeed, the Act itself recognizes (as does the Bureau) that competitor collaborations can be procompetitive and beneficial to society.1
However, it is important to recognize that there is no “COVID-19 exception” to the Act. Businesses should continue to follow competition law compliance programs to avoid anticompetitive conduct that could have civil or criminal implications. In particular, while trade association and competitor meetings can provide opportunities to identify, discuss and develop responses to COVID-19-related business, safety, technological and logistical issues, agreements between competitors or potential competitors to fix prices, limit supply or output, or allocate customers or markets remain serious criminal offences. Before communicating with competitors, consider whether collaboration is reasonable and necessary to accomplish the socially beneficial objective.
COVID-19 is also having significant impacts on supply chains. While Canadian competition law provides ample room for businesses to decide with whom they wish to trade, businesses should ensure that any refusal to deal with a supplier or customer is a unilateral decision based on a valid business justification, not a decision made in concert with competitors.
Here are some practical general guidelines:
- Ensure that proposed standards or best practices do not have the purpose or effect of disadvantaging competitors or favouring one group of competitors over another.
- Best practices discussed or developed must be recognized as voluntary, with each business deciding for itself whether, or to what extent, to adopt or implement any such practices.
- Certain types of information should not be discussed or shared with competitors or potential competitors, such as:
- non-public prices for products and services;
- non-public information regarding products or services to be offered or not offered to customers;
- non-public information regarding geographic areas where products will be sold, or to which customers products will be sold;
- non-public information as to employee salaries and benefits, or work schedules; and
- non-public business plans or strategies.
- Continue to follow competition law compliance best practices in meetings with competitors, including by:
- making a competition law compliance statement before the meeting begins and requiring all participants to agree to observe and comply with competition laws;
- circulating an agenda in advance of the meeting listing the topics to be discussed, including the procompetitive or socially beneficial aims of the meeting;
- having counsel present at the meeting, or someone able to make certain that the conversation does not veer away from the agenda – for example, to ensure participants refrain from disclosure of any competitively sensitive information or discuss competitively sensitive topics or subjects.
Pandemic-related impacts to Bureau processes
The Bureau, like many of us, has to adapt to the new reality of working remotely and social distancing. In a March 18, 2020 letter to the members of the executive of the Canadian Bar Association’s Competition Law Section, Commissioner of Competition Matthew Boswell confirmed that the operations of the Bureau would be affected.1
With respect to merger review, the Commissioner indicates that the difficulties remote working arrangements pose for its usual process of making “market contacts” (contacting merging parties’ competitors, suppliers, customers and others), are affecting the Bureau's ability to meet its (non-binding) service standards to respond to requests for Advance Ruling Certificates or “no action” letters (ARC requests). Applicants under the immunity and leniency process may also see their matters delayed as a result of the inability to organize in-person meetings. Nevertheless, the Commissioner has confirmed that the Bureau will prioritize ʺurgent marketplace issuesʺ. In summary, the Commissioner's letter points to the following implications:
- Possible merger clearance delays. As noted above, the Commissioner advises that the Bureau may not be able to meet its ARC request service standards (14 days and 45 days for transactions designated “non-complex” and “complex,” respectively). Parties should also consider engaging with the Bureau as early as possible (even before making their filings) to ensure the Bureau‘s review can proceed as efficiently as possible.
- Possible investigation delays. The Commissioner acknowledges that immunity and leniency applications, and other investigations that require in-person witness interviews, in-person meetings, and in-person negotiations may also encounter delays.
- Possible delays from parties required to produce information. According to the Commissioner, ʺParties could also experience challenges in preparing and delivering productions and information to the Bureau during this period.ʺ Parties should think ahead about what information may be relevant, and start collecting information and documents as early as possible in the process (merger or otherwise) to mitigate risks of delay.
- The Bureau will give priority to urgent issues to protect the public. The Commissioner indicates that the Bureau may need to ʺprioritize urgent marketplace issues that require immediate actionʺ. Among other things, we expect that the Bureau will carefully scrutinize the veracity of claims about a product’s ability to prevent, treat or cure COVID-19 under the false and misleading advertising provisions of the Act . 3 In a March 20, 2020 statement, the Commissioner underscored that deceptive marketing and collusion between competitors would be his highest enforcement priorities during the pandemic.4
As the age-old advice goes, “an ounce of prevention is worth a pound of cure.” If you have any questions or concerns about how competition law could impact your business at this difficult moment, we are here to help you. For more information, please contact Sandy Walker, Adam S. Goodman, Simon Kupi, Margot Patterson or Barry Zalmanowitz, Q.C.
- See e.g., Competition Act, RSC 1985, c C-34, s 45(4); Competition Bureau, Competitor Collaboration Guidelines (December 23, 2009).↩
- Competition Bureau, ʺ Letter from the Commissioner to the Canadian Bar Association regarding impacts of the COVID-19 pandemicʺ (March 18, 2020).↩
- By way of example, in the United States, the Missouri Attorney General is seeking a restraining order and permanent injunction against televangelist Jim Bakker for promoting a product called ʺSilver Solutionʺ as a treatment for COVID-19. Attorney General of Missouri, Press Release, ʺ AG Schmitt Files Suit Against Jim Bakker for Selling Fake “Coronavirus Cure”ʺ (March 10, 2020).↩
- Competition Bureau, ʺ Statement from the Commissioner of Competition regarding enforcement during the COVID-19 coronavirus situationʺ (March 20, 2020).↩