The chemicals industry, from manufacturing to distribution and retail, is a critical part of the Canadian economy, producing products used throughout the value chain in a wide variety of industries as inputs for other production processes and as end products. Many features of the chemicals industry can raise unique competition law issues.
5 Things You Need To Know
- Canada's Competition Act applies to the chemicals industry in Canada, including mergers and other business practices that impact competition in Canada.
- Canada's Competition Bureau, which administers and enforces the Competition Act, has reviewed over 60 mergers in the chemicals industry since 2012 and entered into consent agreements requiring divestitures for at least five of these mergers.
- Higher fixed costs of production at many chemical facilities can create incentives to operate plants at high utilization rates, which makes capacity utilization an important consideration.
- The ability to ship products significant distances can impact how broadly or narrowly competition authorities consider a geographic market. Since chemical products are often sold globally to recover the fixed costs of production, remedies in one jurisdiction may also solve or mitigate competition concerns in other jurisdictions.
- The significant efficiencies that can be generated by mergers in the chemicals industry may lead to the clearance of mergers in Canada that may face significant obstacles in other jurisdictions.
Competition Law Enforcement Framework
Like many developed economies, Canada has a competition law of general application called the Competition Act (Act). The purpose of the Act is, among other things, to "maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy ... and in order to provide consumers with competitive prices and product choices."
The Act contains numerous provisions potentially relevant to participants in Canada's chemicals industry, including civil provisions relating to mergers and abuse of dominance and criminal prohibitions against certain types of agreements among competitors (cartels). The Act is administered and enforced by the Commissioner of Competition (Commissioner), the head of Canada's Competition Bureau (Bureau). The Act requires that mergers exceeding certain thresholds be reported to the Bureau for review. The Act also permits the Bureau to apply for court orders to produce data and documents, interview company executives and search property. However, the Bureau is not permitted to take action in respect of competitive conduct administratively or unilaterally. Instead, the Bureau must present its concerns to a specialized court, the Competition Tribunal (Tribunal) or a criminal court (as the case may be), which will ultimately decide the issue. Alternatively, the Bureau or the PPSC may enter into settlements that resolve the Bureau's concerns.
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