Capital Perspectives - Newsletter
The large supermarket chains' joint pull back of pandemic "hero pay" from their hourly workers in June 2020 triggered a hearing surrounding this event by the House of Commons Standing Committee on Industry, Science and Technology (Industry Committee) and an investigation by the Competition Bureau. This matter continues to be of interest to the Industry Committee, with more meetings on the subject of possible reforms to the Competition Act (the Act) to be set for April 2021.
While many stakeholders were questioning whether "employment-related" agreements could result in criminal charges under section 45, the conspiracy provision of the Act, in a Sept. 14, 2020 letter from Commissioner of Competition, Matthew Boswell, to Nathaniel Erskine-Smith, Member of Parliament, the Commissioner only made reference to the civil agreements between competitors provision in reference to potential wage-fixing. The Commissioner noted that the burden of proving a substantial lessening of competition "is not a low threshold." In other words, it's difficult to prove an offense has been committed.
In a statement published in November 2020, just prior to his appearance before the Industry Committee, the Commissioner clarified the Competition Bureau's position regarding "buy-side agreements," which include wage-fixing agreements.
The Bureau statement said: "While the Competition Bureau views such buy-side agreements between competitors as raising serious competition issues, the 2009 amendments to the Competition Act included the removal of the word 'purchase' from section 45, limiting its scope to supply-side agreements." In sum, the statement confirmed that the Bureau would not assess buy-side agreements under section 45 of the Act.
Wage-fixing agreements can be viewed as anti-competitive on the basis that they can artificially reduce employees' wages and decrease competition between firms, which may result in reduced output. The United States Department of Justice, Antitrust Division has suggested that wage-fixing agreements are analogous to price-fixing and, along with its sister agency, the Federal Trade Commission, has been clear that it intends to pursue such agreements criminally.
Interestingly, no other jurisdiction has followed the U.S. lead in using criminal powers to tackle wage-fixing, although the Commissioner has said a divergence in approach to this issue with the United States is "a serious issue for Canadian workers."
In contrast, others have recognized that wage-fixing agreements can result in positive effects, such as reduced costs for employers and lower prices for end-use consumers. Some economists have also suggested that, at a macroeconomic level, wage-fixing agreements may actually lead to greater labour market stability for both low and highly skilled workers.
The countervailing power between labour unions and corporations also highlights some of the challenges with determining the appropriate policy response to wage-fixing agreements. It is worth mentioning that collective bargaining activities, including the negotiation of wages, salaries and terms of employment, are expressly exempted from the application of the Act. As noted by the OECD, "(t)he purpose of this exclusion is to shield collective bargaining activities from competition law, in the light of the social objective they pursue."1
As the policy debate moves forward in Canada on the issue of wage-fixing agreements by competitors, policy-makers need to take into account various important considerations. These include:
- The potential pro-competitive and anti-competitive impacts caused by wage-fixing
- The way these impacts can differ based on context (e.g. the construction industry where a large number of small, independent contractors can be confronted by one or more of the building trade unions in wage negotiations)
- The lack of any road testing of the current legislation before the Competition Tribunal
- The effects of divergence with the approach taken by the United States
This debate will no doubt allude to concerns about growing income inequality in our economy and rising corporate concentration. Brace yourselves, competition law is back in the spotlight!
(Note to Readers: This article is based on a paper to be published by the International Bar Association in May 2021 by John Pecman, Senior Business Advisor, Chris Margison, Counsel, and Robin Spillette, Associate, all from Fasken.)
John Pecman is a Senior Business Advisor with the Fasken Ottawa office active in the Antitrust/Competition & Marketing group. With over 34 years of experience enforcing Canada's Competition Act, John served from June 2013 as the Commissioner of Competition of the Competition Bureau Canada for a five-year term.
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.