On May 6, 2021, the Competition Bureau published updated Competitor Collaboration Guidelines, which replace the guidelines initially published in 2009. The updated publication only modestly deviates from its 2009 publication and closely mirrors the draft guidelines published in July 2020. However, some noteworthy changes provide insight into the Bureau's approach to enforcing competitor collaborations.

The Competitor Collaboration Guidelines ("CCGs") describe the Bureau's approach to assessing collaborations between competitors and enforcing the provisions of the Competition Act that relate to agreements among competitors. The recently updated CCGs reflect nearly a decade's worth of experience of administration and enforcement by the Bureau. The Bureau has not made any major changes in its approach to competitor collaborations, which signals that it is confident that its guidance is effective.

There are some changes worth highlighting which may contour the Bureau's enforcement approach. Notably, these changes include:

  • closer scrutiny of potential "sham" agreements;
  • stating that the use of artificial intelligence algorithms may form the basis of a cartel offence;
  • affirming that buy-side agreements will not be subject to criminal enforcement; and
  • a broader approach to identifying who are "competitors" for purposes of an agreement.

Closer Scrutiny of Potential "Sham" Agreements

The Act's competitor collaborations provisions are divided into a "dual-track" regime: a criminal prohibition for hardcore cartel behaviour and a civil provision for potentially procompetitive behaviour. The CCGs state that the Bureau is cognizant that parties may attempt to structure an agreement or collaboration in such a way so as to avoid scrutiny under the criminal cartel provisions of the Act. Accordingly, where the Bureau has evidence that a collaboration or an agreement is a sham, regardless of formality or enforceability, it states that it will consider the agreement under the "most appropriate" section of the Act.

Explicit reference to "sham" agreements in the CCGs suggests that the Bureau may look beyond the four corners of an agreement to infer or assess its true purpose. The CCGs are unclear as to what threshold will be applied for an arrangement that appears legitimate on its face to be considered a "sham". It is conceivable that, where agreements between competitors adopt a seemingly-legitimate structure (such as a merger or joint venture), but where the Bureau believes that the underlying purpose of the agreement is to engage in price fixing or market allocation, it may assess the arrangement under the criminal provision of the Act. Firms should therefore be cautious in structuring and understanding any agreements among competitors.

Artificial Intelligence and Common Pricing Algorithms

Under the criminal provisions of the Act, competitors are prohibited from fixing or controlling the price charged for the sale of a product or service. The Bureau interprets this prohibition to include agreements between competitors on "methods of establishing prices or other indirect forms of agreements to fix or increase prices paid by customers".

Unlike the 2009 guidelines, the updated CCGs cite agreements to use common pricing algorithms or common price lists as potential price-fixing agreements under the Act, provided there is evidence of an actual or tactic agreement or understanding to fix or control prices.

To date, the Bureau has not publicly announced any investigations involving an algorithmic theory of price-fixing. The Bureau's mention of AI indicates an interest in this area. However, such an enforcement approach is not surprising in light of the Bureau's recent focus on enforcement issues in the digital era.

The Bureau's Approach to Buy-Side Agreements

In November 2020, the Bureau published a statement setting out its legal interpretation that the criminal cartel provisions of the Act do not apply to "buy-side agreements" (i.e., agreements relating to the purchase of a product or service, rather than a sale), including wage-fixing and employee non-poaching agreements. Instead, the Bureau stated that it may assess such buy-side agreements under the civil provisions of the Act.

The CCGs reinforce this conclusion and reiterate that the Bureau may subject buy-side agreements to review under the civil provisions of the Act, including the civil competitor collaboration provision or the Act's other civil provisions (namely, abuse of dominance).

Broader Approach to Identifying Competitors

The Act's criminal cartel provision applies only to agreements among "competitors". In the revised CCGs, the Bureau appears to have adopted a broader perspective in identifying who are competitors.

To assess whether it believes entities are "competitors" for purposes of the Act, the Bureau states that it will consider evidence indicating whether the firms actually compete with each other, such as business and strategic plans, marketing and communications with potential customers and evidence of actual competition for similar customers in neighbouring regions or in respect of similar products. The Bureau states that it is also willing to consider whether the parties perceive each other as competitors, including by examining records prepared in the ordinary course that discuss competitors and by examining the extent to which the parties monitor or respond to each other's competitive behaviour.

The Bureau also clarifies that, when enforcing the civil provision of the Act, its primary focus will be on whether two or more of the parties to an agreement are actual or potential competitors in respect of a product subject to the agreement. However, the Bureau indicates that agreements may nonetheless raise concerns where the parties to an agreement are not actual or potential competitors in respect of a product subject to the agreement, but are competitors in respect of some other product, and where the agreement is likely to prevent or lessen competition substantially in a relevant market. For instance, where ongoing collaboration between parties in respect of the development of product A (a product for which the parties are not actual or potential competitors) diminishes their incentive to compete vigorously in respect of product B (a product for which the parties are actual or potential competitors).

Conclusion

The updates to the CCGs are modest and largely clarificatory in nature, reflecting examples and cases the Bureau has dealt with in the past decade or anticipates it will deal with in the future. However, the revised CCGs do not signal a sea change in the Bureau's approach to assessing criminal and non-criminal behaviour under the Act. Monitoring how the Bureau will continue to enforce competitor collaborations will be important, particularly in light of the federal government's 2021 Budget proposal to provide $96 million over five years to the Bureau to enhance its enforcement capacity with digital tools.

This post by Stikeman Elliott's Competition & Foreign Investment Group was written with the assistance of Irma Shaboian, articling student at law.

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