Five Key Things To Know About The Competition Bureau’s Guidance On Cartel Enforcement

The Competition Bureau is consulting on proposed updates to its draft Cartel Enforcement Guidelines (the “CEGs“).¹ The CEGs combine and update guidance previously contained in the cartel-related sections of the Competitor Collaboration Guidelines² and the Enforcement Guidelines on Wage-Fixing and No-Poaching Agreements. The five most notable areas of new or revised guidance involve bid-rigging, foreign-based cartel activity, facilitating practices such as MFN clauses, franchise systems, and agreements between employers that may not be competitors.

1. Bid-Rigging and the “Made Known” Defence

The CEGs provide guidance on the Bureau’s approach to the “call for bids or tenders” element of the bid-rigging offence, how it will analyze the “made known” defence, and situations where it will instead pursue enforcement under the general conspiracy offence.

• The CEGs take the position that the bid-rigging offence may apply to procurements that are not formal contract tendering processes, and also to the use of bid processes for the sale of products (i.e. auctions). The Bureau will consider factors such as whether the process facilitates fair consideration of submissions by the contracting authority (e.g. using submission deadlines, assessment criteria, etc.), the nature of communications with potential bidders, and industry practices. While this broad approach might not be accepted by the courts in a legal proceeding,³ Canadian businesses should be aware that the Bureau may attempt to apply the bid-rigging provisions to RFP and RFQ processes that are not formal legal tenders.
• The Competition Act provides a safety-valve from the bid-rigging offence for agreements that are made known to the party seeking bids at or before the submission of any bids. This provides important protection that allows potential bidders to collaborate through a consortium or joint venture structure, or where one will act as a subcontractor for another that will submit a formal bid. The CEGs state that the person submitting a bid should give clear notice directly to the individual identified in the documents calling for the bid, provide clarity about the agreement between the joint submitting parties, and be given each time there is a call for bids. This strict approach appears to ignore case law indicating that the “made known defence” can be satisfied either by express or implied notification and potentially even on the basis of circumstantial evidence in some situations.
• The CEGs provide some clarity on scenarios where the Bureau may assess conduct under the general offence applicable to conspiracies between competitors instead of the bid-rigging offence.
  • Where an agreement does not satisfy the statutory definition of bid-rigging, the conduct may be assessed under the price-fixing, market / customer allocation or supply restriction branches of the conspiracy offence.
  • Where an agreement between competitors includes other restraints on competition or bid-rigging conduct is part of a broader agreement, the Bureau may proceed under either or both tracks.
  • Where the bid-rigging offence does not apply because of the “made known defence”, the Bureau generally will not pursue the matter under the general conspiracy offence (which does not have a similar defence); instead, it may assess the agreement as a reviewable practice under provisions of the Act that have a competitive effects test.

2. Foreign-Based Cartels

The CEGs provide important guidance on the implementation of a foreign-based conspiracy offence. This provision was added to the Act to provide a mechanism for addressing cartel conduct outside Canada that may affect Canadian businesses or consumers. It may become much more important if the Supreme Court of Canada decides in a pending case that the general conspiracy offence does not apply a conspiracy that occured outside Canada.⁴ It is an offence for a corporation carrying on business in Canada to implement a directive from a foreign person that can influence the corporation, if the foreign conduct would have violated the conspiracy offence in the Act had it been undertaken in Canada. The most common example would be a Canadian subsidiary of a foreign corporation being directed to implement a price-fixing agreement, although the offence is not limited to such situations.

The CEGs indicate that the Bureau interprets this offence broadly:

• The Bureau considers that the “influence” element of the offence may be satisfied in situations that fall far short of formal legal control, such as where a foreign person exercises influence through directions, instructions or other communications related to the Canadian corporation’s policies on price, supply, or employment terms.
• The Bureau’s position is that no directors, officers or employees of the Canadian corporation need to have knowledge of the foreign conspiracy for the offence to be committed. The absence of any knowledge requirement for Canadian personnel would effectively create a criminal offence without the usual “mens rea” requirement, which can be expected to be challenged before the courts.
• Based on the Bureau’s approach, an arm’s length distributor could be investigated for implementing a conspiracy that involved price-fixing or market allocation by its foreign supplier. Similarly, a foreign franchisor’s pricing or market allocation directives to Canadian franchisees or master franchisees could potentially engage this offence if there was underlying conduct abroad that contravened the conspiracy offence.

3. Most Favored Nation Clauses

The CEGs set out the Bureau’s position that certain “facilitating practices” may be prosecuted criminally where there is conduct that can support an inference that they reflect a “meeting of the minds” to engage in conduct prohibited by the conspiracy offence. The Bureau considers such conduct to be different from lawful “conscious parallelism”, but its position on facilitating practices is controversial and they have not yet been found to be criminal offences in Canada.

• The CEGs identify most favored nation (“MFN“) clauses and similar contractual monitoring mechanisms as examples of business practices that could make it easier for firms to coordinate prices (or wages). While MFN-type provisions often have legitimate commercial purposes (and are often requested by a counterparty that wants to ensure it gets the best possible pricing or other terms), the Bureau will consider whether the use of such provisions by competitors in an industry “could be evidence of a meeting of the minds” to contravene the criminal price-fixing (or wage-fixing) offence.
• Businesses that use MFN pricing terms, parity clauses, or other contractual benchmarking mechanisms should therefore be alert to the risk that these provisions may attract scrutiny as circumstantial evidence of cartel conduct, in addition to any separate concerns they may raise under the reviewable practices in the Act. This is concerning and is inconsistent with case law that has held that an MFN clause is not a naked price restraint within the purview of the conspiracy offence. ⁵

4. Franchise Systems

The CEGs maintain the helpful guidance from the former Competitor Collaboration Guidelines that the criminal offences in the Act apply to “hard core cartel” conduct and other “naked restraints” on competition. Conduct that involves other business objectives including supplier-customer interactions and “dual distribution” situations is generally assessed under the reviewable practices provisions of the Act, which all require consideration of competitive effects.

Consistent with these principles, the CEGs indicate that agreements between franchisors and franchisees typically will be dealt with as reviewable conduct. However, the CEGs include an important qualifier that horizontal agreements between franchisees to restrain competition could be examined under the criminal provisions related to price-fixing or market / territory allocation, as well as the wage-fixing and no-poach offences.

The Bureau’s guidance introduces undesirable uncertainty, since franchise systems may engage in a variety of coordination through the parallel interactions between a franchisor and individual franchisees as well as mechanisms such as franchisee councils or advisory groups. Such mechanisms typically have legitimate business objectives and are not “naked restraints”. However,

businesses operating franchise systems should be aware that certain forms of coordination that are standard features of franchise relationships — and may be contemplated or required by provincial franchise legislation — could nonetheless attract scrutiny under the breadth of the CEG guidance related to “horizontal agreements” between franchisees, with or without “vertical” coordination by the franchisor.

5. Agreements Between Employers that May Not Compete

The wage-fixing and no-poach offences added to the Act in 2022⁶ apply to agreements between employers, regardless of whether they are competitors in the supply of any products or services. The CEGs indicate that the Bureau’s enforcement priority is to investigate agreements between employers that compete in upstream markets for the purchase of labour. Such markets may be broader or narrower than the downstream markets in which products and services are sold.

Franchise systems should be particularly attentive to this area. No-poach and non-solicitation of employee provisions are common features of franchise agreements and could be examined under these offences even where they originate from the franchisor and regardless of whether the franchisees have separate territories.

Concluding Observations

The draft CEGs integrate the enforcement guidance on the cartel provisions of the Act into one plain-language document. Some of the Bureau’s enforcement positions go beyond established case law and it will be important to see whether these are adjusted after the stakeholder consultation process. Canadian businesses should also be aware that the CEGs do not make any changes to the Immunity and Leniency Programs that are operated by the Bureau and the Director of Public Prosecutions.⁷

Footnotes

1. Interested parties can submit comments until September 13, 2026 here.

2. The Bureau recently consulted on new Anti-Competitive Conduct and Agreements Enforcement Guidelines (the “ACCAs”) which update the non-cartel portions of the Competitor Collaboration Guidelines. Please see McMillan’s bulletins on the ACCAs, discussing the Bureau’s new holistic approach as well as competitor collaboration and anticompetitive agreements.

3. In R. v. Rousseau 2018 QCCS 640 at para 9, the court held that there must be a formal process and outlined five factors that must be established for a invitation to bid to be considered a call for tenders within the meaning of section 47. Similarly, the court in R. v. Dowdall 2012 ONSC 3945 at para 39 (affirmed in R. v. Dowdall, 2013 ONCA 196), while taking a more flexible approach, held that there must be a formal procurement process that establishes the parties’ intent to create binding rights and obligations even if those obligations do not mandate the contracting authority to call up work or services from the successful bidder.

4. NHK Spring Co., Ltd., et al. v. Tony Cheung, et al., Supreme Court of Canada case no. 41451, appeal of 2024 BCCA 236 scheduled to be heard in October 2026.

5. Difederico v Amazon.com, Inc 2023 FC 1156 at para 121 and 122, online: 2023 FC 1156 (CanLII) | Difederico v. Amazon.com, Inc. | CanLII (appeal decision pending).

6. Please see McMillan’s bulletins on the new wage fixing and no poach provisions of the Act and the Bureau’s guidelines on the wage fixing and no poach provisions. Despite indications that this was expected to be an area of vigorous enforcement activity, there have been no prosecutions initiated since the wage fixing and no poach offences were enacted.

7. For more on the Immunity and Leniency Programs, please see McMillan’s bulletin on whistleblower programs.