On October 24, 2008, the Competition Bureau (the Bureau) released its draft Information Bulletin on Trade Associations (the Bulletin) for public comment.
According to the Bureau, participation in trade associations - particularly those whose members compete - carries with it an inherent risk that the association may be used as a forum for anti-competitive conduct, particularly anti-competitive agreements or collective action that violates the criminal conspiracy (cartel) provision of the Competition Act. "Association activities that deal with subjects such as pricing, customers, territories, market shares, terms of sales and advertising restrictions" are of particular concern to the Bureau. The draft Bulletin aims to provide guidance to trade associations on how best to ensure compliance with the Competition Act; it calls upon trade associations to "ensure that appropriate safeguards are implemented" to guard against anti-competitive conduct.
After summarizing the provisions of the Competition Act that are of greatest concern in the context of trade associations (anti-competitive conspiracies and bid-rigging, price maintenance, restrictive trade practices that exclude or reduce competition, and misleading advertising), the draft Bulletin highlights the following trade association activities as deserving of particular attention:
- information collection and sharing
- recording of meetings (agendas and minutes)
- membership criteria or restrictions
- discipline of association members
- fee guidelines
- advertising restrictions
- self-regulation, voluntary codes and standard setting.
The draft Bulletin discusses the Bureau's concerns in these areas and its recommendations for conduct by associations. These recommendations range from the straightforward (e.g., establishing clear and appropriate agendas and recording minutes of meetings) to the more complicated (e.g., six guiding principles for a trade association's development of any regulation, the primary objective of which, according to the Bulletin, "should be to promote open and effective competitive markets").
The draft Bulletin concludes with a list of "Best Practices" for trade associations. The Bureau suggests that associations establish a competition law compliance program for the purposes of informing members about competition law, setting boundaries for permissible conduct, identifying situations where legal advice or the presence of a lawyer is advisable, and encouraging pro-competitive association activities. Detailed guidelines for association conduct, both general in nature and specific to each of the issues listed above, are provided. These include the more obvious Don'ts, such as:
- discussing current or future prices, costs, output levels, market allocations, business plans or bids; and
- imposing sanctions aimed at inducing members to follow association recommendations that, if carried out, would have an anti-competitive effect.
Do's include such things as:
- having clear membership criteria that are not arbitrary and are based on the legitimate objectives of the association; and
- adhering to clear agendas and record the minutes of the meetings.
The guidelines also include recommendations that may be characterized as either a "gold standard" or as "over the top," depending on your point of view. For example, the guidelines state that associations should not only ensure that legal counsel approve the agenda and minutes of any association meeting, but that legal counsel should actively participate in all association meetings. Generally, however, the guidelines provide workable suggestions for the conduct of trade associations that will go a long way to limit the risk of association activity being off-side competition law and, if an investigation is ever launched, to decrease the likelihood that the Bureau will pursue the prosecution of an association or its executives even if such activities are seen, by the Bureau, to be on the 'margins' of anti-competitive conduct.
The draft Bulletin is a useful addition to the Competition Bureau's many publications, and will serve as an important tool for all Canadian trade associations and their members. Comments on the draft Bulletin are welcomed by the Bureau until January 23, 2009.