The one-year delay before Canada's new, tougher, cartel law comes into force expires this month. Starting March 12, 2010, prohibited agreements between competitors will be criminally illegal in Canada, regardless of their impact on competition. The amendments result in the creation of a new category of "per se" criminal offences (so-called because the outlawed categories of agreement are "per se" illegal without proof of economic effect). Penalties under the new offence will also increase: from the former maximum five years imprisonment and/or C$10 million fine, to a maximum of 14 years and/or C$25 million.
The prohibited categories of agreement include agreements with existing or potential competitors to fix prices, allocate sales, customers, or markets, and to limit or control production or supply of a product. Such agreements are a criminal violation of Canadian competition law, unless the defence can show that they are both "ancillary and necessary" to a broader or different agreement, the purpose of which is not also prohibited (e.g., customer allocation could be necessary, in some circumstances, to a distribution agreement).
The amendments removed the requirement, which had existed in Canadian law since 1890, for the Crown to prove that the impugned agreement had led or was likely to lead to an "undue lessening of competition" - thus facilitating the prosecution of "hardcore" cartels.
As noted in the January 2010 edition of this newsletter, the Competition Bureau has issued Competitor Collaboration Guidelines outlining its intended approach to the enforcement both of the stricter section 45 prohibition against cartels, and of the accompanying civil provision under the new section 90.1 of the Competition Act, which enables the Competition Tribunal, on application by the Commissioner of Competition (head of the Bureau), to prohibit agreements which - although not criminally illegal - nonetheless have led or are likely to lead to a substantial lessening or prevention of competition.
While the Commissioner and the Guidelines have gone out of their way to attempt to reassure the Canadian business community that the new powers will be used responsibly, the fact remains that many agreements which were previously regarded as legal under Canadian law, due to their lack of economic impact, need to be reassessed under the new law.