As discussed in our previous blog post, on November 17, 2022, the Honourable François-Philippe Champagne, Minister of Innovation, Science and Industry, launched the much anticipated public consultation on the second stage of potential amendments to the Competition Act (the “Act”).
As part of this consultation process, the Department of Innovation, Science and Economic Development (“ISED”) issued a discussion paper, titled The Future of Competition Policy in Canada (the “Discussion Paper”), which considers numerous issues and potential areas of reform, including in the mergers, unilateral conduct, competitor collaboration, deceptive marketing and administration/enforcement context. The Discussion Paper does not include any particular recommendations or proposed amendments to the Act. Rather, it simply sets the stage, invites feedback from interested stakeholders on the issues and discusses a number of potential areas of reform. Feedback can be provided on or before February 27, 2023.
To help businesses better understand the issues and potential areas of reform included in the Discussion Paper, we are releasing a series of blog posts discussing these issues and potential areas of reform on a topic-by-topic basis. This is the second blog post in the series, which is focussed on competitor collaboration.
The 2009 amendments to the Act divided Canada’s enforcement approach to horizontal competitor collaborations into (1) a per se criminal regime that applies to agreements to fix prices, allocate markets or restrict output and (2) a civil regime to permit the review of all other forms of collaboration, such as joint ventures and strategic alliances. The Federal Government is considering several possible reforms to the current approach to competitor collaboration and would welcome input on each of the topics listed below, as well as input on possible reforms to this approach more generally.
- Deeming or inferring agreements more easily for certain forms of civilly reviewable conduct, such as through the use of computer algorithms, especially given the difficulty of applying concepts like ‘agreement’ and ‘intent’ in the age of artificial intelligence. In order for the civil competitor collaboration provisions to apply, there must be an agreement between competitors. The Discussion Paper questions this need for an agreement and intent. In particular, the Discussion Paper asks whether it “should … matter whether a discrete meeting of the minds can be clearly established”; notes that civil enforcement is “mostly focused on the health of the market … rather than on what [the] participants were trying to do”; and states that “[i]f the law were to deem or infer the existence of an agreement in more circumstances, competitive harm could be addressed more flexibly”. While the Discussion Paper notes that algorithmic conduct is an obvious candidate for such reform, it also suggests that other types of “facilitating practices”, such as the publication of price lists or the use of price-matching guarantees or most-favoured-nation clauses, could be addressed between firms of any size sufficient to affect the marketplace.
- Broadening and/or strengthening the Act’s civil competitor collaboration provisions to discourage more intentional forms of anti-competitive conduct, including through examining past conduct and introducing monetary penalties. As currently drafted, the civil competitor collaboration provisions apply only to ongoing and future conduct and they do not allow for the imposition of AMPs. While the Discussion Paper notes that “this approach is consistent with the civil approach to protect markets rather than discipline its actors”, it goes on to state as follows: “Firms may be well aware that their anti-competitive behaviour would be remediable under the civil provisions of the legislation, but so long as the Act cannot examine past behaviour or impose [AMPs], they may be incentivized to cross the line until required to stop.” Amending the civil competitor collaboration provisions to capture past agreements would be a significant change, as it would (1) potentially subject all of a company’s past collaboration agreements to scrutiny and (2) mean that a company could not avoid a challenge simply by terminating an allegedly anti-competitive agreement.
- Making collaborations that harm competition civilly reviewable even if not made between direct competitors. As currently drafted, the civil competitor collaboration provisions apply only to agreements between competitors. While the Discussion Paper notes that this makes sense in the criminal context, it goes on to state that “the limit to horizontal coordination [in the civil provision] generally falls outside the norm of international practice” and “shields potentially anti-competitive conduct in vertical contexts (such as supply, licensing or franchise agreements) from the Bureau’s scrutiny, unless they fall under a different provision of the Act, such as tied selling”. The Federal Government is therefore of the view that there is a case for expanding the civil competitor collaboration provisions to encompass more than just direct competitor collaborations – something that would significantly increase the scope of these provisions.
- Introducing mandatory notification or a voluntary clearance process for certain potentially problematic types of agreement. The Discussion Paper states that “detection of anti-competitive collaborations remains a challenge”. The Discussion Paper suggests the possibility of a mandatory notification or voluntary clearance process for certain types of agreements, including patent litigation settlements in the pharmaceutical industry, which are currently subject to mandatory notification in the United States.
- Reintroducing buy-side collusion – beyond labour coordination – into the Act’s criminal conspiracy provision, or considering a civil per se approach to it. The criminal conspiracy provisions currently prohibit agreements between competitors to fix prices, allocate markets or restrict output – each of which is a “supply-side” agreement. As part of the first round of amendments to the Act that were passed on June 23, 2022, wage-fixing and no-poach agreements between unaffiliated employers – each of which is a “buy-side” agreement – will become illegal as of June 23, 2023. Other forms of buy-side collusion are subject to review under the civil competitor collaboration provisions, which apply only where the agreement is likely to result in a substantial prevention or lessening of competition. This approach has been questioned by commentators and alterative approaches to the treatment of buy-side collusion have been identified in the Discussion Paper, namely reintroducing buy-side collusion into the Act’s criminal conspiracy provisions or considering a civil per se approach to such collusion. Importantly, while the Discussion Paper recognizes that certain types of supply-side conduct “never hold an economic justification”, it notes that buy-side coordination “may be seen to reduce costs, increase efficiency and deliver consumer benefit”.
Timing of Submissions
As noted above, interested stakeholders have been invited to provide submissions on or before February 27, 2023. This can be done using the online consultation form on ISED’s website.