The Competition Bureau is contemplating a new pre-notification regime, similar to the regime that currently exists for mergers, whereby businesses will be permitted (or, potentially, obliged) to seek advance clearance from the Bureau before entering into agreements with their competitors. Speaking on a panel at an American Bar Association conference on March 27, Commissioner of Competition John Pecman noted that the plan is in its “early days”, and that the Bureau has not decided whether a regime should be implemented (and if so, whether it should be voluntary or mandatory), but that it is something the Bureau is considering. Such a regime could apply to a variety of types of “normal-course” agreements, such as joint purchasing and selling agreements, buying groups, information sharing agreements, R&D agreements, joint production agreements, non-competition clauses and even joint venture agreements.
The motivation for such a regime may stem from the Competition Act’s dual-track approach to competitor collaborations. In Canada, two provisions of the Act govern agreements among competitors. A criminal provision, intended to capture “naked” price fixing (as well as output restrictions and market allocation), carries significant fines and jail terms. A second, civil provision captures only agreements which adversely affect competition, and carries no such penalties. Although these provisions are intended to serve different purposes, it is up to the Bureau to decide which route it wishes to take when investigating (or prosecuting) any particular agreement. The Bureau has released a guidance document which outlines the types of situations in which it will choose to use the criminal and civil provisions, but this guidance is not binding. So, a pre-clearance regime may give businesses additional certainty in knowing that their joint purchasing agreement or non-compete clause will not be challenged (at least, under the criminal provision).
It is not clear whether the regime would apply to joint ventures. Many joint ventures, because of their structure, are currently subject to mandatory pre-merger notification, but an existing exception exempts certain types of joint ventures from pre-notification (namely, where a limited joint venture agreement exists and where no change in control to any party would result).
The Act already contains a provision which allows any person to apply to the Commissioner for a binding, written opinion on the applicability of any provision of the Act to any conduct or practice that she proposes to engage in. However, this provision is very rarely used for a number of reasons. First, the Commissioner is under no obligation to provide an opinion. Second, the Commissioner may simply reply that the Act “may” apply to the practice in question. Third, the written opinion process may be protracted. Fourth, requesting a written opinion may cause the Bureau to concern itself with an agreement that would not otherwise have come to its attention.
The introduction of a mandatory regime would certainly require legislative amendments to the Competition Act. A voluntary regime may not. In his remarks to the ABA, the Commissioner pointed to New Zealand as an example of a jurisdiction with an effective pre-clearance regime. There, the Commerce Act includes a section permitting (but not requiring) parties to request authorization to enter into contracts whose purpose (or likely effect) may be to substantially lessen competition; the Competition Commission may (but is not required to) grant authorization if certain criteria are met. Amendments to the Act would create a similar, voluntary pre-clearance process for “cartel provisions” in collaborative agreements. As currently drafted, the amendments would oblige the Commission to give clearance if it was satisfied that the agreement containing the “cartel provision” is necessary for a collaborative activity which will not, itself, be likely to substantially lessen or prevent competition. The Bureau may use New Zealand as a model if it proposes its own regime.