In recent weeks, the Canadian Competition Bureau (Bureau) announced a number of initiatives relevant to companies that do business in Canada.
In particular, the Bureau recently issued an information bulletin clarifying its initiative to conduct and publish industry-wide Market Studies.
The Bureau has also updated its Immunity and Leniency Programs, which set out the Bureau’s approach to granting immunity from prosecution or leniency in sentencing for parties that cooperate with the Bureau in criminal proceedings. The updated programs follow previous draft programs released for consultation, which were described in our November 2017 and May 2018 Blakes Bulletins: Competition Bureau Announces Proposed Changes to Immunity Program and Competition Law Compliance: Canada’s Competition Bureau Releases New Draft Immunity and Leniency Programs.
Finally, in two recent speeches, the Interim Commissioner of Competition discussed the Bureau’s efforts to increase transparency and efficiency in its merger review process, including the formation of a new Merger Remedies Unit. He also affirmed the Bureau’s focus on innovation and the digital economy as key advocacy and enforcement priorities this year.
WHAT BUSINESSES NEED TO KNOW
- Market Studies. Despite its plan for more market studies, the Bureau must rely on voluntary participation from businesses. It cannot compel businesses to produce information and, indeed, may not have the statutory authority to conduct market studies at all. In our experience, it is very important for key stakeholders to closely engage with the Bureau to help ensure that any Bureau publications or policy recommendations are properly informed by, and actually reflect, all of the relevant facts. Information voluntarily provided to the Bureau is protected under the confidentiality provisions of the Competition Act.
- Immunity and Leniency Programs. The updated Immunity and Leniency Programs underscore the importance of having a robust competition compliance program and appropriate policies to prevent and detect any behaviour that might give rise to consideration of the Bureau’s programs. In an effort to encourage more participation, every leniency applicant will now be eligible to receive a leniency discount up to 50 per cent of its fine.
- Merger Review Update. The Bureau is creating a formal Mergers Remedies Unit to oversee the design, negotiation and implementation of remedies. It is also working closely with the Canadian Bar Association and the Competition Tribunal to find ways to expedite the Tribunal process.
- The Digital Economy. The Bureau will focus on innovation and the digital economy as key enforcement and advocacy efforts in 2019. In particular, the Interim Commissioner indicated that the Bureau is likely to focus on internet-based misleading advertising, including “drip pricing” and influencer marketing. The Bureau also released its final Fintech Market Study Report at the end of 2017 and indicated that it will be closely reviewing technology mergers as part of its digital economy initiative. Businesses that operate in technology and internet-based channels – an ever-increasing list – should be mindful that the Bureau will also be appointing a new Chief Digital Enforcement Officer to oversee Bureau activity in this area.
MARKET STUDIES INFORMATION BULLETIN
Identification of Sectors
The Bureau looks to prioritize its market studies in sectors that have generated significant public interest. Complaints from the public, past Bureau experience and media reports will likely be considered in identifying potential sectors for market studies. In the past, the Bureau has conducted or announced market studies in a variety of sectors including pharmaceuticals, beer and telecommunications.
In terms of process, the Bureau usually publishes a notice and media release at the start of each market study. As the Bureau has no legal authority to compel the disclosure of information from businesses for a market study, it will collect information from publicly available sources as well as solicit voluntary disclosures from stakeholders. The Bureau may also hold roundtables and workshops involving stakeholders, experts and other interested parties. The Bureau may make policy recommendations to federal or provincial regulators to impose new or additional regulatory restrictions on businesses. Therefore, it can be important for affected stakeholders to closely engage with the Bureau throughout a market study process to ensure that the Bureau receives accurate and comprehensive information, as the process creates significant risk that any Bureau policy recommendations or publications will merely reflect the interests of certain parties to the process rather than all of the relevant facts. If your business decides to participate, information provided will be protected under the confidentiality provisions of the Competition Act, as noted above. The Bureau will typically publish a final market study report within 12 to 18 months of publishing the notice and media release.
Follow up and Evaluation
Following the publication of a market study report, the Bureau may monitor actions by regulators, policymakers and other stakeholders in the applicable sector. In some cases, the Bureau may publish a follow-up assessment to identify areas that may still appear to present competition problems.
UPDATED IMMUNITY AND LENIENCY PROGRAMS
The Immunity Program provides immunity from prosecution or criminal fines for the first party to come forward and cooperate with the Bureau in criminal proceedings. Under the updated Immunity Program, applicants will receive a grant of interim immunity from the prosecution, with full immunity to follow once the Bureau believes that the applicant has met its cooperation obligations. The previous Immunity Program contained no interim step, and this change appears to be aimed at ensuring the Bureau and prosecution receive sufficient cooperation.
Furthermore, automatic immunity for all directors, officers, and employees of a company is no longer provided under the updated Immunity Program. All such individuals will be required to demonstrate their knowledge of the conduct in question and cooperate with the Bureau’s investigation going forward to receive coverage.
The Leniency Program applies to companies that do not qualify for immunity, because they are not the first to cooperate. Leniency applicants must plead guilty to a criminal offence, but can still receive other benefits (including reduced fines and immunity from prosecution for individual personnel) for cooperating.
Under the updated Leniency Program, every leniency applicant will now be eligible to receive a discount of up to 50 per cent off its fine. The amount of the discount will be based on the value of the applicant’s cooperation to the Bureau’s investigation, including the extent that the cooperation added to the Bureau’s ability to advance its investigation to pursue other culpable parties. Accordingly, while companies who are not first or even second in line for leniency in a cartel investigation may now be more incentivized to apply. How the Bureau will assess an applicant’s “value of cooperation”, which must be taken into consideration, remains uncertain.
Where a corporation has a credible and effective corporate compliance program, the Bureau will also treat this as a mitigating factor when making its leniency recommendation to the Public Prosecution Service of Canada.
As with the updated Immunity Program, automatic coverage for all directors, officers and employees of a first-in leniency applicant will no longer be provided. Any individuals included in a leniency recommendation from the Bureau will be required to provide information regarding the relevant conduct and be personally identified in the plea agreement.
MERGER REVIEW UPDATE
Transparency and Efficiency
Interim Commissioner Matthew Boswell confirmed that the Bureau is currently working with various stakeholders, including the Canadian Bar Association and the Competition Tribunal, to increase transparency and efficiency in merger reviews. Mergers between competitors can generate significant efficiencies by allowing firms to achieve cost synergies, operate at scale, offer new products, and invest profits in the development of new product innovations or technologies. However, such complex mergers impose the greatest burden on companies in terms of time and costs. Policy changes that minimize the time and costs it takes for complex mergers to be reviewed would enhance predictability and certainty with the merger review process.
The Bureau’s efforts are in line with recent developments in the U.S. In a speech at the 2018 Georgetown Law Global Antitrust Enforcement Symposium, Assistant Attorney General Makan Delrahim announced that the Department of Justice (DOJ) intends to streamline the process for responding to a “second request” in its merger review process. In particular, the DOJ will aim to resolve most merger investigations within six months. Moreover, as a general matter, the DOJ will assume that 20 custodians per party will be sufficient, in contrast to the previous standard of 30 custodians.
Formal Mergers Remedies Unit
Interim Commissioner Boswell also confirmed that the Bureau is creating a formal Mergers Remedies Unit to oversee designing, negotiating and implementing remedies in mergers. The Bureau envisions the Mergers Remedies Unit as a “strike force” on merger transactions in which the Bureau is negotiating remedies with the parties involved to resolve its concerns by way of a consent agreement.
THE DIGITAL ECONOMY
Interim Commissioner Boswell affirmed that investigations into activities in the digital economy will be a key enforcement activity in the coming year. He indicated that these investigations may be weighted towards internet-based misleading advertising by highlighting the Bureau’s investigation of the Hudson’s Bay Company regarding its representations about ordinary selling prices for mattresses, as well as the investigation of Ticketmaster for drip pricing.
In addition, the Bureau will be closely reviewing technology mergers as part of its digital economy initiative. The Bureau released its Fintech Market Study at the end of 2017, in which it recommended that regulations should be technology neutral and balance consumer protection with promoting innovation. Moreover, the Bureau will be issuing updates to the current Intellectual Property Enforcement Guidelines for public consultation shortly.
The Bureau is currently advancing over 41 investigations in the digital economy and its Annual Plan sets out a goal of commencing 10 additional digital economy investigations. Accordingly, it is important that companies that operate in technology and internet-based channels review their digital pricing practices, especially if they impose additional mandatory surcharges beyond what was initially advertised.
Chief Digital Enforcement Officer
Interim Commissioner Boswell affirmed that the Bureau created a new position, the Chief Digital Enforcement Officer, for the purposes of helping the Bureau build knowledge and capacity in the digital economy field, including by conducting digital intelligence gathering, detection and investigations regarding emerging technologies and threats. The Chief Digital Enforcement Officer is further intended to act as an “ambassador” for the Bureau within the digital enforcement community. The creation of a technology-specific position is similar to initiatives undertaken by antitrust authorities in other common law jurisdictions, including the European Commission’s appointment of a Digital Markets Advisory Panel.
Interim Commissioner Boswell highlighted the publication of the fourth volume of the Deceptive Marketing Practices Digest, which focuses on the use of online influencers for marketing and advertising, as a method to increase compliance by marketing professionals. Accordingly, online influencers and companies that use influencer marketing should ensure they provide the appropriate disclosures.
Additional efforts by the Bureau to increase awareness of, and compliance regarding, internet-based misleading advertising include a partnership with the International Consumer Protection Enforcement Network as well as a Broadband Market Study. The Bureau will be reaching out directly to Canadians regarding its Broadband Market Study and will publish an update about this study in the coming weeks. As noted above, it can be important for affected stakeholders to closely engage with the Bureau throughout its market studies process to ensure that it receives accurate and comprehensive information.