Canadian COMPETITION LAW

July 19, 2010

In R. v. Burrows, importers of mandarin oranges were accused of conspiracy under section 32 of the Combines Investigation Act (the predecessor to section 45 of the Competition Act) in relation to the importation and sale of mandarin oranges.

This case involved an agreement with Japanese exporters to limit sales to three Canadian importers, efforts by the Canadian Fruit Wholesalers Association to get Japanese exporters to refuse to supply to some importers and efforts by Canadian importers to fix the wholesale and retail selling prices for oranges.

The British Columbia Supreme Court found all accused guilty of a conspiracy under section 32 to restrict the number of Canadian importers of Japanese oranges, control the quantity of oranges imported into Canada, control the allocation of oranges in Canada and fix the wholesale and retail prices of oranges in British Columbia.

In coming to its decision, and finding an agreement between the accused, the Court relied on evidence that included efforts to pressure Japanese exporters from selling to certain importers, discussions of prices at association meetings and identical retail and wholesale prices.

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Competition Law Compliance Tips for
Canadian Trade and Professional Associations

The federal Competition Act can apply to many trade and professional association activities in Canada, including board and membership meetings, membership criteria and discipline, member surveys and benchmarking, association codes of conduct and dealings with suppliers and customers. While trade associations can, and frequently do, serve many legitimate purposes, since trade and professional association activities typically involve direct interaction between competitors, it is prudent for association executives, members and their advisors to take basic steps to proactively reduce potential competition law risk.

The federal Competition Bureau (Bureau) has also commenced many civil and criminal association related enforcement matters, including in the areas of conspiracy (cartels), bid-rigging and abuse of dominance, as well as regularly discussing association activities that can raise concerns and the importance of Competition Act compliance. The Bureau has also released several trade association related enforcement guidelines, including its Trade Associations and the Competition Act pamphlet and Corporate Compliance Programs bulletin.

The following are some key legal tips for trade and professional associations to comply with Canada’s Competition Act:

Implement a competition law compliance program. Developing and implementing an effective and credible competition law compliance program plays a crucial role for trade associations to mitigate risk under the Competition Act. As such, implementing a compliance program should be at the top of the compliance list for all associations.

Competition compliance options for associations range from formal compliance programs, which encompass all association activities to compliance guidelines for key activities based on risk (e.g., meetings, surveys/benchmarking and other types of information exchanges and specific initiatives that may raise competition law issues, such as joint negotiations with suppliers or customers, discussions or projects involving competitively sensitive topics).

Some of the key benefits of a competition law compliance program include reducing the risk of violating federal competition law, reducing the costs of investigations and proceedings should they occur and potentially mitigating penalties. Association board and other members may also consider requiring that their associations have a credible and effective competition compliance program to participate in association activities. For more information, see: Associations, Association Compliance, Compliance and Immunity & Leniency.

Prepare agendas and meeting minutes. Associations should prepare written agendas for all meetings involving competitors (including board of director meetings) and meeting minutes.  Discussions at meetings should also stay within the boundaries of legitimate agenda items and discussions (or exchanges) of “competitively sensitive information” should be avoided, including discussions of current or future pricing, costs, individual customers and suppliers, markets, market shares, output, competitive bidding and business or strategic plans.

The Bureau recommends that associations provide a clear copy of the agenda before trade association meetings for competing firms to participate in the meeting. For more information, see: Association Compliance and Information Exchanges.

Prepare and adopt conduct of meeting guidelines. Adopting and strictly following conduct of meeting guidelines is a proactive method to reduce competition law risks for associations. Such guidelines commonly include restrictions on the exchange of competitively sensitive information and topics that may lead to conspiracy risks under section 45 of the Competition Act (e.g., discussions relating to pricing, markets, concerted refusals to deal or limiting the production or supply of goods or services). For more information, see: Information Exchanges, Conspiracy (Cartels), Conspiracy FAQs and Refusal to Deal.

Compliance guidelines should also address steps to take if inappropriate discussions or activities arise during association meetings or events, including when attendees should leave meetings, report incidents to association executives and/or legal counsel and record efforts to prevent anti-competitive discussions from continuing. In certain cases, individuals or organizations that have participated in potentially illegal activities may also qualify for immunity from prosecution or lenient treatment under the Bureau’s Immunity and Leniency Programs. For more information, see: Immunity & Leniency.

Conduct compliance audits and appoint a compliance officer. One practical way for associations to monitor compliance is to conduct periodic audits of association activities, which can be performed on an association-wide, activity-specific or spot basis. Appointing a compliance officer to monitor, audit and assist with compliance can also help ensure that association members understand and comply with the Competition Act. For more information, see: Association Compliance and Compliance.

Conduct compliance orientations for new executives and personnel. Another practical step associations can take to assist with competition law compliance is to conduct compliance orientations for new board members, executives and other key personnel (e.g., staffers who are routinely involved in association surveys or benchmarking). The Bureau also recommends requiring company/member representatives to complete competition law compliance training before joining trade associations and participating in association activities. For more information, see: Association Compliance and Compliance.

Obtain legal advice for key association initiatives. Care should be taken in relation to specific types of trade association activities where there is increased potential risk.  Associations should obtain advice from qualified legal counsel for key activities that may raise competition law concerns, including surveys and benchmarking, standard setting, member discipline and joint member initiatives (e.g., joint marketing, purchasing or negotiations with significant purchasers).

Avoid “off the record” meetings. Associations should discourage informal or “off the record” meetings between members, particularly on the “fringes” of association meetings or using association facilities. Private meetings between competitors under the pretext of association meetings should also be discouraged. Association members should also be aware that merely because a meeting is held “off the record” or “in camera” (i.e., a discussion is not recorded in meeting minutes) does not mean that discussions (which may be recorded in other ways such as attendee notes, e-mails or texts, etc.) or the fact of the meeting itself cannot be used as evidence in competition law proceedings.  The Bureau and private plaintiffs can, and often have in the past, used such “circumstantial evidence” to establish a criminal conspiracy agreement.

Review association activities and rules. Associations should generally review their initiatives and activities through a “competition lens”. For example, if a particular association activity may lead to higher prices, less quality or choice, increase barriers for some members or competitors to compete or generally reduce competition, this may well raise competition law concerns (or at minimum the need to consult knowledgeable legal counsel).

It is also prudent for associations to ensure open consultations among members when developing or reviewing existing rules, codes of conduct and standards and include a clear statement of objectives, expectations and responsibilities that comply with the Competition Act. For example, associations should avoid rules (e.g., in association codes of conduct) that establish prices, mandate levels or types of services, restrict advertising or exclude viable competitors from the market.

Require associations to adopt credible and effective competition compliance programs. Before allowing company personnel to participate in trade or professional association activities, ensure that the association has adopted and follows a credible and effective competition compliance program. As a practical matter, if competition law issues arise (or enforcement) the association, member firms and their participating directors and officers and other personnel may be exposed to risk or penalties under the Competition Act. For more information, see: Association Compliance and Compliance.

Consider using third parties for surveys, benchmarking and other information exchanges. Before collecting and sharing competitively sensitive information within the association, consider using third parties to collect such information and distribute it with precautions to minimize potential competition law risk (e.g., circulating information in aggregated form, not distributing raw competitively sensitive data to competing board or other members, etc.). For more information, see: Information Exchanges.

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SERVICES AND CONTACT

I am a Toronto competition and advertising lawyer offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law.  I also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

My experience includes advising clients in Toronto, Canada and the US on the application of Canadian competition and regulatory laws and I have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal, pricing and distribution, Investment Canada Act and merger matters. For more information about my competition and advertising law services see: competition law services.

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