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In an interesting recent note, Jones Day has commented on a recent FTC administrative action against three of the largest U.S. suppliers of ductile iron pipe fittings (DIPF) alleging that they engaged in price-fixing and other anticompetitive behaviour.  In connection with this case, the FTC has published a proposed consent order for public comment to resolve claims that one supplier, Star, violated section 5 of the Federal Trade Commission Act by engaging in price fixing.

The case is interesting in that the FTC’s complaint alleges that two of the suppliers, McWane and Sigma, invited the third, Star, to collude by communicating through a letter to common customers.  The FTC also alleges that the suppliers utilized an industry trade association (the Ductile Iron Fittings Research Association) to exchange sales information to monitor and enforce the parties’ alleged agreement.

The FTC’s proposed consent order would prohibit Star from: (i) agreeing to fix, raise or stabilize DIPF prices (or allocate markets, customers or business opportunities for DIPF), (ii) soliciting any competitor to participate in such anti-competitive conduct or (iii) participate in any agreement between competitors to exchange competitively sensitive information (e.g., sales information).

In Canada, while there is no express provision in the Competition Act exclusively governing information exchanges, the principal risk of such exchanges between competitors is that they can lead to agreements (e.g., price-fixing agreements) that violate the criminal conspiracy provisions of the Competition Act (section 45).  Such information can include prices, costs, customers, suppliers, markets, market shares and business and strategic plans.

Information exchanges can also be relevant in establishing the existence of an illegal agreement under section 45 (i.e., be used by the Bureau, a court or a private plaintiff to infer the existence of an agreement that violates section 45).

Following amendments to Canada’s Competition Act in 2009 and 2010, agreements to exchange competitively sensitive information can also raise issues under section 90.1 of the Act (the civil reviewable practice section for agreements among competitors) if their effect is to prevent or lessen competition substantially.

Steps that companies and associations can take to reduce the potential risk include adopting effective compliance programs, using conduct of meeting guidelines for board, committee and other meetings involving competitors and implementing a process and guidelines for benchmarking and other information exchange exercises to ensure that legitimate industry and association initiatives do not raise any significant criminal conspiracy issues.

For more about Canada’s conspiracy laws see:

Conspiracy (Cartels)

For more about Canadian competition law and associations see:

Associations

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