Canadian COMPETITION LAW

January 1, 2014

A few days ago this very good blog post by Jarod Bona caught my eye outlining some of the basic considerations for a competition law compliance policy.  Given that many of the same competition law considerations apply on this side of the border, including when dealing with competitors, participating in associations, preparing for a merger and joint ventures, I thought this would be a good compliance piece to reprint here (reprinted with permission).

“Building an Antitrust and Competition Policy: Where to Begin”

Jarod Bona
The Antitrust Attorney Blog

Let’s pretend that you are starting the new year with an exciting opportunity: You were just named general counsel of a multi-national corporation with several market-leading products.  You received lots of congratulations, high-fives, and kudos during holiday parties and family get-togethers, but you can’t help but start to think about the arduous task ahead.

The challenge is even more daunting because you know your company is a target: It was, well, aggressive, in taking the lead in a few different product and geographic markets (throughout the world), and you know that antitrust enforcers everywhere will scrutinize your every move.  Plus, the recent scandal involving the previous general counsel and unpaid parking tickets has brought a lot of unwanted attention to your company (but, hey, you are tired of having to talk about that).

You are planning a top-to-bottom reorganization of your company’s legal priorities and processes, and you naturally want to begin with the firm’s antitrust and competition practices.  But you don’t even know where to begin.  Here are ten places you can start (in no particular order):

1.  Determine where you are vulnerable from an antitrust-and-competition standpoint.

It is easy to know you shouldn’t fix prices or allocate markets—every company assumes major risk if they do that. But you need to understand your company’s unique situation to best mitigate potential liability.

Your company leads certain markets, so you have heightened risks there, as market power transforms certain activities from benign to bullying in the eyes of antitrust and competition law.

You need to understand those markets very well because you are vulnerable to both civil actions and government investigations with even the slightest misstep. Indeed, the line between vigorous competition and an expensive government investigation is very fine.

If you are dominant in Europe, you should tread especially lightly, as the European Commission often takes particularly aggressive positions on the legality of certain conduct by dominant firms.

2.  Develop a comprehensive antitrust and competition policy and implement training.

The policy is that you won’t violate antitrust and competition laws around the world. But it isn’t quite that easy. Part of why practicing antitrust law is fun is because it often isn’t clear what is legal and what isn’t. Sometimes you have to litigate it to know.

There is obvious behavior that your company and its employees should avoid, and you need to put that in the policy. An antitrust attorney can provide you the details.

But just as importantly, you must effectively communicate the policy to the employees—particularly the sales staff (as that is where the most interesting documents from antitrust litigation usually originate). You should set up regular antitrust training for your staff, so they know what conduct to avoid, and make sure they take it seriously.

3.  Prepare your processes to incorporate antitrust and competition review of pricing and product sales decisions.

When you are the market leader, or have market power, decisions about pricing and combining product sales could create serious antitrust issues.

For example, if you manufacture a product and offer retailers rebates that vary depending upon the percentage of their purchases in that market that come from you, the FTC or European Commission could come knocking on your door.

Another example: If you have market power for product A, but not product B, and refuse to sell product A to customers unless they buy product B, a process server might show up in your office with an antitrust complaint.

The moral of the story is that if you have market power, you ought to talk to an antitrust lawyer before you finalize these types of decisions.

4.  Prepare policies and processes for communicating and dealing with competitors.

Antitrust and competition law places horizontal—competitor-to-competitor—dealing at the highest level of scrutiny and, ultimately, liability. So you should make sure that any communication and contracts with competitors are done in a way that doesn’t lead to indictments.

If either you or your competitor are vertically integrated (i.e. perhaps you manufacture and sell inputs to your product, as well as the product itself), there are additional issues that you must consider.

5.  Prepare policies and processes for participating in trade associations.

I talk more about this here.

6.  Prepare processes to incorporate early antitrust participation in merger, acquisition, and joint venture discussions.

In many instances, antitrust agencies must approve these deals in advance. But even if the deal doesn’t qualify for pre-approval requirements, the agency could challenge it after the fact.

Thus, antitrust counsel should enter the discussions as early as possible to (1) point out obvious problems with a possible transaction; (2) advise the parties what considerations are permissible under the antitrust laws—don’t go forward with the deal because it will allow you to cut back production and drive up prices; and (3) assure that the company documents all likely efficiencies of the deal as early as possible.

7.  Prepare policies and processes to address government investigations and dawn raids.

You can do what you can to reduce risk, but some rogue salespeople could take actions that invite a SWAT-team of antitrust enforcers into your company some early morning. You better prepare.

8.  Create policies and processes to incorporate antitrust counsel into intellectual property negotiations and decisions to minimize antitrust risk

Some of the most interesting and complex antitrust issues of our time relate to intellectual property. And the answers aren’t always obvious.

If your company participates in standard-setting organizations, additional issues can arise, particularly if you produce a product that is incorporated into a standard.

9.  Prepare guidelines for relationships with distributors and external sales staff.

In the United States, it wasn’t long ago that minimum-resale-price maintenance—telling retailers and distributors that they had to sale your product for at least a certain amount—was per-se illegal. Under federal law, they may still violate the antitrust laws, but the court will undertake a rule-of-reason analysis before condemning them.

There are many states, however, that still consider these contracts per se illegal, so you should enter them with caution.

10.  Call me.

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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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