January 10, 2014
Throughout last year, competition law compliance for trade and professional associations remained a key theme for Canada’s Competition Bureau. The new Commissioner of Competition John Pecman addressed trade association compliance and recent association cases five times in remarks between late 2012 and the end of 2013 (see for example, here and here).
The Commissioner indicated in his recent public remarks throughout 2013 that the Bureau is likely to show an interest in trade associations where they engage in certain types of anti-competitive activities.
These include, among others: restricting the types of professional service practice offerings (e.g., setting limits on things like members’ office location, size, etc.); limiting the number or range of members or the ability of association members to compete (e.g., through mandatory or suggested fee schedules or product quality standards that advantage some members over others); and activities that reduce incentives to vigorously compete – for example, exchanges of competitively sensitive information.
The Bureau also generally continues to emphasize the importance of compliance programs for associations, including in its key compliance guidelines: Corporate Compliance Programs Information Bulletin:
“A [competition compliance] program also plays a crucial role for trade associations because trade associations face unique compliance issues. Given that an association provides a forum where competitors collaborate on association activities, trade associations are exposed to greater risks of anti-competitive conduct. A number of past Bureau cases have involved trade associations that were engaged in agreements to harm competition. It is therefore critical that trade associations implement credible and effective programs with strict codes of ethics and conduct. Such programs may allow trade associations and [their] members to avoid improper actions and to protect themselves from being used as a conduit for illegal activities. They may also allow trade association members to fully benefit from the association’s activities while reducing the potential for inadvertent contraventions of the Acts.”
Given the importance of competition law compliance for associations, the following are some basic steps associations can take to reduce competition law risk:
STEPS FOR ASSOCIATIONS
TO REDUCE COMPETITION LAW RISK
1. Adopt and maintain an effective competition law compliance program.
According to the Competition Bureau, an effective compliance program “plays a crucial role for trade associations.”
Some of the benefits of a compliance program include reducing the risk of violating federal competition law, reducing the costs of investigations and proceedings and potentially mitigating penalties.
Options for associations range from formal compliance programs encompassing all association activities to compliance guidelines for key activities based on risk (e.g., meetings, information exchanges and specific initiatives that may raise competition law issues, such as benchmarking, research and development initiatives and joint negotiations with suppliers or customers).
2. Adopt agendas and minutes for all association meetings.
Associations should prepare written agendas and keep minutes for all meetings. Discussions at meetings should also stay within the boundaries of legitimate agenda items and discussions (or exchanges) of “competitively sensitive information” should be avoided – this includes discussions of current/future pricing, costs, individual customers, markets, market shares and business or strategic plans.
3. Adopt and follow conduct of meeting guidelines.
One of the most practical steps an association can take to reduce competition law risk is to adopt and strictly follow conduct of meeting guidelines.
Such guidelines commonly include restrictions on the exchange of competitively sensitive information (of the types discussed above) and on discussions of topics that may lead to conspiracy risk under section 45 of the Act (e.g., discussions relating to pricing, markets, concerted refusals to deal or limiting the production or supply of goods or services).
Conduct of meeting guidelines also commonly include guidance on steps to take if inappropriate discussions or activities arise during association meetings or events.
4. Perform periodic compliance audits.
Having a compliance program or policy in place that is not followed can, in some circumstances, be more harmful than not having a program at all, particularly if association personnel understand the compliance program and choose not to follow it.
As such, 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.
5. Conduct competition compliance orientations for new association executives and staff.
Another practical step associations can take to ensure competition law compliance is to conduct compliance orientations for new board and executive members.
In this regard, the Bureau includes “senior management’s clear and unequivocal support” as one of the five essential elements of a credible and effective competition compliance program.
6. Get legal advice for key association initiatives.
Many associations do not have the budget for extensive legal advice. Recognizing this, it is nevertheless prudent for associations to obtain advice for key activities and initiatives that may raise competition law concerns.
These may include specific projects, such as benchmarking, research or joint member initiatives (e.g., joint marketing, purchasing or negotiations with significant purchasers).
7. Avoid informal or “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.
This is not to say that members cannot meet informally for social purposes, but in a number of past association cases members either met informally (and in several cases actually established “sham” associations) to form and maintain criminal cartel arrangements.
Association members should also be aware that merely because a meeting is held “off the record” or “in camera” (i.e., a discussion during a meeting is not recorded in meeting minutes) does not mean discussions or the fact of the meeting itself cannot be used as evidence in competition law proceedings. The Bureau and private plaintiffs can, and commonly do, use such “circumstantial evidence” as part of their cases.
8. Generally review all association activities through a “competition lens”.
Finally, it is useful for association executives and personnel to review association initiatives and activities generally through a “competition lens”.
For example, if particular association activities may lead to higher prices, less quality or choice, make it more difficult for some members or competitors to compete or generally reduce competition, this may raise competition law concerns (or at minimum mean that advice should be sought).
COMPETITION COMPLIANCE SERVICES
I offer competition law and compliance services for Canadian trade, professional and other associations in relation to all aspects of association activities including board and membership meetings, rules and by-laws, voluntary codes of conduct, membership criteria and discipline, compliance programs and policies and special projects.
Some specific compliance services I offer associations include: trade association competition law compliance programs; competition law compliance seminars and talks for association executives; audits and compliance reviews of association activities; vetting trade association meetings, conventions and communications; reviewing association rules, bylaws, policies and voluntary codes; and general competition law and compliance advice.
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