Canadian COMPETITION & ANTITRUST LAW

We are pleased to provide this global competition/antitrust law update from our friends at the leading Singapore firm Rajah & Tann LLP.

Introduction

The European Commission issued a press release on 26 August 2010 announcing that it has commenced an investigation into marine insurance agreements by the Protection & Indemnity Clubs (‘P&I Clubs’) within the International Group of P&I Clubs (‘IG’). According to the European Commission, certain provisions in the agreements may lessen competition between P&I Clubs as well as restrict the access of commercial insurers and / or other mutual P&I insurers to the relevant markets.

P&I Clubs

P&I insurance covers third party liabilities and expenses arising from owning ships or operating ships as principals. Such insurance insures against claims for damage or compensation in respect of, for example, collision liabilities, personal injury to or illness or loss of life of crew members, cargo liabilities, etc. P&I Clubs are mutual non-profit making associations which provide P&I insurance to their members, the ship owners. The IG is a worldwide association of thirteen P&I Clubs.  

The Suspected Infringement(s)

According to the European Commission, in the framework of the IG, the P&I Clubs operate two separate agreements: the International Group Agreement and the Pooling Agreement which contain rules on the sharing of insurance claims and joint reinsurance as well as rules on the contractual relationships between the P&I Clubs and their members. These agreements are not automatically covered by the block exemption for the insurance sector in force in the European Union (‘EU’). This is because the block exemption provides for certain exemptions only where the parties involved have a market share of below 20-25% and according to the European Commission, the members of the IG provide P&I insurance to about 93% of the world’s ocean-going tonnage.

The European Commission’s investigation is seeking to uncover whether, as a result of certain provisions in the International Group and Pooling Agreements, competition between the P&I clubs would be reduced, thus infringing Article 101 of the European Community (‘EC’) Treaty which prohibits agreements which appreciably adversely affect competition in the relevant market(s). Additionally, where provisions in the International Group and Pooling Agreements establish barriers to entry in the market, IG may be liable also for abusing its dominant position in the relevant market, thus infringing Article 102 of the EC Treaty which prohibits the same. Having said this, it is not clear at this stage which direction the European Commission’s investigations will take.

Asia Perspective, Including Singapore & Malaysia

Many of the competition laws of the various Asian countries have similar provisions to that of the EU which prohibit anti-competitive agreements and abuses of market dominance.

In Singapore, for example, the Competition Commission of Singapore (‘CCS’), the competition regulatory authority tasked with the administration and enforcement of competition laws in Singapore, has the power to commence investigations into any sector or any agreement / conduct on its own initiative under the Competition Act (Cap 50B). Similarly, the Malaysian Competition Act 2010, which is slated to come into force in 2012, provides for the power of the Malaysian Competition Commission (‘MCC’) to launch investigations into sectors, agreements or conduct which may adversely affect competition in the relevant market. This is also reflective of the Asian countries’ competition laws. Hence, it is possible that similar reviews could find their way into Asia.

Concluding Words

Given the wide powers of investigation awarded to competition authorities and the very high financial penalties imposed for an infringement of competition laws, businesses should undertake regular review of their activities to ensure compliance with competition laws in every jurisdiction they operate in.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our: Abuse of Dominance, Advertising and Marketing Law, Bid Rigging, Canadian Competition Law, Canadian Competition Law Compliance, Canadian Competition Law Home, Competition Act Amendments, Competition Bureau Investigations, Competition Law Courses and Conferences, Competition Law Litigation, Competition Law Publications, Competition Law Resources, Competition Law Services, Conferences, Conspiracy and Competitor Collaborations, Conspiracy – FAQs, Global Competition / Antitrust Law Resources, Global Competition Law Updates, Investment Canada Act, Merger Control, Merger Control FAQs, Private Actions, Promotional Contests, Publications, Refusal to Deal, Team, Trade Associations or Trade Association Cases pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law and consulting services to Canadian and international clients.  For more information about our services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us on +1 604 687 0555 or +1 778 867 5558.  Visit us on the web in Toronto at www.torontocompetitionlawyer.com or www.torontocompetitionlaw.com.

We are pleased to provide this global competition/antitrust law update from our friends at the leading Singapore firm Rajah & Tann LLP.

Overview

On 19 August 2010, the CCS issued a landmark decision that recommended fees or fees guidelines by professional or trade associations are generally in violation of the Competition Act. As a result of this decision, professional or trade associations which have guidelines on fees or on any other critical commercial term in place would be well advised to immediately review and if necessary, withdraw those guidelines to mitigate the risk of a fine being imposed on them for violating the Competition Act. Whilst this is a decision of the Competition Commission in Singapore, the principles enunciated are equally applicable in other jurisdictions.

The decision arises from the application in 2009 by the Singapore Medical Association (‘SMA’) for a decision by the Competition Commission of Singapore (‘CCS’) as to whether its Guidelines on Fees (the ‘GOF’) for medical practitioners were in breach of the Competition Act or rather excluded from the Section 34 prohibition in view of the Net Economic Benefit (‘NEB’) flowing from them. Whilst the CCS had in the past taken the view that recommended minimum fees by professional or trade associations are likely to be in violation of the Competition Act, the decision issued on the GOF suggests that any type of fees recommendations by associations of undertakings are illegal and expose both the association and the members of the association to fines under the Competition Act.

This update reviews the reasons for this decision and the lessons to be drawn from it.

The Guidelines On Fees Issued By The SMA

The GOF were first issued by the SMA in 1987 and were amended in 1992, 2000 and 2006. Through the GOF, the SMA recommended a range of fees, meant as a guide for a number of services provided by doctors in private practice in Singapore

The recommended fees were categorized under three parts: (i) general consultations fees for General Practitioners (‘GPs’) or Specialists; (ii) professional fees for office surgery and medical procedures, immunisation,  medical examinations and reports as well as for specific procedures in a number of specialty care such as obstetrics, paediatrics, cardiology, etc; and (iii) fees for surgeons and anaesthetists in relation to hundreds of specific procedures.

In 2007, the SMA abolished the GOF published in 2006 amidst concerns that the GOF may infringe Section 34 of the Competition Act which prohibits decisions by an association of undertakings having as object or effect the limitation of competition in the relevant market in Singapore. However, in 2009, the SMA applied to the CCS for a decision as to whether the GOF were indeed anti-competitive or whether they were excluded from the Section 34 prohibition on the basis of NEB. In its decision, the CCS concludes that the GOF are prohibited under the Competition Act and could not benefit from any exclusion in the Competition Act. In particular, the CCS considered that no NEB resulted from the GOF.

The Recommendation Of Fees, Whether Minimum Or Maximum, Is Anti-Competitive Unless Exempted

In 2008, the CCS issued a guidance in relation to decisions by associations of undertakings relating to fees or prices. The matter arose from an application by the Institute of Estate Agents (‘IEA’) to the CCS for guidance on whether the fees guidelines it had issued, which recommended the fees payable and the fee structures (ie, which party should pay) applicable to real estate agents for their services (‘IEA Guidelines’), were likely to have the object or effect of restricting competition on the real estate agency market in Singapore. The IEA Guidelines set out the level of fees and the fee structures for sales, rental, assignment and management transactions involving all types of properties.

The CCS held that the adoption of the Guidelines was a decision by an association of undertakings that had the object of appreciably restricting competition. Importantly, however, the CCS highlighted ‘that the fees payable by property sellers are couched as a minimum fee recommendation in the Fees Guidelines. This practice discourages any price competition below the recommended rate. More efficient estate agents or agencies, which are able to charge lower rates, will have little incentive to do so’. This suggested that the fees recommendation was anti-competitive as it was setting out a minimum recommended price.

The decision issued by the CCS in relation to the GOF goes much further as the CCS takes the view that ‘[E]ven if the GOF comprised only recommended maximum fees (ie without recommended minimum fees), it would still be deemed to be anti-competitive in its nature’. In short, this means that, through its decision, the CCS effectively declares that any type of fees recommendations by professional or trade associations in Singapore are prohibited under the Competition Act.

The Recommendation Of Fees By A Trade Association, Whether Binding Or Not, Is Anti-Competitive Unless Exempted

In its decision, the CCS concluded that the GOF restricted competition even though compliance was voluntary, confirming its view that even non-binding recommendations can amount to a violation of the Section 34 prohibition. The decision lacks clarity on this front, however, as the CCS’ reasoning considers that ‘although the GOF was stated to be voluntary, SMA had an objective mechanism in place to foster compliance’. It seems, therefore, that in this case, the CCS took the view that the recommendation was nevertheless binding on its members, despite the fact that compliance with the Guidelines was said to be voluntary.

It is worth noting, however, that in 2008, the CCS had already publicly taken the view that non-binding recommendations by professional or trade associations may have as object or effect the restriction of competition. This statement was made by the CCS in relation to the recommendation by the Singapore School Transport Association (‘SSTA’) of a fuel surcharge to its school bus operator members. In this case, the CCS only issued a warning to the SSTA. The Media Statement issued by the CCS on 1 August 2008 on the case made clear that a recommendation of prices by an association of undertakings, whether binding or not binding, was likely to be anti-competitive:

“[The] CCS holds the view that price recommendations or guidelines tend to restrict independent pricing decisions.  The circulation of such recommended prices by a trade association, even if it is non-binding, is likely to prompt industry players to cluster their prices around, if not exactly matching, the recommended prices. This is not helpful to free competition”.

Based on this, it seems that the CCS has decided to take a strong stance against any type of price or fees recommendations by professional or trade association and will, as a rule, consider them as being anti-competitive by object and therefore contrary to the Competition Act unless exempted.

The GOF Do Not Result In Net Economic Benefit

In its application for a decision by the CCS, the SMA argued that the GOF resulted in NEB and were, therefore, exempted from the application of the Section 34 prohibition.

In particular, the SMA alleged that in the healthcare market, there is a high degree of information asymmetry between medical practitioners and patients, which afford medical practitioners the ability of overcharging their patients. In addition, patients are not armed to make informed choices on pricing and quality of medical practitioners prior to consultation. By preventing overcharging, the GOF, therefore, promoted the consumption of medical services at socially and economically optimal levels, which, in turn, translated into increased investment in health capital and a boost in productivity. Hence, the GOF promoted economic progress.

The CCS, however, took the view that in the two relevant markets identified, namely the primary care market in Singapore and the hospital care market, either there was no concern of over-charging or the concern was very limited, and, in any event, the GOF did not prevent medical practitioners from overcharging. The CCS analysed that the services in the primary care market related to common and recurring ailments, so that patients would generally know what kind of treatment they need and what would be a reasonable price for the service provided. As such, patients were able to exercise choices and eventually easily switch to another practitioner if overcharged. Therefore, the CCS concluded that over-charging was not a major concern in the primary care market which was, in fact, recognized by the SMA.

In relation to the hospital care market, the CCS recognized that, due to the complexity of the medical conditions, information asymmetry was possibly more severe than in the primary care market and that, effectively, the risk of over-charging existed. However, the CCS highlighted that, in Singapore, the major supplier of hospital care was the public sector which did not refer to the GOF in setting prices of hospital in-patient and specialist outpatient services. On this, the CCS noted that the Ministry of Health had taken various measures to increase transparency of hospital care costs, notably by publishing hospital bill sizes on its website and by requiring hospitals to provide financial counselling to patients and medical bills given to patients to be itemised. As a result, the CCS concluded that over-charging was not an issue for those patients electing the public sector for the provision of hospital care services and was, therefore, an issue only for patients choosing services provided by the private sector. The CCS found, however, that contrary to what was argued by the SMA, the GOF did not provide those patients with greater transparency on private fees and were, therefore not helpful in preventing over-charging. For the CCS, the use in the GOF of ‘highly technical medical terminologies which only doctors would be expected to understand’ made the GOF useless to patients who ‘would not be able to identify or match the medical procedures by themselves, let alone estimate the likely size of the overall bill, based on the information provided in the GOF without any doctor’s assistance’. The CCS, therefore, concluded that there was no support to the SMA’s point that the GOF could, even remotely, prevent overcharging in the hospital care market.

Further, the CCS also found that the SMA had not produced any evidence to establish that medical services in Singapore will fall or has fallen below socially and economically optimal level without the GOF or further to the withdrawal of the GOF. It appears from the decision that the SMA submitted that this would be a ‘complex endeavour’, although the SMA tried to give anecdotal evidence of its allegation.

As an aside, it is worth highlighting here that submissions to the CCS that an agreement or a decision by an association of undertakings should be excluded from the application of the Section 34 prohibition either based on the NEB exclusion or on any other exclusion in the Third Schedule to the Act have to be thoroughly substantiated with evidence. The onus is on the party alleging that the Section 34 prohibition does not apply to prove its case and the CCS can be very demanding when it reviews and eventually accepts the evidence provided to that effect. In practice, applying to the CCS for guidance or for a decision that an agreement results in NEB and is, therefore, not anticompetitive requires a considerable amount of upfront preparation and gathering of comprehensive evidence in support of the applicant’s argument that NEB applies. Without strong evidence being provided, it is unlikely that the CCS will issue a favourable guidance or decision.

In the particular case of the GOF, since the condition of promoting economic progress was not met by the GOF, the CCS decided that there was no NEB resulting from the GOF, with no need to assess whether the other conditions establishing NEB were present. The CCS, nevertheless, considered that the GOF was not indispensable to achieve the benefits alleged by the SMA and, in addition, eliminated competition for a significant part of the relevant markets.

CCS Action In Relation To The GOF

The CCS decided, therefore, that the GOF violated the Section 34 prohibition. As the GOF had been withdrawn prior to any CCS investigation, the CCS chose not to issue any direction vis-à-vis the SMA. It is worth highlighting, however, that in the case where the CCS had opened an investigation, it could have imposed a fine on the SMA for violation of the Competition Act.

On this, it is worth noting that under the Competition Act and its subsidiary legislation, the CCS can impose a financial penalty of up to 10% of the infringing undertaking’s turnover in Singapore for the period of the infringement up to a maximum of three (3) years. In the case of an association of undertakings, the applicable turnover is the aggregate applicable turnover of the undertakings that are members of the association.

Whilst, under Section 69 of the Competition Act, a financial penalty can only be imposed where the CCS is satisfied that the infringement was committed negligently or intentionally, it will be difficult for a professional or trade association still recommending today prices or fees to argue that it did not act negligently even. The decision issued by the CCS states clearly its position that fees or prices guidelines by professional or trade association should be banned.

Practical Points

The decision issued by the CCS is a strong signal to the professional or trade associations in Singapore, as well as their members. Clearly, any fees or prices guidelines issued by professional or trade associations in Singapore, whether binding or not on its members, whether setting maximum fees only or otherwise,  whether they are followed or not followed by the members of the association are viewed as being anti-competitive in nature. In addition, recommendations on critical commercial terms and conditions to be inserted in the contracts entered into by the association’s members may also be viewed as anticompetitive, notwithstanding the fact that prices or fees are not subject of the recommendation. In taking such an approach, the CCS appears to have taken as strict a position in Australia, where such recommendations are per se prohibited.

It must also be emphasised that a decision by a professional or trade association may, in some instances, be also treated as an agreement between the members of the association, which, in most cases, will be competitors. In such cases, it is likely that a fine be imposed on and/or a direction be given to both the association and its members. This means that associations in Singapore that still have such guidelines in place should carefully review and, if necessary, consider withdrawing such guidelines before being investigated and possibly subsequently subjected to financial penalties by the CCS. Similarly, members of such associations should be aware that guidelines on fees or other critical contractual terms and conditions of the association they are members of may trigger their liability under the Competition Act.

A point that business which operate across several countries, including in the region, must note is that this GOF decision could quite easily be adopted in any of the other countries, particularly given the limited apetite for cartel type behaviours amongst various regulators. The Vietnamese and Indonesian regulators, for instance, have uped their ante and have been investigating and penalising businesses remotely in cartel type operations. The recommendation of minimum or maximum prices, where it is adopted and followed by competitors, whether as part of an association or otherwise, will be viewed as cartel behaviour, and so could be subjected to investigations in these countries.

It is thus imperative for businesses and associations operating in Singapore and across region, including Malaysia, Vietnam, Indonesia, India and Taiwan to take positive steps to review their operations.

Conclusion

The decision issued by the CCS is of importance both to professional and trade associations and to their members. In view of the hard stance taken by the CCS against certain types of guidelines, associations in Singapore that still have such guidelines in place should carefully review and, if necessary, consider withdrawing such guidelines before being investigated and eventually fined by the CCS. Similarly, members of such associations should be aware that guidelines on fees or other critical contractual terms and conditions of the association they are members of may trigger their liability under the Competition Act in Singapore as well as under the competition laws of other jurisdictions in the region.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our: Abuse of Dominance, Advertising and Marketing Law, Bid Rigging, Canadian Competition Law, Canadian Competition Law Compliance, Canadian Competition Law Home, Competition Act Amendments, Competition Bureau Investigations, Competition Law Courses and Conferences, Competition Law Litigation, Competition Law Publications, Competition Law Resources, Competition Law Services, Conferences, Conspiracy and Competitor Collaborations, Conspiracy – FAQs, Global Competition / Antitrust Law Resources, Global Competition Law Updates, Investment Canada Act, Merger Control, Merger Control FAQs, Private Actions, Promotional Contests, Publications, Refusal to Deal, Team, Trade Associations or Trade Association Cases pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law and consulting services to Canadian and international clients.  For more information about our services contact us at steve@nortonstewart.com or call us on +1 604 687 0555 or +1 778 867 5558.  Visit us on the web in Toronto at www.torontocompetitionlawyer.com or www.torontocompetitionlaw.com.

What is the scope of Canada’s new conspiracy regime?

Canada now has three new criminal conspiracy offences for “hard core” cartel conduct, making bare price fixing, market allocation and supply restriction agreements per se illegal – i.e., without the necessity of establishing any anti-competitive effects on a relevant market (or markets).  At the same time, a second civil provision has come into force under which other commercial agreements (i.e., agreements that do not fall within the scope of the new criminal offences) may be subject to review, where they prevent or lessen competition substantially.

When did Canada’s new two-track conspiracy regime come into force?

On March 12, 2010, the Competition Bureau announced the coming into force of Canada’s new two-track conspiracy regime.  While the majority of the recent amendments to the Act came into force in March, 2009, Canada’s new two-track conspiracy regime came into force one year later – on March 12, 2010.

Why was Canada’s old conspiracy law changed?

Canada’s new U.S.-style criminal conspiracy regime is meant to make the enforcement of hard-core criminal cartel activity easier – i.e., bare price-fixing, market division and output restriction agreements between competitors and potential competitors -  by removing the former competitive effects test.  At the same time, the new rules are meant to allow a more detailed analysis of non-hard core agreements between competitors, such as joint venture and strategic alliance agreements (i.e., where a more detailed analysis of the potential effects on a market may be warranted).  In short, the new regime is meant to make catching clearly anti-competitive agreements easier while allowing for a more detailed review of agreements that may be competitively neutral or pro-competitive.

What is now illegal under Canada’s new criminal regime (i.e., section 45)?

Under the new criminal conspiracy provisions of the Act, three categories of agreements are now “per se” illegal (i.e., with no requirement to establish any negative effect on a relevant market or markets).  The following three types of agreements are now per se illegal: (i) agreements to fix, maintain, increase or control the price for the supply of a product (price fixing agreements); (ii) agreements to allocate sales, territories, customers or markets for the production or supply of a product (market division/allocation agreements); and (iii) agreements to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product (supply restriction agreements).

What types of agreements may potentially be subject to review under the new civil agreements provision of the Competition Act (i.e., section 90.1)?

Agreements among competitors that are not caught by the three new per se criminal offences (price-fixing, market allocation and output restriction agreements) will be potentially reviewable under the new civil agreements provision (section 90.1).  Some of the types of agreements that may potentially be subject to challenge under section 90.1 include non-compete agreements, research and development agreements, joint purchasing agreements, joint production agreements, joint selling and commercialization agreements and information sharing agreements.

Are vertical agreements (e.g., supplier / customer, franchisor / franchisee, licensor / licensee agreements) caught under the new criminal provisions (section 45)?

Likely not.  While the previous conspiracy provisions applied to both vertical and horizontal agreements (e.g., supplier-distributor-consumer and competitor-competitor agreements), the new criminal provisions appear to be restricted to horizontal agreements between competitors (and potential competitors).  In this regard, it is thought that the scope of the new conspiracy provisions has been narrowed.  The Competition Bureau has also indicated in its recent Competitor Collaboration Guidelines that it will review the majority of allegedly anti-competitive vertical agreements under the new civil provision (section 90.1), or the Act’s other reviewable matters provisions (e.g., section 79 – abuse of dominance), not under the criminal conspiracy provisions.

Where can I get more information about the Competition Bureau’s enforcement policy under the new two-track regime and its approach to collaborations between competitors?

For more information about the Competition Bureau’s enforcement policy under Canada’s new two-track regime and its approach to collaborations between competitors, including joint ventures and strategic alliances, see: Competitor Collaboration Guidelines (Enforcement Guidelines) and Reaching an Agreement with Competitors (Pamphlet).

What is necessary to prove an agreement?

Canadian case law has established that while there must be a “meeting of minds” or “consensus” between parties, both informal and overt arrangements may be caught.  Moreover, it is well established that an agreement may be established based only on circumstantial evidence, which may include, among other things, evidence of meetings, exchanges of competitively sensitive information, identical or similar pricing (or sudden price stabilization), language suggesting the existence of an agreement, enforcement activities among competitors, attempts to keep meetings or other activities secret and conduct that can only be explained by the existence of an agreement.

Does an agreement need to be secret or confidential to be caught by section 45?

No.  Both “overt” (i.e., non-secret) and “covert” (i.e., secret) agreements may be caught by section 45 (the criminal conspiracy provision of the Competition Act.

Does an agreement need to be carried out to violate section 45?

No.  It is settled law in Canada that the offence is in the agreement, not in the carrying out of an agreement.  While acts in furtherance of a cartel may be used as additional evidence, they are not necessary in order to establish an offence under section 45.

What is the burden to prove that section 45 or section 90.1 has been contravened?

The burden for section 45 remains the criminal burden of proof – i.e., beyond a reasonable doubt.  The burden for section 90.1 (the new civil agreements provision) is the civil standard – i.e., on balance of probabilities.

What are the potential penalties for contravening Canada’s criminal conspiracy offences under section 45?

Under the new rules, the penalties for contravention of the criminal conspiracy provisions have been increased to include fines of up to $25 million (per count) and/or imprisonment for up to 14 years (increased from the previous $10 million per count and 5 years).  Canadian courts may also issue “prohibition orders” prohibiting the continuation or repetition of an offence and order a party to take certain steps to avoid future offences and comply with the law (e.g., to implement a corporate compliance program).  In reality, however, most penalties in Canada for violations of the criminal conspiracy provisions arise as a result of plea negotiations between the Competition Bureau and an accused.

What are the potential penalties under the new civil agreements provision (section 90.1)?

The federal Competition Tribunal now has the power, on an application by the Commissioner of Competition, to make remedial orders where it is established that an agreement prevents or lessens (or is likely to prevent or lessen) competition substantially in a relevant market.  The Tribunal may make an order: (i) prohibiting any person (whether or not a party to the agreement) from doing anything under the agreement or (ii) requiring any person, with their consent, to take any other action.  Unlike the criminal conspiracy provisions, however, the Tribunal does not have the power to impose monetary penalties and private parties do not have any right to commence private actions.

Who enforces the conspiracy provisions of the Competition Act?

The Competition Bureau is responsible for the administration and enforcement of the Act, while the Director of Public Prosecutions has exclusive jurisdiction to determine whether to commence prosecutions for alleged violations of the Act’s criminal offences, including the criminal conspiracy, bid rigging and criminal misleading advertising provisions.

What enforcement powers does the Competition Bureau generally have?

The Competition Bureau has broad powers of investigation under the Competition Act.  These include the power to obtain search warrants (including for computer searches), obtain court orders to compel document production and oral testimony under oath, as well as the ability to obtain wiretaps in some cases.  In some cases the Competition Bureau may rely on voluntary information requests, while in others it may resort to compulsory document or information requests (e.g., using its powers under sections 11 or 15 of the Act).

Are conspiracies an enforcement priority for the Competition Bureau?

Yes.  Criminal conspiracies, together with abuse of dominance and deceptive marketing, remain top enforcement priorities for the Competition Bureau.  Moreover, in the past fifteen years there have been more than eighty convictions for cartel offences in Canada with total fines of approximately $250 million.

What industries or sectors are practically most at risk?

The Competition Actis “law of general application”.  As such, it applies, with few exceptions to all businesses and industries in Canada.  Having said that, as a practical matter, the Competition Bureau has tended to focus its enforcement resources in recent years on industries with high consumer impact, including gasoline, real estate and high profile retailers.  Historically, industries in which demand is declining, there is excess capacity, homogenous products, competition primarily on price and consolidated markets have tended to be at the greatest risk for the formation of cartels.

What defences are available under the new conspiracy rules?

The recent amendments have introduced a new ancillary restraints defence that will apply where it can be shown that: (i) the agreement is ancillary to a broader or separate agreement that includes the same parties; (ii) the agreement is directly related to, and reasonably necessary for giving effect to, the objective of the broader or separate agreement; and (iii) the broader or separate agreement does not itself constitute an offence under section 45.  Other pre-existing defences and exceptions continue to apply (e.g., the exception for affiliates and export defence), while other defences have been repealed.

In addition, a new efficiencies defence has been created under section 90.1 that will apply where an agreement has resulted in (or is likely to result in) efficiency gains that are greater than, and will offset, the adverse effects of the agreement (i.e., any prevention or lessening of competition that will result or is likely to result from the agreement).  In this regard, the new civil provision dealing with non-criminal anti-competitive agreements is now more closely aligned with the existing merger provisions of the Act.

Can private parties sue for breach of the conspiracy provisions of the Competition Act?

Yes.  Under section 36 of the Act any person that has suffered actual loss or damage as a result of a contravention of the criminal provisions of the Act, including the criminal conspiracy provisions, may commence a private damages action.  Class actions are also possible for violations of the criminal provisions of the Act.  In general, it is thought that the recent amendments (which have lowered the burden to prove criminal conspiracies) together with several recent class action cases in British Columbia and Ontario (which has made it easier to certify price-fixing class actions) will lead to an increase in competition law private actions in Canada.

Have there been any recent significant competition law private actions?

Yes.  See for example: Supreme Court of Canada Denies Leave to Appeal in DRAMS Price-Fixing Class Action.  For more information about competition law private actions see: Competition Law Litigation in Canada.

What are some examples of recent penalties imposed for breach of the criminal conspiracy provisions?

The Competition Bureau recently announced that Solvay Chemicals has been fined Cdn. $2.5 million in relation to its role in a hydrogen peroxide price-fixing conspiracy.  See Solvay Chemicals Fined $2.5 Million in Hydrogen Peroxide Price-Fixing Conspiracy.  The Competition Bureau has also recently laid 28 additional charges in its ongoing investigation of a gasoline price-fixing cartel in Quebec.  See: Quebec Gasoline Price-fixing Case.  In the past fifteen years there have been more than eighty convictions for cartel offences in Canada with total fines of approximately $250 million.

Are reductions in penalties possible for cooperating with an investigation?

Yes. The Competition Bureau has a formal immunity program intended to encourage participants in criminal cartels to disclose their illegal conduct to potentially receive immunity from prosecution.  The Competition Bureau’s immunity program is set out in a Bureau Information Bulletin.  See: Immunity from Prosecution (Pamphlet), Immunity Program Under the Competition Act (Bulletin), Investigating Cartels, Memorandum of Understanding, Revised Draft  Information Bulletin on Sentencing and Leniency in Cartel Cases (Bulletin) and Sentencing and Leniency in Cartel Cases (Information Bulletin).  Immunity applications are made to the Competition Bureau, which will determine whether to recommend to the Director of Public Prosecutions that the request be granted.

What are the requirements to qualify under the Competition Bureau’s immunity program?

In general, a party may receive immunity where: (i) they are the first to approach the Competition Bureau with evidence of a cartel offence that the Bureau is unaware of or (ii) of which the Bureau is aware but has insufficient proof to refer the matter to the DPP for prosecution.  Both the Bureau’s immunity and leniency programs operate on a “first in” basis, and so time is of the essence in order for participants to seek immunity or leniency (where immunity is unavailable).

Other requirements that a party must satisfy in order to obtain immunity include immediately taking steps to stop its involvement in the illegal conduct, not having coerced unwilling parties to participate in the conspiracy, making full, frank and truthful disclosure of all evidence and information that is known (or available), disclosing all offences under the Act in which it may be involved and agreeing to provide full, timely and continuous cooperation during the Competition Bureau’s investigation.

Is more information available about the Competition Bureau’s immunity and leniency programs?

Yes.  For more information about the Competition Bureau’s immunity and leniency programs see: Immunity from Prosecution (Pamphlet), Immunity Program Under the Competition Act (Bulletin), Investigating Cartels, Memorandum of Understanding, Revised Draft  Information Bulletin on Sentencing and Leniency in Cartel Cases (Bulletin) and Sentencing and Leniency in Cartel Cases (Information Bulletin).

What are some of the key impacts for individuals and companies under the new laws?

Some of the expected impacts of the new rules include: (i) increasing the risk of engaging in hard-core anti-competitive conduct (e.g., price-fixing, market allocation or output restriction agreements), (ii) lowering the bar for the Competition Bureau and private plaintiffs to establish a criminal conspiracy under section 45 (the criminal conspiracy provision of the Act), (iii) increasing the importance of reviewing commercial agreements (and other commercial arrangements, such as information sharing arrangements or joint venture agreements) for competition law compliance and (iv) potentially leading to an increase in competition law litigation in Canada.

Are other Competition Bureau resources available?

Yes.  For example, see: Competitor Collaboration Guidelines (Enforcement Guidelines), Immunity from Prosecution (Pamphlet), Immunity Program Under the Competition Act (Bulletin), Investigating Cartels, Memorandum of Understanding, Reaching an Agreement with Competitors (Pamphlet), Revised Draft  Information Bulletin on Sentencing and Leniency in Cartel Cases (Bulletin), Sentencing and Leniency in Cartel Cases (Information Bulletin), Setting Your Own Price (Pamphlet) and Technical Bulletin on “Regulated” Conduct.

What are some examples of recent conspiracy cases and investigations in Canada?

For some examples of recent conspiracy cases and investigations in Canada see: Criminal Charges Laid Against 25 Individuals and Companies in Quebec Gas Price-fixing Case, Recent Speech by Canada’s Commissioner of Competition Indicates Tougher Enforcement Stance Against Criminal Cartels, Supreme Court of Canada Denies Leave to Appeal in DRAMS Price-Fixing Class Action, Solvay Chemicals Fined $2.5 Million in Hydrogen Peroxide Price-Fixing Conspiracy, Competition Bureau Announces Coming Into Force of New Conspiracy Regime, Two Landmark Supreme Court of Canada Cases, Canada’s New Conspiracy Regime – Potential Implications and Key Practice Points for Commercial Lawyers, Canada’s New Criminal Conspiracy Rules – Some Potential Implications for Companies and Trade Associations, Canada’s New Competition Law – Some Potential Implications for Real Estate Brokers, Agents & Boards.

OUR SERVICES

We practice federal competition law, provide Canadian competition law advice to clients across Canada and internationally and offer a full range of competition law services including in relation to the criminal conspiracy, merger, abuse of dominance, misleading advertising and deceptive marketing provisions of the federal Competition Act.  We also provide Canadian foreign investment law advice under the federal Investment Canada Act.

Our services in relation to criminal conspiracies and competitor collaborations include advice on the application of the new conspiracy rules to commercial activities, structuring commercial agreements and joint ventures to comply with the new regime, designing competition law compliance programs for companies and trade associations, preparing compliance guidelines for key commercial activities (e.g., guidelines for the conduct of meetings, information exchanges, benchmarking projects and joint venture activities), applications for binding Competition Bureau advisory opinions and advice in relation to the Competition Bureau’s immunity and leniency programs.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our: Canadian Competition Law Home, Team, Competition Law Services, Competition Law Publications, Competition Law Courses and Conferences, Global Competition / Antitrust Law Resources, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Conspiracy and Competitor Collaborations, Abuse of Dominance, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to Canadian and international clients.  For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us on +1 604 687 0555 or +1 778 867 5558.  Visit us on the web in Toronto at www.torontocompetitionlawyer.com or www.torontocompetitionlaw.com.

The Chronicle Herald has reported that some Nova Scotia automobile dealers recently received a reminder from their trade association regarding the conspiracy rules under the federal Competition Act.

According to the Executive Vice-president of the Nova Scotia Automobile Dealers Association, the association wanted to “make sure that [its] members know this legislation exists.”

The association sent a warning to its member dealers (as well as its associate members) in response to a letter received from the Competition Bureau, with information relating to potential conspiracy issues raised by Sydney automobile dealers.  According to the Bureau, there had been “allegations that the automobile dealers agreed not to purchase individual advertisements in the Yellow Pages and to co-ordinate their hours of operation.”

According to the association’s Executive Vice-President, the Bureau may have responded to an inquiry received from a Sydney automobile dealer who wanted to clarify the legality of local discussions among dealers in relation to collective advertising in the Yellow Pages and coordinating weekend hours in the summer.

While the Bureau has not commenced a formal inquiry in this case, it raised the possibility that it may do so in the event of further complaints.

As a result of recent amendments to the Act, the criminal conspiracy provisions of the Act (section 45) have been significantly changed making it easier for the Bureau (and private plaintiffs) to commence proceedings under section 45.  In addition, three new “hard core” criminal conspiracy offences have been introduced, including agreements between competitors (and potential competitors) to restrict output, which can take a number of forms including agreements to eliminate or reduce production, collectively refuse to deal with certain customers or competitors, restrict or limit advertising or standardize products or services (including collectively adopting standard terms of sale, limiting hours of operation, etc.).

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our: Canadian Competition Law Home, Team, Competition Law Services, Competition Law Publications, Competition Law Courses and Conferences, Global Competition / Antitrust Law Resources, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Conspiracy and Competitor Collaborations, Abuse of Dominance, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to Canadian and international clients.  For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us on +1 604 687 0555 or +1 778 867 5558.  Visit us on the web in Toronto at www.torontocompetitionlawyer.com or www.torontocompetitionlaw.com.

The Saskatchewan Roofing Contractors case involved an inquiry by the Bureau that was focused on allegations that some of the members of the Saskatchewan Roofing Contractors Association had discussed not submitting bids in reply for a tender request for a roofing project in La Loche Saskatchewan.  The Bureau obtained a five year prohibition order prohibiting the association from taking action directed towards committing an offence under the bid-rigging and conspiracy provisions of the Competition Act (the “Act”).  The order also requires the association to educate its members regarding the relevant provisions of the Act, impose a membership condition for members to acknowledge that they will comply with the association’s corporate compliance program and to advise the Bureau of any unauthorized communications or activity relating to the pricing of products by members.

OUR COMPETITION LAW SERVICES FOR TRADE ASSOCIATIONS

We practice federal competition law, have provided competition law and compliance advice to clients across Canada and provide a full range of competition law services in relation to the criminal conspiracy, merger, abuse of dominance, misleading advertising and deceptive marketing provisions of the federal Competition Act.  We regularly counsel trade and professional associations and their executives and personnel on compliance with the Canadian Competition Act.

Our Canadian competition law services for trade associations include:

- Trade association competition law compliance programs.
- Competition law compliance seminars and talks for association executives.
- Audits and compliance reviews of trade association activities.
- Advice on the application of the recently amended Competition Act.
- Vetting trade association meetings, conventions and communications.
- Reviewing trade association rules, bylaws, policies and voluntary codes.
- General competition law and competition compliance advice for associations.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our: Canadian Competition Law Home, Team, Competition Law Services, Competition Law Publications, Competition Law Courses and Conferences, Global Competition / Antitrust Law Resources, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Conspiracy and Competitor Collaborations, Abuse of Dominance, Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal, Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to Canadian and international clients.  For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us on +1 604 687 0555 or +1 778 867 5558.  Visit us on the web in Toronto at www.torontocompetitionlawyer.com or www.torontocompetitionlaw.com.