Canadian COMPETITION LAW

September 27, 2010

The Competition Bureau announced today that it has issued its new Bulletin on “Regulated” Conduct (see: “Regulated” Conduct Bulletin).  This new Bulletin outlines the Bureau’s current approach to the enforcement of the Competition Act where conduct may be regulated by other valid provincial or federal legislation (potentially subject to the “regulated conduct defence” or “RCD”).

The Bulletin replaces two former Bureau Bulletins: its 2006 Technical Bulletin on “Regulated” Conduct and its earlier 2002 Information Bulletin on the Regulated Conduct Defence, which was criticized for not accurately reflecting existing regulated conduct case law.

In issuing its new Bulletin, the Bureau stated:

“The Bulletin on “Regulated” Conduct outlines the Bureau’s approach to the enforcement of the Competition Act in situations where conduct is regulated by other laws enacted by various levels of government. The updated Bulletin replaces the Bureau’s 2006 Bulletin on “Regulated” Conduct, and reflects current Bureau priorities.”

The Bureau’s new Bulletin remains largely unchanged from its earlier 2006 Bulletin, in that it continues to reflect a cautious approach by the Bureau to the regulated conduct defence generally, a hesitation to apply the RCD in the same way to federally regulated conduct as to provincially regulated conduct as well as continuing to indicate (based on undeveloped case law) that it will apply the RCD more cautiously to the civil reviewable matters provisions than the criminal offences of the Act (under which the RCD primarily developed).  The Bureau’s position also remains largely unchanged in that it continues to recognize that while the RCD may apply where conduct is required or merely authorized by other valid legislation, that it will apply “greater scrutiny” to the activities of parties that are legislatively regulated than to regulators themselves (despite continuing to acknowledge that no Canadian court has expressly held that such a distinction should be made).

At the same time, the Bureau’s new Bulletin addresses some of the new issues that have arisen as a result of the recent amendments to the Act in 2009, including how the RCD applies to conduct under section 45 of the Act (the criminal conspiracy provisions), how the doctrine applies to other criminal offences under Part VI of the Act, as well as perhaps the most interesting issue of whether, and to what extent, the Bureau views the RCD as applying to the civil reviewable matters provisions of the Act (e.g., abuse of dominance, price maintenance, tied selling, exclusive dealing, etc.).  In essence, the Bureau needed to consider (and has now articulated in its new Bulletin) its position regarding the application of the RCD under provisions where it is now codified (section 45 – criminal conspiracy offences), other criminal offences where it is not codified (Part VI of the Act) and in relation to the Act’s civil reviewable matters provisions (under which the RCD is also still not codified and there is little authority for its application, outside of cases where its application was conceded by the parties and not in issue).

The Bureau indicates that it will continue to consider whether the RCD applies to conduct under the criminal conspiracy provisions according to the Supreme Court of Canada’s leading decision in Jabour, which is considered to be the “high water mark” of RCD case law in that the Law Society of British Columbia was permitted to invoke the RCD based on mere general legislative discretion to regulate “conduct unbecoming” lawyers.

With respect to the Act’s other criminal offences, the Bureau states that, based on the Supreme Court’s decision in Garland, it will first attempt to determine whether Parliament intended the provision to apply and, if so, “may still refrain from pursuing the case in reliance on the RCD.”  In Garland, while not a case decided under the Competition Act, the Supreme Court held that in the absence of so-called “leeway” language in the relevant provision (i.e., language indicating that another legislative regime may apply), the RCD would not apply.  In this regard, the Bureau’s position that the RCD may continue to apply to other criminal offences under the Act would appear to be correct, given that the newly codified RCD defence under section 45 (criminal conspiracies) does not on its face foreclose the application of the doctrine to other criminal provisions of the Act, or indeed to the Act generally.

Perhaps the most interesting aspect of the Bureau’s new Bulletin is in regard to the application of the RCD to the Act’s civil reviewable matters provisions.  While the Bureau also does not foreclose the possibility that the doctrine may continue to apply to the Act’s civil provisions, despite the codification of the doctrine only under section 45, it takes a cautious approach consistent with that in its former Bulletins:

“RCD caselaw is extremely limited in respect of the reviewable matters provisions of the Act.  While the jurisprudential preference for avoiding (where possible) an application of the federal paramountcy rule supports the application of the RCD to the reviewable practice provisions of the Act, neither the “public interest” nor the “mens rea” rationales relied upon by the courts in RCD cases support the application of the RCD to the reviewable matters provisions of the Act. Moreover, in Garland, the Supreme Court applied a federal law resulting in penal sanctions to conduct expressly authorized by a provincial regulatory body because there was no clear Parliamentary intent to do otherwise. In this context, and absent further judicial guidance, the Bureau cannot responsibly limit its statutory mandate by the general application of the RCD to the reviewable matters provisions of the Act.

Accordingly, until RCD caselaw is further developed in respect of the reviewable matters provisions of the Act, the Bureau will consider RCD caselaw in its examination of reviewable matters but will not consider RCD caselaw to be dispositive of such matters. Consistent with Garland, the Bureau will strive to determine Parliament’s intention with respect to the application of the relevant Competition Act provision(s) to the impugned conduct. Unlike Part III of this Bulletin, however, the Bureau will not refrain from pursuing regulated conduct under the reviewable matters provision(s) simply because the provincial law may be interpreted as authorizing the conduct or is more specific than the Act given that the Bureau’s mandate is to enforce the law as directed by Parliament not a provincial legislature or its delegate.”

This recent enforcement policy update by the Bureau is another in a number of recent updates relating to recent amendments to the Competition Act, which are the most significant since the modern Act was passed in 1986 (and in some cases since Canada introduced competition law in 1889).  For more on the amendments see: Competition Act Amendments.

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