Canadian COMPETITION LAW

“A credible and effective compliance program also plays a crucial role for trade associations because they 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 critical that trade associations implement credible and effective programs with strict codes of ethics and conduct and appropriate procedures and compliance steps to prevent improper conduct and to protect the trade association and its members from being used as a conduit for illegal activities.”

(Canadian Competition Bureau)

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DECEMBER 2023 COMPETITION ACT AMENDMENTS

On December 15, 2023, Bill C-56 (An Act to amend the Excise Tax Act and the Competition Act), which introduced the first of two new significant rounds of amendments to the federal Competition Act, largely came into force.

This first new round of amendments to the Competition Act, which is intended to strengthen the ability of the Competition Bureau (Bureau) and private parties to enforce Canadian competition law and enhance competition generally in Canada, includes fundamental changes to Canadian competition law not seen since the last major amendments in 2009.

In general, the amendments to the Competition Act under Bill C-56 include new broad powers for the Bureau to conduct market studies, changes to the core substantive test for abuse of dominance under section 79 (creating new two-track tests for abuse of dominance), increased penalties for abuse of dominance, broadening the civil agreements provision (section 90.1) to include agreements between non-competitors (i.e., to also apply to vertical agreements, such as distribution/supply agreements) and repealing the efficiencies defences under section 90.1 and also for mergers under section 96.

These amendments increase the potential competition law risk for companies, trade and professional associations and other entities, particularly those without credible and effective competition law compliance programs and that have not reviewed their business practices to reflect Canada’s new competition law.

The amendments introduced by Bill C-56 in December 2023 are expected to be followed by a second and more significant round of amendments contained in Bill C-59, which is currently working its way through Parliament. If passed, Bill C-59 would be the most important amendments to Canadian competition law since the current modern Competition Act replaced the former Combines Investigation Act in the 1980s.

For more information about the December 2023 amendments, see: Significant Canadian Competition Act Amendments Come Into Force (Bill C-56). See also: Competition Bureau, Guide to the December 2023 amendments to the Competition Act. For more information about Bill C-59, the second amending bill, which has not yet passed, see here.

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OVERVIEW OF CANADIAN COMPETITION LAW
COMPLIANCE FOR TRADE/PROFESSIONAL ASSOCIATIONS

The federal Competition Act can apply to many trade and professional association activities, including board of director and membership meetings, membership criteria and member discipline, member related industry surveys and benchmarking exercises, trade/professional association codes of conduct and dealings with suppliers and customers.

While trade/professional associations can, and frequently do, serve many legitimate industry-related purposes, because association activities typically involve direct interaction between competitors it is prudent for association executives, members and their advisors to take basic steps to proactively reduce potential competition law risk.

Canada’s federal Competition Bureau (Bureau) has also commenced many civil and criminal trade/professional association related enforcement matters, including in the areas of conspiracy (cartels), bid-rigging and abuse of dominance.

The Bureau also regularly reminds associations and their leadership of the types of activities that can raise potential competition law concerns and the importance of Canadian competition law compliance for associations.

These include the Bureau’s Trade Associations and the Competition Act pamphlet, Competitor Collaboration Guidelines (which set out the Bureau’s general position to enforcing the criminal conspiracy and civil agreements provisions of the Competition Act under sections 45 and 90.1) and its Compliance Hub (which sets out the Bureau’s position relating to Canadian competition law compliance programs and policies).

CANADIAN COMPETITION LAW COMPLIANCE TIPS
FOR TRADE AND PROFESSIONAL ASSOCIATIONS

The following are some key tips for trade and professional associations to comply with Canadian competition law:

Adopt a Credible and Effective
Competition Law Compliance Program

Trade and professional associations should adopt a credible and effective competition law compliance program. Such programs are both part of the obligations owed by directors and officers to their corporations and, if adopted and followed, play an important role for associations to mitigate potential competition law risk. Implementing a competition law compliance program should be at the top of the compliance list for all trade/professional associations.

Competition compliance program options for trade/professional associations range from formal compliance programs, which encompass all association activities to compliance guidelines for key activities based on potential risk (e.g., board of director and other meetings, industry surveys and benchmarking, information exchange exercises and specific initiatives that may raise competition law issues, such as joint negotiations with suppliers or customers and proposed member-related joint ventures).

Some of the key benefits of a competition law compliance program include reducing the risk of violating the Competition Act, reducing the costs of investigations and proceedings should they occur and potentially mitigating penalties. Association members (e.g., companies and their personnel) may also consider requiring that any association have a credible and effective competition law compliance program to participate in association activities.

Prepare Written Agendas and Meeting Minutes

Trade/professional associations should prepare written agendas for all meetings involving competitors (including board of director meetings) and meeting minutes. Discussions at meetings should also stay within the boundaries of legitimate meeting agenda items and discussions or exchanges of competitively sensitive information should be avoided, including discussions of current or future member pricing, costs, individual customers and suppliers, markets, market shares, output, competitive bidding and business or strategic plans.

Where some potentially competitively sensitive information may be required to be exchanged among competitors (e.g., in relation to legitimate industry surveys or benchmarking exercises), appropriate precautions should be taken to minimize potential competition law risk, such as adopting and following information exchange guidelines.

The Bureau recommends that associations provide a clear copy of the agenda before trade association meetings for competing firms to participate in the meeting. For more information, see: Information Exchanges.

Adopt Conduct of Meeting Guidelines

Adopting and strictly following conduct of meeting guidelines is a key proactive step to reduce potential competition law risks for trade/professional associations.

Such guidelines commonly include restrictions on the exchange of competitively sensitive information and topics that may lead to criminal conspiracy risks under section 45 of the Competition Act (e.g., discussions relating to member pricing, markets, concerted refusals to deal or limiting the production or supply of goods or services). For more information, see: Information Exchanges, Conspiracy (Cartels), Conspiracy FAQs and Refusal to Deal.

Compliance guidelines should also address steps to take if inappropriate discussions or activities arise during board of director, conference or other association meetings or events, including when attendees should leave meetings, report incidents to association executives and/or legal counsel and record efforts to prevent anti-competitive discussions from continuing.

Conduct Competition Law Compliance Audits
and Appoint a Compliance Officer

One practical way for trade/professional associations to monitor compliance is to conduct periodic audits of association activities.

Competition law compliance audits can be performed on an association-wide, activity-specific or spot basis.

Appointing a compliance officer to monitor, audit and assist with compliance can also help ensure that association members understand and comply with the Competition Act. There are no formal requirements for a compliance officer under the Competition Act and such officers may be an association executive or employee that has received competition law compliance training. For more information, see: Compliance.

Conduct Competition Law Compliance Orientations
for New Executives and Personnel

Another practical step trade/professional associations can take to assist with competition law compliance is to conduct compliance orientations for new board directors, executives and other key personnel (e.g., staffers who are involved in association activities that may raise competition law risk, such as industry surveys or benchmarking).

The Bureau also recommends requiring company/member representatives to complete competition law compliance training before joining trade associations and participating in association activities. For more information, see: Compliance.

Obtain Competition Law Legal Advice
for Key Association Initiatives

Care should be taken in relation to specific types of trade/professional association activities where there is increased potential competition law risk.

In general, associations should obtain advice from qualified legal counsel for key activities that may raise competition law concerns, including industry surveys and benchmarking, standard setting exercises, member discipline or expulsion and joint member initiatives (e.g., joint marketing, purchasing or negotiations with significant purchasers).

In practice, competition law risk may arise in relation to, among other things, member pressure relating to discount firms or maverick member activities, where members face pricing pressure from suppliers or customers or shifts in business models or technology that threaten incumbent members leads them to ask their association “to do something”.

Do Not Hold or Facilitate “Off the Record” Meetings

Trade/professional associations should discourage informal or “off the record” meetings between their members, particularly on the fringes of association meetings or using association facilities.

Private meetings between competitors under the pretext of association meetings should also be discouraged.

Association members should also be aware that merely because a meeting is held “off the record” or “in camera” (i.e., a discussion is not recorded in meeting minutes) does not mean that discussions (which may be recorded in other ways, such as attendee notes, e-mails, texts, etc.) or the fact of the meeting itself cannot be used as evidence in competition law enforcement or proceedings.

The Bureau and private plaintiffs can, and often have in the past, used such “circumstantial evidence” to establish a criminal conspiracy agreement.

Regularly Review Association Activities and Rules

Trade/professional associations should generally review their initiatives and activities through a “competition lens” for compliance with the Competition Act.

For example, if a particular association activity may lead to higher prices, less quality or choice, increase barriers for some members or competitors to compete or generally reduce competition, this may well raise competition law concerns (or at minimum the need to consult competent legal counsel).

It is also prudent for associations to ensure open consultations among members when developing or reviewing existing rules, codes of conduct and standards and include a clear statement of objectives, expectations and responsibilities that comply with the Competition Act. For example, associations should avoid rules (e.g., in association codes of conduct) that establish prices, mandate levels or types of services, restrict advertising or exclude some competitors from the market.

Members Should Require Trade/Professional Associations
to Adopt Credible and Effective Compliance Programs
as a Condition of Membership

A credible and effective competition law compliance program is an essential element of any trade/professional association that includes competitors.

Participating in an association’s activities that has not adopted a competition law compliance program may lead to potential criminal or civil risk for individual members as well as their companies/firms.

As such, before permitting a company’s personnel to participate in trade/professional association activities, it is prudent to ensure that the association has adopted and follows a credible and effective competition compliance program.

Use a Third Party for Industry Surveys,
Benchmarking Exercises and
Other Types of Information Exchanges.

Trade/professional associations may collect and circulate competitively sensitive information, with the appropriate safeguards in place, for a variety of legitimate purposes.

Such purposes may include efforts to reduce prices or costs, research ways that members can more effectively compete in a market or developing more innovative products or services.

However, based on the potential criminal and civil competition law risks, before collecting and sharing competitively sensitive information gathered from association members, associations should consider using a third party to collect the information and distribute it with precautions to minimize potential competition law risk (e.g., adopting information exchange guidelines, only circulating information gathered in aggregated and anonymized form and not distributing raw competitively sensitive data to competing board or other members, etc.).

For more information, see: Information Exchanges.

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SERVICES AND CONTACT

We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

Our experience includes advising clients in Toronto, Canada and the United States on the application of Canadian competition and regulatory laws and we 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 and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.

To contact us about a potential legal matter, see: contact

For more information about our firm, visit our website: Competitionlawyer.ca