Canadian COMPETITION LAW

TRADE AND PROFESSIONAL ASSOCIATION ACTIVITIES
THAT CAN RAISE COMPETITION LAW RISK

Trade and professional associations can serve many legitimate purposes, including promoting common interests to the public, lobbying and advocacy, research, member education and promoting and improving product and service standards.

However, because trade/professional association activities typically involve the interaction of direct competitors, they can also in some cases raise competition law concerns under Canada’s federal Competition Act. For more information about some of the provisions of Canada’s Competition Act that can apply to trade/professional association activities, see: Associations. For information about the Competition Bureau’s compliance guidance for trade and professional associations, see: Association Compliance.

In general, some of the types of trade/professional association activities that can raise competition law concerns include those dealing with pricing, advertising, customers, territories, market shares, terms of sale and other key dimensions of competition.

Some of the specific trade/professional association activities that can potentially raise competition law concerns under Canada’s Competition Act include the following:

1. Board of director and other association meetings (e.g., where competitively sensitive information may be exchanged between competing members of the association).

2. Information exchanges (e.g., exchanges of competitively sensitive information, such as relating to fees, customers, suppliers, costs or bidding/tendering) during association activities.

3. Association rules, by-laws or codes of conduct that restrict competition (e.g., mandatory or suggested fee guidelines, advertising restrictions or restrictions on members’ business models).

4. Advertising or marketing restrictions (e.g., restrictions on members’ advertising/marketing in codes of ethics or association by-laws or other rules).

These potential areas of competition law risk for trade and professional associations are discussed in more detail below.

Board of Director and Other
Trade/Professional Association Meetings

Meetings are a normal and routine part of most trade/professional associations and can include a variety of legitimate and pro-competitive activities. However, given that association meetings also in many cases involve the interaction of direct competitors, they can be a high-risk area for associations, their leadership and their personnel.

This is because meetings between direct competitors can in some instances either result in conduct that actually violates the Competition Act (e.g., the formation of a criminal price-fixing or other agreement that violates the conspiracy offences under section 45 of the Competition Act) or can make it easier for the Competition Bureau, a court or a private plaintiff to infer that anti-competitive conduct has occurred (e.g., use evidence of an association meeting where competitively sensitive topics were discussed by attendees that an illegal conspiracy agreement was formed). While the exchange of competitively sensitive information between competitors is not in itself illegal under Canada’s Competition Act, this is traditionally a high risk areas for associations based on the fact that it can be used as evidence of a competition law violation.

Key competition law compliance tips: Based on the potential risk, trade/professional associations should adopt conduct of meeting guidelines for board of director, committee, task force, membership and other types of meetings where competitors gather.

For more information, see: Association Compliance, Conspiracy (Cartels) and Information Exchanges.

For information about the Competition Bureau’s compliance guidance for trade/professional associations, see: Trade Associations and the Competition Act and Compliance Hub.

Information Exchanges
(Exchange of Competitively
Sensitive Information)

Information exchanges (e.g., the exchange of competitively sensitive information between competitors) is another key risk areas for trade and professional associations.

Some of the potential competition law risk areas include the exchange of information relating to association members’ current or future pricing, market shares, costs, customers, suppliers, markets and current or future business plans or strategic plans.

The reason the exchange or discussion of such information can potentially raise competition law concerns under the Competition Act is because, when exchanged among competitors, it can either potentially lead to the formation of an illegal anti-competitive agreement (e.g., a price-fixing, bid-rigging or other illegal agreement under sections 45 or 47 of the Competition Act) or support the inference of an illegal anti-competitive agreement (e.g., the exchange of pricing information followed by a stabilization of price could infer that an anti-competitive conspiracy agreement between association members exists).

Key competition law compliance tips: Based on the potential risk, trade/professional associations should implement basic compliance guidelines for information exchanges between members.

In this regard, some common competition compliance measures include conduct of meeting guidelines (e.g. for board of director and other association meetings), compliance guidelines for industry surveys, benchmarking and other information exchange exercises and guidelines for other types of information exchanges between members (e.g., participating in social media platforms,  chat rooms or intranet platforms within the association).

For more information, see: Association Compliance, Conspiracy (Cartels) and Information Exchanges.

For information about the Competition Bureau’s compliance guidance for trade/professional associations, see: Trade Associations and the Competition Act and Compliance Hub.

Trade/Professional Association Rules, By-laws or Codes of Conduct
That Restrict Competition

Trade and professional association rules, policies or bylaws can also, in some cases, raise Canadian competition law concerns under the Competition Act if they touch on competitively sensitive topics such as member fees/pricing, marketing, advertising or membership restrictions or member discipline.

The key potential issue is that where an association enacts or enforces rules relating to competitively sensitive topics (e.g., fee or price tariffs, advertising restrictions in a code of ethics, etc.), that the association may be either a party to or assisting in the formation of an illegal conspiracy agreement under section 45 of the Competition Act (criminal conspiracy). Section 45 of the Competition Act makes it a criminal offence for two or more persons to agree to fix prices, divide/allocate territories or customers or restrict output.

In this regard, while there can sometimes be pressure on trade/professional association leadership to “do something” in response to perceived low pricing members, mavericks or new business models, associations and their members must be cautious not to take steps (or be perceived to be attempting to) that may violate the criminal conspiracy offences under section 45 of the Competition Act.

In its Competitor Collaboration Guidelines, the Competition Bureau’s position is that anti-competitive agreements involving industry trade associations (or association rules, policies or by-laws that prevent or lessen competition substantially) and are enacted and enforced by an association with the approval of members who are competitors can result in liability for an association as either a party to an offence itself or on the basis of aiding and abetting an illegal agreement under the Criminal Code.

Trade/professional association rules and codes of conduct can in some cases also raise concerns under the price maintenance, abuse of dominance, misleading advertising or other provisions of Canada’s federal Competition Act. In this regard, the Competition Bureau has commenced cases against trade and professional association enacted rules under section 79 of the Competition Act (abuse of dominance).

Key competition law compliance tips: Trade/professional associations should review any rules, policies, bylaws or codes of conduct that touch on competitively sensitive topics for Competition Act compliance and potential risk, including rules relating to member fees/pricing, discounts, marketing and advertising and membership restrictions and discipline.

For more information, see: Association Compliance, Abuse of Dominance, Conspiracy (Cartels) and Price Maintenance.

For information about the Competition Bureau’s compliance guidance for trade and professional associations, see: Trade Associations and the Competition Act and Compliance Hub.

Misleading Advertising & Restrictions on Trade/Professional
Members’ Advertising and Marketing

Advertising and marketing related efforts by trade/professional associations can also raise Canadian competition law concerns in some cases in several ways.

First, the criminal and civil misleading advertising provisions of Canada’s Competition Act can be relevant to trade and professional association activities where, for example, an association makes false or misleading claims about its own products or those of its members (e.g., in connection with industry-wide marketing conducted by an association).

Second, other provisions of the Competition Act, including the criminal conspiracy (section 45) and civil abuse of dominance (sections 78 and 79) provisions, can apply where a trade/professional association restricts or attempts to restrict member advertising/marketing.

Key competition law compliance tips: Trade/professional associations should ensure that their own advertising and marketing activities comply with the Competition Act (e.g., relating to claims about the association’s products and services or in relation to marketing on behalf of its membership).

Trade/professional associations should also review any association rules, bylaws or codes of conduct regulating member advertising or marketing to reduce the likelihood that such rules (i.e., association restrictions on member advertising or marketing) may violate the Competition Act.

For more information, see: Association Compliance, Advertising Law and Misleading Advertising.

For information about the Competition Bureau’s compliance guidance for trade and professional associations, see: Trade Associations and the Competition Act and Compliance Hub.

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