Canadian COMPETITION LAW

I am pleased to be participating in the Canadian Bar Association’s upcoming CBA Canadian Legal Conference in Vancouver on a panel on August 13th, part of which is still to be announced, discussing recent competition law developments for in-house counsel:

“Canada’s competition and foreign investment laws are being enforced more vigorously than ever. The Competition Bureau has wide powers allowing them to investigate conduct that might have an anti-competitive impact on the Canadian marketplace, and investigations often involve high-stakes consequences for companies including public stigma, criminal penalties, or unneeded complications arising in the middle of a strategic merger. Learn how to minimize your risk and limit liability with practical guidance from our experienced panel on how to ensure regulatory approval for mergers, strategic alliances and joint ventures. (90 min)”

For more information about the CBA’s conference or this panel see:

CBA Canadian Legal Conference

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The Competition Bureau has published its June Monthly Report of Concluded Merger Reviews.  Advance Ruling Certificates were issued in five transactions with No Action Letters having been issued in eight transactions.  Notified mergers included Glencore International plc / Xstrata plc and it appears at least one Chinese acquisition (Aluminum Corporation of China / Winsway Coking Coal).

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Earlier today, the Federal Government announced that the Minister of Industry has approved the acquisition of Viterra Inc. by Glencore International plc., a transaction announced last March.  The Competition Bureau had already issued a no action letter in the transaction on May 4, 2012 (see: Competition Bureau Issues No Action Letter in Glencore/Viterra Merger).

In making the announcement, the Industry Minister made very brief comments saying only that he was “satisfied that the investment [was] likely to be of net benefit to Canada”, that he carefully considered Glencore’s proposed undertakings and referred to Glencore’s press release for details regarding commitments provided by Glencore.  According to media reports, Glencore has agreed to increase capital expenditures in Canada by more than $100 million, contribute to Manitoba “grain industry initiatives” and maintain Viterra’s Regina head office.

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Conventional wisdom is that the Competition Bureau will pursue most misleading advertising cases civilly, under section 74.01 of the Competition Act, not criminally (the Act also contains a criminal misleading advertising provision, section 52, as well as a number of other criminal deceptive marketing offences).

For example, in the Bureau’s 1999 Bulletin on the choice of the criminal or civil track for misleading advertising, which remains its leading statement on the question, the Bureau states that the civil track will be pursued in most instances (though it may proceed criminally where there is both clear evidence of intent – for example, continuing conduct after complaints are made – and a criminal prosecution is in the public interest).

Despite this expressed restraint to proceed criminally, there have been a steady stream of deceptive advertising and marketing cases over the past few years where the Bureau has commenced criminal enforcement proceedings.  Some recent cases have involved deceptive telemarketing (see: here, here and here), employment opportunity schemes (see: here and here), a GST refund fraud scheme (see: here) and the sale of counterfeit cancer drugs on the Internet (see: here).  In terms of criminal misleading advertising cases, the Bureau has appeared to be most concerned with deceptive telemarketing and fraudulent business directory schemes (although its efforts have not been restricted to those two categories of cases).

While imprisonment is rather rare in Canada for competition law offences, several individuals in these cases were also sentenced to imprisonment, ranging from conditional sentences in the community to 3 years, in addition to paying monetary penalties.

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In an interesting statement made yesterday, the Federal Government announced that it was extending the list of offences that will render companies and individuals ineligible from bidding on Government contracts to include money laundering, participating in criminal organization activities, tax evasion (income and excise tax), bribing foreign public officials and drug trafficking.  These new additions have been added to an existing list, which includes certain Criminal Code fraud offences against the Government and a number of Competition Act offences (including conspiracy and bid-rigging).

In making the announcement, the Government said:

“Our Government continues to stand up for accountability by ensuring we do business with companies that respect the law and act with integrity,” said Minister Ambrose. “We are taking action to protect taxpayers from fraudulent companies who seek to do business with the Government of Canada.”

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The Malaysian Competition Commission (MCC) has set out its position on information exchanges in the association context, in relation to information exchanges involving the Malaysian Automotive Association (MAA).

According to the MCC, it had previously advised the MAA as to why and how the dissemination of disaggregated information to MAA members could infringe Malaysian competition law.

In her announcement, the MCC’s chief executive officer pointed to potential risks of the formation of horizontal or vertical agreements that may raise competition concerns, principally dampening competitive rivalry among them:

“The detailed information exchanged and shared by the MAA’s members may facilitate them to coordinate their prices and such information could facilitate members to plan their marketing strategy by allocating territories or adjusting their production.  This indirectly has the consequence of discouraging members from competing fairly and more effectively against one another.”

The potential issues associated with information exchanges between competitors is not, of course, unique to Malaysia, nor are the types of commonsense precautions trade and professional associations can take to reduce competition/antitrust issues from arising.

In Canada, like many other jurisdictions, the potential risk of exchanging competitively sensitive information in un-aggregated form (e.g., price, cost, market, market share, customer or supplier information) is generally twofold: first, exchanging such information can lead to agreements that violate section 45 of the Competition Act (the criminal conspiracy provision, which prohibits price-fixing, market allocation/division and output/supply restriction agreements between competitors); and second, that information exchanges can be used as evidence by the Competition Bureau, a court or private plaintiff to infer the existence of an agreement.

Also, since the passing of Canada’s relatively new civil agreements provision (section 90.1), information exchanges can also now in theory be challenged on a stand-alone basis (i.e., apart from, for example, a price-fixing agreement) where they prevent or lessen competition substantially (or as well raise issues in relation to otherwise legitimate vertical agreements and arrangements).

For more information about information exchanges and competition law in Canada, and steps associations can take to minimize competition risk, see:

Information Exchanges

Associations and Competition Law

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In an interesting story in yesterday’s Globe, Jeff Gray reported on a recent decision by the U.S. Court of Appeals for the Seventh Circuit reviving a U.S. antitrust suit against Potash Corp., Agrium Inc. (and several other firms: Mosaic Co. and four Russian and Belarussian potash companies).  The plaintffs in this case allege that the seven firms controlled 71% of the world’s potash supply and that they coordinated cuts to production to maintain prices.  The case is an interesting example of an alleged output restriction cartel (in Canada, section 45 of the Competition Act prohibits agreements between competitors to restrict output/supply) and a challenge against an export cartel (Canadian competition legislation includes a number of exemptions, including for agreements relating only to exports).  Like Canada, however, the U.S. is an “effects” jurisdiction, in that agreements formed abroad that may adversely impact U.S. consumers can be challenged under U.S. antitrust laws.  According to the Globe, the recent Court of Appeals ruling reversed an earlier decision quashing the case now in the favour of the plaintiffs and apparently the U.S. DoJ and FTC (who filed submissions in the case).  Also interesting is that the pleadings challenge Canpotex Ltd. the Potash/Agrium/Mosaic JV that sells potash outside North America.

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The ABA’s Section of Antitrust Law has published its June edition of Antitrust Source.  This new issue of the ABA’s bi-monthly online antitrust journal includes articles on a Roundtable Conference with Enforcement Officials (including Jon Leibowitz (FTC), Sharis Pozen (DoJ), Joaquin Almunia (EC) and Ashok Chawla (Competition Commission of India)), the Risk of Tagbacks to Leniency Applicants in Cartel Investigations and Analyst Calls and Price Signaling Under EU Law.

For the complete issue see: Antitrust Source – June 2012

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