Archive for the 'Competition Law' Category
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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On July 4, 2012, the Competition Bureau announced that it had issued a No Action Letter clearing the Maple/TMX transaction (see: Competition Bureau Completes Review of Proposed Maple-TMX Transaction).
In two interesting notes yesterday and today (see: here and here) Bloomberg has reported that the Competition Bureau is seeking to overturn an earlier interim stay obtained by RBS in relation to a court order to produce records related to the Bureau’s ongoing LIBOR price-fixing investigation involving Deutsche Bank AG, HSBC, Citigroup Inc., ICAP Plc and RP Martin Holdings Ltd.
According to Bloomberg, the Bureau sought and obtained court orders for the compulsory production of documents (section 11 orders) requiring the firms being investigated to produce documents including lists of individuals responsible for making Yen LIBOR submissions and internal communications. Also according to Bloomberg, the Bureau has taken the position that its [section 11 orders] “may be the only tool available to the Commissioner to obtain evidence of an international cartel formed by foreign-based persons impacting the Canadian economy but where records are held in a foreign jurisdiction …”
On June 21, 2012 the Competition Bureau announced that, together with the Unité permanente anticorruption (UPAC) in Quebec, it has laid 77 charges against 11 individuals and 9 companies in relation to a broad range of allegations that include corruption in municipal affairs, breach of trust, influencing municipal officers, fraud upon the government, production and use of counterfeit documents, accepting reward, advance or benefit, extortion and conspiracy.
With respect to allegations of competition law violations, the Bureau has announced that bid-rigging charges were also laid under section 47 of the Competition Act.
According to the Bureau, this newly announced case is the result of an investigation that ran for more than two years, which uncovered “evidence of a sophisticated collusion scheme giving preferential treatment to a group of contractors to obtain municipal contracts, mainly for infrastructure projects in Saint-Jean-sur-Richelieu and surrounding areas.”
Under section 45 of the Competition Act (the criminal conspiracy offences of the Act) three types of agreements between competitors are “per se” illegal (i.e., with no adverse competitive impacts required to be proven): (i) price-fixing agreements (agreements to fix, maintain, increase or control the price for the supply of a product or service), (ii) market allocation/division agreements (agreements to allocate sales, territories, customers or markets for the production or supply of a product) and (iii) output/supply restriction agreements (agreements to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product). Other types of agreements between competitors are potentially subject to review under a second and separate non-criminal reviewable matters agreement provision (section 90.1).
In addition to these conspiracy offences, the Competition Act (somewhat in contrast to, for example, the U.S. where bid-rigging is challenged under Section 1 of the Sherman Act together with other types of cartels, such as price-fixing or market division arrangements) also contains stand-alone bid-rigging offences (under section 47 of the Act).
In this regard, section 47 of the Act makes it a criminal offence to: (i) agree to not submit a bid or tender, (ii) agree to withdraw a bid or tender already submitted (recently added to the Act as a result of the 2009 amendments) or (iii) submit a bid or tender that is arrived at by agreement. Bid-rigging in Canada is also, like the amended section 45, ”per se” illegal, in that no anti-competitive effects on a relevant market (or markets) need to be established in order to make out an offence (though all of the elements need to be established on the standard criminal burden of proof – i.e., beyond a reasonable doubt).
Some common types of coordinated bidding activities that can contravene the criminal bid-rigging provisions of the Act include: “cover”, “courtesy” or “complementary” bidding (some firms submit bids that are too high to be accepted, or with terms that are unacceptable to the party calling for bids, to protect an agreed upon low bidder); “bid suppression” (one or more bidders that would otherwise bid agree to refrain from bidding or withdraw a previously made bid); “bid rotation” (all parties submit bids but take turns being the low bidder according to a systematic or rotating basis); “market division” (suppliers agree not to compete in designated geographic areas or for specified customers); and “subcontracting” (parties that agree not to submit a bid, or submit a losing bid, are awarded subcontracts or supply agreements from the successful low bidder. Trade association activities involving information exchanges about upcoming or proposed tender opportunities, or that facilitate coordination of bids and tenders, can also raise competition law concerns.
The CBA’s National Competition Law Section has posted its letter to the Parliamentary and Senate Standing Committees on Finance and National Finance commenting on the proposed amendments to the Investment Canada Act (ICA) contained in Bill C-38 (for our previous posts on the proposed Investment Canada Act changes see: here and here).
Bill C-38 would, if passed, introduce two changes to the ICA: first, the Federal Government would be authorized to accept security for payment for certain penalties under the ICA, including where undertakings had been breached; second, it would broaden the exceptions to the existing privilege protections under the ICA to allow the Minister of Industry or Canadian Heritage to publicly explain why an investor had been sent a notice under subsection 23(1) of the ICA (a preliminary notice that the Minister was not satisfied that an investment was likely to be of net benefit to Canada, the relevant substantive test under the ICA).
The Section is generally critical of Bill C-38’s “omnibus style” of legislation and lack of “meaningful comment or debate”. The Section also questions whether security payments would increase compliance with undertakings, expresses a concern about the absence of limitations or guidance in the Bill on the circumstances when security may be taken (or the nature or amount) and takes the position that the additional disclosure powers for the responsible Minister under the ICA represents an “inadequate improvement on the status quo” (a criticism echoed by many other observers). In particular, the Section is critical of the permissive nature of disclosure and recommends a requirement to give reasons for Ministerial decisions (and make them public where the Minister approves or rejects an investment).
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Companies and other organizations, such as trade and professional associations, may exchange information for a wide range of legitimate and pro-competitive purposes. These may include industry research, benchmarking, joint ventures or other business or strategic alliances or in the context of merger negotiations.
Indeed, the exchange of information between companies or association members can have many pro-competitive purposes and effects – for example, facilitating research or production initiatives that would be impossible without cooperation, increasing market transparency and consumer knowledge, leading to enhanced products and services or supporting lobbying and industry advocacy efforts. In this regard, competition enforcement officials, both in Canada and other major jurisdictions, generally acknowledge that markets operate more efficiently when information is relatively free and openly available to industry members.
Having said that, information exchanges – that is the exchange of certain types of competitively sensitive information between competitors, such as price, cost, market, market share, customer, supplier or business or strategic plan information – can represent a significant risk for companies, trade or professional association members (as well as their management and boards) and merging or joint venture partners.
Generally speaking, the exchange of competitively sensitive information between competitors can dampen competitive rivalry by reducing competitors’ uncertainty about their rivals’ competitive and commercial responses. More specifically, the exchange of competitively sensitive information between competitors can raise significant competition law risk under the Competition Act (the “Act”).
In Canada, the principal risk of information exchanges between competitors is that they can lead to agreements that violate section 45 of the Act, which makes it a criminal offence for competitors (or potential competitors) to enter into agreements to fix prices, divide markets or restrict output. Potential penalites under section 45 include criminal fines of up to $25 million (per count), imprisonment or up to 14 years and damages arising from civil actions.
While section 45 does not criminalize information exchanges themselves, the risk of such exchanges between competitors, without appropriate safeguards, is two-fold: first, exchanging (or discussing) competitively sensitive information may result in an agreement that contravenes section 45 (e.g., a price-fixing agreement); and second, an information exchange may be used by a court, the Competition Bureau or a private plaintiff to infer the existence of an agreement that violates section 45 (i.e., be used as “circumstantial” evidence of the existence of an agreement).
Canadian courts have relied on evidence of information exchanges as one basis to conclude that an illegal conspiracy existed and such exchanges are commonly relied on in criminal and civil proceedings in Canada under section 45. Information exchanges have sometimes involved conduct as seemingly straightforward as the discussion of prices at association meetings and in one older, but noteworthy, case, an attempt by industry members to adopt an “open pricing” policy (by exchanging price information with no express agreement to follow the exchanged rates) without contravening section 45.
The American Bar Association, Section of Antitrust Law has published their new edition of Antitrust Law Journal, which includes the following articles: “Dynamic Analysis and the Limits of Antitrust Institutions” (Douglas H. Ginsburg and Joshua D. Wright) and “Does Leegin Liberate the Law Governing Horizontal Conspiracies From Its Vertical Contamination” (M. Laurence Popofsky).
The new edition also includes a series of notes on Neo-Chicago Antitrust topics, including “A Neo-Chicago Perspective on Antitrust Institutions” (D.A. Crane), “Antitrust and the Costs of Movement” (Herbert Hovencamp), “Marrying Neo-Chicago with Behavioural Antitrust” (Max Huffman), “Chicago, Post-Chicago, and Beyond: Time to Let Go of the 20th Century” (B.H. Kobayashi and Timothy J. Muris), “A Neo-Chicago Approach to Concerted Action” (W.H. Page) and “Cartels, Corporate Compliance, and What Practitioners Really Think About Enforcement” (D. Daniel Sokol).
For a copy of the new edition see:
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On June 15, 2012, the Competition Tribunal released the public version of its decision in the contested BC landfill merger case Commissioner of Competition v. CCS Corporation, allowing the Commissioner’s application and making a divestiture order.
As we wrote in our earlier post, the case, which involves the acquisition by CCS Corporation of Complete Environmental Inc. and its wholly-owned subsidiary Babkirk Land Services, is noteworthy for being the first contested merger case in Canada in six years (since 2005) and an uncommon example of a “prevent” case (mergers in Canada may be challenged under the Competition Act where they either lessen or prevent competition substantially, being the two aspects of the substantive test under section 92 of the Act). While there have been three previous prevent cases considered by the Tribunal in Canada, all of those focused on the substantial lessening aspect of the substantive test under section 92.
The Bureau’s overarching concern in this case was that the completed merger was likely to prevent competition in the hazardous waste disposal service market in the relevant market in Northern British Columbia, given that, in the Commissioner’s view, Complete was ready to enter and compete with the acquirer CCS. In this regard, Complete had obtained regulatory approvals to operate a secure landfill for hazardous solid waste.
The case is also noteworthy as an example of the Bureau’s apparent increased willingness to challenge some transactions post-closing, regardless of size, that may raise competition concerns.
In granting the Commissioner’s application, albeit with a lesser remedy than that sought by the Bureau (i.e., divestiture not dissolution), the Tribunal had some interesting things to say about the analytical framework for “prevent” cases and the competitive effects in this case (all forward looking), efficiencies and the assessment of the appropriate remedy.
A few interesting points from the Tribunal’s decision include:
Substantial Prevention of Competition
The Tribunal found that the completed merger was likely to result in a substantial prevention of competition in the market for the supply of secure landfill services, and in particular that a decrease in average tipping fees of at least 10% would be prevented by the merger.
In coming to this conclusion, the Tribunal applied a “but for” test in assessing competitive effects (i.e., comparing whether the market would, “but for” the merger, be substantially more competitive, or in the Tribunal’s words: “comparing a world in which CCS owns the relevant Secure Landfills … with a world in which Babkirk is independently operated as a Secure Landfill”).
In adopting this test, the Tribunal drew on the Federal Court of Appeal’s decision in Canada Pipe, an abuse of dominance case under section 79 of the Act, finding a parallel between the language in sections 92 (which sets out the substantive test for merger review) and 79 (abuse of dominance).
Interestingly, the Tribunal refused to rely on U.S. authorities suggested by both the Commissioner and CCS to interpret the appropriate analytical framework in a prevent case, finding that they had developed in relation to a different statutory test and were not recently decided.
Entry
In its prevent analysis, the Tribunal held that it should focus on entry, both with respect to existing firms and new entrants. Entry is a key component of the Bureau’s analysis of competitive effects as set out in its Merger Enforcement Guidelines and barriers are a relevant factor under section 93 of the Act that the Tribunal may consider in evaluating the competitive effects of a merger.
Citing Hillsdown, the Tribunal said that “conditions of entry into a relevant market can be a decisive factor in [its] assessment of whether a merger is likely to prevent or lessen competition substantially … because, ‘[i]n the absence of significant entry barriers it is unlikely that a merged firm, regardless of market share or concentration, could maintain supra-competitive pricing for any length of time.’”
While CCS argued that the relevant market was not characterized by significant barriers, pointing to a permissive regulatory approval regime, growing demand for secure waste facilities and short-term contracting practices in the industry, the Tribunal found that effective new entry would likely take a minimum of 30 months from site selection to a complete operational landfill, with no evidence of proposed new entry.
The Tribunal also found that, absent the merger, the vendors (Complete Environmental) would have constructed a new competing secure landfill that would likely have been operational by the fall of 2012 or early 2013.
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