In our March 24, 2020 bulletin, we reminded clients that Canada’s Competition Act (the “Act”)continues to applyto their collaborations with competitors to combat the COVID-19 pandemic and its effects. This is a point the Commissioner of Competition underlined in a statement on March 20, reinforcing that collusion between competitors (e.g., price fixing) would be one of the Competition Bureau (“Bureau”)’s highest enforcement priorities. On April 8, the Bureau published another statement:
- Recognizing the “exceptional circumstances” surrounding the pandemic;
- Signalling it will generally refrain from exercising scrutiny where there is a clear imperative for competitors to collaborate in the short-term in ʺgood faithʺ and where they do not go further than needed; and
- Advising that it has assembled a team and process within the Bureau to offer rapid informal enforcement guidance to businesses regarding proposed collaborations.1
The Bureau’s response follows the lead of a number of antitrust enforcement agencies in key jurisdictions, including the United States, Europe, Australia, Mexico and the United Kingdom. Authorities in these jurisdictions have all signalled tolerance for competitor collaborations that are intended to respond to the COVID-19 crisis (for example, to ensure the ongoing production and distribution of critical goods and services), and/or processes for the provision of expedited guidance to businesses in relation to such collaborations.
As we discuss below, the Bureau’s statement highlights the need for businesses to continue to make fact-specific assessments of the competition law risks of cooperating with rivals during the pandemic.
The Bureau’s “case-by-case” approach to COVID-19 competitor collaborations
The Bureau’s new statement leads by noting the agency’s intent to avoid having competition enforcement “potentially chill what may be required to help Canadians”. In particular, the chill arises from concerns about criminal prosecution under the conspiracy provision of the Act, which prohibits agreements between competitors to fix prices, allocate markets or restrict output. As noted above, the Bureau indicates that it will “generally refrain from exercising scrutiny” with respect to competitor collaborations in response to the COVID-19 crisis where: (1) those collaborations “are undertaken and executed in good faith”; and (2) those collaborations “do not go further than what is needed” in the circumstances. As examples of generally permissible conduct under this framework, the Bureau indicates that competitors might share supply chain resources, such as distribution facilities, or form collaborative buying groups.
The statement does not, however, offer any other specific examples of the types of activities that the Bureau would find acceptable to respond to COVID-19. (The two examples it does mention in the statement are already considered as non-criminal conduct under the Bureau’s pre-existing Competitor Collaboration Guidelines.2 Indeed, the Bureau’s view in those guidelines is that the price-fixing prohibition does not apply in the context of buying groups.) Nor does the statement offer any best practices or “bright line” tests as guidance. Accordingly, firms will largely need to continue assessing their own COVID-19–related activities on a case-by-case basis under existing competition law. In doing so, businesses will need to bear in mind the Bureau’s warning that it will take a “zero tolerance” approach to attempts to use pandemic-related enforcement flexibility as “cover for unnecessary conduct that would violate the Competition Act”.
New Bureau COVID-19 team and process for guidance on specific collaborations
As noted above, the Bureau announced the establishment of a new process to offer potential case-specific guidance to businesses.
Through the formation of a new COVID-19 team to provide “informal guidance,” the Bureau is seeking to provide comfort to collaborating businesses on the Bureau’s enforcement position at an expedited pace. .
The Bureau has asked businesses interested in using this new process (the “COVID-19 Guidance Process”) to provide it with the following initial information about their proposed collaboration:
- The firms involved and the parameters of the collaboration, including its proposed scope and duration;
- How the collaboration is intended to achieve a clearly identified COVID-19 related objective in the public interest;
- Why the collaboration is necessary to meet this objective; and
- Any guidance sought from relevant authorities on whether the collaboration contemplated will actually further Canada’s response to COVID-19.
The Bureau also describes a number of “operational considerations” relevant to the new COVID-19 Guidance Process, including:
- The Bureau may seek input from other parts of government at all levels, stakeholders, and market contacts;
- The Bureau may require conditions to limit the impact on competition;
- The informal guidance would be time limited and, if the parties request an extension, the Bureau would conduct a review after the initial time period;
- The Bureau’s guidance would not insulate conduct from private actions;
- The Bureau might make the guidance public in the interests of transparency; and
- At the conclusion of the time period, the parties would be expected to provide written confirmation that the collaboration has been terminated.
The Bureau does not mention any fee for using this process in contrast to the Bureau’s written opinion process.
Practical considerations for use of the new COVID-19 Guidance Process
While the Bureau’s openness to a new process responding to the pandemic-related compliance needs of businesses is welcome, it is unclear to what extent that process will be responsive to the emergency nature of COVID-19–related collaboration.
In our view, the following considerations should inform companies’ decisions on whether to seek informal guidance from the Bureau:
- Will the process be timely enough? The Bureau only refers to facilitating “rapid” decisions without providing a specific timeline for the review. This contrasts with the US, where antitrust agencies have indicated their intention to provide advice within seven days. The Bureau also notes that input from other government actors, as well as “stakeholders, and market contacts,” may be required. While this is appropriate in non-urgent circumstances, unless those stakeholders are given short timelines to meet, the consultation could end up lengthening the Bureau’s response time. (Indeed, in the Bureau’s recent letter to the Canadian Bar Association, it noted that delays in making market contacts as a result of COVID-19 could delay merger reviews.) Only time will tell if the process is efficient in responding to requests for guidance.
- How useful will any issued guidance be? As this ʺinformalʺ process is new to the Bureau, and the Bureau will be balancing significant public interest factors against competition-related concerns, it remains to be seen whether the Bureau will be willing to provide the extent of guidance that businesses responding to the pandemic may require. In this connection, we are hopeful that in these pandemic circumstances, the Bureau would provide the assurance necessary for the collaborating parties to proceed, without caveats.
- Will Bureau guidance encourage private actions? While the Bureau’s guidance in response to a request may clarify that a proposed collaboration will not be pursued by the Bureau as a criminal conspiracy, the parties will not be immune from civil suits for damages arising from criminal offences under the Act. This risk may be enhanced if the Bureau makes public its decision on any given collaboration, although a plaintiff would be required to prove damages (which may be less likely to arise in COVID-related cases). Finally, we note that protection from civil suits is not something that the Bureau has the power to address; rather, an amendment to the Act would be required to exempt “public interest” collaborations from the criminal conspiracy provision, as is the case in the UK.
- Could resort to the Bureau’s process invite other risks? Parties contemplating the use of the COVID-19 Guidance Process should also note that the Bureau may seek conditions to limit the disclosed collaboration’s potential competitive impacts and may choose to make its guidance public, exposing the parties to potentially uninvited publicity in addition to the risk of private actions, as noted above.
- What if conduct is more than just “proposed?” The COVID-19 Guidance Process applies, on its face, only to “proposed” conduct. The Bureau’s statement does not address cases where a business recognizes that its continuing or previously-executed conduct has exposed it to competition law risk. The rapid pace of pandemic-related business responses observed to date may increase the risk of firms requiring advice under such circumstances.
The Bureau’s April 8, 2020, statement on pandemic-related competitor collaborations is a welcome signal from the Bureau and a proper recognition that there should be no “enforcement as usual” when evaluating business collaborations aimed at combating the ongoing COVID-19 crisis. That said, the statement is very general, is largely consistent with its prior enforcement position enunciated in its Competitor Collaboration Guidelines, and offers no specificity either in relation to the decision timeline or the types of conduct that would be likely to be “cleared.” Additional clarity and guidance would have helped businesses understand where the Bureau currently sees the red lines as well as the timeframe for receiving a decision. In any event, businesses should not assume that reliance on the Bureau’s COVID-19 Guidance Process would be an effective substitute for their existing competition law-related policies, or for seeking out early legal advice as appropriate, when contemplating COVID-19-related collaborations with competitors (including within industry associations). Our competition team is available to assist you in designing and structuring such collaborations to minimize competition risks.
Should you have any questions about how to manage your business’s compliance with competition law while addressing COVID-19’s challenges, we can help you. Please contact one of the members of our Canadian Competition and Foreign Investment Review Group: Sandy Walker, Adam S. Goodman, Simon Kupi, or Barry Zalmanowitz, Q.C.