Last May, the Competition Bureau published a draft version of the Competitor Collaboration Guidelines in order to receive public feedback on proposed amendments to the Competition Act regarding conspiracies or agreements to reduce competition. The revised version published in December contains two new provisions that will come into effect on March 12, 2010. If you are interested in reading the Guidelines or the new provisions, an online version is available on the Competition Bureau website.

The Guidelines outline the general approach that the Bureau will take in its enforcement of the amended criminal prohibition in s. 45, and the newly added civil agreements provision in s. 90.1 of the Act. These provisions create a comprehensive enforcement system that makes it difficult for alleged offenders to elude sanctions for anti-competitive practices. In the Guidelines, it is emphasized that the criminal prohibition will only be enforced against conspiracies, agreements or arrangements  between competitors to “fix prices, allocate markets or restrict output that constitute “naked restraints” on competition”. Criminal sanctions should not be pursued against legitimate collaborations between competitors that are beneficial alliances. These new provisions also indicate a shift in the approach to enforcing the Act towards greater transparency and certainty.

Higher Fines and More Jail Time

At first glance, the most striking changes to s. 45 are the increased jail sentence and fine upon conviction. The current provision allows for offenders to be imprisoned not more than five years and or liable for not more than $10 million. In contrast, the amended provision allows for imprisonment for not more than fourteen years, and or liability for not more than $25 million. Proof of intent to commit the offence is no longer part of the provision. As well, the defences available to the alleged offender seem to have narrowed in scope. The current provision expressly allows for the exchange of information, such as statistics and research, cooperation regarding measures to protect the environment, the adoption of the metric system and other innocuous forms of cooperation. There is failsafe against any of these defences being exploited to benefit anti-competitive practices.

The amended version of the provision removes all of these explicit defences, and leaves what seems to be a shell of its predecessor. When the new version comes into force, the accused will escape conviction where he or she shows on a balance of probabilities that the alleged anti-competitive conspiracy, agreement or arrangement is: a) “ancillary to a broader or separate agreement or arrangement” between the parties; and b) “directly related to, and reasonably necessary for giving effect to, the objective of that broader or separate agreement or arrangement.” It is also required that the accused show that the “broader or separate agreement or arrangement…does not contravene” s. 45(1). In the abstract, the new version of the defence can be interpreted as being either favourable or unfavourable to the accused. It is conceivable that the more general wording of the defence will provide the leeway necessary for legitimate collaboration between competitors to occur. On the other hand, the deletion of seemingly innocuous activities, that under normal circumstances may not lessen competition, removes legitimate forms of collaboration. As mentioned above, cooperation regarding measures to protect the environment is a defence in the current provision. From a broader perspective, an explicit defence that condones environmentalism is a valid policy based provision based on the increased awareness of the vulnerable state of the environment. Although the relevance of environmentalism seems tangential to competition law as a whole, the point is that the new version deletes express defences for legitimate collaborations. The initial policy choice to include such provisions should have been respected in the new version.

Like with typical criminal offences, the burden of proof remains proof beyond a reasonable doubt. As well, the ability of the court to infer the existence of a conspiracy, agreement, or arrangement from circumstantial evidence, with or without direct evidence of communication between the parties, is also unchanged.

Once You’re Caught in Their Web, Good Luck Squirming Your Way Out of It

In the event that the Bureau determines that there is sufficient evidence to establish that alleged anti-competitive collaboration is an “ancillary restraint’ pursuant to the aforementioned defence to the criminal offence, the Guidelines recommend against criminal prosecution, but leaves open the door for pursuing sanctions under the civil agreements provision in s. 90.1. If the Bureau does pursue sanctions under s. 90.1, then the Competition Tribunal will have jurisdiction over the matter. A notable feature of this particular provision is that it prohibits the Bureau from making an application pursuant to it on the basis of facts that are the same or substantially the same as the facts of which: a) proceedings have been commenced against the accused under ss. 45 or 49; and b) an order sought against the accused under ss. 76, 79 or 92. The effect is that a person will not be “prosecuted” twice, though he or she will likely be caught by one of the two avenues for sanctions. According to the Guidelines, the Bureau can change its mind regarding which avenue it ultimately wants to use to pursue sanctions. Where the Director of Public Prosecutions refuses to prosecute the criminal offence, the Bureau can pursue sanctions via s. 90.1. The choice afforded to the government is somewhat tempered by the Guidelines prohibiting the Bureau from using the threat of criminal prosecution as leverage to encourage civil settlements.

Time will only tell how these new provisions operate in reality. It is important to remember the Guidelines do not have the binding force of law. Given the more general nature of the defences available and comprehensiveness of the enforcement provisions, it is likely that the business community will find certainty and clarity through future court decisions.