Canadian businesses continue to face unprecedented challenges in light of the rapid spread of COVID-19. On March 20, the commissioner of competition provided some guidance for industry on the continuing application of the Competition Act to competitor collaborations, which we summarized in a recent bulletin. In short, the statement indicated that the Competition Bureau’s pre-existing analytical framework would continue to apply: agreements among competitors to fix prices, allocate markets or restrict output would be pursued criminally, but other agreements among competitors on matters outside these three areas would only be prohibited where they resulted, or were likely to result in, a substantial lessening or prevention of competition. This guidance fell short of what many had hoped for, particularly in light of steps taken by other antitrust agencies around the world to provide block exemptions to permit certain collaborations or to expedite the review of proposed collaborations.
On April 8, 2020, the Bureau issued further guidance that recognized that businesses may need to quickly collaborate in the short-term to ensure the supply of “critical” products and services during the COVID-19 pandemic. In these exceptional circumstances, the Bureau stated that it will generally refrain from exercising scrutiny “where there is a clear imperative for companies to be collaborating in the short-term to respond to the crisis, where those collaborations are undertaken and executed in good faith and do not go further than what is needed.”
Informal Guidance on Proposed Collaborations
The Bureau has formed a team to assess and deliver informal guidance to businesses seeking clarification on whether the Commissioner would take enforcement action against collaborations necessary to meet urgent needs. Businesses that want informal guidance need to provide certain information about the proposed collaboration, including the parties, its scope and duration, a detailed description of how it is intended to achieve a “clearly identified COVID-19 related objective in the public interest”, why it is necessary to achieve that objective, and guidance obtained from other authorities.
Guidance Still Leaves Open Questions
The Bureau notes that its assessment will be “rapid” and that the Bureau may seek input on the proposed collaboration from other parts of government at all levels, stakeholders and market contacts. However, unlike in the United States where the Federal Trade Commission and the Department of Justice Antitrust Division announced that they will complete health-care related business review letter assessments within 7 days of receiving all necessary information, the Bureau has not provided a timeline to complete its assessments. This will no doubt cause some concern among businesses considering seeking guidance from the Bureau.
The commissioner also indicated that they could make the informal guidance public. While the Bureau may require detailed information to prepare the guidance, at this point, it is unclear what information the Bureau will publish. In the past, the Bureau has published capsule summaries of its written opinions.
Further, while the informal guidance does not appear to be binding, the Commissioner may require conditions “to ensure the impact on competition is limited only to the extent necessary to meet the critical needs in this emergency period”. The informal guidance will be limited to an initial period and parties can request an extension. Importantly, the guidance does not insulate businesses from exposure to civil liability.
Despite this flexibility, the Bureau stresses the importance of competition law enforcement to ensure availability and affordability of critical goods and services during the COVID-19 pandemic and maintains that it has “zero tolerance” for attempts to abuse this approach to competitor collaborations.
In fairness to the commissioner and the Bureau, the Competition Act does not provide for block exemptions in a manner similar to the laws in other countries. It is possible that legislative amendments may be needed to allow for the expeditious review and exemption of certain competitor collaborations that are necessary to address the current public health and economic crises we face.
Developments in this area are moving quickly. Companies must continue to be aware of their obligations under the Competition Act when considering any action that could involve cooperating with competitors or otherwise affect competition.
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