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Competition Bureau Guidance on Buy-Side Agreements and Focus on Economic Recovery

Competition Bureau Guidance on Buy-Side Agreements and Focus on Economic Recovery
December 1, 2020

The Competition Bureau (Bureau) recently released guidance regarding its approach to no-poach, wage-fixing or other purely “buy-side” agreements among competitors, and the Commissioner of Competition (Commissioner) discussed his key priorities for Canada’s emergence from the COVID-19 related economic downturn.

KEY TAKEAWAYS

  • The Bureau will not assess no-poach, wage-fixing or other buy-side agreements among competitors under the criminal provisions of the Competition Act (Act). These agreements may be addressed under the civil competitor collaboration provisions of the Act.

  • The Commissioner sees the pandemic recovery as an opportunity to reshape regulations to reduce barriers to entry and expansion, and will continue to advocate for pro-competitive regulations across the Canadian economy, and views the digital and telecommunications sectors as key to Canada’s economic recovery.

GUIDANCE REGARDING BUY-SIDE AGREEMENTS

Buy-side agreements relate to the purchase of a product or service (e.g., joint purchasing agreements) and include agreements not to hire employees away from competitors (no-poach agreements) and agreements to set employee wages at a specific level or within a specific range (wage-fixing agreements). Questions have arisen regarding whether the Bureau will assess employee-related buy-side agreements under the criminal provisions or civil competitor collaboration provisions of the Act.

To address these questions, the Bureau released a statement confirming that it will not assess such buy-side agreements under the criminal provisions; however, where an existing or proposed agreement substantially prevents or lessens competition, it will pursue such agreements under the civil competitor collaboration provisions of the Act.

Implications for Businesses

For businesses considering buy-side agreements with competitors or potential competitors, this guidance clarifies the enforcement approach to such agreements, although it does not eliminate the risk of civil action in respect of such agreements.

Businesses that engage in such buy-side agreements still face the risk that such agreements violate the civil provisions of the Act. The significant financial costs of a civil investigation and prosecution as well as the reputational risk associated with a violation of these provisions mean that businesses should still be cautious about entering into buy-side agreements with competitors. Advance consultation with experienced competition counsel is key to minimizing risk.

CHALLENGES AND OPPORTUNITIES FOR THE POST-PANDEMIC RECOVERY

The Commissioner set out three areas of focus for the Bureau as Canada emerges from the pandemic.

First, the Commissioner re-emphasized the Bureau’s focus on the digital economy, stating that enforcement should ensure that dominant market participants compete on the merits and that no firms act as market gatekeepers. To that end, the Bureau is working with Innovation, Science and Economic Development Canada to ensure that the Act is up to the task of enforcement in the digital age. On this point, the Commissioner noted that market study powers, including the power to compel production from market participants, are important enforcement tools.

Second, the Commissioner emphasized that strong telecommunications infrastructure underpinned by vigorous competition is foundational to Canada’s economic success and the Bureau will continue to be vigilant in the sector.

Third, the Commissioner stressed the need for regulations that are pro-competitive, stating that pandemic recovery could provide an opportunity to rethink the rules of Canada’s economy to prioritize competition, remove unnecessary barriers to entry and expansion, and improve productivity.

For further information on competition law matters, please reach out to a member of our Competition, Antitrust & Foreign Investment group.