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Competition Law Considerations in Current Circumstances

Competition Law Considerations in Current Circumstances
April 9, 2020

As businesses manage the impact of the global health and economic crisis, Canada’s competition and foreign investment laws continue to apply. The Competition Bureau, responsible for Canada’s Competition Act, and the Investment Review Division (IRD), responsible for the Investment Canada Act, will work remotely to enforce these laws. Anticipating and managing risks in these areas remain crucial, even in uncertain times.

In the "new normal," here are five important things to consider:

  1. Carefully manage any communications or coordination with competitorsAlthough industry challenges may warrant coordination between competitors, agreements to fix or control prices or output, allocate sales or markets, or rig bids are, generally, unlawful under the Competition Act, giving rise to significant fines for companies and jail time for individuals. In his statement of March 20, 2020, the Canadian Commissioner of Competition (Commissioner) has emphasized that the Bureau will focus on potentially harmful anti-competitive conduct looking to take advantage of consumers and businesses during the COVID-19 crisis, including collusion by competing businesses.  However, the Bureau’s subsequent statement of April 8, 2020, recognized that competitor collaborations of “limited duration and scope” may be required to ensure the supply of products and services “that are critical to Canadians” during these exceptional times.  The Bureau signalled that it will “generally refrain” from scrutinizing temporary business collaborations undertaken for those purposes that are “executed in good faith and do not go further than what is needed” and has provided for a process for Bureau “clearance” of any such collaborations. Even absent this statement, the Competition Act allows competitors to communicate and even to coordinate where reasonably necessary and directly related to an otherwise lawful agreement, for example to enhance output, deal with supply or distribution issues, address health or similar challenges, or drive efficiencies. Other exceptions also apply, most notably for regulated conduct. For further guidance on competitor collaborations in Canada, please see Blakes Bulletin: Additional Guidance for Businesses on Competitor Collaboration During COVID-19 Pandemic. For further updates on Canadian and foreign government initiatives regarding competitor collaborations during COVID-19, please see Blakes Bulletin: Competitor Collaborations in the Age of COVID-19.

  2. Transaction planning and agency reviews. Market volatility has created significant uncertainty but also opportunity for transactions such as joint ventures and mergers, especially given the need for the Competition Bureau to consider the viability of a transacting party and the Competition Act’s efficiencies defence in addition to any anti-competitive effects. Unlike certain other agencies around the world that have made or requested changes to merger filing deadlines and time periods or in some other cases, exempted entire sectors from application of the competition laws, neither the Bureau nor IRD have (yet) requested that parties delay filings or agree to extend review periods. In a communication to Canadian competition lawyers, the Commissioner has advised that because staff are working remotely and difficulties in making market contacts are anticipated, the pace of merger reviews may be slowed. Similarly, for IRD, some delays in response time may be unavoidable. To mitigate the risk of delays, early and frequent engagement with the agencies is essential. The terms of transaction agreements should be reviewed to ensure they provide appropriate protections for the current environment.

  3. Businesses are free to set their own prices, but with limits. While each business remains generally free to set its own prices, emergency-measures legislation can authorize the government to prohibit price gouging or even to establish prices.  In addition, businesses should be mindful of reputational risks and potential complaints to the Bureau in the event of significant price increases.  Please see our April 2020 Blakes Article: Increased Investigations and Enforcement Efforts Against Price Gouging for a summary of Canadian and examples of foreign government initiatives on price gouging.

  4. Document rationale for any refusal to supply or adjustment of contract terms. Market leaders contemplating refusing to supply or imposing other restrictive trade terms should obtain competition law advice, especially where the customer is also a competitor. A pro-competitive business justification will be important to fending off a potential Bureau investigation or enforcement action.

  5. Exercise particular caution when making health claims. Businesses are prohibited from making false or misleading claims, and more specifically, are required to conduct scientific testing of any products before making performance claims. False or misleading claims about a product’s ability to prevent, treat or cure viruses were singled out in the Commissioner’s March 20, 2020 statement. The Bureau actively monitors health-business websites and has recently taken enforcement action in relation to health claims. Such actions may result in criminal sanctions, monetary penalties or restitution to customers even if those claims later prove to be true.  More recently, Health Canada announced that it is coordinating with other government departments, including the Competition Bureau, to address false and misleading product claims related to COVID-19.

See our April 2020 chart on COVID-19 Competition Updates – Canada summarizing the competition-related updates from the Competition Bureau and Canadian government for COVID-19.

Have more than five minutes? Contact any member of our Competition, Antitrust & Foreign Investment group to learn more.

Please visit our COVID-19 Resource Centre to learn more about how COVID-19 may impact your business.