As the COVID-19 public health crisis continues to unfold around the globe, antitrust considerations remain important for businesses evaluating strategic options and reacting to the pandemic's disruptive impact on business operations. The legality of competitor collaborations, the applicable rules concerning "price gouging" during the pandemic, and whether strategic mergers will attract more (or less) scrutiny under antitrust or foreign investment legislation are but a few of the issues that have arisen and remain relevant. We discuss the Canadian antitrust perspective on each of these issues as well as the latest guidance provided by the Competition Bureau and various branches of the federal and provincial governments in Canada.
COVID-19 and public health measures to combat the virus have led to significant business disruptions and challenges that may, in some circumstances, justify a coordinated response between competitors that would not otherwise be permissible. Canada's Competition Act 1 (the Act) contains no mechanisms to temporarily suspend any of its provisions based on crisis or emergency situations.2 Accordingly, short of new government measures suspending the application of all or parts of the Act either generally or for specific sectors,3 the Act continues to apply to all businesses in Canada and, as a result, it remains critical for businesses to evaluate whether a proposed collaboration with one or more competitors could lead to antitrust enforcement or private actions (including class actions) in Canada.
As a general matter, section 45 of the Act criminally prohibits (and authorizes private actions to recover damages in respect of) agreements or arrangements between competitors to fix or control prices, production or supply, or allocate sales, territories, customers, or markets. This is a per se illegal offense and it is not necessary for the agreement to have any anticompetitive effect. Section 45 contains a defense where competitor coordination is reasonably necessary for the implementation of, and directly related to, a broader and otherwise lawful agreement between the cooperating parties.4 This defense is known as the ancillary restraints defense and can apply, for example, to non-competition covenants in agreements of purchase and sale or in a joint venture arrangement between competitors.
In addition, section 90.1 of the Act allows the Commissioner of Competition (the head of the Bureau) to challenge any agreement between competitors that is likely to prevent or lessen competition substantially in a market. Section 90.1 is much broader in scope than the criminal offense. However, absent consent of the respondent, the only potential remedy is an order prohibiting implementation of the agreement, and no monetary penalties can be imposed. Nor does section 90.1 provide a basis for civil actions by private parties.
Competition Bureau Guidance on COVID-19 Collaborations
Early on in the pandemic, the Competition Bureau publicly stated that it is committed to a "reasonable and principled enforcement" of the Act in cases of COVID-19 crisis collaborations, noting that the Act can "accommodate pro-competitive collaborations between companies to support the delivery of affordable goods and services to meet the needs of Canadians."5 A subsequent statement released by the Bureau on April 8, 2020 noted that the Bureau "does not wish to see specific elements of competition law enforcement potentially chill what may be required to help Canadians."6 To this end, the Bureau adde
[I]n circumstances where there is a clear imperative for companies to be collaborating in the short-term to respond to the [COVID-19] crisis, where those collaborations are undertaken and executed in good faith and do not go further than what is needed, [the Bureau] will generally refrain from exercising scrutiny7
The Bureau's statement specifically highlighted the potential for firms to form buying groups or share supply-chain resources, such as distribution facilities, to ensure access by Canadians to critical goods and services without fear of enforcement under the Act. However, the Bureau emphasized that its enforcement restraint will be limited to situations in which "firms are acting in good faith, and motivated by a desire to contribute to the crisis response rather than achieve competitive advantage."8 The Bureau also said that it will have "zero tolerance" for any attempts to abuse the Bureau's enforcement flexibility or to use any informal guidance provided by the Bureau "as cover" for unnecessary conduct that would breach the Act9
1 Competition Act, R.S.C. 1985, c C-34 (Can.).
2 In the transportation sector, however, an existing or imminent "extraordinary disruption to the effective continued operation of the national transportation system" provides grounds for the federal cabinet to take steps that are considered essential to stabilize the national transportation system including the imposition of capacity and pricing restraints. Any such order prevails over the Competition Act. Canada Transportation Act, S.C. 1996, c 10, § 47(i)(a).
3 In April 2020, the Canadian Bar Association (CBA) urged the federal government to enact a specific exemption for competitor collaborations considered to be in the "public interest" as determined by the Minister of Innovation, Science and Industry (who oversees the Competition Bureau and is responsible for competition policy and legislation): Canadian Bar Ass'n, COVID-19 Pandemic and Urgent Competition Act Amendments (Apr. 9, 2020), https://www.cba.org/CMSPages/GetFile.aspx?guid=424c7d84-4a1d-448b-bd65-9c1989be0edd. In addition, in 2009, when the current conspiracy offense was amended to establish statutory per se liability, the CBA also advocated for a power of either the federal Cabinet or the Commissioner of Competition to provide clearances or block exemptions to address unintended consequences of the new per se offense: Canadian Bar Ass'n, Bill C-10—Amendments to the Competition Act (Feb. 13, 2009), https://www.cba.org/OurWork/Submissions-(1)/Submissions/2009/Bill-C-10-%E2%80%94-em-Competition-Act-em-Amendments-(1).
4 Competition Act, R.S.C. 1985, c C-34, § 45(4) (Can.).
5 News Release, Competition Bureau Can., Statement from the Commissioner of Competition Regarding Enforcement During the COVID-19 Coronavirus Situation (Mar. 20, 2020), https://www.canada.ca/en/competition-bureau/news/2020/03/statement-from-the-commissioner-ofcompetition-regarding-enforcement-during-the-covid-19-coronavirus-situation.html.
6 News Release, Competition Bureau Can., Competition Bureau Statement on Competitor Collaborations During the COVID-19 Pandemic (Apr.8, 2020), https://www.canada.ca/en/competition-bureau/news/2020/04/competition-bureau-statement-on-competitor-collaborationsduring-the-covid-19-pandemic.html
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