On May 6, 2021, Canada’s Competition Bureau (Bureau) implemented the first revisions to its Competitor Collaboration Guidelines (CCGs)¹ since they were issued over a decade ago. The CCGs describe the Bureau’s approach to enforcing the criminal and civil provisions of the Competition Act (Act) applicable to agreements among competitors and potential competitors.

While the revised CCGs are more “evolutionary” than “revolutionary,” they signal an increased ambiguity about the Bureau’s approach to certain types of competitor collaborations. 

What are the Competitor Collaboration Guidelines?

The CCGs were first introduced in 2009, ahead of amendments to the Act aimed at narrowing the scope and increasing the effectiveness of the Canadian cartel conspiracy offence under section 45. At the same time, the 2009 amendments introduced a separate civil provision for non-cartel collaborations under section 90.1. The Bureau’s original CCGs² described these amendments as having been intended, in part, to “avoid discouraging firms from engaging in potentially beneficial alliances.”    

The CCGs outline the Bureau’s approach to distinguishing between “naked restraints” on competition (to which section 45’s criminal prohibition would apply) and collaborations that, while not criminal, could result in a “substantial lessening or prevention of competition” (to which section 90.1’s civil regime could apply). The CCGs also provide examples of how the Bureau would approach various types of commercial agreements among actual or potential competitors under sections 45 and 90.1.  Only a small number of decided cases have otherwise shed light on these provisions of the Act to date.³  

What has changed?

The 2021 CCGs follow the Bureau’s release of draft revised CCGs for public consultation in July 2020, which attracted significant commentary from stakeholders.  While many of the Bureau’s changes are minor in nature, a number appear to reflect a marginal increase in enforcement discretion relative to the 2009 CCGs.  Some of the more significant changes are:

1. Enforcement under multiple provisions and avoidance concerns

The revised CCGs reserve more flexibility for the Bureau in determining the appropriate section of the Act for enforcement, stating that multiple investigations under different provisions of the Act may initially be required to gather sufficient facts. This, in part, appears to reflect the Bureau’s experience with a 2017 asset swap transaction that evolved from parallel investigations under section 45 and the merger provisions of the Act into a single section 45 investigation.⁴

The revised CCGs also note that “[t]he Bureau is cognizant that parties may attempt to structure or design agreements or collaborations to avoid scrutiny under section 45,” and that any so-called “sham” collaborations will be pursued “under the most appropriate section of the Act.” While the Bureau’s explicit reference to “sham” transactions is new to the CCGs, it is consistent with the underlying principles of the original CCGs. Indeed, the Commissioner of Competition at the time of the issuance of the original CCGs noted:

[W]e have explicitly removed whole categories of agreements from the scope of criminal enforcement action, such as dual distribution agreements, franchise agreements and non-competes, unless, of course, the agreement is just a sham. We are doing our best to put a fence around the conduct we would consider investigating as criminal, and to paint that fence in bright, bold colours. This will, I believe, promote the healthy, aggressive, competitive initiatives that we so badly want to encourage.⁵

2. Exposure of non-compete clauses in M&A transactions

The revised CCGs continue to recognize that non-compete clauses are common and legitimate in a number of contexts, including by “ensuring that a purchaser realizes the full value of a purchased business by not being required to compete against the vendor for customer loyalty.” However, the Bureau’s approach to these clauses is somewhat more qualified than in the 2009 CCGs, which indicated that non-compete clauses in M&A transactions would be considered in relevant Bureau merger reviews. The CCGs now cite “rare instances” where such a clause may be considered under section 45 as a market allocation agreement, or under section 90.1 where the clause’s effects are uncertain during a merger review.     

3. Removal of comfort on joint input production agreements

The prior CCGs indicated that the Bureau “generally will not have concerns” under section 90.1 with respect to joint production agreements relating to “intermediate goods” that are inputs into final products supplied by the parties, provided the inputs in question are not a significant portion of the total cost of those final products. In its revised CCGs, the Bureau has removed this language entirely, reserving its ability to challenge such agreements on the basis of anti-competitive effects under the civil provisions of the Act.   

4. Consortium bidding subject to section 90.1 enforcement

In the context of bidding processes, the revised CCGs specifically note that consortium bids may be reviewable for their competitive effects under section 90.1 of the Act even where the consortium’s members have informed the party requesting the bids of their arrangement (i.e., so as to avoid potential criminal liability under the Act’s bid-rigging provisions). 

5. Pricing algorithms and price-fixing

Consistent with the Bureau’s recent interest in Artificial Intelligence (AI) in relation to its section 45 mandate,⁶ the CCGs now expressly reference “pricing algorithms” as a potential means of price-fixing, while noting that an agreement to fix or control prices would still need to be established in such a case.   

6. Potential implications for R&D collaborations

Concerning R&D agreements whereby firms cooperate to produce new or improved products, the revised CCGs indicate that the Bureau will, in evaluating whether such an agreement is between actual or potential “competitors” under section 90.1, “primarily focus” on whether the collaborating parties could have developed the product independently.  This marks a change from the more “bright line” guidance of the prior CCGs, in which the Bureau had stated that parties without this ability would not be considered “competitors.” In their comments on the 2020 draft CCGs, stakeholders had criticized this change as having a potential chilling effect on beneficial research collaborations.

7. Clarifying language on “buy-side” agreements

The release of the Bureau’s initial draft revised CCGs in July 2020 also raised concerns as to whether the Bureau had taken the view the Act’s conspiracy offence applies to joint purchasing or “buy-side” agreements, including employee no-poach agreements and wage-fixing agreements.  The final revised CCGs clarify that the Bureau views these agreements to be subject only to section 90.1’s civil regime, consistent with a November 2020 statement the Bureau issued on the matter.⁷

Conclusion

While the first revisions to the Bureau’s CCGs since 2009 do not represent a major change in the Bureau’s approach to sections 45 and 90.1 of the Act, they do reveal that the Bureau is increasing its enforcement discretion regarding competitor collaborations previously described in more anodyne terms.  As a result, commercial parties may need to consider the implications of the Bureau’s revised guidance ahead of any contemplated arrangements with actual or potential competitors.  For assistance in understanding the CCGs or any aspect of how the Act regulates competitor collaborations, please contact a member of our national Competition Group.

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1. For the revised CCGs, see Competition Bureau, Enforcement Guidelines, Competitor Collaboration Guidelines (6 May 2021), online.↩
2. See Competition Bureau, Enforcement Guidelines, Competitor Collaboration Guidelines (23 December 2009), online.↩
3. No criminal proceedings under the post-2010 version of section 45 have been adjudicated at trial before a court to date, although the amended section 45 has been considered in court decisions: see e.g. Fairview Donut v The TDL Group Corp, 2012 ONSC 1252; Hughes v Liquor Control Board of Ontario, 2018 ONSC 1723.  Likewise, the Competition Tribunal has not yet decided a contested section 90.1 application on its merits, although there are a small number of decisions regarding disputed consent agreements that followed the completion of the Bureau’s e-books investigation under section 90.1: see e.g. Rakuten Kobo Inc. v. Canada (Commissioner of Competition), 2015 FCA 149; Kobo Inc. v. Canada (Commissioner of Competition), 2016 Comp Trib 11.  An application with respect to a proposed transborder joint venture in Air Canada/United Continental, Comp Trib File No CT-2011-004 (resolved by consent agreement in 2012), is the only other section 90.1 matter to have been brought before the Competition Tribunal to date. ↩
4. See Competition Bureau, “Statement from the Commission of Competition regarding searches in the greater Toronto area” (12 March 2018), online.  The Bureau recently announced the closure of the conspiracy investigation in this matter on January 7, 2021.↩
5. Melanie Aitken, Remarks to the Economic Club of Canada (4 May 2010), online. ↩
6. See e.g. Competition Bureau, Draft for Public Consultation, “Big Data and Innovation: Implications for competition policy in Canada” (18 September 2017), online (discussing issues around AI’s use in coordinating price-fixing); Competition Bureau, “The Competition Bureau’s Strategic Vision for 2020-2024” (11 February 2020), online (discussing the Bureau’s plans to use AI tools to detect anti-competitive activity).↩
7. See Competition Bureau, “Competition Bureau statement on the application of the Competition Act to no-poaching, wage-fixing and other buy-side agreements” (27 November 2020), online.↩