Competition Bureau Releases COVID-19 Competitor Collaboration Guidance

By The Competition/Antitrust & Foreign Investment Group of McCarthy Tétrault LLP

Yesterday, the Canadian Competition Bureau published updated guidance[1] on both its enforcement approach to competitor collaborations that are designed to ensure the supply of products and services critical to Canadians arising from disruptions caused by COVID-19 and on a procedure by which private parties may obtain the Bureau’s feedback on their proposed joint conduct. The Bureau’s guidance confirms that the Competition Act continues to apply and, in this respect, parties’ conduct remains subject to possible private enforcement.

In line with similar initiatives from competition regulators in various other jurisdictions, the Bureau’s guidance confirms that it will refrain from strictly enforcing the criminal conduct provisions of the Competition Act where competitors are acting in good faith, they are motivated by a desire to contribute positively to the crisis, their response is intended to operate only for a short-term while the crisis remains and any coordination is limited to what is strictly necessary to obtain the underlying objectives of the collaboration. The Bureau’s guidance also sets out a procedure by which firms can apply to the Bureau for comfort before implementing their arrangement, thereby guarding against future investigation and prosecution. The guidance only refers to conduct in relation to the supply of “critical” goods and services (presumably food, drugs and medical equipment).  It is not intended, for example, to allow firms to collaborate as a way to maintain profitability or to address temporary excess capacity or weak prices in their respective industries.

The Bureau’s guidance will be welcome to those firms seeking to coordinate to address an acute market supply disruption but would be otherwise concerned about criminal exposure under the Competition Act. For the analytical framework and practical information applicable to competitor collaborations during these trying times, please see our previous article on this topic. Parties contemplating industry-wide responses to the pandemic, which may include information exchanges and coordination of their activities, should consider the Bureau’s new guidance as part of their risk assessment.

In this article, we describe the key elements of the Bureau’s guidance and compare it with similar initiatives from various competition regulators in other jurisdictions.

Overview

The Bureau’s key messages are:

  • It “recognizes that the exceptional circumstances surrounding the COVID-19 pandemic may call for the rapid establishment of business collaborations of limited duration and scope to ensure the supply of products and services that are critical to Canadians.”
  • It “wishes to signal that in circumstances 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, it will generally refrain from exercising scrutiny.”
  • It “wishes to underline that it has zero tolerance for any attempts to abuse this flexibility or the guidance offered herein as cover for unnecessary conduct that would violate the Competition Act.”
  • For those that would like greater certainty, it “has created a team to assess the proposed collaborations and advise the Commissioner [the head of the Bureau] on what informal guidance the Commissioner might provide. The aim of this team will be to facilitate rapid decisions to enable business to support the crisis response efforts.”
    • To make use of this option, parties must provide the Bureau with detailed information, including the parties to, and the parameters of, the collaboration, how the collaboration is necessary to achieve a clearly identified COVID-19-related objective in the public interest, and guidance from other governmental authorities on whether the collaboration would further the objective.
    • The Bureau may consult with other parts of government and the marketplace as part of its evaluation.
    • The Bureau’s assessment would also be time-limited (with a requirement for the parties to confirm their cessation of the conduct at the end of the period) and could be made public “to support transparency”.
  • There would be no insulation from potential civil lawsuits (brought by private parties) for alleged breaches of the Competition Act’s criminal competitor collaboration provisions.

Analysis

Parties can elect to take comfort from the Bureau’s general statement that it would not scrutinize good-faith competitor collaborations limited to furthering COVID-19 objectives in the public interest, or they can ask the Bureau to provide specific comfort.  

Should parties apply to the Bureau to request an assessment of a proposed collaboration, they must take into account that the Bureau is not subject to a specific timetable in which it must conclude its analysis. To this end, the guidance explicitly provides that the Bureau may seek input on the proposed collaboration from third parties. This will take time, particularly in the current environment where the Bureau may find it more difficult to contact third parties who are working from home (the Bureau has reported on this challenge in the context of its merger reviews).  As such, where implementation is urgent, as a practical matter we expect that parties may elect, following consultation with competition law counsel, to rely on the Bureau’s general guidance and/or rely on a self-assessment of the lawfulness of the conduct under the Competition Act

Parties that decide to reach out to the Bureau should be ready to comply with conditions that could be imposed on the collaboration or accept an outright rejection.

While the guidance is a step in the right direction, its practical usefulness is uncertain.

Initiatives in Other Jurisdictions

The measures taken by the Bureau share some similarities with those taken in other jurisdictions, but there are also examples of more sweeping action:

  • U.S.: The U.S. Department of Justice and Federal Trade Commission did not suggest any relaxation of competition laws to facilitate COVID-19-related competitor collaborations. However, they did state that they would aim to respond expeditiously to all COVID-19-related requests for opinions, and to resolve those addressing public health and safety within seven days of receiving all necessary information; such opinions usually take months.[2]
  • EU: The European Commission (EC) has put out general guidance stating that parties engaging in conduct that would be problematic absent the crisis are permitted to do so (or the EC would not exercise its enforcement powers) in order to protect the supply of essential products.[3] The EC has also set up a similar process as the Bureau for parties to seek informal guidance.[4] Although, potentially unlike the Bureau, the EC would keep its guidance confidential. Nonetheless, under this process, the EC also asks that parties provide comprehensive detail on the proposed collaboration at the outset. Additionally, the European Competition Network (comprising the EC and the competition authorities of the EU member states) recognized that COVID-19 may “trigger the need for companies to cooperate in order to ensure the supply and fair distribution of scarce products to all consumers”, and stated that it will “not actively intervene against necessary and temporary measures put in place to avoid a shortage of supply”.[5]
  • UK: The Competition and Markets Authority (CMA) has stated that it will not take enforcement action in respect of temporary measures to avoid shortages or to ensure security of supply of essential products and services in the face COVID-19 that are clearly in the public interest and assist consumers.[6] The CMA also pointed to a provision in the UK competition legislation that exempts agreements from competition scrutiny, provided that the agreement improves production or distribution, but does not include restrictions that are not imperative to the objective nor create the possibility of eliminating competition. The UK Secretary of State has also taken it a step further by utilizing its power under the UK competition legislation to exempt grocery retailers and suppliers[7] and health services providers[8] from the application of competition laws to certain specified types of agreements that do not involve sharing information on costs or pricing.
  • Australia: The Australian Competition and Consumer Commission (ACCC) has issued a number of interim authorizations in order to allow industry-wide coordinated responses to ensure adequate supply of essential goods, including food, medical equipment, and pharmaceutical products.[9] Banks, insurance companies and shopping centre owners were also authorized to discuss and implement financial relief measures to small businesses, individuals and tenants impacted by the pandemic. Finally, exemptions were granted to oil refiners to ensure fuel supply during the COVID-19 pandemic and after the economic shutdown ends, to communications service providers for the operation and optimization of telecommunication networks, and to airlines to coordinate flight schedules. These interim authorizations contain safeguards on the scope of activities exempted from antitrust scrutiny, and the impact on prices.

Conclusion

In sum, the Bureau’s guidance confirms that certain COVID-19 competitor collaborations, if done properly, are not likely to face enforcement under the Competition Act. Nevertheless, it is important to note that the guidance only covers the supply of “critical” products and services, so competitor collaborations addressing the economic downturn or other impacts of the pandemic would be riskier. As well, unlike in the UK and Australia, except in limited cases (e.g., section 47 of the Canada Transportation Act), there is no legislative mechanism in Canada to exempt parties from competition laws, which limits the comfort that the Bureau can offer to parties. It therefore remains to be seen whether parties will elect to apply to the Bureau for an assessment of a particular competitor collaboration and, if they do, how long such a process will take.

 

 

[1] Competition Bureau Canada, Competition Bureau statement on competitor collaborations during the COVID-19 pandemic, April 8, 2020.

[2] U.S. DOJ and FTC, JOINT ANTITRUST STATEMENT REGARDING COVID-19, March 24, 2020.

[3] EC, Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak, April 8, 2020

[4] https://ec.europa.eu/competition/antitrust/coronavirus.html

[5] European Competition Network, Antitrust: Joint statement by the European Competition Network (ECN) on application of competition law during the Corona crisis, March 23, 2020.

[6] CMA, CMA approach to business cooperation in response to COVID-19, March 25, 2020

[7] http://www.legislation.gov.uk/uksi/2020/369/made

[8] http://www.legislation.gov.uk/uksi/2020/368/made

[9] The ACCC’s authorizations register can be found at: https://www.accc.gov.au/public-registers/authorisations-and-notifications-registers/authorisations-register