Competition law concerns in a time of pandemic

  • April 27, 2020

Business practices that might be anti-competitive in normal times could be just what the doctor ordered in a pandemic, when collaboration between competitors might be what it takes to keep vital supply lines open.

To this end, the CBA’s Competition Law Section has written to both the Minister of Innovation, Science and Industry, and to the Commissioner of Competition with some constructive input on how best to do this.

In its April 9 letter the Section urges ISI Minister Navdeep Bains to amend the Competition Act to allow him to exempt from the Act certain agreements between competitors and mergers when those agreements are made in the public interest in response to the pandemic.

“In the current environment, we believe urgent action is required to ensure the Competition Act does not have a chilling effect on businesses’ ability to supply products and services to meet the needs of Canadians,” the Section writes. “As the COVID-19 emergency deepens and lengthens, there is a real potential for supply chains to seize up, businesses to fail and essential products and services to become unavailable.”

The Section has also conveyed concerns to the Competition Commissioner about the April 8 statement in which the Bureau outlined its approach to competitor collaborations during the crisis. The Section says that some of the information in the statement could impede competitor collaborations arising from a “desire to contribute to the crisis response.”

For example, the Bureau may be sending a mixed message about flexibility when it also says there will be zero tolerance for attempts to abuse the flexibility as cover for unnecessary conduct that would violate the Competition Act. “We recommend that ‘zero tolerance’ be explicitly reserved for shams that are not legitimate attempts to address COVID-19 issues. The Bureau should also indicate that it will not use its enforcement discretion to treat as criminal, conduct that might go further or longer than what the Bureau believes is absolutely necessary to address the COVID-19 issue for which it has been implemented.”

Some changes in wording would also clarify the Bureau’s intentions about exercising its discretion. The Section suggests, for example, saying “the Bureau will refrain from exercising scrutiny” in certain cases instead of “the Bureau will generally refrain from exercising scrutiny.”

As well, there is a question of how binding the statement will be, as the Bureau characterizes its guidance on COVID-19-related collaborations as “informal.”

“To some, it suggests that the guidance will not be binding (even on the Commissioner). Given that (contravening) section 45 is a serious criminal offence, many businesses will want a high degree of comfort that they will not be subject to criminal prosecution.”

The Section notes other concerns, including:

  • Uncertainty about “good faith” requirement
  • The timeline for Bureau responses
  • Whether the Bureau process can be used on a no-names basis through outside counsel
  • Concerns about confidentiality
  • Increased risk of private actions