Competition Law in Canada: What, If Anything, Changes in a Crisis Situation?

March 24, 2020

Canada’s Competition Bureau has clearly signalled that although the response to COVID-19 may cause delays and raise novel issues, it remains committed to fulfilling its mandate, including with respect to merger control, cartel conduct and misleading advertising, during this period of disruption. While it is true that desperate times may call for desperate measures, the Competition Act is still in force and violations can still lead to significant penalties, up to and including criminal sanctions.

As discussed below, companies considering new collaborations with competitors arising from the exigencies of the COVID-19 would be well-advised to consult with competition law counsel to confirm the risk profile of such proposed collaborations. In short, continue to keep your distance from competitors and seek expert advice where “self-isolation” is not practical.

General Principles Remain the Same

In a March 20 statement, Commissioner of Competition Matthew Boswell made clear that the Competition Bureau “remains vigilant against potentially harmful anti-competitive conduct by those who may seek to take advantage of consumers and businesses during these extraordinary circumstances.” In particular, his statement referred to deceptive marketing practices, “such as false or misleading claims about a product’s ability to prevent, treat or cure the virus”, and collusion by competing businesses, “such as illegal agreements about what price to charge for products or services.”

During this challenging period, all businesses should consider it a key compliance priority to avoid potentially misleading representations relating to health issues, and should also ensure that any dealings with competitors comply with the Competition Bureau’s guidance and could not be construed as an improper agreement.

Cooperation by Competitors in a Crisis Situation

However, the Commissioner’s statement also explicitly pointed out that “Canada’s competition laws accommodate pro-competitive collaborations between companies to support the delivery of affordable goods and services to meet the needs of Canadians” and noted that the Competition Bureau is

“…committed to a reasonable and principled enforcement of Canada’s competition laws, and … will work closely with our partners in federal, provincial and municipal governments, along with the business and legal communities, to navigate these exceptional circumstances for the benefit of all Canadians.”

This is likely a signal that the Competition Bureau, or the federal government more broadly, anticipates that some form of broader coordination between competitors could, in limited cases, be a legitimate part of the response to the crisis. This may particularly be the case in industries involving the provision of critical goods and services to Canadians and in respect of firms who may be responding to novel governmental requirements or seeking to fulfil unusual levels of demand in a manner that serves the broader public interest. So far, however, it is important to note that there has been no specific change in law or guidance and prudent firms will continue to avoid cartel behaviour in all its forms and seek expert advice before engaging in any new form of collaboration.

Competition Bureau Operations

Like everyone else, the Competition Bureau is practicing social distancing by working from home. So far, this has required only minor adjustments to service delivery models – for example, hard copy letters (including advance ruling certificates and no-action letters) have been replaced with emails from the signatory, and telephone tip lines have been shut down in favour of purely online forms – and reviews and investigations continue.

Expect delays

However, the Competition Bureau also signalled in a recent open letter to the Canadian competition law bar and the business community that it expects to encounter difficulties and delays in certain parts of its work as a result of the crisis.

Merger review timelines

In particular, in the merger sphere, the Competition Bureau has advised that it expects that it will be more difficult to complete the market outreach that is normally a critical part of the first 30 days of a review in a timely fashion, which may make it difficult to meet service standards or to fully assess complex matters within the initial review period. The Competition Bureau also recognizes that parties may have difficulty responding to requests for information or delivering required productions during this period. As a result, the Competition Bureau encourages merging parties to contact case teams and management as early as possible on complex matters and throughout the conduct of a review in order to minimize delay during the period of disruption.

On the substantive side, the uncertainty associated with the COVID-19 pandemic may make merger review more challenging in certain highly-impacted sectors, as it may be difficult to predict the effects of a merger as the crisis reshapes the world economy. So-called “failing firm” arguments, which have historically struggled to gain traction with the Competition Bureau, may also become more significant as the situation continues to develop. However, there is no indication at this time that the Competition Bureau’s approach to mergers will become any more accommodative as a result of the crisis.

Other areas of the Bureau’s activity

Other areas of the Competition Bureau’s work have also been affected. For example, the Competition Bureau has advised that investigations that may involve face-to-face interviews with witnesses pursuant to an immunity or leniency applications, the operationalization of solicitor-client protocols, meetings with complainants, and plea or other settlement negotiations may suffer delays. The Competition Bureau has also communicated that it intends to prioritize matters to maximize its resources and meet its service standards where possible, and to communicate realistic timelines where this cannot be done.

Finally, the Competition Bureau noted that it may also, quite sensibly, need to prioritize urgent marketplace issues that require immediate action to protect Canadians, which could may have implications on its ability to address other ongoing matters.

What’s Next: The Global Context

Broadly speaking, the Competition Bureau’s approach to the crisis is in line with that of its international counterparts. Most international competition authorities have transitioned to remote work and advised that they may encounter new delays, and certain authorities have encouraged parties to delay voluntary filings where possible or taken steps to “pause the clock” on matters in progress. In general, though, key priorities remain in place and statutory regimes have not fundamentally changed.

As the crisis continues to develop, we could see policy changes that would change the role of competition enforcers. For example, competition authorities may be made responsible for enforcing price controls or preventing price gouging. The U.K. CMA has issued a statement indicating that it would request such authority if necessary, and the Italian and Polish authorities are also investigating examples of potentially excessive pricing for healthcare products. Similarly, as some companies find themselves with excess capacity while certain products become critically undersupplied, it may eventually become permissible, and even advisable, to engage in coordinated reductions in production or market allocation to ensure that supply and distribution is managed efficiently. In the U.K., for example, some elements of competition law have been temporarily “relaxed” in order to facilitate cooperation between grocers where necessary to ensure supplies are available to consumers. Such coordinated actions should not take place in Canada without first seeking appropriate counsel.

Conclusion

As of now, the competition law basic framework remains in place in Canada, and the “ground rules” of the Canadian marketplace have not changed. However, the situation is extremely fluid. As always, consider consulting expert counsel before engaging in any behaviour that is not “business as usual”, particularly when it comes to contemplated interactions with competitors or significant changes in pricing or advertising practices. 

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.

Stay in Touch with Knowledge Hub