Canadian businesses are facing unprecedented challenges in light
of the rapid spread of COVID-19. Supply chains are under
significant strain and Canadians are worried about the availability
of essential goods. Industry associations and various levels of
government are working to address some of these concerns, but it is
important to remember that any time competitors find themselves
working together, they must be mindful of their obligations under
Canada's Competition Act. This remains the case in the
In addition to setting out rules about how competitors may interact, the Competition Act also governs misleading advertising and provides for the review of mergers. Below are six key takeaways:
- Agreements between
competitors that fix prices, allocate markets (customers or
territories) or control, lessen or eliminate output are
illegal. Companies may be under pressure to cooperate with
rivals to ensure adequate supplies of essential goods reach
Canadians. They may also be tempted to align with rivals on pricing
during these challenging times. However, any agreement with one or
more competitor (or potential competitors) cannot involve
agreements on prices, customer allocation or output restrictions
without violating the Competition Act. Such agreements
need not have a negative impact on competition. Violations of these
provisions can result in fines of up to $25 million and up to 14
years in jail (or both), and the commissioner of competition has
indicated that the Bureau remains vigilant against such
- Agreements between
competitors outside those areas are permissible so long as they
don't lessen or prevent competition substantially. In
a recent statement the commissioner of competition
indicated that the Act "accommodate[s]
pro-competitive collaborations between companies to support the
delivery of affordable goods and services to meet the needs of
Canadians." Agreements found to have violated the Act
can lead to an order by the Competition Tribunal against any
person, whether a party to the agreement or not, prohibiting them
from doing anything under the agreement or requiring any person
(with their consent and that of the commissioner) to take any other
action. Even where such an agreement does result in a substantial
lessening or prevention of competition, agreements that have
brought about or are likely to bring about gains in efficiency that
will be greater than, and offset, the effects of any prevention or
lessening of competition cannot be subject to an order under the
- The Competition Act
does not generally regulate prices. Concerns have been
raised in the press and on social media about allegations of price
gouging. Charging high prices is not, in and of itself, illegal.
The Competition Act does not prohibit price gouging;
rather, companies are generally free to set their own prices.
However, it is important to remember that certain provinces,
including Ontario, have emergency legislation that, once activated,
may prohibit price gouging.
- The Bureau will vigorously
pursue misleading advertising, particularly those making
false or misleading claims regarding a product's ability
prevent, cure or treat the virus. The Act requires that
any performance claims be supported by adequate and proper testing
completed before the claim is made. Penalties for violating the
civil misleading advertising provisions carry a maximum monetary
penalty of up to $10 million for a company ($15 million for
subsequent violations) and exposure to restitution claims.
- Expect merger reviews to take
longer. The Competition Bureau has indicated that with
increased numbers of employees (both its own and in the private
sector) working remotely, it is having difficulty making market
contacts, which are a key method for gathering information to
assess the potential impact of a merger. The Bureau is monitoring
the situation and will prioritize matters to maximize its resources
and meet its service standards where possible. Counsel should
maintain close contact with case officers, but parties planning
transactions or with transactions pending should expect reviews to
take longer than usual.
- Properly document decisions to suspend or cancel deliveries. If your company is unable to continue to supply customers during the pandemic, particularly for reasons related to supply chain issues or lack of staff, document those reasons. This may be necessary to defend against allegations of refusal to supply or other reviewable practices.
Developments in this area are moving quickly. Antitrust agencies in other countries have taken more aggressive action, including suspending application of competition legislation to specific sectors affected by the pandemic. Companies must continue to be aware of their obligations under the Competition Act when considering any action that could involve cooperating with competitors or otherwise affect competition.
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