As we reported in an earlier article, the Competition Bureau is still very much on the job, even if staff are now working from home. The Bureau's merger review functions remain in place, with no change in approach and only minor logistical adjustments so far. In the area of competitor collaborations, however, the Bureau has expressed a clear and unprecedented willingness to support short-term, good faith collaborations designed to enable businesses to respond to the crisis, and has even created a new informal mechanism through which firms can seek the Bureau's guidance regarding prospective collaborations.
In Merger Review, Potential Delays, But No Major Changes
The Bureau appears to be adjusting well to remote work, and continues to move cases forward at an impressive pace and with no apparent compromise to their substantive or procedural standards.
After three weeks at home, no service standard deadlines have been missed, and necessary technical adjustments have been made to facilitate the electronic delivery of documentary productions and clearance letters. As we predicted in our previous article, the Bureau has advised that it is experiencing delays in obtaining information from market contacts, particularly in the telecom, grocery and pharmaceutical sectors, but has certainly not ground to a halt. The Bureau has emphasized the importance of proactive and open communication in ensuring that timelines are well understood on both sides and has made a number of practical recommendations to help parties navigate the merger control process during this period.
The Bureau has been very clear that it has no plans to relax its approach to merger review, either in terms of its conceptual framework or its expectations as to evidence. Where requested information is not available or reasonably obtainable because of the crisis, or where historical data no longer provides a reasonable basis to predict the future, parties will be expected to make specific, well-substantiated submissions to this effect and not simply expect it to be taken on faith. Nor will the Bureau be any more sympathetic to "failing firm" or "flailing firm" arguments, although they do expect to hear more of them in the weeks and months to come, and it may well be that merging firms have a more compelling basis upon which to ground such arguments in light of the upheaval facing many industries.
Overall, we anticipate that the Bureau will continue to conduct merger reviews as normal, subject to potential new delays caused by factors outside staff's control, such as the responsiveness of market contacts. From a substantive point of view, our expectation is that the Bureau will be reluctant to depart from its traditional analytical and evidentiary framework, even where there appear to be compelling reasons to do so because of the crisis. Experienced competition counsel can help to navigate new timing issues and to engage with the Bureau regarding the substantive effects of COVID-19 for particular firms, industries and transactions.
New Scope for "Crisis Response" Collaborations
In our previous article, we predicted that the Bureau would provide the market with a signal that it views certain forms of competitor collaboration as a legitimate part of the response to the COVID-19 crisis. On April 8, the Bureau published a statement recognizing that in order to ensure the supply of critical goods and services to Canadians during the COVID-19 pandemic, it may be necessary for competing firms to collaborate, such as by forming buying groups or sharing distribution facilities and other supply chain resources. The Bureau's statement, which is broadly similar to statements made by competition authorities in other countries in response to the crisis, makes clear that it will not pursue enforcement actions that would undermine bona fide efforts in this regard:
...where firms are acting in good faith, and motivated by a desire to contribute to the crisis response rather than achieve competitive advantage, the Bureau does not wish to see specific elements of competition law enforcement potentially chill what may be required to help Canadians. The Bureau therefore 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.
In addition to this general statement of approach, the Bureau has also established a new mechanism through which firms may seek expedited informal guidance as to the appropriateness of a contemplated crisis response collaboration. Although such guidance would not protect against the possibility of private action under section 36 of the Competition Act, it will be able to offer firms comfort that the Bureau will not pursue its own enforcement actions in respect of crisis response conduct.
To avail themselves of this guidance mechanism, firms must provide the Bureau with certain information regarding the firms involved and the parameters of the collaboration, including its proposed scope and duration, a detailed description of how the collaboration is intended to achieve a clearly identified objective that relates to COVID-19 and is in the public interest and why the collaboration is necessary to meet this objective and a description of any guidance sought from other relevant authorities as to whether the proposed collaboration will in fact further Canada's response to COVID-19. In evaluating a request for guidance, the Bureau has signalled that it may seek input from other parts of government, stakeholders, and market contacts or require conditions to ensure that the proposed collaboration has no greater impact on competition than necessary to respond to the COVID-19 crisis. Finally, any guidance the Bureau issues through this mechanism may also be made public.
It remains to be seen how frequently and in what circumstances firms will avail themselves of this comfort mechanism. Some firms, together with their legal counsel, may decide that the guidance quoted above, when combined with the fact that the Competition Act, by its own terms, does not prohibit pro-competitive collaborations or agreements between competitors that restrict competition but which are ancillary and reasonably necessary to give effect to broader agreements, provides sufficient certainty upon which to proceed even in the absence of conferring with the Bureau. This is to say that for some firms the risk profile associated with forging ahead with a short-term collaboration that is very clearly rooted in a bona fide response to the crisis is such that they may be prepared to proceed without Bureau comfort. In other cases, however, Bureau comfort may be sought and valued.
It is important to note that this new flexibility does not represent a blanket exemption to the Competition Act's competitor collaboration or cartel provisions. On the contrary, the Bureau's statement is explicit that the Bureau "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." Agreements with competitors of any kind carry significant legal risk and should not be entered into lightly. Instead, seek expert legal advice before engaging in any new form of competitor collaboration.
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