Posted: February 4, 2010
Written by: Philip Watts
In just over a month, changes to the Competition Act (the “Act”) will significantly affect how business competitors are able to collaborate with each other.
On March 12, 2010 amendments pertaining to collaboration between competitors in Section 45 and Section 91 of the Act will come into force. Agreements between competitors that, fix prices, allocate territory, maintain control, prevent or eliminate the production or supply of a product or service will be illegal unless they fit within the exceptions outlined in the Act. Under the current rules, this type collaboration between competitors is only illegal if it lessens competition in the marketplace. Under the new rules, this conduct will be illegal “per se” regardless of any effect it might have on consumers. This change is significant because these rules do not just apply to large businesses with market power such as large fast-food chains or oil companies; these laws will also apply to any business regardless of size or market power. It would be considered a criminal act under the new law if two rival lemonade stands agree to split up the sales territory in a neighborhood.
The maximum sentence available for violating Section 45 is 14 years in jail and a $25,000,000 fine. Businesses should review their existing agreements to ensure that they are not party to any agreement which would be criminal under the new rules. When a business makes an agreement with a competitor, it is the responsibility of that business to ensure that their agreements fall within a lawful exception in the Act.
On December 23, 2009 the Competition Bureau released its new Competitor Collaboration Enforcement Guidelines which give helpful direction in determining the type of conduct they will be targeting when these new amendments come into force.
If your business has agreements with competitors, review your agreements and get the advice you need to determine if these agreements will remain lawful. If necessary, amend or terminate any unlawful agreements prior to March 12th when the new rules take effect.