Posted: January 8, 2010
Written by: Philip Watts
It is important for every business to be competitive, but if businesses compete without following the rules the penalties can be very costly.
In Canada the Competition Act (the “Act”) governs many aspects of how businesses may deal with their suppliers, competitors and customers. The Act lists many anti-competitive acts which are prohibited in Canada. It is an extensive list which includes conspiracy among competitors, bid-rigging, price fixing, refusal to deal, predatory pricing, tied selling, exclusive dealings and misleading advertising. The Act makes some of the activities criminal offences, while others only attract civil liability. Having a competition law compliance policy for your business can decrease the risk of your business violating the Act, or it could be a mitigating factor if you are penalized for breaching the Act. Because breaches of the Act can have significant costs, effectively implementing a competition law compliance policy can be a financially prudent decision for your business.
The Competition Bureau (the “Bureau”) is the law enforcement agency charged with ensuring that Canadian businesses comply with the Act. In 2009 the federal government brought in major changes to the Act which increased the powers of the Bureau and considerably increased the application of the Act to small and medium sized businesses. These changes have increased the similarities between Canadian competition law and antitrust law in the United States. New amendments to the Act will come into force in March 2010 which will increase the maximum penalties available under the Act to a $25,000,000 fine and 14 year term of imprisonment for violations of the provisions prohibiting conspiracies, agreements or arrangements between competitors. Over the last year there have also been notable advancements in the ability of class action litigants bringing actions for anti-competitive acts in Canada.
Although some managers and employees will not be aware of the changes in the law or may not be aware that certain business practices are illegal in Canada, pleading ignorance of the law does not absolve individuals or corporations from criminal responsibility. Business owners and management should be taking positive steps to ensure that employees are aware of what activities are prohibited and that their business is following the law.
The Bureau has an immunity program where the first party to a conspiracy to turn themselves in and agree to cooperate with the Bureau in the prosecution of the other parties may receive immunity from criminal and civil responsibility for their participation. This immunity program highlights the need for management to ensure that their employees recognize and report any breaches of the Act to their managers in a timely manner.
A competition law compliance policy will be different for each business depending on the size and nature of the business. Some businesses may choose to amend their employee code of conduct to include provisions dealing with competition law, other businesses will need a stand alone competition law compliance policy with designated competition law compliance officers. It is essential that the policy addresses the unique aspects of your business: a manufacturing business will have different concerns than a retail sales business would and a business with few competitors may have different concerns than a business with many competitors.
To begin creating a competition law policy for your business, a good resource is the Bureau’s Information Bulletin on Corporate Compliance Programs. Readers should be mindful that changes have been made to the Act since this bulletin was published. Competition law is a complex area of the law and a competition law policy should be drafted in consultation with a lawyer who practices in competition law.
Having a policy in place will not eliminate the risk of your business breaching competition law, but ensuring that your business has an effective competition law policy is a good way that you can minimize risk to you and your business.