Not-So-Simple Non-Comps (Part 2)

Posted: February 09, 2010 | Last Updated: February 06, 2016

Posted: February 9, 2010

Written by: Bradley Madison

As my colleague, Philip Watts, posted on January 8, 2010, there are significant changes to the federal Competition Act coming into effect in March 2010.

Changes to the conspiracy provisions of this Act will apply to every written and unwritten agreement between competitors in a marketplace.  A Non-Competition covenant is just that.

Thinking this surely can’t apply to your small business here in Manitoba?  After all, this is the stuff of cut-throat competitors in huge marketplaces, criminal conspirators and racketeers right?  Perhaps, “generally”…

Your Non-Comp will “generally” not make you a Criminal

In the amended Competition Act there is no consideration of the size of the business involved, market effect or conspiratory intent while the penalties range up to millions in fines and years in prison.

The Competition Bureau, which is tasked with enforcing these provisions, states in their draft guidelines that they will “generally” not assess Non-Comps given in employment agreements or asset or share sales under the criminal provision of the Act, but the door remains open.  In addition, Non-Comps “may be subject to review under the civil (liability) provisions of the Act.” To avoid this civil liability, the Non-Comp must fit within the “ancillary restraints” exception in the Competition Act which allows agreements between competitors in certain circumstances.

Considering the potential consequences for a finding of conspiratory intent and the vague wording of the guidelines, anyone giving, receiving or remaining a party to a Non-Comp should be very cautious to ensure that their agreement is lawful. We will watch with interest how The Competition Bureau applies these new rules.

To read about another way that Non-Comps are “Not-so-Simple”, see Part 1. of this series of posts by clicking here.