UPDATE: Competition compliance during the COVID-19 crisis: Price-gouging, deceptive marketing and collusion

In a policy statement on April 8, 2020, the Commissioner of Competition acknowledged the extraordinary circumstances of the COVID-19 crisis and advised businesses that the Bureau would be unlikely to challenge good faith efforts at competitor collaboration that were aimed at responding to the crisis and meeting the essential needs of Canadians.^[1] The Commissioner also opened a channel for businesses to obtain informal guidance from the Competition Bureau’s Cartels Directorate on proposed competitor collaborations. This statement updated previous guidance which had signalled no change in enforcement approach despite the crisis.^[2]

We note that the Commissioner’s statement is specifically directed at collaborations between competitors. Businesses which do not compete (such as a supplier and its customer) and which are not potential competitors, and who wish to collaborate to implement supply chain efficiencies in the COVID-19 environment should not fear scrutiny under Canada’s cartel law.

The Commissioner’s latest guidance follows on the heels of similar statements of enforcement flexibility by other international antitrust regulators^[3]. In his statement, the Commissioner recognized that the “exceptional circumstances” surrounding the pandemic might require “the rapid establishment of business collaborations of limited duration and scope” to facilitate the steady supply of essential goods to Canadians. He noted that businesses might need to establish collaborative buying groups or share supply chain resources to deliver essential goods to Canadians, and the Bureau did not want its existing enforcement policy to “chill” prompt and effective responses that might be required to help Canadians.

In the most important passage, the Commissioner stated that the “the Bureau … 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, [the Bureau] will generally refrain from exercising scrutiny.” (emphasis added) It is significant that the Commissioner’s statement did not exclude potential collaboration on matters of pricing, output and markets from this relaxed enforcement scrutiny, but he stressed that there would be “zero tolerance” for any attempts “to abuse this flexibility”.

Given the qualified nature of this guidance and the criminal risks associated with certain forms of competitor collaborations, the Bureau opened a channel for businesses to obtain informal guidance. Businesses seeking such guidance are expected to provide the following information in respect of any form of collaboration:

• 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 COVID-19 related objective in the public interest;
• An explanation of why the collaboration is necessary to meet this objective; and
• A description of any guidance sought from relevant authorities on whether the collaboration contemplated will actually further Canada’s response to COVID-19.

The Bureau is under no specific timeline to provide guidance and its guidance may be subject to a number of conditions, including a time limitation and the possibility of public disclosure. There is no obligation to seek such guidance. As a result, some businesses may choose to proceed with a collaboration without seeking guidance, after seeking the advice of competition counsel. 

Many COVID-19 collaborations have involved, and are expected to involve, joint purchasing activities. While the Commissioner historically has taken the position that joint purchasing arrangements are generally not subject to criminal enforcement in Canada – rather, they are reviewable under the civil provisions of the Act—there is only limited caselaw interpreting such arrangements. The Bureau’s statement reminds us that its guidance does not insulate businesses from the possibility of private lawsuits seeking damages. As such, competitors should continue to approach joint purchasing arrangements carefully, just as they would  potential collaboration in respect of the supply or sale of goods and services in Canada.

As a statement of enforcement intent, the Bureau’s guidance does not change Canada’s existing criminal prohibitions on anti-competitive agreements relating to pricing, market allocation or output restrictions. Moreover, it does not bind the Public Prosecution Service of Canada, the authority that is responsible for enforcing Canada’s criminal competition laws.

For further information or any questions regarding the impact of the Bureau’s statement or the opportunities for consultation with the Bureau about competitor collaboration, please contact the members of Osler’s Competition/Antitrust and Foreign Investment Group.