The COVID-19 pandemic has impacted our lives in countless ways. For example, most of us are now working remotely for our home offices, living rooms or kitchen tables. In-person meetings have been replaced by video calls, email and texts. This is expected to continue for weeks – if not months – as governments at all levels are requesting that Canadians stay home in an attempt to “flatten the curve”.
While statistics aren’t available, it’s reasonable to assume that the number of documents being created and retained by businesses has increased since the pandemic began. In many cases, these documents are likely being drafted quickly and without regard to the tremendous impact that they could have on the business, including in the context of future antitrust investigation or proceedings. A short refresher on document creation – including the problems that bad or hot documents may create – is in order.
What are considered documents?
The Competition Act (the “Act”) does not define what constitutes a “document”. It does, however, include the following definitions:
- “data” means representations, including signs, signals or symbols, that are capable of being understood by an individual or processed by a computer system or other device;
- “information” includes data; and
- “record” means a medium on which information is registered or marked.
Together, these definitions capture a wide range of documents, including emails, text messages, voicemails, PowerPoint presentations, spreadsheets, agreements, internal memoranda, meeting minutes, etc.
Importance of Documents
Like other antitrust agencies around the world, the Competition Bureau (the “Bureau”) places tremendous weight on parties’ internal documents, which are normally taken by Bureau staff at face value. In fact, the Bureau’s investigations – whether involving mergers, abuse of dominance, cartels or other matters – are often built around bad or hot documents.
- If internal documents refer to merging parties as close competitors, indicate that barriers to entry into the relevant industry are high or otherwise suggest that a transaction may have anti-competitive effects, the Bureau may be more inclined to closely scrutinize a proposed or completed merger.
- If internal documents refer to a party as large or dominant and suggest that a particular practice has been put in place to eliminate, crush, block, destroy or otherwise discipline a competitor, the Bureau may be more inclined to pursue the matter under the abuse of dominance provisions of the Act.
- If internal documents refer to meetings or communications between competitors – particularly communications relating to competitively-sensitive matters such as prices, costs, customers, markets or production capacity – the Bureau may be more inclined to proceed with an investigation under the cartel provisions of the Act.
The United States Federal Trade Commission’s challenge of the Staples / Office Depot merger several years ago illustrates the tremendous impact that internal documents can have in the mergers context. Specifically, the FTC was able to rebut the merging parties’ argument that the relevant market included a number of significant competitors other than Staples and Office Depot by pointing to the parties’ own ordinary course of business documents. For example, a presentation prepared by Staples stated that “[t]here are only two real choices for customers”. Similarly, an email from Office Depot to a customer noted that, “[o]n a national scale, Office Depot’s competition is Staples”. In light of evidence such as this, the U.S. District Court for the District of Columbia granted the FTC’s motion for a preliminary injunction and the parties subsequently abandoned the proposed transaction.
Depending on the type of investigation in question, the Bureau can use various tools to obtain parties’ internal documents – including any bad or hot documents like the ones referred to above – such as supplementary information requests, voluntary information requests, court orders and/or search warrants.
Given the important and increasingly central role that documents play in antitrust investigations, businesses and their employees should do what they can to prevent the creation of bad or hot documents wherever possible – as even the casual remarks of a single employee can have a material impact on an agency’s investigation. The following best practices may help with this:
- As a general rule, businesses should assume that the Bureau will someday see all of their documents, including emails, texts, chats and presentations. Businesses should avoid creating any documents – or using any language – that they do not want the Bureau to see.
- Documents should be accurate, fair and in context – they should not include hyperbole, puffery, exaggeration or unfounded speculation. Rather, they should stick to objective facts, avoid conclusionary characterizations and acknowledge any limitations in the information or data they contain.
- Documents should be written clearly and concisely – they should not include vague, ambiguous or loose language that may be taken out of context, misunderstood or misconstrued. Below are just a few examples of how seemingly innocuous statements written by company employees may be misinterpreted by the Bureau:
|Employee writes:||Bureau reads:|
|“the industry needs a price increase” or “there appears to be an industry consensus that prices will rise”||“competitors have agreed to a price increase”|
|“avoid ruinous competition”||“stop competing”|
|“we need to bring stability to the market”||“stop competing”|
|“let them stay in their market; we’ll stay in ours”||“competitors have allocated the market”|
- Documents created during the COVID-19 pandemic may need to be produced to the Bureau years from now. To minimize the risk of such documents being taken out of context, they should provide complete information, including accurately identifying the legitimate business reasons for engaging in the conduct in question. For example, rather than stating that the business implemented a particular distribution program in response to COVID-19, it would be better to state that the program was implemented at the request of the Ontario healthcare systems in order to ensure the safety and well-being of COVID-19 patients.
- Implement a competition compliance training program to ensure that business personnel at all levels have at least a basic understanding of competition laws and the implications of damaging documents. Either separately or as part of the program, consider auditing or surveying a portion of the business’ documents, particularly those of key officers or employees involved in sales or marketing functions.
- If in doubt about a document or the language it contains, ensure that it is reviewed by legal counsel prior to circulation to ensure accuracy and that it does not raise competition law concerns.
Failing to take steps to prevent the creation of bad or hot documents could result in costly and time-consuming investigations by the Bureau – often years after the documents have been created. Businesses can minimize this risk by following the best practices outlined above and ensuring that employees are aware of their obligations under Canadian competition laws.
If you have questions regarding document creation specifically or antitrust compliance generally, you can reach out to any member of Fasken’s Antitrust/Competition Marketing group. Our group has significant experience advising clients on all aspects of Canadian competition law.
The information and guidance provided in this blog post does not constitute legal advice and should not be relied on as such. If legal advice is required, please contact a member Fasken’s Antitrust/Competition Marketing group.