On May 6, 2021, the Competition Bureau (the “Bureau”) released its new (and long-awaited) competitor collaboration guidelines (the “New CCGs”). This is the first update to these guidelines since the previous version was published by the Bureau over a decade ago, in 2009 (the “2009 CCGs”).
The New CCGs include updated guidance on various matters, including with respect to (i) how the Bureau assesses whether or not certain firms are competitors or potential competitors, (ii) how the Bureau intends to approach buy-side agreements, and (iii) increased scrutiny of certain agreements between competitors, particular in the context of mergers.
Competitors and Potential Competitors
The New CCGs clarify the types of evidence the Bureau will consider when deciding whether suppliers of differentiated products are competitors or potential competitors. The types of evidence enumerated in the CCGs include business and strategic plans prepared in the course of business, marketing and communications with potential customers, evidence of actual competition for similar customers, and the extent to which each party considers the other party to be a competitor or potential competitor.
With respect to section 45 of the Competition Act (the “Act”), new examples provided in the New CCGs clarify that where a wholesaler facilitates a price-fixing conspiracy among its retail clients, such wholesaler may be a party to the conspiracy even if it does not compete in the retail market. This new guidance may act to remove some of the ambiguity around certain “hub-and-spoke” – like arrangements.
The updated guidance in the New CCGs directly addresses buy-side agreements such as no-poach and wage-fixing agreements (something the previous guidelines did not). In addition to reiterating the statement from the 2009 CCGs that section 45 applies only to the supply – and not the purchase – of a product, the New CCGs also explicitly contemplate no-poaching and wage-fixing agreements, stating that such agreements may be subject to review under Part VIII of the Act. This echoes the previous guidance by the Bureau set out in its November 2020 statement on buy-side agreements.
Mergers and Ancillary Agreements
The New CCGs include some additional notable changes regarding review of ancillary arrangements, which appear to signal increased scrutiny and enforcement by the Bureau.
The New CCGs suggest that some merger transactions may be reviewed under other provisions of the Act, aside from section 92. The New CCGs include a note that “[w]here parties enter into any agreement(s) that goes beyond the acquisition, amalgamation or combination agreement, whether within or outside said agreement, the Bureau will consider under which provision(s) of the Act any investigation or inquiry should be pursued.” For example, the New CCGs also note that where non-compete agreements are entered into in connection with a merger, such agreements may, in rare circumstances, be considered under section 45 of the Act.
The New CCGs also note that, in general, the Bureau will be looking closely at agreements between competitors which are structured so as to avoid the application of section 45. The Bureau will carefully assess whether such collaboration is a “sham” and whether the arrangement should be reviewed under section 45. Together with the above point, this signals that the Bureau will be increasing its scrutiny of certain business agreements, including non-compete agreements entered into in connection with a merger, and may be less willing to accept these as ancillary restraints in all cases.
Lastly, in its list of examples of agreements/clauses which may potentially be considered an ancillary restraint by the Bureau, and therefore generally be reviewed under Part VIII rather than section 45 of the Act, the New CCG’s have notably removed the example of a non-competes found in employment agreements, which was previously included in the 2009 CCGs. This may not be a significant change, and may simply be recognition by the Bureau that employment agreement non-competes should not have been contemplated as an ancillary restraint under section 45(4). Such agreements are generally vertical agreements between an employer and an employee rather than horizontal agreements between competitors, and accordingly they would not generally be considered under section 45 at all.
While the revisions to the New CCGs may not be as drastic as expected after more than a decade, they do signal that the Bureau is taking note of current issues, and may be increasing its scrutiny of competitor collaborations.