Competition Bureau Navigates the Pandemic

On October 21, 2020, the Commissioner of Competition (Commissioner) delivered a Speech, Supporting competition on the road to economic recovery, to the CBA’s Competition Law Fall Online Symposium that concentrated on the challenges that the Competition Bureau (Bureau) is facing in navigating the COVID-19 pandemic and associated economic downturn. This update highlights key takeaways from the Commissioner’s remarks.

The Commissioner began with the observation that economic crises tend to provide opportunities for companies to enhance their market power or engage in anti-competitive activity. As such, competition law can take on heightened importance in protecting competition and safeguarding consumers in this environment. At the same time, the Commissioner acknowledged that competition law enforcement must be flexible to accommodate the extraordinary circumstances that many companies are experiencing.

As discussed below, the Commissioner identified several aspects of competition law enforcement that may warrant increased attention during the pandemic and economic downturn.

The Competition Act, R.S.C. 1985, c. C-34 contains various provisions, both criminal and civil, governing agreements and arrangements between competitors. See Practice Notes, Canadian Conspiracy (Cartel) Law and Joint Ventures and the Competition Act. These provisions prohibit competitors from entering into agreements relating to specific aspects of competition, such as pricing, markets, or output. More generally, there are restrictions on competitors forming any agreements that have the effect of lessening competition substantially.

In April 2020, the Bureau released a Statement, Competition Bureau statement on competitor collaborations during the COVID-19 pandemic, regarding competitor collaborations during the pandemic, which acknowledged the unprecedented challenges facing some companies and their potential need to quickly develop business collaborations to facilitate the supply of critical products to Canadians. In particular, the Bureau indicated that it would not scrutinize short-term collaborations that are clearly done to meet exigent circumstances, are done in good faith, and do not exceed collaboration that is strictly necessary. The Bureau also established a process for parties to seek informal, time-limited guidance from the Bureau regarding proposed competitor collaborations.

One of the factors under the Competition Act that is relevant to the Bureau’s assessment of mergers is whether a party to the merger is failing. See Practice Note, Substantive Merger Review. If a party is likely to fail absent the merger and its assets are not likely be acquired by a competitively preferable purchaser, then the Bureau would typically not oppose the merger, given that such intervention would not likely improve competition.

The Commissioner’s recent speech acknowledged the prospect that the current economic climate may give rise to an increase in failing firm mergers. The Commissioner was careful to point out that the Bureau is not planning to change its analytical framework for assessing such mergers and, particularly, where there is any competitively preferable alternative. Nonetheless, there appears to be a clear recognition that there may currently be more situations that in fact meet the Bureau’s criteria for permitting mergers on failing firm grounds.

The Competition Act establishes a per se criminal offence for bid-rigging, which is collusion in respect of responding to calls for bids or tenders. See Practice Note, Canadian Bid-Rigging Law, Detecting Bid-Rigging Checklist and Deterring Bid-Rigging Checklist. Government procurement, which accounts for a material portion of the Canadian economy, has always been an area of enforcement concern for the Bureau in relation to bid-rigging.

The Commissioner’s speech underscores the fact that government stimulus measures to shore up the economy may increase the frequency and scale of government procurement contracts. Consequently, the Bureau has signalled the need for heightened vigilance against potential bid-rigging in respect of such government procurements. The Bureau has stepped up its efforts to educate all levels of government regarding awareness and detection of bid-rigging.

Beyond the Bureau’s own direct enforcement work, the Commissioner has increasingly stressed the importance of promoting competition through advocating for more pro-competitive policies and regulations. Notably, the Bureau recently published a Toolkit, Strengthening Canada’s economy through pro‑competitive policies, August 20, 2020, designed to provide a practical guide to regulators and policy-makers regarding how to assess the state of competition in various sectors, how to remove barriers to competition, and how to identify and implement more pro-competitive alternatives.

In the current economic climate, this Toolkit will hopefully serve to encourage pro-competitive initiatives by other regulators and policy-makers to supplement the Bureau’s efforts to respond to the challenges posed by the pandemic.