Canadian firms face increasing pressure to adopt flexible business strategies to remain competitive, particularly in an economy that is frequently changing due to globalization, technological innovation, and advancements in production processes.
Competitor collaborations, such as joint ventures and strategic alliances, can enable firms to combine capabilities and resources. These alliances can help firms lower the costs of production, improve product quality, and reduce the time it takes to bring new products to market.
However, the Competition Act contains provisions against competitors entering into agreements that substantially prevent or lessen competition in a market or are likely to do so. For example, such an agreement could enable the parties involved to charge higher prices or hinder the development of future competition.
Depending on the circumstances, below are five common types of agreements the Bureau may review to ensure they do not substantially prevent or lessen competition.
- Commercialization, an arrangement where competitors jointly develop new products or enter new markets together.
- Information sharing, where competitors agree to provide or exchange information.
- Research and development, where competitors agree to cooperate on research and development activities allowing firms to combine complementary technologies and resources.
- Joint production, a type of agreement can take many forms, such as parties agreeing to jointly purchase from a third party or produce a product together, either at an outside facility or through a jointly run company.
- Joint purchasing (buying groups), an agreement between firms to purchase all or some of their requirements for a product from one or more suppliers.
Just as we do when we review mergers and acquisitions, we consider a variety of factors to determine if an agreement is likely to affect competition. For example, we might ask: Is the agreement likely to cause prices to rise, or reduce the choices available to consumers?
Remedies for non-compliance
Like a court, the Competition Tribunal is chaired by a judge and operates independently of government.
If an agreement between competitors contravenes the civil (non-criminal) provisions of the Competition Act, we will generally try to obtain voluntary compliance with the law.
If all parties agree on a solution that will restore competition to the marketplace, a formal consent agreement is then registered with the Competition Tribunal.
If the parties do not comply voluntarily, we may file an application with the Competition Tribunal. The Tribunal can issue an order prohibiting someone from doing anything under the agreement or arrangement (whether or not they are a party to the agreement). It can also order someone to take any action, provided that person and the Commissioner of Competition agree with the order.
How to ensure compliance with the Competition Act
If you are unsure about what complying with the Competition Act means for your business, we recommend that you seek legal advice.
You can also protect your business by having a strong compliance program in place. This is an ideal way to ensure you meet your legal obligations and it will reduce the financial risks associated with non-compliance. Like an early-warning system, a compliance program can help you detect and correct unlawful conduct quickly before it damages your company, your reputation, and your bottom line.
We also facilitate compliance by providing written opinions (fees apply) on proposed practices. A written opinion is binding if the material facts on which the opinion is based are accurate, complete, and remain substantially unchanged.