When Is a Business Alliance a Criminal Cartel?

  • Report of the C.D. Howe Institute Competition Policy Council

TORONTO, Nov. 10, 2011 /CNW/ - The Competition Bureau should better define and clarify its legal view on when ordinary business practices or strategic alliances will be treated as offences and subject to civil review or criminal prosecution, according to a report released today by the C.D. Howe Institute. Otherwise, businesses may be inhibited in their ordinary activities, or inclined to avoid entering strategic agreements with competitors that would be of benefit to Canadian consumers. In addition, the Bureau has not pursued court actions testing the criminal provisions of the recently revised Competition Act, and this may have resulted in harmful price-fixing activities going unchecked. This is the consensus of the C.D. Howe Institute's Competition Policy Council, which held its second meeting November 3, 2011.

The Competition Policy Council comprises top-ranked academics and practitioners active in competition policy. The Council, chaired by Finn Poschmann, Vice President, Research at the C.D. Howe Institute, provides analysis of emerging competition policy issues, including those potentially faced by the federal Competition Bureau. The Council, whose members participate in their personal capacities, convenes a neutral forum to test competing visions of competition policy and share views with practitioners, policymakers and the public.

At the November 3 meeting, the Council addressed the following questions: "How can competition policy legislation and enforcement discourage truly anti-competitive agreements without discouraging healthy cooperation? What guidance should the Competition Bureau provide, to better define when an agreement is likely to be subject to criminal prosecution? Are severe potential criminal sanctions for competitor agreements warranted?"

The Council's view is that because illegal price-fixing behaviour can be difficult to detect, the availability of severe criminal sanctions, under the recently amended Section 45 of the Competition Act, constitutes an important and desirable deterrent to criminal behaviour. However, the possibility of severe criminal penalties, and the potential for damages and other costs associated with private actions, make clarity essential on what is an offence and whether it will be treated as a criminal matter under Section 45, or a civil matter under the new Section 90.1. Recently increased criminal penalties and civil damages, and uncertainty surrounding their potential application, increase the likelihood that legal chill will forestall socially beneficial business choices.

The Council called on the Competition Bureau to take the necessary steps to clarify its interpretation of the Competition Act as to what activities will be treated as potentially criminal offences, or when Section 90.1 will apply. Accordingly, the Competition Bureau should:

  • Restore its prior practice of issuing binding advisory opinions to firms, when requested, as to whether proposed conduct or a potential business alliance would contravene the Act, and be subject to criminal prosecution or civil action; and

  • Commence criminal proceedings, where appropriate, and intervene in private actions to develop sound and clear jurisprudence regarding competitor agreements.

For the full report go to: http://www.cdhowe.org/pdf/The%20Verdict_Nov10.pdf

SOURCE C.D. Howe Institute

For further information:

Benjamin Dachis, Policy Analyst, C.D. Howe Institute; 416-865-1904


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