Adam S. Goodman is a partner in the competition and foreign investment law group at Dentons Canada LLP. Philippe Couillard, a former premier and minister of health and social services of Quebec, is a senior business adviser at Dentons Canada LLP.
As the House of Commons standing committee on industry, science and technology continues its consideration of competitiveness in Canada, there have been and will continue to be calls to toughen Canadian competition law and enforcement. In recent weeks, for example, the committee heard pleas to strengthen enforcement against instances of abuse of dominance and the suggestion that the Competition Bureau, Canada’s antitrust law enforcement agency, be granted new powers to conduct market studies, among other things.
All of these measures are worthy of debate to ensure that Canadian competition law and policy are properly calibrated to address current and emerging risks. If the pandemic has taught us anything, however, it is that governments must be nimble in balancing important objectives, especially in the protection of public health. To that end, in the next amendment of the Competition Act, we believe a provision should be added to permit the minister of innovation, science and economic development to provide businesses with specific exemptions to the application of Canadian competition law in the context of national emergencies. In other words, in addition to potentially toughening the Competition Act, Parliament should also permit the minister to suspend it in particular cases.
Such a proposal was made by the competition law section of the Canadian Bar Association a year ago, at the outset of the pandemic, but was largely ignored.
The need for a ministerial exemption process should not imply that competition law or bureau enforcement are not flexible – they are. While the Competition Act contains strict criminal prohibitions on competitors agreeing to fix prices, allocate markets, restrict output or rig bids, the bureau has issued practical guidance for businesses indicating that the criminal provisions of the act are reserved for hard-core cartel conduct (also called “naked restraints” on competition that have no associated legitimate collaboration). The act also empowers the bureau to challenge mergers, joint ventures, abuse of dominance and other non-hard-core conduct on the basis of anti-competitive effects (usually higher prices), but also permits defences on the basis of offsetting efficiencies, among other things. Nevertheless, the act presents varying degrees of risk to businesses seeking to collaborate. Risk can be stifling in emergency circumstances such as a pandemic.
For its part, the bureau indicated early in the pandemic that where businesses collaborate “in the short term to respond to the crisis,” it would “generally refrain from exercising scrutiny” and offered to provide “informal guidance” to businesses willing to submit their plans to the bureau in advance. This approach stopped short of measures taken in other countries – the United Kingdom, for example, passed specific regulations that permitted certain competitor collaborations in the grocery, health, transportation and agricultural sectors that might have otherwise contravened competition law.
To ensure any new exemption process is not abused, its use could be limited to circumstances where an emergency has been declared under federal or provincial law and could require the minister to consider competitive impact. Furthermore, outside of mergers, exemptions could be limited to the duration of the emergency (or another reasonable period) and could incorporate ministerial oversight, with regular reporting to ensure the measures remain relevant to the objective of emergency response.
While ensuring robust competition may be the optimal industrial policy as a general matter, it is not necessarily optimal when confronting national emergencies.
During the pandemic, for example, expressly permitting competing vaccine producers to manufacture each other’s product could have ensured existing capacity was used most effectively to deliver the most efficacious product. Furthermore, the government could have explicitly permitted competing airlines to allocate certain routes with declining profitability between them to ensure national connectivity. Mergers between competing drug companies that would otherwise be considered anti-competitive could be permitted if they offered increased production capacity for vaccines and life-saving drugs. What about restaurants seeking to share outdoor patio spaces and/or wait and delivery staff with each other? Or competing retailers fixing pricing for PPE to combat price gouging?
While all these activities would raise varying degrees of risk under the Competition Act, and the bureau would certainly be expected to take into account any intention by the parties to address the pandemic, none would necessarily be risk-free. By permitting the minister to grant collaborating parties an explicit exemption, any such risk would be eliminated, allowing businesses to become full partners with government in the execution of emergency response.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.