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LEGAL REPORT: BUSINESS/CORPORATE LAW New rules aimed at combating egregious forms of cartel agreements remove the competitive effects test. BY KELLY HARRIS Competition Act changes too broad A mong the sweeping changes to Canada's Competition Act are new rules aimed at combating the most egregious forms of cartel agreements. The law has received its fair share of criticism for being too broad and run- ning the risk of potentially criminalizing legitimate agreements. At the crux of the concern are amend- ments to s. 45 of the act that remove the competitive effects test and in its place there are a trio of per se illegal, or non-reviewable, prohibitions. These pro- hibitions are designed to capture what some call hard-core illegal cartel activity. However, the legislation goes far beyond cartel activity, says Neil Campbell, a partner with McMillan LLP's compe- tition, international trade, and public policy group. In a paper on the sub- ject, Campbell says there are concerns the new law "will have a chilling effect on pro-competitive collaborations in Canada." He says the actions should still be a reviewable practice. His concerns are reflected in the Competition Bureau's draft guidelines on competitor collaboration. The guide- lines were released in May and are open for feedback until Aug. 14. The rules are due to come into force March 2010. "What the bureau is trying to say is that 'even though s. 45 has broad word- ing, we as a matter of enforcement dis- cretion, as the government law enforce- ment agency in the area take most of the potentially legitimate commercial con- duct and, if we do anything at all with it, take any action with it, it'll be under s. 90.1,' treating it as a reviewable practice where the focus is on whether it lessens competition or not," says Campbell. The first prohibition in the legislation states any person who collaborates with a competitor with the same product con- spires, agrees, or arranges to fix, main- tain, increase, or control the price for the supply of the product has committed an offence. An offence is also committed for collaboration on sales, territories, cus- tomers, or markets for the production or supply of the product. The third offence is collaboration to fix, maintain, control, prevent, lessen, or eliminate the produc- tion or supply of the product. The penal- ties for committing an offence under s. 45 are stiff. They range to a maximum 14-year prison term or a maximum $25 million fine. The draft guidelines state that, despite the per se illegal offence, "the bureau will generally not assess certain types of ancillary restraints under the criminal provision in [s.] 45 of the act, although these restraints may be subject to review under the strategic alliances provision in [s.] 90(1) of the Act." The instances the bureau would seek remedy under s. 90(1) include a www. C ANADIAN Law ye rmag.com JULY 2009 51 DARCY MUENCHRATH