Law Times

Page 8 SePtember 15, 2014 • Law Times www.lawtimesnews.com Competition lawyers cool to pre-notification regime Proposal would offer early opinion on deals among competitors By Julius Melnitzer For Law Times ompetition lawyers are cool on the prospect of a new pre- notification regime for busi- nesses seeking to enter into agreements with their com- petitors. The possibility that such a regime was in the offing came from commissioner of competition John Pecman when he spoke at an American Bar Association confer- ence in March. Pecman was clear that con- sideration of such a regime was in its "early days" and there was no decision yet on whether to implement it and, if so, wheth- er it would be voluntary or mandatory. A mandatory regime would require legislative amendments to the Competi- tion Act; a voluntary regime might not. However that may be, Chris Hersh of Cassels Brock & Blackwell LLP's Toronto office opposes any such scheme. "I'm against more power and regula- tion for the [Competition] Bureau, espe- cially because they're going to need new resources to administer it properly," he says. "I can see why some people think it makes sense, but the reality is that in most cases, it won't have the requisite an- ticompetitive effect." For his part, Michael Laskey of Stike- man Elliott LLP's Toronto office says a vol- untary pre-notification framework would be consistent with Pecman's stated desire to work more closely and collaboratively with stakeholders and enhance transpar- ency about how the agency operates. "There are many risk-averse busi- nesses that would welcome the idea in principle because even if it were not bind- ing, they could pretty well count on it," he says. Laskey doesn't believe, however, that a mandatory regime is a good idea. "I understand that a mandatory re- gime also would create a mechanism where you could get some clarity, but it would have too much process in it and too many hurdles that would slow things down unnecessarily," he says. "A voluntary system could achieve the same objectives if parties were able to rely on the advisory opinions." Hersh, however, worries any opinion rendered under a pre-notification re- gime, whether voluntary or mandatory, could still be vulnerable to changing cir- cumstances. "An agreement could get a blessing at the beginning, but market conditions might change down the road and then the bureau would likely still be able to take action," he says. "It's better to leave things be and not make the bureau aware of something of which they haven't taken notice." As it turns out, the Competition Act already has a provision that allows parties to apply for a binding written opinion. "But it's infrequently used because his- torically it takes a long time to get an an- swer and when it comes, it rarely provides any certainty," he says. "You get responses like, 'The act may apply,' which isn't all that helpful." Indeed, the commissioner is under no obligation at all to provide an opinion in response to an application. "When you combine that with the fact that a request for a written opinion may cause the bureau to concern itself with an agreement that would not otherwise have come to its attention, it's rarely worth- while to use the provision," says Laskey. The bureau's motivation for such a re- gime could, however, emanate from the act's dual-track approach to competitor collaboration. The criminal provision, aimed at capturing hard-core price fix- ing, has sanctions that include significant fines and jail terms. The civil provision applies to agreements that adversely af- fect competition and doesn't attract simi- lar penalties. "But it's up to the bureau to decide which way it wants to go," says Laskey. The bureau has released guidance on its approach to agreements among com- petitors, but it's not binding. "A pre-clearance regime may give businesses additional certainty in know- ing that their joint purchasing agreement or non-compete clause will not be chal- lenged — or at least not under the crimi- nal provision," says Laskey. In terms of its scope, a pre-notifi- cation regime could apply to a host of agreements found in the normal course of business, such as joint purchasing and selling agreements, buying groups, information sharing, research and de- velopment arrangements, joint produc- tion agreements, and non-competition clauses. What's not clear is whether the regime would apply to joint ventures. "Joint ventures are, for example, al- ready subject to mandatory pre-merger notification, but some types are exempt," says Laskey. "It's also easier to assess the competi- tive impact of mergers than of collabora- tive agreements whose scope can change over time." If the bureau decides to proceed with some form of pre-notification, it could turn to the United States and New Zea- land, the two major jurisdictions where such a process exists. "The U.S. system comes in the form of a business review letter, which is a public process by which parties can go to the Department of Justice with their pro- posed conduct," says Laskey. The department can either provide an opinion or refuse to issue one. "Generally, if the [department] gives bad vibes, parties try to withdraw their request," says Laskey. New Zealand, which Pecman has sin- gled out as a jurisdiction with an effective pre-clearance regime, has a voluntary sys- tem that allows parties to request autho- rization to enter into contracts that could substantially lessen competition. The competition commission can — but has no obligation to — grant authorization if the parties meet certain conditions. "The bureau may well use New Zea- land as a model if it proposes its own re- gime," says Laskey. LT 'The bureau may well use New Zealand as a model if it proposes its own regime,' says Michael Laskey. Focus on competition Law WWW.CANADIANLAWYERMAG.COM/LEGALFEEDS A DAILY BLOG OF CANADIAN LEGAL NEWS FEEDS LEGAL POWERED BY Untitled-3 1 14-05-27 1:32 PM C

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