Law Times

PAGE 10 FOCUS September 28, 2009 • Law timeS BY DARYL-LYNN CARLSON For Law Times awyers are bracing as amendments to Canada's Competition Act get set to take eff ect next March. Th ey will replace the current conspiracy provisions with a two- track approach to monitoring agreements between competitors and include both criminal and civil repercussions. Price-fixing law needs clarity, lawyers say L with the revised approach to pros- ecutions and civil actions. "Th is is the area where I think there will be the most uncertain- ty, the changes to s. 45 and 90.1," says Lawson Hunter, counsel at Stikeman Elliott LLP. "It's wiped out 120 years of jurisprudence." Th e changes refl ect the United States' antitrust laws under the Sherman Antitrust Act. Starting next March, the crim- competitors that could dimin- ish or prevent competition will be subject to investigation by the Competition Bureau or a civil re- view. However, there is no provi- sion for fi nes or private damages. Hunter says that although the bureau has issued guidelines, the language contained within the amendment is still very ambiguous, especially when it comes to parties involved in joint ventures or strategic alliances. uncertainty as to how joint ven- tures will be treated and, in partic- ular, whether they will be reviewed under the criminal section." In an eff ort to clarify its in- tent, the bureau in May released its draft competitor collabora- tion guidelines that stated: "Th e amended criminal prohibition is reserved for agreements between competitors to fi x prices, allocate markets or restrict output that constitute naked restraints on Other forms of competitor collaborations, such as joint ventures and strategic alliances, may be subject to review under the civil provision in 90.1 that prohibits agreements only where they are likely to substantially lessen or prevent competition. Currently, the act provides only for a single-track, criminal approach to competitor agree- ments and requires the Crown to prove beyond a reasonable doubt that competition has been less- ened "unduly." As a result, cases involving price fi xing and com- petitor agreements were hard to prosecute, while private lawsuits allowed under the law were rare. But not all lawyers are thrilled inal standard will change under s. 45 to provide the government with means to criminally pros- ecute what are formally known as hard-core cartels for price fi x- ing and agreements that limit the supply of their product. Th e penalties include prison terms of up to 14 years or a fi ne as high as $25 million. Private par- ties can also take civil action. Other agreements between "Th e whole way that the law will be treated in reviewing joint ventures is clearly creating un- certainty and making it diffi cult to give advice," he says. "It's a bit ironic because some advocates argued the old law created a chilling eff ect on joint ventures, but my experience to date is that it's exactly the op- posite, that the change in law has actually created considerable competition (restraints that are not implemented in furtherance of a legitimate collaboration, stra- tegic alliance or joint venture). "Other forms of competitor collaborations, such as joint ven- tures and strategic alliances, may be subject to review under the civil provision in 90.1 that pro- hibits agreements only where they are likely to substantially lessen or prevent competition." Keep on top of the latest in bankruptcy and restructuring Canadian Commercial Reorganization: Preventing Bankruptcy Designed to help you manage or avoid bankruptcy by keeping you up to date on the legislative and judicial changes. This resource helps you understand both the and the . 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Perfectbound • 802 pp. • Published September each year Standing order $65 • P/C 0825140000 Current edition only $75 • P/C 0825010000 • ISSN 1195-3144 But Hunter says the guide- lines don't provide enough clarity to properly advise cli- ents, some of whom have de- termined that if they put their intent in writing, they can bend the law to their favour. "In giv- ing advice to some parties, we've found already parties are seeing how they can take advantage of this change in the law to further their own business." "Th ere are two things the bu- reau needs to do. It needs to be really clear in the guidelines, and they will need to intervene if there are private cases to help shape the law as we go through this period of what I think will be several years of uncertainty," he says. Ultimately, he foresees further changes. "I wouldn't rule out the possibility that in a couple of years, the bureau will have to amend the section." Last week, the Canadian Bar Association hosted its competi- tion law conference where one of the sessions, titled Plugging the Gap? Agreements Under Section 90.1, focused on the amendments. Adam Fanaki, a lawyer and acting senior deputy commis- sioner of competition for the bu- reau's mergers branch, was one of the panellists. During the session, he pre- sented a slide show illustrating fi ve case studies from the United States to try to provide lawyers with some "tangible" examples of how the law will work. "Hard-core cartel agreements typically are subject to criminal prosecution in the United States," he acknowledges. "Other categories of agree- ments, strategic alliances, joint ventures, and other forms of collaboration anti-competitive can still have eff ects, but COMING SOON! Bankruptcy in Canada, Fourth Edition Substantially revised and rewritten by two leading practitioners, this fourth edition is of benefit to civil and common law practitioners. 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Th en it continues: "Will it lessen the 'chilling eff ect' that some believe pre-amendment s. 45 had on otherwise pro-com- petitive competitor collabora- tions or will it continue to dis- courage these arrangements by providing the Competition Bu- reau with new latitude to chal- lenge non-structural arrange- ments between competitors that may (or may not) also raise issues under s. 45?" Fanaki says it's expected there will be judicial interpretation to establish further clarity. He adds that because hard- For a 30-day, no-risk evaluation call: 1.800.565.6967 CA052 Canada Law Book is a Division of The Cartwright Group Ltd. Prices subject to change without notice, to applicable taxes and shipping & handling. www.lawtimesnews.com LT0928 core cartel agreements between competitors to fi x prices, split markets, reduce supply or rig bid- ding on tenders "can have harm- ful eff ects on the economy," more stringent means to prosecute them are somewhat overdue. LT Michael G. 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