The Canadian Bar Association—Responses to the consultation on the Draft Information Bulletin on Trade Associations

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National Competition Law Section
Canadian Bar Association

January 2009

Preface

The Canadian Bar Association is a national association representing 37,000 jurists, including lawyers, notaries, law teachers and students across Canada. The Association's primary objectives include improvement in the law and in the administration of justice.

This submission was prepared by the National Competition Law Section of the Canadian Bar Association, with assistance from the Legislation and Law Reform Directorate at the National Office. The submission has been reviewed by the Legislation and Law Reform Committee and approved as a public statement of the National Competition Law Section of the Canadian Bar Association.

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I. Introduction

The National Competition Law Section of the Canadian Bar Association (the CBA Section) welcomes the opportunity to comment on the Competition Bureau's Draft Information Bulletin on Trade Associations (the Draft Bulletin).

The CBA Section strongly supports the Bureau's continuing efforts to clarify its enforcement policies by publishing guidelines, information bulletins, speeches, press releases and other interpretive aids for the Canadian business community and consumers. In this specific case, the CBA Section supports the Bureau's decision to provide guidance on the applicability of the Competition Act to activities conducted by or under the auspices of trade associations. Trade association compliance is an important and timely issue for the Bureau to address.

The CBA Section agrees with much of the Draft Bulletin's contents. Accordingly, our comments focus on areas of suggested improvement and clarification. The annotated copy of the Draft Bulletin, attached, marks up some of our suggestions into the text.

II. General comments

Context

Trade association activity continues to come under scrutiny in Canada and elsewhere. The CBA Section suggests that it would be helpful to emphasize this point and provide illustrative examples in the Draft Bulletin (e.g., in a revised Introduction).Footnote 1 This will help the target audience (trade associations and their members) fully appreciate the extent to which their conduct can be the focus of antitrust proceedings and form the basis for liability.

In a similar vein, the CBA Section suggests that the Draft Bulletin would be enhanced if greater effort were made to integrate specific case examples into the text rather than isolate them in an Appendix. Again, the goal would be to convey to the readers that the concerns addressed in the Draft Bulletin are real and not merely theoretical. (As noted in Part III below, the CBA Section believes that there are additional cases that also could be usefully referred to other than the three currently discussed in Appendix I.)

Be more concise where possible

Portions of the Draft Bulletin could be more concise and would benefit from additional editing. This applies in particular to Part 2 of the Draft Bulletin (Relevant Provisions and Factors Assessed). For example, section 2.4 goes on at length about the Act's restrictive practices even though the actual examples (on page 11) seem to relate largely to section 79 (abuse of dominance). Another option is to move the bulk of Part 2 into an Appendix and include in the text of the Draft Bulletin only very brief references to the relevant provisions and supporting examples of how they could apply to trade association activity.

Accessibility to the target audience

Parts of the Draft Bulletin could avoid using legalisms that may not be clear to the lay reader or generalities that lack sufficient specificity. As an example, the statement is made on page 18 of the Draft Bulletin (section 3.7.2) that "voluntary codes should not be used in a way that could substantially reduce competition" without giving examples of what the Bureau means by this statement. Similarly, section 3.7.3 of the Draft Bulletin states that standard setting organizations should "generally avoid" adopting certain types of standards, without explaining the Bureau's view of when it is actually permissible/not permissible to adopt these standards (page 18). In the first paragraph in section 3.1 (Information Sharing), the discussion uses terminology ("homogenous" products, "competitive variables") that may not be understood by non-specialists. Additional examples are in Part III of this submission (Specific Comments) and in the attached mark-up.

The CBA Section suggests that the Bureau review the Draft Bulletin to ensure the language is clear and non-technical and that examples are provided wherever possible to give concrete meaning to general statements. The goal should be to make the Draft Bulletin useful to the business people and association executives who are the Bulletin's principal target audience.

Best practices/guidelines

The CBA Section considers it particularly helpful that Part 4 of the Draft Bulletin incorporates best practices or guidelines. The CBA Section also acknowledges the helpful opening statement in section 4.2 that these guidelines represent a non-exhaustive list of procedures which trade associations "can follow" to avoid potential issues under the Act. Nonetheless, the CBA Section suggests that it would be preferable for the Draft Bulletin to incorporate a more robust statement leaving no doubt that the guidelines are suggestions only and should not be treated as mandatory. It is important to avoid confusion on this point because associations might disregard the guidelines in their entirety if they believe there is no flexibility to adapt the guidelines to the association's specific circumstances. The CBA Section recommends using similar language to that in the preface to Appendix A of the Bureau's recently released Information Bulletin on Corporate Compliance Programs, which sets out a suggested "Corporate Compliance Program Framework".Footnote 2 The key message should be the same, i.e., that: (i) the Bureau's guidelines are intended to be a flexible tool that should be adapted to the specific circumstances of particular trade associations; and (ii) trade associations will not be considered deficient if their programs and procedures do not conform to the Bureau's guidelines in every respect. This concept also should be consistently reflected in the guidelines themselves as well as elsewhere in the text of the Draft Bulletin where the Bureau recommends that certain conduct be adopted. Additional examples are in Part III of this submission (Specific Comments) and the attached mark-up.

"Informal" versus "formal" sessions

The CBA Section suggests that the Bureau place greater emphasis in the Draft Bulletin on the risks posed by "informal" meetings of competitors at trade association events. As recognized by the OECD in a recent report, trade associations often have in place compliance procedures to avoid improper discussions at their formal sessions (similar to what the Draft Bulletin suggests in its Best Practices section).Footnote 3 However, as the Bureau well knows, trade association meetings also offer many opportunities for "unofficial" interactions that can provide a forum for anticompetitive discussions. The CBA Section suggests the Bureau use the Draft Bulletin to highlight these risks. For example, the discussion in Part I (Background) could benefit from this additional emphasis (see page 5).

Impact on competition

On occasion, the Draft Bulletin is unclear about the degree of impact on competition required to create liability under the Act. For example, the first paragraph in section 3.7.1 states that there is a risk that association rules and regulations "can have a negative impact on competition". This type of language leaves the erroneous impression that any negative impact on competition can be an issue, whereas the Act requires that there be a substantial or undue impact on competition for liability to arise (depending on the provision). The CBA Section suggests that this type of erroneous impression can be corrected without being overly technical. For instance, using the above example, the Draft Bulletin could state that there is a risk that association regulations "can result in a substantial reduction in competition contrary to the Act", and then set out how this risk could materialize. (The attached mark-up highlights additional occasions where similar changes should be made.)

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III. Specific comments

Below are more specific comments on the Draft Bulletin. In addition, we attach a mark-up with selected drafting suggestions.

Introduction

  • The CBA Section suggests deleting the reference to the ABA publication in the second paragraph of this section. As a general matter, the CBA Section does not believe it is appropriate for a Bureau publication to cite non-Canadian authorities unless there is a specific reason for their inclusion. One option might be to add an Appendix listing helpful materials from other jurisdictions, such as the ABA publication and the OECD Report mentioned previously.

Part 1: Background

  • The Bureau should consider including a discussion of what its enforcement approach will be in situations where a trade association may be an unwitting rather than active participant in the alleged anticompetitive conduct (e.g., where members use association events as a "cover" for their conduct). For example, are there circumstances in which the Bureau might pursue the association for "aiding and abetting" the offence or consider the association to be a "party" to the offence?

Part 2: Relevant provisions and factors assessed

2.1 Section 45: Conspiracy

  • The discussion on page 7 of the elements of the section 45 conspiracy offence does not seem entirely consistent with the Supreme Court of Canada's decision in PANS.Footnote 4 It would be more accurate to say that there are two elements to the offence (actus reus and mens rea), each of which has two aspects, rather than three elements. In any event, the statement in the Draft Bulletin is inaccurate in saying that the elements must be met in determining whether or not a conspiracy exists; the issue is whether or not the conspiracy offence has been committed. To simplify matters, the CBA Section suggests starting off the second paragraph as follows: "The Crown (Public Prosecutions Service of Canada) must prove the following elements beyond a reasonable doubt in order to obtain a conviction under section 45".Footnote 5
  • The defence offered by subsection 45(3) is of increasing importance for industries and their associations, particularly as they embark on various environmental initiatives. It would be helpful, therefore, if the Bureau could go beyond the very generic discussion in the Draft Bulletin and provide one or more concrete examples (based on experience or theoretical) of when an agreement that falls under subsection 45(3) could still be considered illegal by virtue of the operation of subsection 45(4). For example, reference could be made to the written advisory opinion issued to the Society of Obstetricians and Gynaecologists of Canada, which considers this issue.Footnote 6

2.2/2.3 Section 47: Bid-rigging/Section 61: Price maintenance

  • The Bureau could provide examples of how the bid-rigging and price maintenance sections of the Act could apply in the trade association context, as the Draft Bulletin does for the other provisions it discusses.Footnote 7

Part 3: Association activities that may raise concerns

3.1 Information sharing

  • Given the importance of this issue, the CBA Section suggests that it would be helpful to provide more specific advice or examples (based on experience or theoretical) of when (or if) an agreement among trade association members to exchange information may in itself violate section 45.
  • This is an instance where the Draft Bulletin's recommendations for trade association conduct are too absolute and do not convey the appropriate message of flexibility. For example, the last bullet point on page 12 (independent data collection agency) is too prescriptive. The need to consider using an independent agency will depend on the circumstances, such as the type of information involved and whether the association members could conceivably be viewed as possessing market power. The CBA Section suggests rewording this bullet point as follows to reflect this point:

    • Consider using an independent collection agency – In certain circumstances, trade associations may consider using an independent firm to collect data. This is an additional way to preserve the anonymity of individual members and their data.
  • Similarly, the statement in the second to last bullet on this page that information exchanged "should not reveal individual firm data or specific transaction data" is too strict as a general proposition. For example, there should be no concern if the data deals with issues that are not necessarily competitively sensitive. The CBA Section suggests rewording this paragraph as follows:

    • Where appropriate, only disseminate information in an aggregated form – Trade associations should not disseminate individual firm data or specific transaction data without considering whether the data is of a competitively-sensitive nature (e.g., pricing data). If it is, then the association should disseminate the data in aggregated form. Aggregating competitively-sensitive information so that individual data cannot be identified makes it unlikely that the disclosure of such information will have an adverse effect on competition.

See the attached mark-up for additional suggestions.

  • Several bullet points on the same page also state that adhering to the Bureau's recommendations will only "reduce the likelihood" of violations (or similar language to that effect). This creates unnecessary doubt about the utility of the Bureau's recommendations and more definitive language should be used, e.g., "makes it unlikely" that concerns will be raised. See the attached mark-up for specific suggestions.

3.2 Agendas and meetings

  • The CBA Section suggests that it is unrealistic and often unnecessary to recommend that every trade association have legal counsel review agendas and minutes and attend all association meetings where there is "potential" for discussion of sensitive subjects (page 13 of the Draft Bulletin). First, many associations have memberships that include a wide range of firms that are not necessarily competitors – e.g., the Chamber of Commerce – and it seems unnecessary to require legal counsel to review all agendas and minutes in those circumstances. Second, where an association includes mostly or only competitors, there is always "potential" for discussion of sensitive subjects. While attendance of legal counsel may be a preferred practice, it is not realistic for many associations to have counsel attend all meetings.
  • As noted in Part II of this submission, the CBA Section believes that there is greater risk that "informal" meetings and conversations at trade association events could lead to anticompetitive conduct. Accordingly, we recommend that the phrase "should be treated with great caution" in the second paragraph of section 3.2 be supplemented with the following admonition: "and should not, under any circumstances, involve discussions of competitively sensitive topics".

3.4 Association discipline

  • The meaning of the first sentence of this section is unclear. Is it the "recommendations" referred to that "may have an anticompetitive effect" or the imposition of sanctions that may render the recommendations anticompetitive? Based on the rest of the discussion in the section, it seems that the Bureau intends to convey the latter meaning. Assuming that is the case, the CBA Section suggests rewording the first sentence to make this meaning apparent and also to clarify that the use of sanctions will not, in all cases, be anticompetitive: "Imposing sanctions to enforce association recommendations may, in certain circumstances, lead to anticompetitive effects". See the attached mark-up for additional drafting suggestions.
  • The Bureau also might consider discussing other possible situations – apart from fee guidelines or recommendations – where coercion/sanctions can give rise to competition concerns, e.g., in the development of policies and responses directed to non-members.

3.5 Fee Guidelines

  • Fee guidelines are clearly an important issue for the Bureau.Footnote 8 While the Bureau may not favour the use of fee guidelines, it recognizes they are legal provided that certain criteria are satisfied, e.g., the guidelines are voluntary and non-binding. The CBA Section welcomes the Draft Bulletin's acknowledgment of the legality of properly structured fee guidelines.Footnote 9 It is helpful that the Draft Bulletin sets out the criteria which the Bureau believes must be satisfied by fee guidelines in order not to raise issues under the Act. However, the value of this list of criteria is undermined by the Draft Bulletin's use of the equivocal phrase "are less likely to raise concerns under the Act" (emphasis added). As noted previously on the Information Sharing section, the CBA Section suggests this equivocal language is not as helpful as stating that fee guidelines will not raise issues (or are unlikely to raise issues) where the Bureau's conditions are met.

3.7 Self-regulation, voluntary codes and standard setting

  • With respect to section 3.7.2, it would be helpful for the Bureau to explain why "explicit commitment of the leadership", "acceptance by members" or "regular flow of information" are characteristics of voluntary codes which do not create competition concerns (page 18, second paragraph).
  • With respect to section 3.7.3, the statement that: "[a]ssociations should generally avoid adopting standards that require members to gain access to intellectual property controlled by certain members of the association" (page 18, last paragraph) is on the one hand too vague (what does "generally avoid" mean) and at the same time too strict. First, this may not be practical for many standard setting organizations. Second, there should not be competition concerns if intellectual property included in the standard has been fully disclosed in the standard setting process. Such a process might include an agreement by the intellectual property owner to standard licensing terms as a condition for its intellectual property being adopted by the standard setting organization.

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Part 4: Best practices

4.2 Guidelines

General
  • Some suggested guidelines under this heading could be revised to be more practical and meaningful. For example, the suggestion that a compliance officer should be appointed is likely impractical for many associations, unless that is simply another title of an existing officer who already performs these functions. The suggestion to "implement clear guidelines on association activities" is not meaningful and should be explained if the Bureau intends it to convey something substantive. Finally, the suggestion to make the board of the association sufficiently diverse so as to minimize the risk of competition law violations by including more than competitors presumes that the association itself includes more than competitors, and that associations can control who runs for these positions and is elected, which is not necessarily the case. This suggestion should be at least qualified by words such as "where applicable" or "if possible".
Agendas & meetings
  • The CBA Section believes that the suggestion to "allow all members to attend meetings so as not to exclude a specific group or segment" is too broad, particularly with regard to executive or committee meetings where only the specific members should be permitted to attend.
  • It also would be helpful to include more particular guidance on what should be done if an association meeting does stray into inappropriate discussions (e.g., should the chair stop the meeting?)
Membership
  • The CBA Section suggests that requiring an appeals process for membership refusals is unrealistic in many cases.
Sanctions/discipline
  • As previously mentioned, this guideline is unclear. The CBA Section suggests replacing the guideline as written with the following: "Consider whether the imposition of sanctions aimed at inducing members to follow specific association recommendations could have a substantial anticompetitive effect."
Voluntary codes
  • For the first item, please see our comments with respect to section 3.7.2 above.
Legal counsel's role
  • The CBA Section suggests that the recommendations that legal counsel approve the agenda or minutes of any association meeting and actively participate in association meetings are too broad. For example, this would represent an impossible task for national associations, which may have thousands of members, numerous task forces, and meetings on a weekly if not daily basis. The suggestion to participate in all association meetings also seems to contradict the earlier recommendation (in section 3.2) that counsel attend meetings where "sensitive" issues are discussed.
Immunity Program
  • The Bureau might consider placing this discussion under a separate heading so that it stands out and is not lost.
  • It would be helpful for the Bureau to provide greater detail on how its Immunity Program applies in the context of an application for immunity by an association. For example, given the Bureau's position that joint applications for immunity will not be accepted, would the immunity extend to the association's members?Footnote 10

Part 5: Binding Written Opinions Program

  • The Bureau might consider mentioning in the body of the text, rather than in a footnote, that it charges fees for advisory opinions (and what those fees are). Fees are a matter of obvious interest to trade associations contemplating a request for an advisory opinion.

Appendix 1

  • The Bureau might consider incorporating illustrative case references in the body of the Draft Bulletin and expanding the cases referred to beyond those included in this Appendix. For example, the Bureau might consider discussing (or at least citing where relevant) the reported cases in which convictions were registered against trade associations or in which trade association personnel were charged (e.g. Electrical Contractors - 1961 (OCA), B.C. Pharmacists (1971 BCSC), Armco (1974 Ont.H.C.), Container Materials (1991 SCC)).
  • The Bureau also might consider summarizing and citing relevant advisory opinions that have been made public, such as the advisory opinion provided to the Society of Obstetricians and Gynecologists of Canada and the advisory opinion provided to the Working Group on Lawyers and Real Estate (referred to above).
  • With respect to the three cases summarized in Appendix 1, it is important to clarify that the Kent County Law Association and real estate orders were issued under section 34(2) of the Competition Act and, as such, did not involve convictions or any finding of guilt. For that reason, the references to "Time Frame of Conspiracy" and "Trade Association Activity and Conspiracy" should be changed to "Time Frame of Conduct" and "Trade Association Activity". See attached mark-up for additional comments.
  • It is also important that the summaries in the Appendix are reviewed carefully to ensure they are fair and accurate. For example, the summary of the “Real Estate Prohibition Order”:

    1. inaccurately suggests that the some of the particular conduct described was engaged in by more than one board; and
    2. refers to prohibitions against "attempting to control" entry or advertising that are not in the actual prohibition order.

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IV. Conclusion

The CBA Section thanks the Competition Bureau for the opportunity to submit these comments and hopes that they are of assistance. The CBA Section would be pleased to discuss its comments further at the Bureau's convenience.

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