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Anti-cartel and two-stage merger review draft guidelines seen as reasonable

|Written By Kelly Harris

Reasonable is the word lawyers are using to describe draft anti-cartel and two-stage merger review guidelines stemming from recent amendments to Canada’s Competition Act.

The Competition Bureau began receiving submissions on the draft guidelines of the two-stage merger review process in March and the closing date to provide feedback is May 29. The draft guidelines on competition collaboration were recently released and the closing date for responses is Aug. 14.

“They are pretty reasonable, there are always questions, but the overview is that I was pleased by them,” says James Musgrove, chairman of the competition and marketing law group at Lang Michener LLP. “What troubles people is not the people in the bureau, and it is not these guidelines, it is that guidelines are guidelines and not the law . . . we’ll just have to wait some considerable period of time to find out what the law actually means.”

Musgrove says the guidelines provide the bureau’s interpretation of the laws, but in the end the courts will make the final determination. However, his impressions that they are reasonable are consistent with those of lawyers who have been working with the bureau’s new guidelines.

John Carleton, the Macleod Dixon LLP Calgary partner heading up Competition Act compliance for Petro-Canada in the Suncor merger, told Canadian Lawyer InHouse the Competition Bureau has been working with him and his clients to understand the issues they may raise.

He says, “we are seeing them trying to define their processes and trying to determine their own parameters when they are seeking information.”

John Bodrug, competition lawyer with Davies Ward Phillips & Vineberg LLP and the chairman of the Canadian Bar Association’s national competition law section, says the guidelines go a long way to ease the tension in the business community.

“The draft competitor collaboration guidelines provide Canadian businesses with a significant degree of comfort about the types of competitor agreements that the Competition Bureau will, and will not, pursue criminally,” he says. “The draft indicates that the bureau will pursue criminal investigations only against agreements that have no pro-competitive benefits.

“However, such guidelines are not binding on the bureau and it also remains to be seen how the courts will interpret the potentially broad language in the new criminal prohibition on certain types of competitor agreements in the context of private actions.”

The anti-cartel amendments found under the conspiracy provisions of the Competition Act come into force March 2010.

The Competition Bureau says the new rules “create a more effective criminal enforcement regime for the most egregious forms of cartel agreements. They also remove the threat of criminal sanctions for legitimate collaborations to avoid discouraging firms from engaging in potentially beneficial alliances.”

Bodrug says the guidelines provide a number of examples dealing with very specific types of competitor collaborations, such as buying groups and vertical distribution arrangements. He also says the feedback process allows for the business and legal communities to highlight other issues.

The two-stage merger review process, much maligned when it was first introduced in January, aims to improve the “predictability, effectiveness, and efficiency of the merger review process” according to the bureau.

The amendments focus on three key areas including raising the threshold for pre-merger notification, reducing the time period in which the bureau can challenge a merger to the Competition Tribunal, and establish a new mechanism for obtaining information on a merger.

The information mechanism is necessary “to fulfill [the bureau’s] merger review mandate through a supplementary request for information process,” according to the Competition Bureau.

The legislation amending the Competition Act was passed as part of the federal government’s 2009 budget. At the time, many lawyers commented on a lack of transparency in the process as the amendments were attached to a larger bill.

Despite the early criticism, Don Houston, a competition lawyer with McCarthy Tétrault LLP, says the Competition Bureau has done a good job keeping the guideline process open.

“The bureau is really doing its utmost to make this a transparent process in both issuing the guidelines and seeking a transparent process on the guidelines,” he says.

One key, says Houston, is the way the guidelines have addressed early concerns especially around cartels. He says the bureau has “gone to some length to talk about dual distribution agreements.”

Kevin Ackhurst, who specializes in competition law and foreign investment at Ogilvy Renault LLP, also says the process for drafting the guidelines is a departure from the way the amendments were brought in.

“Since (the amendments were brought in) the bureau has been pretty open and timely in getting the draft merger notification regulations out fairly quickly,” he says. “They organized a call with the merger committee of the CBA to talk about transition issues and they were open and flexible about that.”

Following the submission closing dates, responses will be available on the Competition Bureau’s web site, as long as the person or group making the submission agrees to the posting.

Competition Bureau communications officer Phil Norris says once the submissions have been received they will be taken into consideration when the bureau produces its final set of guidelines.

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