Trade Associations and the Competition Act

It is important for all those involved in the operation of a trade association to be aware of competition law in Canada.  The Competition Act (the “Act”) is designed to create a competitive marketplace for Canadian businesses and consumers whereas the Competition Bureau (the “Bureau”) is an independent law enforcement agency whose mandate is to enforce the Act and review conduct which may be harmful to competition in the marketplace.

Compliance with the Act is of utmost importance for all trade associations, as the consequences of non-compliance can be severe, with penalties ranging from reputational damage to civil or even criminal prosecution. The Bureau has released guidance for trade associations entitled “Trade Associations and the Competition Act” intended to help minimize the risk of issues under the Act and recommends the following:

  1. Establish an effective compliance program and, where practicable, appoint a compliance officer;
  2. Exercise care when collecting and sharing competitively sensitive information within the association.  Use a third party to collect the information and have it disseminated in aggregated form so that it cannot be attributed to any competitor;
  3. Ensure that measures are in place to prevent the disclosure of competitively sensitive information to or between individual association members;
  4. Ensure that association meetings have agendas and that minutes accurately reflect attendance and discussions;
  5. Ensure that attendees use caution during association meetings.  If improper discussions arise, attendees should leave the meeting and have their departure noted in the minutes.  The incident should be reported to association executives and/or legal counsel and appropriate action should be taken;
  6. Allow all members to attend annual and other general meetings so as not to exclude a specific firm or category of the association’s membership;
  7. Find alternatives to recommended fee guidelines to provide information to the public or association members on prices;
  8. Ensure that the exercise of standard-setting and other statutorily granted self-regulatory powers is appropriately related to the regulatory mandate established by legislation;
  9. Ensure that rules, codes of conduct or standards (rules) include a clear statement of objectives, expectations and responsibilities, as well as a transparent dispute resolution mechanism; and
  10. Ensure open consultations in the development of any rules.

 The Bureau has recommended that trade associations avoid the following behaviour:

  1. Engaging in communications at meetings or social events about competitively sensitive information.  Private meetings between competitors under the pretext of association meetings should be discouraged;
  2. Using unreasonable disciplinary measures to coerce members to provide information or data for information sharing purposes;
  3. Establishing arbitrary criteria for membership that will exclude a competitor or, category of competitors, from membership in the association;
  4. Imposing sanctions or discriminate against members that do not adhere to rules with respect to competitively important considerations;
  5. Creating a false impression that lower prices or fees are indicators of lower quality services;
  6. Using rules to establish prices, mandate levels or types of services, restrict advertising, or exclude viable competitors from the market;
  7. Using standard-setting to artificially provide some competitors with a competitive advantage over others, including firms with the potential to enter the market; and
  8. Making materially false or misleading representations to the public promoting the business interests of the association’s members.

Overall, the performance or omission of any of these actions will constitute a red flag to the Bureau and will likely incite an unwelcome and unpleasant investigation.  It is the responsibility of everyone involved in a trade association to ensure compliance with the Act.

In the event that a trade association is unsure of their behaviour, the Commissioner of Competition at the Bureau has the discretion to provide a binding written opinion to associations seeking to comply with the Act.  Any person or trade association may request written opinions regarding whether proposed business plans and practices could raise concerns under the Act.  Otherwise, it is recommended that trade associations seek legal advice, as without proper knowledge, compliance and vigilance, a trade association may find itself facing an investigation and potentially serious repercussions.

Jordan Morelli is a corporate and not-for-profit lawyer at Dale & Lessmann LLP in Toronto. He can be reached at jmorelli@dalelessmann.com or (416) 369-3813.