Competition Bureau statement on the application of the Competition Act to no-poaching, wage-fixing and other buy-side agreements
November 27, 2020 - GATINEAU, QC - Competition Bureau
In 2016, the United States’ Department of Justice’s Antitrust Division and Federal Trade Commission issued guidance regarding the application of U.S. antitrust laws to no‑poaching and wage-fixing agreements between employers. This joint guidance indicated that “Going forward, the Justice Department intends to criminally investigate naked no-poaching or wage-fixing agreements that are unrelated or unnecessary to a larger legitimate collaboration between the employers.”
The Competition Bureau has since received increasing interest from the legal and business communities regarding the treatment of such agreements in Canada. Specifically, stakeholders have sought clarity on whether no‑poaching, wage-fixing and other types of agreements between purchasers (buy-side agreements) could result in criminal charges in Canada under section 45 of the Competition Act.
Section 45 is a criminal provision regarding conspiracies, agreements or arrangements between competitors. Following the Government of Canada’s amendments to the Competition Act in 2009, section 45 prohibits agreements among competitors to fix prices, allocate markets or limit the supply of a product.
Other forms of competitor collaborations, such as joint ventures and strategic alliances, may be subject to review under section 90.1 of the Competition Act, a civil provision that prohibits agreements when they are likely to substantially lessen or prevent competition.
In order to provide clarity and transparency for stakeholders, the Competition Bureau sought legal advice from the Department of Justice Canada and the Public Prosecution Service of Canada with respect to the application of the Competition Act to buy-side agreements, including employment-related no-poaching and wage-fixing agreements. This advice has informed the enforcement approach described below.
The Competition Bureau’s enforcement approach to buy-side agreements:
The Competition Bureau recognizes that certain buy-side agreements are anti-competitive and have no pro-competitive consequences.
Buy-side agreements not to hire employees away from competitors (no-poaching agreements) or agreements that set wages at a specific lower level or range (wage-fixing agreements) may have anti-competitive effects in the labour and related product markets. While the Competition Bureau views such buy-side agreements between competitors as raising serious competition issues, the 2009 amendments to the Competition Act included the removal of the word “purchase” from section 45, limiting its scope to supply-side agreements.
Given the 2009 amendment and based on the legal advice it has received, the Competition Bureau will not assess buy-side agreements for the purchase of products and services—including employee no-poaching and wage-fixing agreements—under section 45.
However, the Competition Bureau may assess buy-side agreements under section 90.1 of the Competition Act. Two important thresholds must be met in order to find that an agreement between competitors contravenes section 90.1 of the Competition Act:
- an agreement that is either existing or proposed (not past) must be established; and
- the agreement must substantially prevent or lessen competition.
Proving a substantial lessening or prevention of competition is not a low threshold. Where the Competition Bureau brings a case forward under section 90.1, the Competition Tribunal may issue an order to any person—whether or not a party to the agreement—from doing anything under the offending agreement. The Tribunal does not have the authority to order the payment of administrative monetary penalties without the express consent of the parties to the buy-side agreement.
Agreements between competitors to fix the price, allocate markets or limit the supply of a product in a market, regardless of the degree of formality or enforceability of the agreement, will continue to be scrutinized under section 45.
The Competition Bureau will outline its enforcement approach to buy-side agreements in further detail in the forthcoming update to its Competitor Collaboration Guidelines.
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