Applicability of the conspiracy and price maintenance povisions to an agreement between several departments or agencies of a Government (the "Departments"), and a professional association (the "Association") to provide goods and services to the clients of the departments

The following opinion has been amended to prevent identification of the specific parties involved.

The Program of Advisory Opinions seeks to facilitate compliance with the Competition Act (the "Act"). Through this program, the Commissioner of Competition (the "Commissioner") endeavours to assist persons who wish to avoid conflict with the Act by examining matters submitted to him and by indicating whether or not the proposed plan would lead him to commence
an inquiry.

As you can appreciate, the Commissioner has no authority to regulate business or decide the law. In addition, you should be aware that the Commissioner, under certain circumstances, is obliged to commence an inquiry under paragraphs 10 (1)(a)Footnote 1 and 10 (1)(c)Footnote 2 ofthe Act.

Our understanding of the facts based on the information gathered are as follows:

  • The Departments wish to enter into the Agreement with the Association to create a program for the provision of goods and professional services to their clients.
  • The Departments have entered into similar agreements with the Association since at least [Date removed].
  • Pursuant to the program established by the Agreement, members of the Association, who register as providers under the program, agree to charge fees no higher than those set out in a fee schedule established in negotiations between the Association and the Departments. In return, the Departments permit the providers to directly bill the Departments for services provided to their clients.
  • The Association cannot bind its members by contract to participate in the program and/or ensure that those who elect to participate comply with the provisions of the Agreement.
  • Under the proposed draft Agreement, members of the Association would remain free to participate or not to participate in the program and the Association would not take any action to coerce the members to enter into the program and/or impose any sanction or discrimination against the members who do not wish to participate in the program.
  • The Association will limit its activities to informing the members of the terms of the Agreement and to encouraging them to take part in the program to promote as wide a coverage as possible of professional sources to the clients of the Departments, as requested by the Departments.
  • Approximately 50% of the Association members have elected to participate in [another similar program involving the Association] and one might infer that 50% would participate under the proposed Agreement with the Departments.
  • The Association members who choose not to register as providers under the program will retain the right to deal with clients of the Departments outside of the program at fees of their choosing. However, in such a case the professional must bill and collect payment from the Departments' clients, who, in turn, would receive compensation from the Departments only up to the maximum fees allowed under the Agreement.
  • The Association members who decide to register as providers under the program may charge any fees they wish up to the maximum fees stated in the Agreement.
  • The Departments have no intention to coerce members, directly or through their Association, to participate in the proposed program. They intend only to mail the negotiated fee schedule to the Association members who register under the program as providers of goods and professional services.
  • The Association has expressed concerns that subscribing to the proposed Agreement might raise issues under the Act and its concerns have prompted the Departments to ask the Competition Bureau to review the draft Agreement.
  • [A specific provincial statute] expressly governs the activities of the Association and/or its members. It does not however authorize the Association to set professional fees for its members, nor to regulate in any manner the rates they charge in providing goods and professional services.

The Agreement has been reviewed in relation to the provisions of the Competition Act, particularly sections 45 and 61.

Section 45 (Conspiracy):

For an offence to be committed under section 45, there must be an agreement or arrangement to prevent or lessen competition unduly. Based on the information which you have provided, there has been no agreement or arrangement to follow the fees suggested in the fee schedule, and there will be no attempt to enforce adherence to those fees. Consequently, there has been no agreement or arrangement to lessen competition unduly. You should be aware, however, that if there were evidence of the existence of an agreement or arrangement among the Association members to follow or enforce fees, this fee schedule might constitute relevant and admissible evidence in proceedings under section 45.

Section 61 (Price Maintenance):

The fee schedule included with the Agreement might constitute an attempt to influence upward, or to discourage the reduction of, the fees charged by the Association members. However, on the basis that the Association and its members have not agreed to adopt the fees, and will take no action directed towards forcing or enticing members to adopt the fees, such an attempt at influence would not be by one of the prohibited means, i.e., "by agreement, threat, promise or any like means". Consequently, there would be no contravention of paragraph 61 (1)(a) of the Act. You should again be aware that if there were other evidence indicating a contravention of section 61, this fee schedule might constitute relevant and admissible evidence in proceedings under that section.

As long as members will not suffer in their business relations with the Association or other members if they deviate from the suggested fees, I have concluded that there would be no refusal of a product to, or discrimination against, any member who charges fees below that suggested in the fee schedule. Consequently, there would be no contravention of
paragraph 61 (1)(b) of the Act.

To ensure that Association members themselves do not contravene section 61, I suggest that it might be prudent for the Association to caution its members against attempting to influence a colleague to follow the fee schedule, or attempting to coerce a supplier of goods and professional services into taking action against a member who does not follow the fee schedule. Such attempts, depending on the circumstances, could be in contravention of subsections 61 (1) and/or 61 (6) of the Act, even if the attempts were not successful.

Notwithstanding the preceding comments, a strict reading of the Agreement, as currently worded, could be interpreted so as to raise issues under sections 45 and 61. Accordingly it is essential, from the Competition Bureau's perspective, to revise certain provisions of the Agreement to reflect more accurately the intent of the Departments to respect the right of each Association member to decide on an individual basis to participate or not participate in the program.

The changes could also serve to alleviate the concerns of the Association that its involvement in the negotiation and the implementation of the Agreement might raise questions under the Act.

The first provision for which changes are suggested is [term deleted] which now reads as follows:

1) The Association agrees to use its best efforts to

(b) Have all Members adhere to the services and pricing that have been set forth in this Agreement.

Since the Association has no authority over its members and cannot bind them to comply with the Agreement, we suggest that the wording be changed to reflect that situation and that no mention be made of having the members adhere to the pricing set forth in the Agreement, although it is understood that members who wish to register as providers are obliged to limit their fees to the maximum fees set out in the schedule.

It is suggested that the text of 1)(b) could be revised to read as follows:

(b) Encourage all members to provide goods and services to clients of the Departments covered by this Agreement.

The next provision for which changes are suggested is [term deleted] which now reads as follows:

10) The Departments acknowledge that the Association cannot bind its members by contract and agree that any representation, warranty or covenant contained in this memorandum of Agreement by the Association relating to its members will be interpreted and construed as an obligation on the part of the Association to use its reasonable best efforts to require compliance of its Members.

Again, as the Association cannot legally bind its members, and since the Departments have no intention to coerce members to participate in the program, the provision should be modified to reflect this. The terms "obligation" and "require compliance" seem to indicate that as a party to the proposed Agreement the Association would exercise some form of compulsion to have its members comply with the Agreement.

It is suggested that the paragraph could be revised to read as follows:

10) The Departments acknowledge that the Association cannot bind its members by contract and agree that any representation, warranty or covenant contained in this memorandum of Agreement by the Association relating to its members will be interpreted and construed as an undertaking on the part of the Association to use its reasonable best efforts to encourage all members to provide goods and services to clients of the Departments pursuant to the terms of the Agreement.

In your correspondence you indicate that the fees stated in Appendix "D"of the Agreement are maximum fees and that Association members may charge any amount below the maximum fees established in the proposed Agreement. In order to comply with the Act, you should include a provision in the Agreement that confirms that members are under no obligation to charge the maximum fees listed in the fee schedule. In addition, a prominent note to that effect should be added to the fee schedule proper.

It would also be worthwhile, as a measure of precaution for the Association, to advise its members that an agreement, even among members in a local market, to abide by the recommended fees or to boycott the provision of professional goods and services, could raise an issue under the conspiracy provisions of the Act. It could also be noted that the fact that government departments are party to the Agreement does not protect or exempt the Association or its members from any liability under the Act.

In my opinion, based on the information which you provided and with the implementation of the changes to the draft Agreement identified in this letter, the adoption and promulgation of the Agreement, and more specifically the [suggested] fee schedule, would not provide the Commissioner with grounds for causing an inquiry to be made pursuant to paragraph 10 (1)(b) of the Competition Act.

This opinion is predicated on the assumption that no material facts have been omitted or misrepresented in your submission. It is based on interpretation of the existing jurisprudence. Finally, this opinion will continue to be valid unless there is an amendment of the provisions of the Competition Act upon which it is based. Should you be uncertain as to the impact of any amendment on the opinion you have received, you should seek legal advice or re-contact the Competition Bureau.

Yours sincerely,

Senior Deputy Commissioner
of Competition
Criminal Matters Branch

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