Applicability of the collective bargaining exemption

(original sent December 22, 1999)

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 Act by indicating whether a particular practice or transaction would provide the Commissioner of Competition ("the Commissioner") with sufficient grounds to commence an inquiry on his own initiative pursuant to paragraph 10 (1)(b) of the Act.

You should understand that the Commissioner has no authority to 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 of the Act.

I understand that your collective agreement has expired and that presently unionized employers engaged in various aspects of the construction industry are preparing to enter into a new collective agreement with the various building trade unions. Consequently, you are deliberating the legality of including in the new agreement an article which was not contained in the now expired agreement.

The proposed article states as follows:

"Unionized sub-contractors, general contractors, general contractors acting as Project Managers, or their agents on their behalf, will not subcontract work from non-Union general contractors or non-Union Project Managers, except where the non-Union General contractor or non-union project manager has an agreement with the Building Trades that all work on the project will be performed by unionized forces.

This will not apply where an Owner stipulates that a portion of the work is to be performed by non-Union forces.

Any failure to comply with this article shall render the Employer liable for damages equivalent to those for the breach of the sub- contracting provision set forth in article ( ) of this Agreement.

All signatory Unions agree, that, other than for bona fide organizing purposes, they shall not supply manpower to any Employer in the construction industry that is not bound to this collective agreement.

This provision will be introduced for the duration of this agreement."

In my view this article, if implemented as part of a collective agreement between the construction unions and construction employers, would amount to a "group boycott", involving a group of competitors at one level who attempt to protect themselves from competition from non-group members who seek to compete at that level. The hallmark of the group boycott is the effort of the competitors to barricade themselves from competition at their own level.

Unless this exclusion of competition, by way of a group boycott, is facilitated by the collective bargaining exemption of the Act, it may raise questions under the conspiracy provision of Competition Act ("Act").

According to paragraphs 4 (1)(a) and (c) of the collective bargaining provision of the Act, nothing in the Act applies to contracts, agreements or arrangements, in respect of salary or wages and terms and conditions of employment, which are or have been bargained for, entered into and executed by combinations of workmen or employees and combinations of employers in a trade, industry or profession. On the other hand, however, sub-section 4 (2) of this provision makes it clear that the section 4 (1) exemptions do not apply to contracts, agreements or arrangements that are entered into by an employer to withhold any product (defined in the Act to include an article or any type of industrial, trade or professional service) from any person, or to refrain from acquiring from any person any product other than in respect of the services of workmen or employees who are part of the above said exempted combinations.

Moreover, the proposed article, rather than speaking to the reasonable protection of workmen or employees as members of the permitted combinations by paragraph 4 (1)(a) of the Act, provides for refusing to deal with would be competitors, and rather than speaking in respect of salary or wages or working conditions of employment, as contemplated by
section 4 (1)(c) of the Act, it establishes a boycott, having the effect of barricading the parties to the boycott from competition at their own level. Thus, if implemented, the proposed article would cause the unionized construction firms to boycott non-union general contractors and project managers pursuant to an agreement that is not exempted from the application of the Act. It seems that this agreement would in effect deprive non-union general contractors of the services of unionized firms, impair their ability to carry on business and, consequently, lessen competition in the purchase, sale and supply of sub-contract construction work in the region covered by this collective agreement.

It is my view that such a situation would have implications for section 45,
the conspiracy provision of theAct. Pursuant to this section, it is an offence
for anyone to conspire, agree or arrange with another person to lessen competition unduly in respect of prices, production sale and supply of a product. A contractual outcome of this nature becomes substantive under this section when it can be demonstrated that its effect is to lessen
competition unduly.

Your letter seeks an advisory opinion as to whether there would be grounds for the Commissioner to commence an inquiry under paragraph 10 (1)(b) of the Act in connection with the proposed article.

In my opinion, based on the information which you have provided and as set out above, section 4 of the Competition Act does not exempt the proposed article from the application of the Competition Act and, therefore, inclusion of this article in the contemplated collective agreement would provide the Commissioner with reason to believe for causing an inquiry to be made under sections 45 and pursuant to paragraph 10 (1)(b) of the Competition Act. On the other hand, I would suggest that if the article, instead of attempting to control the business dealings between building contractors, would require unionized employers to have all the contractual work performed by unionized employees only, it would most likely be excepted by the section 4 exemption from the application of the Competition Act.

This opinion will continue to be valid unless there is an amendment of the provision of legislation 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,

Jim Walker
Assistant Deputy Commissioner
(Criminal Matters)

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