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Archived — Draft Technical Bulletin on "Regulated" Conduct

Technical Bulletin

November 2005


I.  Introduction

This Technical BulletinFootnote 1 (“Bulletin”) outlines how the Commissioner of Competition (“Bureau'”) approaches the enforcement of the Competition Act (“Act”) with respect to conduct which may be regulated by another federal, provincial or municipal law or legislative regime (“law”), including the Bureau’s approach to the “Regulated Conduct Doctrine” (“RCD”).Footnote 2

The Bureau’s starting point is that the Act generally applies to all conduct covered under a plain reading of the relevant provision(s) of the Act.  The Bureau believes that, in the vast majority of cases, both the Act and any other law said to regulate the impugned conduct will be able to coexist, without conflict, and that the Act will apply as written. The approach outlined in this Bulletin is based on a recognition that the Bureau is obliged to apply the Act, the Act is a framework law of general application and Parliament “… is not presumed to depart from the general system of law without expressing its intention to do so with irresistible clearness…”.Footnote 3 The Bureau’s approach to the RCD recognizes that the RCD is an exception to these fundamental principles, that RCD caselaw is underdeveloped, and that the most recent decision of the Supreme Court of Canada to address the RCD directs a cautious application of the RCD.Footnote 4

Generally, in determining whether conduct regulated by another law will be pursued under the Act, the Bureau will carefully consider the purpose of the Act and any other law said to be applicable to the conduct, the interests sought to be protected by both laws, the impugned conduct, the potentially applicable provision(s) of the Act and of the other law, the parties involved, and the principles of statutory interpretation applicable to the case.Footnote 5  As outlined below, the Bureau will not necessarily approach conduct regulated by provincial laws in the same manner as conduct regulated by federal laws.Footnote 6 Similarly, the Bureau will not necessarily approach the application of the reviewable practice provisions of the Act to conduct regulated by another law in the same manner as it will approach the application of the criminal provisions of the Act to such conduct.Footnote 7

Even if particular conduct is not immune from the application of the Act by virtue of one doctrine or defence, such as the RCD, a party may still benefit from other doctrines or defences, such as a lack of requisite mens rea, official inducement of error, statutory justification, or Crown immunity.  Even absent any such defence or doctrine, the Bureau will consider the public interest in pursuing conduct undertaken in good faith reliance on a law.  Each case will be considered on its individual merits in accordance with its particular facts.

II.  Conduct That May Be Regulated By Provincial Laws

The Supreme Court of Canada has traditionally concluded that a valid federal law, such as the Act, will overrideFootnote 8 a valid provincial law where the operation of the provincial law conflicts with the operation of the federal law (“federal paramountcy” rule).  Such a conflict has often been said by the courts to occur where a party could not comply with both laws (so-called “impossibility of dual compliance” test).Footnote 9 More recently, the Supreme Court has held that, even absent such a conflict, “[p]rovincial legislation that displaces or frustrates Parliament’s legislative purpose” can also be overridden by a valid federal law.Footnote 10

In a number of cases,Footnote 11 Canadian courts developed a principle of interpretation, the RCD, which immunized a regulatory body, exercising its authority under a validly enacted law, from the criminal conspiracy provisions of the prevailing competition law by, effectively, reading down the conspiracy provision. Footnote 12 In its most recent decision in Garland, the Supreme Court described the foundation of the RCD as follows: “When a federal statute can be properly interpreted so as not to interfere with a provincial statute, such an interpretation is to be applied in preference to another applicable construction which would bring about a conflict between the two statutes.”Footnote 13  The RCD effectively negates the federal paramountcy rule.  Moreover, unlike the traditional federal paramountcy cases, a number of these courts, including the Supreme Court, applied the RCD to conduct that was simply authorized – not compelled – by a provincial law,Footnote 14 i.e. “impossibility of dual compliance” was not required for the RCD to apply, and did not consider whether the provincial law frustrated the purpose of the federal law, i.e. the Act.  Instead, the courts focused on the criminal nature of the competition law provision at issue, indicating that conduct engaged in pursuant to valid provincial legislation cannot be contrary to the “public interest” or “undue” (“public interest rationale”)Footnote 15 and conduct compelled by valid provincial legislation cannot be voluntary (“mens rea rationale”),Footnote 16 as required by the criminal law.  Most recently, the Supreme Court, in Garland, held that the “regulated industries defence” (RCD) can only immunize conduct from the Criminal Code where the Code clearly allows for the application of the RCD, e.g. by “leeway language” such as “[contrary] to the public interest” or “unduly [limiting competition]”.Footnote 17

Under any interpretation of the existing caselaw, it is clear that the RCD constitutes an exception to the standard rules calling both for the application of a general law in accordance with its plain meaning and for the paramountcy of validly enacted federal law, such as the Act.

In compliance with the decision of the Supreme Court in Jabour, the Bureau will always consider whether the RCD applies to conduct that may be regulated by provincial law, focusing on the question of whether a validly enacted provincial law authorizes (expressly or impliedly) or requires the impugned conduct.Footnote 18  Where this occurs, the Bureau will apply the RCD and refrain from pursuing a case under section 45 of the Act.  With respect to the other provisions of Part VI, in compliance with Garland, the Bureau will strive to determine whether Parliament intended that the particular provision(s) of the Act apply to the impugned conduct and may not pursue the case by application of the RCD.  Even if the Bureau concludes that the RCD, itself, does not immunize the impugned conduct, other doctrines or defences,Footnote 19 or the Bureau’s discretion to pursue an inquiry, may lead the Bureau not to pursue a case under Part VI of the Act in respect of conduct that is authorized or required by valid provincial law.

RCD caselaw is extremely limited in respect of the reviewable practice provisions of the Act.  Only the desire to avoid application of the federal paramountcy rule directly supports the application of the RCD to the reviewable practice provisions of the Act.  Neither the “public interest” nor the “mens rea” rationales, discussed above, directly support the application of the RCD to these provisions.  Moreover the “leeway language” referenced in Garland does not appear in the reviewable practice provisions of the Act.Footnote 20  Where the Supreme Court has, in Garland, applied a law resulting in penal sanctions to conduct expressly authorized by a provincial regulatory body because there is no clear Parliamentary intent to do otherise, it is difficult for the Bureau to conclude that such an approach is not applicable to the reviewable practice provisions of the Act.  In light of above, it is by no means certain that the RCD immunizes conduct from the reviewable practice provisions of the Act.Footnote 21

Accordingly, until RCD caselaw is further developed in respect of the reviewable practice provisions of the Act, the Bureau’s consideration of conduct under the reviewable practice provisions will be informed, but not governed, by the RCD caselaw.  Consistent with Garland, the Bureau will strive to determine Parliament’s intention with respect to the application of the relevant reviewable practice provision(s) to the impugned conduct.  Unlike Part III below, however, the Bureau will not refrain from pursuing regulated conduct under the reviewable practice provision(s) simply because the provincial law authorizes the conduct or is more specific than the Act given that the Bureau’s mandate is to enforce the law as directed by Parliament not a provincial legislature or its delegate.

The RCD is either invoked by those who regulate (“regulators”) or those they regulate (“regulatees”). Although no Canadian court has expressly indicated that the application of the RCD differs as between regulators and regulatees, regulatees have not typically benefited from an application of the RCD by Canadian courts.Footnote 22 Therefore, while the Bureau’s basic RCD analysis will remain the same, the activities of regulatees may be subject to greater scrutiny by the Bureau than the activities of regulators in recognition of this caselaw.Footnote 23

Regardless of whether the RCD or some other doctrine or defence immunizes a party from a provision(s) of the Act, the Bureau will consider the regulatory context in which the conduct is engaged where it is relevant to the application of the provision(s) of the Act in question, for example, the extent to which a regulatory regime already limits or constrains the exercise of market power.Footnote 24

III.  Conduct That May Be Regulated By Other Federal Laws

When faced with conduct that may be regulated by a valid federal law(s) other than the Act, the Bureau will, applying  ordinary principles of statutory interpretation, attempt to determine whether Parliament intended that the particular provision(s) of the Act, or conceivably the entire Act, applies to the particular conduct.Footnote 25 The Bureau will read the Act and the other federal law(s) in their ordinary sense harmoniously with the scheme and objects of the statutes in which they appear.  As Parliament is presumed to enact legislation that is coherent,Footnote 26the Bureau will first consider whether the provisions can stand together and both operate without either interfering with the other i.e. whether a party may reasonably comply with both the Act and the other federal law(s).Footnote 27

In summary, the Bureau will apply the Act as it readsFootnote 28 unless it can confidently determine that Parliament intended that the other federal law prevail, either by clear language in the Act or by the other federal law authorizing or requiring the particular conduct or, more generally, providing an exhaustive statement of the law concerning a matter.Footnote 29  Parliament’s intention in the other federal law may be express, for example, by express authorization or by express reference to the Act.  Parliament’s intention in the other federal law may also be implied, in which case the Bureau will generally conclude that a specific law is intended to take precedence over a general law.Footnote 30

Accordingly, the Bureau will not pursue a matter under any provision of the Act where Parliament has articulated an intention to displace competition law enforcement by establishing a comprehensive regulatory regime and giving an accountable regulatorFootnote 31an authority to itself  take, or to authorize another to take, action inconsistent with the Act, provided the regulator has exercised its regulatory mandate in respect of the conduct in question.Footnote 32 Where such a regulator has forborne from regulation, the Bureau will apply the Act to the unregulated conduct until such time as the regulator exercises its authority to vary or rescind such forbearance; where such a regulator has forborne conditionally, the Bureau will apply the Act to all conduct conditionally forborne from regulation.Footnote 33

As with Part II above, the activities of regulatees may be subject to greater scrutiny by the Bureau than the activities of regulators and the Bureau will always consider the regulatory context in which the conduct occurs where it is relevant to the application of the provision(s) of the Act in question, regardless of whether a doctrine or defence(s) immunizes a party from a provision(s) of the Act.

IV.  Conclusion

In order to responsibly fulfill its mandate under the Act, the Bureau will, using all applicable statutory interpretation tools and considering the particular facts of the case, attempt to determine whether Parliament intended that the relevant provision(s) of the Act applies to the conduct in question and, if so, whether any defence(s) or doctrine(s) immunizes that conduct.  Even if the Bureau concludes that the Act applies, it will proceed to consider whether it is, nonetheless, in the public interest to pursue the conduct under the Act in the circumstances.  While the Bureau believes that both the Act and any other law said to regulate the impugned conduct will generally be able to co-exist, such that the Act will apply as written, the Bureau recognizes that the status of regulated conduct under the Act requires greater clarity.  As such, the Bureau will seek to benefit from caselaw that will clarify the status of regulated conduct and will explore the potential for a legislative resolution of this longstanding issue.

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