"Regulated" Conduct


Bulletin

September 27, 2010

This publication is not a legal document. It contains general information and is provided for convenience and guidance in applying the Competition Act.

This publication replaces the following Competition Bureau publication:
Technical Bulletin on "Regulated" Conduct, June 29, 2006

For information on the Competition Bureau's activities, please contact:

Information Centre
Competition Bureau
50 Victoria Street
Gatineau QC K1A 0C9

Tel.: 819-997-4282
Toll free: 1-800-348-5358
TTY (for hearing impaired): 1‑866‑694‑8389
Fax: 819-997-0324
Web site: www.competitionbureau.gc.ca

This publication can be made available in alternative formats upon request. Contact the Competition Bureau's Information Centre at the numbers listed above.

Permission to reproduce

Except as otherwise specifically noted, the information in this publication may be reproduced, in part or in whole and by any means, without charge or further permission from the Competition Bureau provided due diligence is exercised in ensuring the accuracy of the information reproduced; that the Competition Bureau is identified as the source institution; and that the reproduction is not represented as an official version of the information reproduced, nor as having been made in affiliation with, or with the endorsement of the Competition Bureau. For permission to reproduce the information in this publication for commercial redistribution, please Apply for Crown Copyright Clearance or write to:

Communications and Marketing Branch
Innovation, Science and Economic Development Canada
C.D. Howe Building
235 Queen Street
Ottawa, ON K1A 0H5

Email: ISED@Canada.ca

Aussi offert en français sous le titre Les activités « réglementées ».

Table of contents

  1. Introduction
  2. Conduct that may be regulated by provincial laws
  3. Conduct that may be regulated by other federal laws
  4. Conclusion
  5. How to contact the Competition Bureau

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1. Introduction

This BulletinFootnote 1 ("Bulletin") outlines the Competition Bureau's ("Bureau"'s) general approach to 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 This approach is based on the Bureau's recognition that it is charged with the administration and enforcement of the Act, that the Act is a framework law of general application, and that Parliament"… is not presumed to depart from the general system of law without expressing its intention to do so with irresistible clearness…".Footnote 3 It is the Bureau's position that the RCD is an exception to this and other important principles of statutory interpretation and that RCD caselaw is underdeveloped. Consequently, absent further judicial guidance, it is the Bureau's view that a cautious application of the RCD is warranted.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 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 matters provisions in 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

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 defences or doctrines, such as a lack of requisite mens rea, official inducement of error, statutory justification, issue estoppel or Crown immunity. Even absent any such defence or doctrine, the Bureau will consider the public interest in pursuing conduct undertaken in good faith in reliance on a law or in exercise of fundamental freedoms. While each case will be considered on its individual merits in accordance with its particular facts, it is unlikely that the Bureau will pursue a case under any criminal (Part VI) provision(s) of the Act in respect of conduct that is authorized or required by a valid law.

Regardless of whether the RCD or some other doctrine or defence immunizes an impugned conduct from a provision(s) of the Act, the Bureau will always 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 in certain areas of competition but not others.Footnote 8

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2. Conduct that may be regulated by provincial laws

The Supreme Court of Canada has traditionally concluded that a valid federal law will override a valid provincial law where the operation of the provincial law conflicts with the operation of the federal law ("federal paramountcy" rule); a conflict occurs where a party cannot 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

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

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 provisionsFootnote 12 of the prevailing competition law by, effectively, reading down the conspiracy provision.Footnote 13 Notwithstanding "federal paramountcy" caselaw, a number of these courts, including the Supreme Court in Jabour, applied the RCD to conduct that was simply authorized — not compelled — by a provincial law;Footnote 14 they did not require "impossibility of dual compliance" nor did they consider whether the provincial law frustrated the purpose of the Act in applying the RCD. 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") nor can it involve the criminal intent or volenti required by the criminal law ("mens rea rationale").Footnote 15 In its most recent pronouncement on the RCD, in Garland, the Supreme Court held that the RCD can only immunize conduct from the Criminal Code where the Criminal Code clearly allows for the application of the RCD, for example, by "leeway language" such as "against the interests of the public" or "unduly [limiting competition]" found in the competition law provisions at issue in previous RCD caselaw.Footnote 16

As of March 12, 2010, section 45 no longer requires proofFootnote 17 that an agreement or arrangement prevents or lessens competition "unduly". It contains a per se criminal prohibition against agreements between or among competitors to fix prices, allocate sales, territories, customers or markets, or control the production or supply of a product. Subsection 45(7) explicitly provides that the RCD as it applied to section 45 prior to the 2009 amendments will continue to apply to the amended section 45.

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. It will do so by 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 not pursue a case under section 45 of the Act in reliance on the RCD.

With respect to the other provisions of Part VI of the Act, in compliance with Garland, the Bureau will first attempt to determine whether Parliament intended that the particular provision(s) of the Act apply to the impugned conduct. If the Bureau concludes that the Competition Act provision is intended to apply to the impugned conduct, the Bureau may still refrain from pursuing the case in reliance on the RCD, on other doctrines or defences,Footnote 19 or the Bureau's discretion to pursue an inquiry.

RCD caselaw is extremely limited in respect of the reviewable matters provisions of the Act.Footnote 20 While the jurisprudential preference for avoiding (where possible) an application of the federal paramountcy rule supports the application of the RCD to the reviewable practice provisions of the Act, neither the "public interest" nor the "mens rea" rationales relied upon by the courts in RCD cases support the application of the RCD to the reviewable matters provisions of the Act. Moreover, in Garland, the Supreme Court applied a federal law resulting in penal sanctions to conduct expressly authorized by a provincial regulatory body because there was no clear Parliamentary intent to do otherwise.Footnote 21 In this context, and absent further judicial guidance, the Bureau cannot responsibly limit its statutory mandate by the general application of the RCD to the reviewable matters provisions of the Act.Footnote 22

Accordingly, until RCD caselaw is further developed in respect of the reviewable matters provisions of the Act, the Bureau will consider RCD caselaw in its examination of reviewable matters but will not consider RCD caselaw to be dispositive of such matters. Consistent with Garland, the Bureau will strive to determine Parliament's intention with respect to the application of the relevant Competition Act provision(s) to the impugned conduct. Unlike Part III of this Bulletin, however, the Bureau will not refrain from pursuing regulated conduct under the reviewable matters provision(s) simply because the provincial law may be interpreted as authorizing the conduct or is more specific than the Act given that the Bureau's mandate is to enforce the law as directed by ParliamentFootnote 23 not a provincial legislature or its delegate.

The RCD may be invoked by those who regulate ("regulators") and/or those they regulate ("regulatees"). Indeed, regulators may, depending on the legislative regime, also be 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 24 Therefore, greater scrutiny of the activities of regulatees, whether acting in their private capacity or as self-regulators, may be warranted.

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3. 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 Competition Act, apply to the particular conduct. In undertaking this analysis, the Bureau will consider existing RCD caselaw but does not consider the RCD caselaw to be dispositive of the analysis.

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 25 the Bureau will, of course, consider whether the provisions can stand together and both operate without either interfering with the other,Footnote 26 i.e. whether a party may reasonably comply with both the Act and the other federal law(s).Footnote 27 The Bureau will apply the Act as it reads 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 28 Parliament's intention in the other federal law may be express or implied; in the latter situation, the Bureau will generally conclude that the enactment by Parliament of specific provisions to address the conduct in question is intended to take precedence over a law of general application such as the Act.Footnote 29

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 providing a regulator the authority to itself take, or to authorize another to take, action inconsistent with the Act, provided the regulator has exercised its regulatory authority in respect of the conduct in question. 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 30

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4. 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 Competition Act apply 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 Competition Act in the circumstances.

5. How to contact the Competition Bureau

Anyone wishing to obtain additional information about the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act, the Precious Metals Marking Act or the program of written opinions, or to file a complaint under any of these acts should contact the Competition Bureau's Information Centre:

Web site

www.competitionbureau.gc.ca

Address

Information Centre
Competition Bureau
50 Victoria Street
Gatineau, Quebec
K1A 0C9

Telephone

Toll-free: 1-800-348-5358
National Capital Region: 819-997-4282
TTY (for hearing impaired) 1‑866‑694‑8389

Facsimile

819-997-0324

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