Joint venture cartel exemption of the United States to apply in Canada?
Canada’s recent move to a stricter cartel law that does not require proof of market effect is considered to be a shift towards American cartel law, where hard core cartels receive per se treatment. The new Canadian law can raise complicated issues with respect to joint venture activities. It defines criminal cartels as agreements between “competitors” to engage in the activities of fixing price, allocating markets or controlling supply. These activities may also arise in the context of what would otherwise be considered legitimate joint ventures. Although the Commissioner’s Competitor Collaboration Guidelines indicate that the new parallel reviewable matter provision for agreements that substantially lessen or prevent competition is the preferred approach for the assessment of legitimate joint venture agreements, she nonetheless has the discretion to recommend that such agreements be subject to criminal prosecution. Private litigants may also bring private actions in respect of joint venture activities that they allege contravene the cartel provision.
The Supreme Court of the United States has recently decided American Needle, Inc v. National Football League et al, in which the court affirmed a line of authority that rejects formalistic distinctions based on the mechanics of how competitor collaborations are structured, in favour of a functional analysis as to whether the collaboration is effectively a separate economic enterprise controlled by a single center of decision-making and therefore not subject to cartel liability. Whether the Commissioner of Competition, and, ultimately, Canadian courts will be receptive to this approach under Canada’s new cartel law remains to be seen. However, to the extent that the changes to the Canadian cartel law were intended to move towards the United States system, it follows that decades of consideration of joint venture treatment ought to be considered when developing Canadian law. In particular, United States law may provide some guidance when considering whether firms engaging in legitimate joint venture activities are “competitors” under the new cartel law or whether the better view is that particular joint venture activities amount to a separate economic enterprise and are therefore outside the scope of the law. American law may also be relevant to the application of the new ancillary restraints defence.
