Trade Associations must guard against anti-competitive practices and create culture of compliance
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Some interesting comments from by John Pecman, Interim Commissioner of Competition at the Canadian Competition Bureau. They deal with non-profits and the importance of compliance and avoiding anti-competitive behaviour.
I would like to take a moment to touch on Trade Associations. As you know, the Bureau has had a number of investigations involving trade associations, several within the last year alone.
These include: the Canadian Real Estate Association, the Toronto Real Estate Board and the Canadian Wireless and Telecommunications Association.
Trade associations, by their very nature, face unique compliance issues. They are naturally exposed to greater risks of anti-competitive behaviour because they provide a forum that may encourage competitors to collaborate. For this reason, compliance programs are of the utmost importance to trade associations.
While the Bureau does not believe that trade associations are inherently bad, it is also clear to us that there are practices they engage in which raise significant risks. Indeed, meetings and relationships formed between competitors through trade associations provide the forum and the temptation to engage in anti-competitive activity.
On the criminal side, there is the potential for price-fixing and bid rigging and on the civil side there is also the potential to violate the Act in the establishment of rules, policies, by-laws and other initiatives enacted and enforced by an association.
These may be considered to be agreements among competitors for the purposes of both the criminal conspiracy and civil agreements provisions.
What this means is that any rule that restricts, in some manner, competition, could raise issues under the Act.
The Bureau is likely to show an interest in trade associations if they engage in three types of conduct:
1.Restricting the types of professional service practice offerings – setting limits on things like office location, size. ◦These sorts of restrictions can deter or limit expansion by competitors and could, depending on the circumstances, raise issues under the conspiracy, civil agreement and abuse of dominance or price maintenance provisions of the Act.
2.Secondly, limiting the number or range of members or the ability of members to compete — for example, through mandatory or suggested fee schedules or standards for product quality that advantage some members over others. ◦Rules like these prevent entry and alternative service models and decrease choice for consumers. The CREA case is an example of this.
3.Finally, we are concerned with conduct that reduces incentives to compete vigorously. ◦Information sharing agreements are an example of this. Competitively sensitive information exchanged among competitors who can have serious negative effects on competition, especially if these are in highly concentrated markets with relatively homogeneous product offerings.
Clearly, Trade/Industry Associations must be extra vigilant in their efforts to manage and alleviate risk with respect to their activities.
Beyond developing a credible and effective corporate compliance program, there are other steps that trade associations can take including: exercising caution when sharing commercially sensitive information, ensuring accurate minute taking in meetings, and finding alternatives to fee setting guidelines.
I cannot; however, underscore enough the importance of what I have about spoken at length today – the development of and, commitment to, a corporate compliance program. And, first and foremost — instilling a culture of compliance throughout the organization.
(I noticed the speech at the BLG Non-Profit and Charity law blog: http://blog.blg.com/nfp/_layouts/mobile/disppost.aspx?__ufps=103821&List=735ccef0-80ce-4355-9ca9-548b1ef0667a&ID=43