The Antitrust Review of the Americas 2009

Canada: Joint Ventures

This chapter provides a brief overview of the treatment of joint ventures under Canada's Competition Act (the Act).1 The expression 'joint venture' lacks a consensus meaning in Canadian competition law and is often used to describe any of a wide variety of cooperative arrangements between firms, ranging from short-term, loose contractual alliances to more permanent and comprehensive structural integrations. The words 'joint venture' appear twice in the Act, in both cases in relation to a limited exemption to the merger review process.2 However, for reasons touched on below, those statutory exemptions are of little practical relevance and do not connote the broader sense in which 'joint venture' is typically used in Canada. Therefore, for the purposes of this chapter, the expression 'joint venture' will be more generically employed to encompass any form of inter-firm cooperative arrangement that falls shy of outright merger. Such arrangements are more commonly referred to in Canada as 'strategic alliances', an expression roughly akin to 'competitor collaborations' in the United States. In 1995, the Canadian Competition Bureau (the Bureau)3 published the Strategic Alliances Bulletin, which remains the Bureau's most extensive policy statement on its treatment of 'inter-firm cooperative arrangements, be they called strategic alliances, joint ventures, or any other name'.4 The Strategic Alliances Bulletin acknowledges that most joint ventures do not raise competition concerns and that many produce pro-competitive benefits, such as technology transfers and cooperative research and development. Indeed, a stated goal of the bulletin is to explain the potentially applicable provisions of the Act and avoid the 'chilling effect' of discouraging joint ventures that may be beneficial to the economy. This chapter discusses the three main substantive provisions of the Act that are most potentially applicable to the analysis of joint ventures in Canada: the civil merger provisions, the criminal conspiracy provisions and the civil abuse of dominant position provisions. There are important differences between these provisions. For example, conspiracy is a criminal offence, involving criminal burdens of proof, mens rea considerations, substantial penalties and private rights of action. By contrast, mergers and abuse of dominance are civil matters, the enforcement of which is confined to actions by the Commissioner of Competition (the Commissioner) before the Competition Tribunal (the Tribunal) for remedial orders. There are also potentially significant divergences in the treatment of efficiencies: there is a statutory efficiency defence in merger review, whereas the Supreme Court has held that 'counterbalancing efficiency gains to the public' is not relevant to the inquiry under the conspiracy provisions. Furthermore, there may also be procedural considerations, notably that certain joint ventures, depending on their structure and size, may trigger pre-merger notification requirements. Notwithstanding these differences, it is worth noting that the merger, conspiracy and abuse of dominance provisions all share the threshold prerequisite that a joint venture may only be condemned if it is likely to prevent or lessen competition substantially or unduly. Therefore, under any of these provisions, a joint venture should be permitted unless it can be shown that, among other things, in the absence of the venture, the joint venture parents would likely have competed with respect to matters within the scope of the venture and that they possess market power. Further, since the focus of the Bureau's competition concerns under the Act has been foremost on pricing and output effects, joint ventures that involve cooperation at the early stages of bringing a product to market, such as cooperative research or production, are less likely to attract scrutiny than ventures involving joint distribution or marketing.

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