*This article was written in collaboration with Daniel Meyers, President of Consulting & Information Governance at TransPerfect Legal and a member of TransPerfect’s Antitrust Practice Group.
Recent (and ongoing) amendments to the Competition Act have resulted in several new powers for the Competition Bureau, which may have significant and far-reaching implications for businesses in Canada. One such amendment that took effect in December 2023 provides the Competition Bureau with the power to seek a court order compelling companies to produce large volumes of documents and electronic information in support of “market studies,” which are in-depth examinations of a market or industry to identify potential competition issues and improve the Competition Bureau’s understanding of the market.
Previously, the Competition Bureau could commence a market study but had to rely on a company’s willingness to voluntarily provide information. The Competition Bureau had no power to compel a company to cooperate, which they argued limited the effectiveness of such studies. The Competition Act only allowed the Commissioner of Competition to request a court order for the mandatory production of records or testimony where an inquiry had been commenced under the Competition Act (i.e., the Competition Bureau had reason to believe that the Competition Act had been violated), and they believed that the target of the order had relevant information. The December 2023 amendments will now allow the Competition Bureau to seek a court order compelling the production of data, documents, or testimony where a market study has been commenced. These orders are known as “Section 11 Orders,” because they are granted pursuant to Section 11 of the Competition Act.
Responding to a Section 11 Order can impose significant costs and burdens on market participants, including customers and suppliers in the target market. Under the new market study framework, these costs may be imposed on businesses that have not done anything deemed to be anticompetitive or otherwise in violation of the Competition Act.
In light of this significant burden, it may become advisable for companies in the target market to proactively engage with the Competition Bureau in the early stages of a market study process, including by voluntarily responding to general calls for information and/or specific information requests (to the extent reasonable). Canadian businesses operating in markets that are the focus of a market study can also prepare for a formal Section 11 Order in case the Competition Bureau determines that such an order is necessary to conduct the market study effectively.
This article details four key ways Canadian businesses can prepare for, and comply with, a Section 11 Order without materially disrupting regular business operations and while controlling costs.
- Proactively Map Corporate Data Sources
Section 11 Orders have accelerated deadlines, typically requiring the disclosure of significant volumes of documents and electronic information within 30–60 days. While we expect that the Competition Bureau will be amenable to longer deadlines for market studies, collecting, searching for, reviewing and producing responsive information in that timeframe is challenging in the best of cases. Thus, it is essential that organizations understand where their data is located, how long it is retained and how to defensibly extract that information prior to receiving a Section 11 Order.
Identifying all sources of potentially relevant information across a modern IT ecosystem can be daunting. IT environments often include Microsoft 365 or Google Workspace, in addition to collaboration platforms like Slack, cloud storage like Dropbox or Box, CRM platforms, accounting systems, mobile device data and traditional file shares. Some of these systems have integrated search-and-export features, while others do not. Working with an eDiscovery partner to inventory your corporate data sources and design a collection plan can save weeks of precious time should a Section 11 Order be received.
When considering the types of documents likely to be responsive to the market study, it is also prudent to keep in mind that the information sought by the Competition Bureau (such as contracts the respondent has with third parties) may be subject to confidentiality obligations or non-disclosure provisions. While companies may not be able to provide such information voluntarily, certain confidentiality obligations may have an “out” where disclosure is required by law, such as a Section 11 Order. The disclosure of such contractually protected information may also trigger an obligation to notify the third party that the agreement has been provided to the Competition Bureau pursuant to a legal requirement.
- Update Your Compliance & Employee Training Programs
With the looming prospect of increasing enforcement action under the Competition Act, Canadian businesses must be careful to ensure their compliance efforts are sufficient to protect the business against claims that they are operating offside the law. Competition counsel can work with businesses to review and update (or design and implement) their compliance programs, identify exposure gaps and mitigate compliance risks. In particular, the following measures can assist companies dealing with various Competition Bureau inquiries, including a possible Section 11 Order in connection with a market study:
- Employee Awareness & Training: Under the new market study framework, any information obtained by the Competition Bureau during a market study (which, as noted above, may be compelled from market participants who have not engaged in any conduct contrary to the Competition Act) can subsequently be used by the Competition Bureau for other enforcement purposes, including leading to further investigations and potentially criminal enforcement action against the company (or its peers) for violations of the Competition Act. Accordingly, it is increasingly important to educate key business personnel about competition issues and the potential consequences of running afoul of the Competition Act. Outside counsel can play an important role in designing and implementing training programs.
- Document Hygiene: Businesses should assume that any ordinary course business documents, including plans, presentations, emails and memos, could be requested and reviewed by the Competition Bureau. Indeed, the Competition Bureau will attribute significant weight to statements made in ordinary course business documents, even where those statements are exaggerated or unrealistic. As such, when creating these documents, employees should be accurate and specific when describing the competitive conditions of the market (e.g., avoid speculation, conjecture and exaggeration and clearly identify underlying assumptions) and avoid language that incorrectly creates the perception of dominance, power or any intent to harm competitors or competition. Employees should be especially mindful of the language used in emails and informal chat applications (e.g., text messages and WhatsApp) and consider whether an offhand comment or joke could leave the impression of improper conduct or be misinterpreted if later taken out of context. It is also important to understand that even if the Competition Bureau does not seek documents from your company, they may obtain documents or emails that your company has sent to others in the industry.
- Managing and Protecting Privilege: It is also important for companies to take steps to maintain legal privilege and avoid inadvertent waivers of privilege (such as by disclosing legal advice or findings to third parties). This includes ensuring that privilege is protected and maintained in all documents that are prepared at the request of legal counsel (internal and external), or for the purpose of seeking or obtaining legal advice. In order to avoid inadvertently waiving privilege, companies should clearly mark all such documents as “Privileged and Confidential” and look to not disseminate privileged documents more broadly than necessary.
- Establish Your Network of Support in Advance
Many internal and external stakeholders must be rallied to successfully respond to a Section 11 Order. Internal stakeholders typically include people from IT, Legal, Marketing, the relevant business lines and the C-Suite. External stakeholders include outside competition counsel and data management service providers (e.g., legal technology providers and forensics, e-discovery and document review specialists). It is essential to identify and connect with such internal and external stakeholders in advance of receiving a Section 11 Order to allow you to “hit the ground running” and position the business as best as possible to meet the expedited production deadline under Section 11. For companies that do not already have existing relationships with relevant service providers, your go-to competition counsel typically can make appropriate introductions.
- Tips to Mitigate the Burden and Cost of Complying with a Section 11 Order
The Competition Bureau typically shares a draft of the Section 11 Order with intended targets in advance of seeking the order from the court. Once the draft Section 11 Order is received, a company’s first step is to review and evaluate the associated burden of the Order with competition counsel, and then engage with the Competition Bureau as necessary in order to seek to streamline it. This “pre-issuance dialogue” provides businesses the opportunity to seek clarifications and request the removal or amendment of requests that are impractically broad or would impose an undue burden on the business, including as a result of the business’ specific IT infrastructure or data repositories. Any concerns regarding the timeframe for compliance (or the date range of materials sought) can also be raised at this stage (although businesses may request extensions later in the process if necessary).
Typically, businesses will work with the relevant data management and forensic providers in parallel to proactively identify the available information likely to be within the scope of the inquiry and develop a plan to respond substantively to the Order in the most efficient and cost-effective manner possible. Ultimately, it is important for companies to act quickly to establish a strong working team of legal counsel and document management experts to help manage the process of complying with a Section 11 Order, which can help mitigate any significant legal risks and minimize cost and business disruption.
As mentioned above, the Competition Bureau’s new investigative powers in connection with market studies are just one of many recent fundamental changes to competition law in Canada, with additional amendments still winding their way through the legislative process (as of the time of writing).
We encourage Canadian companies to refer to other publications by the authors in this area to learn how your business may be impacted.
