Competition Bureau – June 22, 2023, new legal provisions come into force

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[00:02] SPEAKER_01: Hi everyone, welcome to Canada's podcast. I'm Phil West Founder and CEO. Today we're
[00:09] SPEAKER_01: going to meet with the competition bureau. The competition bureau is an independent
[00:14] SPEAKER_01: law enforcement agency that protects and promotes competition for the benefit of Canadian
[00:20] SPEAKER_01: consumers and businesses. Competition drives lower prices and innovation and funds economic
[00:28] SPEAKER_01: growth. The competition bureau works to support and protect Canadians by fostering a
[00:35] SPEAKER_01: competitive and innovative marketplace. They do this by using various methods including
[00:42] SPEAKER_01: advocacy, outreach, consultation, partnerships and enforcement. Today we're meeting with
[00:50] SPEAKER_01: Majid Charania, director of compliance. The unit is responsible for promoting compliance
[00:57] SPEAKER_01: through the competition act. Today we're going to discuss a new policy about wage fixing
[01:04] SPEAKER_01: and a no-p聚ing agreement. Majid, welcome to Canada's podcast. Let's dive in and
[01:10] SPEAKER_01: on asking some questions about these new conditions. What is the new policy in relation to
[01:20] SPEAKER_01: the enforcement guide on wage fixing and no-p聚ing agreements? Phil, first thanks for having me.
[01:28] SPEAKER_00: Very happy to be on the podcast. Maybe we can start off with what these agreements are.
[01:34] SPEAKER_00: What is wage fixing? What is no-p聚ing? Yeah, that would be good.
[01:39] SPEAKER_00: Wage fixing is an agreement to fix or maintain or decrease or control wages or other terms of
[01:48] SPEAKER_00: employment. That's what we call a wage fixing agreement. Now, no-p聚ing agreement or a no-hiring
[01:55] SPEAKER_00: agreement, that's an agreement to refrain from hiring or trying to hire each other's employees.
[02:04] SPEAKER_00: So the provision is new. It's within the existing criminal conspiracy provisions of the
[02:10] SPEAKER_00: competition act, but it's new. The idea behind it is aimed at protecting
[02:17] SPEAKER_01: competition in labor markets. You guys think this was an important sort of new policy?
[02:26] SPEAKER_00: I'm happy to provide a bit of context. I should say that we've got guidance on these new
[02:32] SPEAKER_00: agreements that will be illegal as of June 23rd, 2023. We can share a link to that in the show
[02:39] SPEAKER_00: notes, but it's a great question. Now, why is this all coming about?
[02:44] SPEAKER_00: So there's been some changes to the competition law in Canada that go back
[02:51] SPEAKER_00: all the way to 2009. In 2009, the competition act, as it's known, was amended to apply only to
[03:01] SPEAKER_00: quote-unquote sellers. So if you think of employment, employers are actually purchasers of labor.
[03:09] SPEAKER_00: So the criminal provisions of the law didn't adequately address
[03:14] SPEAKER_00: harmful agreements amongst employers related to labor. So what does this mean?
[03:21] SPEAKER_00: The conspiracy provisions of the act, they don't protect workers from agreements between
[03:26] SPEAKER_00: employers that fix wages and restrict job mobility. So Canada arguably became out of step internationally.
[03:36] SPEAKER_00: And international jurisdictions have recently identified no poaching and wage fixing
[03:43] SPEAKER_00: agreements is particularly egregious. So for example, in October of 2021, a couple of years ago,
[03:51] SPEAKER_00: the European Commission, they committed to expanding their conspiracy-related enforcement to
[03:57] SPEAKER_00: labor markets. And that included these types of agreements. This followed similar types of
[04:04] SPEAKER_00: enforcement in Ireland and Italy. Recently, the US, the Department of Justice in the US,
[04:12] SPEAKER_00: they also looked to the courts for criminal sanctions for these types of offenses in the labor market.
[04:19] SPEAKER_00: They actually brought their first wage fixing case in the states in December 2020,
[04:26] SPEAKER_00: and their first no poaching case in January of 2021. So in the US, there is a commitment
[04:33] SPEAKER_00: to pursue no poaching or wage fixing agreements that are unrelated or unnecessary to a larger
[04:41] SPEAKER_00: legitimate type of agreement between employers. There's an important US decision that came out
[04:50] SPEAKER_00: in 2021 in November. So this is sort of gaining traction around the world. So that's a bit of
[05:03] SPEAKER_01: no. Now, is she like, oh.
[05:08] SPEAKER_00: Let's first maybe talk about employers at a high level. You know, employers don't need to be
[05:15] SPEAKER_00: competitors for the act to apply. The new criminal offense applies to agreements involving
[05:22] SPEAKER_00: two or more unaffiliated employers. Regardless of whether they compete in the supply of a product.
[05:29] SPEAKER_00: So regardless of whether they're competitors in that intuitive sense. Second,
[05:36] SPEAKER_00: they're people. So the employees, the staff within a company and employer can engage the
[05:42] SPEAKER_00: company's liability. So the word employers includes directors or officers as well as agents or
[05:51] SPEAKER_00: employees, including, you know, human resources professionals, for example. So, you know,
[05:58] SPEAKER_00: if we think conceptually an agreement between an officer of a company and the director of another
[06:03] SPEAKER_00: company, that could be considered to be an agreement amongst employers under the law. Now, in this
[06:11] SPEAKER_00: circumstance, you know, the individuals who entered into that agreement, they might themselves
[06:16] SPEAKER_00: be subject to prosecution. And the corporations may also be subject to prosecution as a result of
[06:24] SPEAKER_00: the agreement between these people. You know, if the people are acting as what we call senior officers.
[06:32] SPEAKER_00: So maybe, you know, we can flip to employees, talk a little bit about it. Yeah.
[06:37] SPEAKER_00: So the changes in the law, they're really designed to protect labor market competition. So,
[06:43] SPEAKER_00: if wages remain competitive and employees are able to move around, without being hindered by anti-competitive
[06:52] SPEAKER_00: barriers put up by employers, then that helps to ensure that labor market competition is strong.
[06:59] SPEAKER_00: So now that the bureau is going to be empowered to investigate and take action against illegal
[07:06] SPEAKER_00: agreements, you know, amongst employers, we really want to hear from anyone who thinks there
[07:12] SPEAKER_00: might be these types of illegal wage fixing or no hire, no poaching agreements in their region
[07:19] SPEAKER_00: and their industry. And, you know, we can share some information about how to get in touch with us
[07:24] SPEAKER_01: in the show notes. Okay. What does it become? What is all of this coming to place?
[07:31] SPEAKER_00: So these types of agreements, wage fixing and no poaching agreements will become illegal on June 23rd
[07:38] SPEAKER_00: of 2023. So, you know, all of what I've described really applies as of that date, as of June 23rd.
[07:46] SPEAKER_01: Can you give us some examples without being too specific on what is prohibited? That kind of
[07:54] SPEAKER_01: thing, just so we can maybe grasp it a little better. Sure. So I can maybe run through an example
[08:02] SPEAKER_00: where, you know, the agreement would probably be illegal. And then another example where it
[08:07] SPEAKER_00: wouldn't be, just to provide a bit of contrast. That would be good. That would be good.
[08:12] SPEAKER_00: So let's first look at something where the agreement would probably be illegal. You know,
[08:19] SPEAKER_00: let's consider a couple of different people, Lucy. She owns a private medical laboratory. And
[08:26] SPEAKER_00: she had a meeting with someone named Jerry. He owns a chemical testing lab. So they're kind of in
[08:33] SPEAKER_00: the same field. They agreed amongst themselves to limit each of their employees annual bonuses
[08:41] SPEAKER_00: to 5% of salary. So, you know, what would this look like in terms of an analysis under the law?
[08:49] SPEAKER_00: Would this be illegal? So the agreement would probably raise concerns under, you know, the new
[08:54] SPEAKER_00: provisions after June 23rd of this year. So in this example, you know, both employers, Lucy and Jerry,
[09:02] SPEAKER_00: they both have employees who are in a salary and who each generally get an annual bonus.
[09:09] SPEAKER_00: And so an agreement to fix or maintain or decrease or do anything really to control bonuses
[09:17] SPEAKER_00: are prohibited under under the competition act as of June 23rd. So let's look at the flip side then.
[09:25] SPEAKER_00: You know, maybe something where it wouldn't, you know, necessarily be problematic under the new provision.
[09:30] SPEAKER_00: So company A, let's say is a consulting firm. They embed their employees, their consultants,
[09:39] SPEAKER_00: and their clients' businesses for a certain period of time. And as part of a consulting contract,
[09:46] SPEAKER_00: company B, they agree not to hire company A's embedded employees, their consultants.
[09:54] SPEAKER_00: Company A doesn't make the same agreement regarding company B's employees. So that's important.
[10:02] SPEAKER_00: So the no-pouching agreements, this would be a no-higher, no-pouch agreement. That was entered into
[10:08] SPEAKER_00: by two employers, companies A and B, to prevent company A's employees from being hired by company B.
[10:17] SPEAKER_00: But since the restraint contained in the agreement, so since this restraint on employee mobility,
[10:25] SPEAKER_00: only applies to company A's employees. It's what we would call a one-way agreement. And it doesn't have
[10:32] SPEAKER_00: a reciprocating promise from company B. So the restraint doesn't apply to each other's employees.
[10:42] SPEAKER_00: And so it doesn't break the law. So that's kind of an important point people should keep in mind.
[10:47] SPEAKER_00: I should also mention, I talked about two examples. We're going to be publishing a compliance boot camp
[10:55] SPEAKER_00: on wage fixing and no-pouching agreements. And that's going to be short and plain language and
[11:00] SPEAKER_00: really designed for small and medium-sized businesses and entrepreneurs to really understand how
[11:06] SPEAKER_00: to comply with the law. So, you know, I'd really encourage all of the listeners to take a look at our
[11:12] SPEAKER_00: website, keep track of our publications. And you know, once it's ready, we can certainly provide a
[11:18] SPEAKER_01: link in the show notes. So, you know, I mean, if it's the law, what kind of penalties are there for
[11:27] SPEAKER_01: infractions? So examples, obviously, you know, there's no penalties at the moment that have been
[11:35] SPEAKER_00: put in place, but examples. Certainly. So, you know, the first off, these types of agreements wage
[11:42] SPEAKER_00: fixing no hire, no-pouching, they're all going to be criminal offenses. So the penalties for
[11:50] SPEAKER_00: infractions can be quite serious. You know, we're looking at fines with no maximum lipid, no upper
[11:57] SPEAKER_00: limit. So those are fines that can be set at the discretion of the court. There's potential jail time,
[12:05] SPEAKER_00: up to 14 years. You know, someone could be subject to both of those things. So this is, you know,
[12:13] SPEAKER_00: this is quite a serious infraction, you know, as of June 23rd. And how would those things be enforced?
[12:20] SPEAKER_01: I mean, what kind of what kind of process is that? Yeah, I'm happy to talk a bit about,
[12:26] SPEAKER_00: you know, the competition bureau's enforcement process or investigative process. Generally,
[12:32] SPEAKER_00: that's, you know, usually how we would proceed. I'm happy to talk about our process. So, you know,
[12:39] SPEAKER_00: we're going to vigorously enforce these provisions once they come into force and our investigative
[12:45] SPEAKER_00: process criminally, it follows a couple of stages. You know, let's start off with the beginning,
[12:53] SPEAKER_00: usually. We get some information, for example, in a complaint. You know, we'll take a look at that
[13:00] SPEAKER_00: information as part of a preliminary examination. We assess, you know, whether there are reasons to
[13:07] SPEAKER_00: believe that an offense might have been committed. And then if we do believe that offense might
[13:13] SPEAKER_00: have been committed, then we continue investigating further. We, you know, commence a formal inquiry
[13:19] SPEAKER_00: under section 10 of the Competition Act. We have legal powers to go on formal inquiry.
[13:26] SPEAKER_00: And then once we get to that point, we can use various investigative tools to determine the facts.
[13:34] SPEAKER_00: So these tools range from search warrants to subpoenaing witnesses and questioning them under oath,
[13:43] SPEAKER_00: wiretaps obtained through court order. And, you know, in the cases that might have an
[13:48] SPEAKER_00: international or across-order dimension, we can use what we call mutual legal assistance treaties
[13:56] SPEAKER_00: to get information from other enforcement agencies outside of Canada. So these are all tools,
[14:02] SPEAKER_00: formal tools that we have. I shouldn't mention that our inquiries by law are conducted in private.
[14:11] SPEAKER_00: And so there is only a certain amount of information that we are empowered by law to share as we
[14:17] SPEAKER_00: conduct our investigations. Maybe I can talk a bit about how we resolve our investigations and
[14:26] SPEAKER_00: what are possible outcomes. So, you know, there are a few different possible outcomes. The first
[14:35] SPEAKER_00: is what we call alternative case resolutions. So, you know, what does this mean? If we find in a
[14:42] SPEAKER_00: particular matter that, you know, resources are best used to resolve it outside of the court system,
[14:49] SPEAKER_00: outside of litigation, you know, we might inform the targets of an investigation of a complaint against
[14:56] SPEAKER_00: them. And if, you know, what the law generally says, what the Competition Act says, we may provide
[15:05] SPEAKER_00: presentations to the targets of an investigation. All of that we consider under the umbrella of an
[15:11] SPEAKER_00: alternative case resolution. The other path is a referral to Canada's public prosecutors,
[15:18] SPEAKER_00: the public prosecution service of Canada. So, as an enforcement agency, we are the ones who gather
[15:25] SPEAKER_00: the facts, but we're not the prosecutors. And this is sometimes a common misconception about our role
[15:32] SPEAKER_00: in the competition ecosystem. If we believe a case might have merit after going through our
[15:39] SPEAKER_00: investigative process, we have to refer it to the independent federal prosecutors. So, we make
[15:46] SPEAKER_00: recommendations as to the charges to be laid, as to the penalties that should be imposed in our
[15:52] SPEAKER_00: view. And about recommending, you know, whether immunity or leniency should be granted, you know,
[15:59] SPEAKER_00: to the companies that are the target of the investigation. So, we provide recommendations, but the
[16:05] SPEAKER_00: prosecutors, they're the ones who are responsible for the decision of what to do in the case. And
[16:11] SPEAKER_00: that includes, you know, whether to enter into an immunity agreement or give lenient treatment
[16:18] SPEAKER_00: in what's called a plea agreement, or whether or not to lay charges and against whom to lay
[16:25] SPEAKER_00: charges. Now, if, you know, we go through that process, they take on the case, and if a case goes to
[16:31] SPEAKER_00: trial, then as the investigators, we support, you know, the prosecution team during the trial process
[16:40] SPEAKER_01: as needed. So, I mean, obviously, you're on Canada's podcast. You did this a year or so ago as well,
[16:48] SPEAKER_01: which is one way of communicating it to, you know, an entrepreneurial audience, which is certainly,
[16:54] SPEAKER_01: you know, the kind of audience you want to know about it. How will this new policy be communicated
[17:00] SPEAKER_00: to people in general? So, a few different ways. As I mentioned before, we've finalized some
[17:09] SPEAKER_00: enforcement guidance. So, that's the bureau's expression of how we would enforce these provisions.
[17:17] SPEAKER_00: It's not a restatement of the law. It's not legal advice, but it's our guidance,
[17:22] SPEAKER_00: you know, to the business community and the legal community. And so, that guidance includes,
[17:29] SPEAKER_00: you know, a description of what's prohibited, some examples to illustrate the new provisions.
[17:35] SPEAKER_00: All of that is laid out in the guidance. As I mentioned, we're going to put together compliance
[17:42] SPEAKER_00: boot camps. So, a shorter plain language, you know, set of content across different media,
[17:49] SPEAKER_00: video, quiz, and curated resources to help people get a quick sense of what they need to know
[17:55] SPEAKER_00: so that they can assess their risks and determine what they might need to do in their businesses
[18:01] SPEAKER_00: to comply with the law. We also engage in outreach. So, we often speak with trade associations,
[18:09] SPEAKER_00: chambers of commerce, you know, other business support organizations. And we're happy to
[18:15] SPEAKER_00: explore opportunities to talk about these new offenses, the laws we enforce more generally. So,
[18:22] SPEAKER_00: for any listeners who are part of business support organizations, it might be members of
[18:27] SPEAKER_00: their local Chamber of Commerce or Trade Association. You know, they're welcome to contact us
[18:34] SPEAKER_00: to have us go speak to the membership or to encourage their associations to come in and
[18:40] SPEAKER_00: and get us to engage. I should say, however, that we don't provide legal advice. We don't work,
[18:48] SPEAKER_00: you know, directly with individual businesses. We encourage businesses that think if, you know,
[18:54] SPEAKER_00: if they need to get some independent legal advice, they should consider going to do that.
[19:00] SPEAKER_00: And then finally, you know, I would say sign up for the Bureau's social media for distribution
[19:05] SPEAKER_00: lists. That's the easiest way to hear about our resources, which are all free to help, you know,
[19:13] SPEAKER_01: folks understand the law and have it comply with it. Is there any other, you know, way that people can
[19:19] SPEAKER_01: prepare themselves for this, you know, so they can better understand the new rules as quickly as possible,
[19:27] SPEAKER_00: kind of thing? Yeah, so I would advise folks for listening to take a look at the resources that I
[19:34] SPEAKER_00: mentioned, but then think about, you know, what programs do I have in place? Let's say I'm an entrepreneur
[19:41] SPEAKER_00: business owner. What do I have in terms of controls within my business to help address legal risks?
[19:49] SPEAKER_00: So, you know, do I have an effective compliance program in place? If not, you know, I would say,
[19:57] SPEAKER_00: consider developing one. If this is the type of thing that might expose your company to risk,
[20:04] SPEAKER_00: if you do have one, you know, maybe you should consider updating it or making sure that it's
[20:10] SPEAKER_00: adapted. So it captures the risk of a new offense, you know, coming out there. And then I would say,
[20:18] SPEAKER_00: you know, no matter what type of control measure you have in place, assess your risks, think
[20:24] SPEAKER_00: critically about your business operations, what you do, where you do it, who does it, and apply
[20:30] SPEAKER_00: the learnings from that assessment. So let's take an example, you know, if you're not currently
[20:36] SPEAKER_00: training your HR people, or they're not covered by a compliance program, consider making the
[20:44] SPEAKER_00: changes necessary so that they get trained up on this new risk area and your businesses have put
[20:50] SPEAKER_00: to handle it. You know, adapt your internal controls. Let's say you've got compliance controls
[20:56] SPEAKER_00: for anti-bribery or environmental risks. These types of control systems could be adapted to
[21:03] SPEAKER_00: cover new risk areas like wage fixing and no poaching offenses. We've got at the Bureau
[21:11] SPEAKER_00: a new compliance portal that we've just put out. It sets out our guidance to businesses and how
[21:18] SPEAKER_00: to come up with these programs, how to put them into place, no matter how big or small the business,
[21:23] SPEAKER_00: no matter how many resources are available. So we've got some free guidance out there that can
[21:29] SPEAKER_00: help you do all of this. I would say a couple simple quick wins share this podcast within your
[21:36] SPEAKER_00: business, you know, send it to your HR folks. If you've got training programs, consider using the
[21:42] SPEAKER_00: podcast itself as part of a training program, and then stay on top of the updates to the Bureau's
[21:49] SPEAKER_00: programs. So I mentioned immunity and leniency, ways to come in and cooperate if you realize,
[21:56] SPEAKER_00: wait a minute, there might be an actual exposure to risk within my company. You know, we have programs
[22:02] SPEAKER_00: that provide incentives for companies that cooperate and fulfill certain requirements. So,
[22:09] SPEAKER_00: you know, we're planning to revise those to cover wage fixing and no poaching agreements.
[22:15] SPEAKER_00: And I would say look out for those programs and consider how they might apply to you. And then
[22:21] SPEAKER_00: finally, you know, if you feel that you need to, get tailored legal advice. They, you know,
[22:27] SPEAKER_00: legal advice can help you understand your particular situation around your facts.
[22:32] SPEAKER_00: So recently in Canada, there was actually quite a bit of debate about, you know, things like
[22:38] SPEAKER_00: hero pay, as it was called. There was a lot of high profile discussion around agreements,
[22:46] SPEAKER_00: you know, between companies that look like wage fixing. So, you know, the hero pay issue,
[22:52] SPEAKER_00: some might remember during the COVID pandemic in the summer of 2020, you know, several grocery chains
[22:59] SPEAKER_00: communicated amongst themselves about ending the $2 an hour so-called hero pay for frontline staff.
[23:08] SPEAKER_00: And executives, you know, from a number of different grocery chains had to testify about this
[23:13] SPEAKER_00: before a parliamentary committee. So, that was, you know, the genesis in some ways of this most
[23:21] SPEAKER_00: recent change to the Competition Act. I should say the new provisions go beyond just hero pay and
[23:28] SPEAKER_00: they address competition in labor markets more generally. So, this ended up in 2022 with the
[23:36] SPEAKER_00: amendments to the Competition Act that criminalized the two types of agreements that I've mentioned.
[23:42] SPEAKER_00: And the idea is that in the long run, you know, more robust competition in the labor market will
[23:47] SPEAKER_01: benefit everyone. It's great, Eugene. Thank you very much for explaining this. I feel it's a,
[23:54] SPEAKER_01: it's a very good policy and glad to see we're following kind of the international standards that
[24:00] SPEAKER_01: are emerging. So, thanks for coming on Canada's podcast and letting everyone know about this.
[24:08] SPEAKER_00: Happy to be here. Thanks, Phil.