Rethinking Price-Fixing Law

45 Pages Posted: 24 Oct 2008

Date Written: October 1, 1993

Abstract

Section 45 of the Competition Act prohibits price-fixing and other forms of horizontal agreements among rivals by imposing criminal sanctions on parties to arrangements which "unduly lessen competition." The authors argue that there are policy reasons for rethinking the current price-fixing prohibition.

The authors argue that many horizontal arrangements by contract (through agreements among rivals) are similar to horizontal arrangements by ownership (through mergers). In the 1986 amendments to the Competition Act, Parliament removed merger review from the purview of criminal courts and gave the Competition Tribunal jurisdiction over mergers. The authors propose similar amendments to section 45 of the Competition Act, and argue that all horizontal arrangements other than naked price-fixing ought to be subject only to civil review by the Competition Tribunal. Naked price-fixing, they tell us, is always anti-competitive and should therefore continue to attract criminal penalties and remain within the jurisdiction of criminal courts.

Having outlined the appropriate focus of a criminal prohibition, the authors proceed to frame a criminal price-fixing prohibition that will target only naked price-fixing arrangements without at the same time targeting potentially pro-competitive arrangements. Many horizontal arrangements are pro-competitive joint ventures, for example, yet may have the ancillary effect of fixing prices. At the same time, arrangements which purport to be pro-competitive may in fact be naked price-fixing arrangements in disguise.

Since price-fixing prohibitions are central features of competition laws all over the world, the authors undertake a comparative review of the price-fixing regimes in the United States, the European Community, the United Kingdom, Germany, Australia and New Zealand to determine the extent to which those jurisdictions have been able to maintain workable distinctions between naked price-fixing arrangements and potentially pro-competitive arrangements.

From the jurisdictions surveyed, the authors conclude that it is impossible to frame a criminal prohibition against naked price-fixing arrangements which will not, in many cases, target pro-competitive arrangements. The authors therefore propose a new focus to a criminal prohibition. Since most naked price-fixing is covert, the authors propose to make covert arrangements the target of the criminal prohibition. That is, the authors propose to distinguish covert arrangements from overt arrangements, rather than distinguishing naked price-fixing from price-fixing which is ancillary to some pro-competitive objective. The authors propose amendments which would confer immediate immunity from criminal sanctions on parties who notify the Bureau of Competition Policy of their arrangements. Notified arrangements would then be subject only to prospective civil review by the Competition Tribunal. Parties to price-fixing arrangements who do not notify their arrangements to the Bureau would remain subject to criminal penalties.

Suggested Citation

Trebilcock, Michael J., Rethinking Price-Fixing Law (October 1, 1993). McGill Law Journal, Vol. 38, No. 1, 1993, Available at SSRN: https://ssrn.com/abstract=1288210

Michael J. Trebilcock (Contact Author)

University of Toronto - Faculty of Law ( email )

78 and 84 Queen's Park
Toronto, Ontario M5S 2C5
Canada
416-978-5843 (Phone)
416-978-1279 (Fax)

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