NAFTA, the USMCA, and Competition Law in North America

Publication October 2018

In practical terms, NAFTA had little effect on competition law and enforcement in North America. However, the new United States-Mexico-Canada Agreement (USMCA) contains much more robust competition enforcement and cooperation provisions.

The extent to which the parties will take advantage of these enhanced mechanisms for cooperation and be able to turn them into efficiency gains remains to be seen. For now, it is more or less business as usual for North American competition law.

Enforcement of Anticompetitive Business Conduct

NAFTA reinforced the national competition laws of Canada, Mexico, and the United States regarding anticompetitive business conduct. Specifically, Article 1501 of NAFTA provided that Canada, Mexico and the U.S. would each “adopt or maintain measures to proscribe anticompetitive business conduct.” Article 1501 did not specify, however, the required nature or form of such “measures,” though that term was broadly defined in the agreement to include “any law, regulation, procedure, requirement or practice.”

The parties met this requirement through legislation: in the case of Mexico, its Federal Law of Economic Competition; in the case of Canada, the Competition Act; and the Sherman Act, Clayton Act, and Federal Trade Commission Act in the United States. Article 1501 also required the parties to “take appropriate action” on anticompetitive business conduct, though the agreement did not provide guidance as to what constituted “appropriate action.”

The USMCA, while maintaining the same overarching goal of providing for the regulation of anticompetitive business conduct, is much more prescriptive.

Among other things, it requires the parties to:

  • endeavour to apply their national competition laws to all commercial activities in their territories;
  • maintain national enforcement authorities;
  • abide by robust procedural fairness commitments, such as:
    • providing transparency as to the applicable competition laws and rules;
    • conducting investigations subject to definitive deadlines or within reasonable timeframes;
    • providing for representation by legal counsel;
    • protecting confidential information;
    • requiring the national authority to establish the legal and factual basis of alleged violations; and
    • ensuring all final decisions are communicated in writing.

Prior to imposing any sanctions or remedies, the USMCA also requires that accused parties be given an opportunity to engage with the relevant national competition authority, be heard and present evidence, and cross-examine any witnesses, among other things. Parties to the USMCA also have to provide an opportunity for judicial review of decisions to impose a fine, sanction or remedy and must make public the criteria used for calculating a fine.

Parties must also treat the individuals and companies of the other parties no less favourably than their own individuals/companies, must consider the effect of enforcement activities on related activities by another party, and must generally limit remedies relating to conduct outside their territory.

While the USMCA sets out much more detailed requirements for enforcement than NAFTA did, it is unlikely these new provisions will have a significant practical impact on competition enforcement in North America, as these practices are already relatively commonplace.

North American Cooperation and Coordination

NAFTA recognized the importance of cooperation and coordination between North American competition authorities for effective enforcement. However, at the day-to-day working level, such cooperation was primarily addressed through bilateral antitrust cooperation agreements (e.g., the Canada-Mexico Cooperation Agreement on Competition Law Enforcement that took effect in 2003) and more informal means, rather than through the formal auspices of NAFTA itself.

As a recent example, in 2015, competition authorities in Canada, the U.S. and Mexico gathered for the inaugural North American Antitrust Authorities Conference, at which Canadian Commissioner of Competition John Pecman highlighted the importance of international cooperation, indicating that “approximately one third of [Canada’s] cartel cases have an international dimension and one quarter of [Canada’s] complex merger reviews involve a significant level of cooperation with at least one international antitrust counterpart.”

It is therefore no surprise that the USMCA includes detailed cooperation provisions.

Specifically, in addition to recognizing the importance of cooperation and coordination, the new chapter 21: Competition Policy of the USMCA provides that the parties shall:

  • seek to further strengthen cooperation and coordination, particularly on commercial practices that hinder efficiency and reduce consumer welfare within the free trade area;
  • adopt or maintain measures sufficient to permit negotiating cooperation instruments to address things such as enhanced information sharing and mutual legal assistance;
  • seek to cooperate on such things as investigations that raise common law enforcement concerns; and
  • consider undertaking mutual activities such as training programs.

These provisions may help open the door to more collaborative North American competition law enforcement.

Consumer Protection

The USMCA also includes new provisions on consumer protection that complement the anticompetitive business conduct provisions. These provisions recognize the importance of consumer protection policy and enforcement in creating efficient and competitive markets and require each party to adopt or maintain consumer protection laws that proscribe fraudulent and deceptive commercial activities.

The provisions also call for cooperation and coordination between the parties to address fraudulent and deceptive commercial activities and provide for the exchange of consumer complaints and other enforcement information.

Conclusion

Although the USMCA does not fundamentally shift competition law in Canada – or North America for that matter – the agreement may open the door to enhanced cooperation between Canadian, American and Mexican competition authorities, including in relation to merger reviews and cartels.

Businesses may benefit from increased cooperation if the parties are able to streamline and accelerate the pace of investigations by sharing information, aligning timelines, and combining resources. Meanwhile, consumers may benefit from more efficient international policing of cartel behaviour.

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