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Article Excerpt
Canadian trade with the Asia Pacific region continues to grow. In the first eleven months of 2004, for example, Canada's trade with the region increased by approximately 12 per cent over the same time period in 2003, with China, Japan and South Korea representing Canada's top three Asia Pacific trading partners.
Consistent with this expanding trade relationship, Asia Pacific direct investment in the Canadian economy has also continued to increase. In the 20 year period between 1984 and 2004, total Asia Pacific investment in Canada climbed by approximately 700 per cent, involving sectors such as natural resources, construction, manufacturing, wholesale trade, financing and services.
The majority of Asia Pacific businesses in Canada are still wholly-owned operations of the investing entities. However, an increasing number of operations are now being established in the form of joint ventures, either between two or more Asian joint venture partners or involving Canadian partners as well.
In light of the growing importance of joint ventures as an investment vehicle for Asian entities in Canada, the purpose of this article is to provide a brief summary of the treatment of joint ventures under Canadian competition law.
Joint ventures in Canada - an overview
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 Canadian Competition Act (the 'Act')1, 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 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 a '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 which 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 before the Competition 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" are not relevant to the inquiry under the conspiracy provisions. Further, 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...
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