Anonymised, illustrative composite. Three businesses that used to compete for the same suppliers now shared an owner. The question was whether they could now also share a purchasing programme.
At a glance
A sponsor built an industrial services platform through three separate acquisitions completed over eighteen months, each a previously independent business operating in a different metro area. Before the acquisitions, the three businesses had, on occasion, competed for supply contracts with the same regional distributors — the market for their core consumable inputs was small enough that all three knew each other and, at least indirectly, knew roughly what the others were paying.
Once all three sat under the same platform holding company, the operating partner running the combined business wanted to consolidate purchasing: negotiate a single supply agreement across all three sites’ volume rather than three separate contracts, to capture the pricing leverage that scale should provide.
Before raising it with suppliers, the platform’s counsel flagged a genuine question: three businesses that had, until recently, been independently owned and had at times competed for the same supply contracts were now proposing to jointly negotiate purchase pricing. That has the shape of the conduct the Competition Act polices, and nobody wanted to build a centralized procurement function only to have it unwind under regulatory scrutiny later. The first job was to identify which provision was actually engaged, because the answer is not the one most people reach for.
Under Competition Act s. 45(1), “every person commits an offence who, with a competitor of that person with respect to a product, conspires, agrees or arranges (a) to fix, maintain, increase or control the price for the supply of the product,” and s. 45(8) defines “competitor” to include “a person who it is reasonable to believe would be likely to compete with respect to a product in the absence of” the very arrangement being assessed. Read quickly, that looks like it captures three former rivals sitting down to negotiate one purchase price.
It does not. Paragraph 45(1)(a) is written to the price “for the supply of the product.” The Competition Bureau’s Competitor Collaboration Guidelines state the consequence in terms: “The prohibition in paragraph 45(1)(a) applies to the price for the supply of a product, and not to the price for the purchase of a product. Accordingly, joint purchasing agreements — even those between firms that compete in respect of the purchase of products — are not in and of themselves prohibited by paragraph 45(1)(a) (or paragraphs 45(1)(b) or (c)) and will only be subject to review under the reviewable matters provisions in Part VIII of the Act.” Buy-side coordination is a civil question, not a criminal one. The live provision was never s. 45; it was s. 90.1, under which the Tribunal may order relief where an agreement between competitors “prevents or lessens, has prevented or lessened or is likely to prevent or lessen competition substantially in a market.”
Three sites, one holding company owning 100% of the equity of each operating subsidiary since the last of the three acquisitions closed — a clean, unambiguous common-control structure with no minority co-owners or independent voting blocks at any of the three operating entities to complicate the analysis.
The Act supplied the answer twice, once in each provision, using the same test. Section 45(6)(a) states that the conspiracy offence “does not apply if the conspiracy, agreement or arrangement” is “entered into only by parties each of which is, in respect of every one of the others, an affiliate.” Section 90.1(7) carries a matching exception for the civil provision, in almost identical words: subsection (1) “does not apply if the agreement or arrangement is entered into, or would be entered into, only by parties each of which is, in respect of every one of the others, an affiliate.” And the Act defines the term itself: under s. 2(2)(a), “one entity is affiliated with another entity if one of them is the subsidiary of the other or both are subsidiaries of the same entity or each of them is controlled by the same entity or individual.”
All three operating subsidiaries were, since closing, wholly owned by the same platform holding company — squarely within the Act’s own affiliation test, which s. 2(4)(a) grounds in holding more than 50% of the votes to elect directors. A purchasing programme entered into only among the three subsidiaries and their common parent therefore sits outside the civil provision by the express operation of s. 90.1(7), and outside the criminal provision twice over: paragraph 45(1)(a) does not reach purchase prices at all, and s. 45(6)(a) would exempt the arrangement even from the parts of s. 45(1) that could otherwise bite — allocating customers or territories under (b), or restricting supply under (c) — if consolidation ever reached that far. Affiliated entities acting as what they now legally are, commonly controlled parts of one corporate group, are not treated as competitors conspiring with each other, whatever their commercial history before the acquisitions closed.
Counsel was explicit with the operating partner about the boundary of that comfort: the exemption runs to the platform’s own wholly owned subsidiaries, not to any looser arrangement the platform might later want with a fourth, still-independently-owned business it merely had a commercial relationship with. A genuine buying group among businesses that remain independently owned and controlled is a different fact pattern — still not a s. 45 problem, on the Bureau’s stated reading, but squarely a s. 90.1 one, assessed on whether the group could depress input prices by exercising monopsony power. The Bureau’s own general rule in the Guidelines is that it “will not challenge joint purchasing agreements under section 90.1 on the basis of a concern related to the exercise of monopsony power by the parties where the share of the relevant upstream market held by the parties to the agreement is less than 35%.” That is a stated enforcement posture, not a safe harbour written into the Act, and it turns on a market share nobody on this deal had measured.
The portfolio-operations counterpart to this file — standardizing financial reporting across the same three-site structure — runs through one accounting policy across four companies.
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