Insight

Competitive Balance

Major amendments to Canada’s Competition Act were rushed through Parliament this June with scarcely any debate. They will likely have enormous antitrust ramifications—and businesses had better be ready.

Blaring megaphone sounds the alarm
DF

David Feldman and Peter Flynn

September 29, 2022 04:30 PM

The government of Canada has now passed significant amendments to the Competition Act via its Budget Implementation Act, 2022, No. 1 (BIA), which received Royal Assent this June 23. The inclusion of these changes in the BIA—a budget bill—ensured that there was no opportunity for meaningful debate on their merits, and indeed there was not even a prospect of making modest revisions to the proposed language, which was passed exactly as it was introduced. Although the private sector had no ability to shape or influence these changes, it must now adapt to them.

Remarkably, this is the second time in a row that the Competition Act—a core piece of economic legislation in Canada—has been substantially amended via a budget bill. This mirrors the experience of 2009, when the then-Conservative government adopted the same approach, which at the time generated considerable criticism from many quarters—including the then-Liberal opposition, which, now governing, has done the very same thing.

Abuse of Dominance Amendments

In our view, the changes most likely to have a meaningful impact on large businesses in Canada are the amendments to the abuse-of-dominance provision.

In short, it is now possible for private litigants, with the permission of the Competition Tribunal, to commence litigation against larger companies alleging that they are dominant and engaged in substantial anticompetitive conduct. In so doing, these private litigants will be able to seek financial penalties—payable to the government—of up to triple the amount of the benefit gained by the dominant firm, or, where that amount cannot be determined, 3% of that company’s global revenue. It is entirely plausible that in certain circumstances, these penalties may amount to tens or hundreds of millions of dollars. It is of course less clear at the moment how inclined the Competition Tribunal will be to issue such penalties.

This all stands in marked contrast to how the law of abuse of dominance has operated in Canada since it was last amended 13 years ago—and indeed since its creation in 1986. The Competition Bureau itself has, until now, always served an important “gatekeeper” function as the only party that had standing to bring such cases. The bureau, notwithstanding its tremendous expertise in such matters, its extensive information-gathering power and its considerable resources, has always been extremely judicious in bringing these cases, with the result that most Canadian businesses would generally not have viewed an abuse-of-dominance proceeding as a likely occurrence. This was in part because in many instances, following a detailed investigation and a discussion with the firm or firms in question, the Competition Bureau exercised its expert judgment not to commence litigation. This situation has been fundamentally disrupted by the Competition Act amendments, and we would expect in the coming years (or even months) to see private litigants bring or threaten to bring abuse-of-dominance cases, incentivized by the leverage the new penalties may give them in settlement discussions.

Other Changes

In addition to the changes to the abuse-of-dominance provisions described above, the 2022 amendments also include the following significant changes:

  • The criminalization of wage-fixing and no-poach agreements. Effective next year, employers in Canada will have to exercise extreme care that they are not engaged in any agreements or arrangements with one another that could be said to fix or control salaries, wages or other terms of employment, or to solicit or hire one another’s employees.
  • Increased, and potentially unlimited, monetary penalties for criminal cartel offenses, such as price-fixing, also effective a year from now. The practical effect of this delay is likely to be minimal, as cartel offenses are already subject to large fines, imprisonment and class-action liability—considerable disincentives for engaging in such conduct.
  • The explicit addition of “drip pricing,” where an initial price is advertised but additional non-optional fees are included in the final price, making that initial price unobtainable, to the definition of misleading advertising.
  • The introduction of an anti-avoidance provision intended to ensure that the parties to a merger transaction cannot deliberately structure a transaction to avoid pre-notification obligations.

The Next Round

It is widely understood that the government has in mind further significant amendments to the Competition Act. The Commissioner of Competition has been calling for an overhaul of the act—much, but not all, of which will have been accomplished via the BIA amendments. The most notable major area only minimally affected by the BIA is that of mergers, including the efficiencies defense, which we would expect to be an area of heavy focus in any subsequent amendments.

The Competition Bureau itself has, until now, always served an important “gatekeeper” function as the only party that had standing to bring such cases."

It is also understood that the government will engage in some form of consultation before proceeding with further changes. The nature of such consultation—and the willingness of the government to allow its proposals to be influenced by the Canadian competition bar and the private sector more broadly—remains to be seen, however. In our view, especially following successive rounds of forcing through changes in budget bills, it is imperative that Canada get these next changes right, and that can be done only through in-depth engagement with stakeholders outside the federal government, who can bring their informed and diverse perspectives to bear.

This article was first published on Stikeman Elliott LLP’s Knowledge Hub and originally appeared at www.stikeman.com. All rights reserved.

David Feldman is an associate in the Competition & Foreign Investment Group of Stikeman Elliott. He assists clients with the review of transactions under the Competition Act and the Investment Canada Act. David also advises on compliance issues related to the Competition Act, federal and provincial marketing and advertising laws and regulations, as well as various other regulatory issues.

Peter Flynn is an associate in the Competition & Foreign Investment Group of Stikeman Elliott. His practice focuses on the review of transactions under the Competition Act and the Investment Canada Act. Under the Competition Act, Peter advises on all aspects of competition law, including complex merger review, joint ventures and strategic alliances, criminal and civil investigations, regulatory compliance matters and misleading advertising.

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