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Canadian Government Opens the Door for Broad Reforms of Competition and Foreign Investment Law

Yesterday, Canada’s Prime Minister released his ministerial mandate letters, outlining the government’s priorities and providing direction to each member of Cabinet for the duration of their term. Though the letters’ release was highly anticipated since the swearing in of Cabinet in late October, it was unclear whether they would differ materially from the prior iterations, given that the Liberal Party remained at the helm (albeit as a minority government). In the case of the reappointed Minister of Innovation, Science and Industry, François-Philippe Champagne (the “Minister”), his mandate letter set a more assertive tone than mandates in recent years, especially in respect of competition law and foreign investment regulation.

Though the mandate letter’s stated priorities are broadly consistent with recent messaging from the Commissioner of Competition (“Commissioner”) and the Department of Innovation, Science and Economic Development (“ISED”), the Prime Minister’s instructions are the strongest endorsement yet from the government regarding antitrust reform and bolstered use of national security reviews under the Investment Canada Act. The mandate includes important proposed policy and legislative changes to both enforcement regimes.  

Competition Reform and Digital Enforcement at the Forefront

The mandate letter offers the first glimpse into the new government’s plans for competition law reform, and highlights two priorities:

  • The Minister must undertake a broad review of the current legislative and structural elements that may restrict or hinder competition. This includes directly reviewing the mandate of the Commissioner, and in so doing, ensuring that Canadians are protected from anti-consumer practices in critical sectors, including in the oil and gas, telecommunications and financial services sectors; and
  • The Minister is to introduce legislation to advance the Digital Charter, strengthen privacy for consumers, and provide a clear set of rules that ensure fair competition in the online marketplace.

The Prime Minister’s support of a wide scale competition law review is consistent with the push for antitrust reform internationally and increasing pressure from key stakeholders in the federal Parliament and the Commissioner – who have all indicated their support for a comprehensive review of the Competition Act, and in particular ensuring that the Competition Bureau (“Bureau”) has the proper tools to review and address anticompetitive conduct in the increasingly digitalized economy.

The mandate letter follows the Commissioner’s recent annual address to the CBA Competition Section’s fall conference in October, where he stressed the need, in his view, for a broad review of the Competition Act. Questioning whether “the Bureau has the right tools under the Competition Act to take necessary and meaningful enforcement action”, the Commissioner highlighted several areas where legislative reform may be warranted, such as (i) criminalizing “no-poach” and wage fixing agreements, (ii) increasing penalties in abuse of dominance and criminal cartel cases, (iii) opening up private litigation in abuse of dominance cases, (iv) adopting a lower standard to facilitate injunctions against anti-competitive mergers, and (v) repealing the efficiencies defense. The mandate letter reflects these concerns. However, unlike the Commissioner’s speech, the letter highlights specific “critical sectors”, all of which have been traditional industries of concern for the Bureau. This may suggest the government’s desire to ensure strong competition enforcement in the enumerated industries, rather than introducing industry-specific amendments.

The Digital Charter was released in 2019 and set out the principles for the growth and governance of the digital economy, incorporating the maintenance of a competitive, data-driven digital economy as a key component. Its inclusion in the mandate letter marks the Liberal government’s second attempt to codify the Digital Charter, having tabled the Digital Charter Implementation Act, 2020 over a year ago with no success. Despite the reference to “fair competition”, the abandoned bill focused on privacy concerns (and not competition). It remains to be seen whether this second attempt will follow the same approach, or rather introduce some form of digital competition regulation, similar to developments in Europe, in order to strengthen the Competition Act’s ability to address anti-competitive conduct in the digital economy.

Protectionist Stance on Foreign Investment and Increased Use of National Security Powers

The mandate letter’s priorities for foreign investment review strike a decidedly protectionist tone, building upon the trend of policy statements issued by ISED over the course of the pandemic. The mandate references the following priority items regarding foreign investment review:

  • The Minister is to use the Investment Canada Act and national security reviews as a tool to ensure the protection and development of Canada’s critical minerals. The Minister is asked to work collaboratively with the Minister of National Resources to ensure that Canada is positioned at the forefront of critical mineral exploration, extraction, processing, and manufacturing, as well as being a global leader in the production of sustainable battery innovation and industrial ecosystem in Canada, and other clean and digital technologies derived from critical mineral processing; and
  • The Minister must contribute to broader efforts to promote economic security and combat foreign interference by reviewing and modernizing the Investment Canada Act to strengthen the national security review process and better identify and mitigate economic security threats from foreign investment.

These priority items are consistent with the revised Guidelines on the National Security Review of Investments (“Revised Guidelines”) released on March 24, 2021, which we covered in detail at the time. Like the Revised Guidelines, the mandate letter highlights critical minerals as an industry of concern, requesting that the Investment Canada Act (presumably using the national security review provisions) be used as a shield against foreign interference in the sector. Moreover, the mandate letter’s priorities clearly demonstrate the government’s continued concern for economic security and its desire, since the onset of the pandemic, to implement domestic industrial policies. However, the mandate goes further than prior policy statements – it calls for the review and modernization of the Investment Canada Act with these protectionist principles in mind, signaling a desire for a permanent shift in Canada’s approach to foreign investment.  

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Given that the Prime Minister is currently leading a minority government, it is uncertain which of its priorities will come to fruition, especially where such changes involve passing legislative reform through a divided Parliament. Moreover, various stakeholders have warned about implementing the same proposed sets of reforms that are proceeding in other countries – specifically the U.S. – without taking into account the specificities of the Canadian economy. We therefore expect that legislative amendments will, rightly, involve significant public consultation before any far reaching changes are implemented.