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Gradually, then Suddenly: Significant Competition Law Reform Arrives in Canada

After more than two years of much talk of Canadian competition law reform but only limited legislative action, on November 28, 2023, the Canadian government took initial steps towards implementing substantial amendments to the Competition Act (the “Act”). If passed, the latest amendments will dramatically broaden certain provisions of the Act, most significantly in relation to civil collaboration agreements (by applying to not only agreements between competitors) and abuse of dominance, and will alter Canada’s competition law enforcement landscape, ushering in, among other changes, expanded private litigation, stronger civil conduct provisions, and a more expansive merger notification regime.

The newly proposed changes are included in an omnibus bill (Bill C-59) introduced by Deputy Prime Minister and Finance Minister Chrystia Freeland to implement a broad range of measures announced in the government’s November Fall Economic Statement.

Bill C-59 follows on a narrower set of amendments to the Act proposed by the government in September 2023 through Bill C-56 (The Affordable Housing and Groceries Act), which remains before Parliament. While Bill C-56 is advancing on an accelerated timeline and seems poised to take effect in advance of Bill C-59, the two sets of amendments interact with one another and, taken together, represent the first set of comprehensive amendments to the Act since 2009.

This bulletin highlights the key changes proposed in Bills C-56 and C-59 that are likely to have the greatest effect on Canada’s business environment. The proposed amendments are expansive in scope and significant in their impact. Over the coming weeks, we will be posting a series of further web bulletins digging deeper into specific sections of the amendments. Subscribe to receive these timely updates directly to your inbox from the Competition/Antitrust & Foreign Investment Group. Please stay tuned for the posts.

  1. Expanded Private Litigation

Historically, private litigants have had limited access to the Act’s civil (i.e., non-criminal) provisions. Prior to 2022, private applications could be brought only for refusal to deal (section 75), price maintenance (section 76) and exclusive dealing, tied selling and market restriction (section 77); none of which provisions allowed for private litigants to recover losses — remedies were limited to corrective behavioural orders.

Following on modest enhancements to private access introduced in the 2022 amendments (which created private access for abuse of dominance applications), Bill C-59 throws open the doors to private enforcement. These amendments mark a shift in enforcement policy, building incentives for much greater private enforcement of key sections of the Act, and represent a move towards US-style private antitrust litigation:

  • New Rights of Action: Bill C-59 extends private rights of access to sections 90.1 (civil collaborations) and 74.1 (deceptive marketing practices) cases. The only significant civil provision for which private access remains unavailable is merger review, although that too may be inadvertently caught by the amendment that grants private access to the civil collaboration provisions.
  • Lower Leave Test. Private applications to the Competition Tribunal (the “Tribunal”) will remain subject to a leave test under section 103.1 of the Act. Previously, leave would typically be denied unless the applicant’s entire business was affected by the target’s conduct. Bill C-59 eases this burden on would-be applicants:
    • For refusal to deal (section 75), price maintenance (section 76), exclusive dealing, tied selling and market restriction (77), abuse of dominance (section 79) and civil collaborations (section 90.1), leave may be granted even if only part of an applicant’s business is affected, or if the Tribunal determines it is in the “public interest” to grant leave.
    • For deceptive marketing practices (section 74.1), leave may be granted where the Tribunal is satisfied that it is in the public interest to do so.
  • Monetary Awards. Bill C-59 introduces monetary awards for private litigants — for an amount up to the value of the benefit derived from the conduct — to be distributed among the applicant and any other person affected by the conduct under sections 75, 76, 77, 79 and 90.1 (but not with respect to deceptive marketing applications under section 74.1). This is a considerable change aimed at incentivizing private litigants to bring applications before the Tribunal.
  1. Abuse of Dominance

In addition to expanding the ability of private litigants to bring an abuse of dominance case, the amendments also lower the substantive test that applies to abuse cases:

  • Lower Standard. Currently, both intent (to engage in an anti-competitive act) and effect (substantial prevention or lessening of competition) are required to establish abuse of dominance under the Act; Bill C-56 lowers this threshold. Under Bill C-56, in order for the Tribunal to make a prohibition order, it will be sufficient for the Tribunal to find that a dominant firm has (i) engaged in a practice of anti-competitive acts or (ii) engaged in conduct that substantially lessens or prevents competition.

The Tribunal’s ability to order a party to (i) take any action, including a divestiture and/or (ii) pay an administrative monetary penalty (“AMP”) will remain limited to cases where both anti-competitive intent and effect are established. However, under Bill C-59, where private litigants successfully obtain any order from the Tribunal (including a prohibition order), the Tribunal can also order a monetary award for an amount up to the value of the benefit derived from the impugned conduct.

  • Excessive and Unfair Selling Prices. Section 78 of the Act provides a non-exhaustive list of anti-competitive acts that can constitute abuse of dominance. Bill C-56 proposes to add to this list “directly or indirectly imposing excessive and unfair selling prices”. This is notable in two respects:
    • Canadian case law to date has limited abusive acts to practices that are “predatory, exclusionary or disciplinary” vis-à-vis a dominant firm’s competitors. By explicitly recognizing an “exploitative” practice as an anti-competitive act, the addition of “excessive and unfair selling prices” may open the door to the abuse of dominance regime being applied to a wider range of “exploitative” conduct.
    • The reference to “indirectly” imposing excessive and unfair prices may expose resale price maintenance — which falls under section 76 of the Act — to AMPs under the abuse of dominance regime. Under section 76, price maintenance is subject only to prohibition orders and, if Bill C-59’s proposed changes are adopted, monetary relief for private litigants and other persons affected by the conduct will become available.
  1. Anti-Competitive Collaborations

Bills C-56 and C-59 together substantially expand the scope of conduct that is captured by the Act’s civil collaboration provisions and the available remedies. Notably, as identified above, this expanded regime will also be made accessible to private litigants with leave of the Competition Tribunal.

  • Non-Competitor Collaborations. Currently, section 90.1 applies only to anti-competitive agreements between competitors, but Bill C-56 proposes to expand the scope of this regime to agreements between non-competitors, where a “significant purpose of the agreement or arrangement or any part of it is to prevent or lessen competition”. This change will bring into scope vertical agreements, such as between suppliers and their customers.
  • Efficiencies Defense Repealed. As is the case for merger review, Bill C-56 will eliminate the efficiencies defense from section 90.1 — which currently shields an agreement or arrangement from a Tribunal order where is it likely to bring about efficiency gains that are greater than, and offset, its anti-competitive effects.
  • Past Conduct. Whereas section 90.1 currently only applies to “existing or proposed” agreements or arrangements, under Bill C-59, the Tribunal will have jurisdiction to make orders also in respect of past agreements or arrangements, provided that they have not been terminated for more than three years.
  • Broader Remedies. Presently, the only remedy available in connection with section 90.1 is a prohibition order. Under Bill C-59, the Tribunal is empowered also to make conduct orders (including requiring divestitures) and to impose substantial AMPs. Moreover, as above, private litigants will be able to recover monetary awards.
  1. Mergers

The proposed amendments to the Act’s merger provisions will both increase the number of transactions subject to mandatory merger review and recalibrate the substantive review framework:

  • Efficiencies Defense Repealed. As is the case for the civil collaboration provisions, Bill C-56 will eliminate the efficiencies defense from the merger review regime — which currently prohibits the Tribunal from issuing an order against a merger where the merger is likely to bring about gains in efficiencies that are greater than, and offset, the resulting anti-competitive effects and those efficiencies would be lost should the Tribunal issue an order.
  • Structural Presumptions. While the amendments do not go so far as to establish market share-based structural presumptions, Bill C-59 proposes to repeal subsection 92(2) of the Act, which provides that the Tribunal shall not find a merger to be anti-competitive based only on the basis of concentration or market shares. The removal of subsection 92(2) is likely to enhance the Bureau’s ability to rely on market share data in challenging mergers.
  • New Assessment Factors. Bill C-59 proposes amendments to sections 92 and 93 of the Act in order to explicitly identify a transaction’s impact on labour markets and to add consideration of concentration/market shares and potential for tacit coordination as factors relevant to determining whether a merger raises competition concerns. As sections 92 and 93 of the Act are in any event non-exhaustive, the practical implications of these changes are likely limited.
  • More Notifiable Transactions. Bill C-59 proposes modifications to the merger notification rules that are likely to increase the number of transactions that trigger mandatory pre-closing merger review. In particular, for both asset and share deals, the target’s revenues from sales into Canada will count towards the size-of-transaction financial threshold (in addition to sales in and from Canada, to which the threshold is currently limited). This said, as currently drafted, the new threshold test still will require the target to have a presence in Canada (referred to as an “operating business”) or directly or indirectly control an entity that has a presence in Canada (re: it will not cover purely foreign-to-foreign transactions).
  • Limitation Period Extended. While only transactions that exceed prescribed thresholds are subject to mandatory merger notification, all mergers are subject to potential substantive merger review. For those transactions where either the parties do not make a voluntary filing requesting an advance ruling certificate or a mandatory pre-merger notification filing (i.e., where the relevant thresholds are exceeded), Bill C-59 extends the limitation period within which the Bureau can challenge a transaction from one year post-closing to three years from closing (the limitation period remains one year for those transactions where a filing is made to the Bureau).
  • Interim Relief. Bill C-59 will enhance the Bureau’s ability to prevent closing while it reviews and/or challenges a merger. Under Bill C-59, where the Bureau applies for an interim order to enjoin closing (either under section 100 or 104 of the Act), the merger will be prohibited from closing until the Bureau’s injunction has been heard and disposed of by the Tribunal. Effectively, the Bureau will be enabled to pause the closing of a transaction simply by filing a section 100 or 104 application.
  1. Other Key Amendments

The amendments proposed in Bills C-56 and 59 are far-reaching and touch nearly every significant part of the Act. In addition to the areas highlighted above, other key changes being proposed include:

  • Right to Repair. Bill C-59 creates an express right to repair by preventing manufacturers from refusing to provide to third-parties the “means of diagnosis and repair” (provided that it does not require disclosure of any trade secrets).
  • Greenwashing. Bill C-59 introduces an anti-greenwashing provision, expressly making it a deceptive marketing practice to make a representation in the form of a statement, warranty or guarantee of a product’s benefits for protecting the environment or mitigating the environmental and ecological effects of climate change that is not based on an adequate and proper test.
  • Environmental Collaborations. Bill C-59 creates a mechanism for the exemption of certain agreements relating to the environment from the competitor collaborations provisions of the Act (both the conspiracy and bid rigging offences, as well as the civil competitor collaborations provision). Private parties will be able to request a certificate from the Commissioner that “greenlights” the proposed collaboration (which certificate can last up to a maximum of 10 years, subject to extension by the Commissioner). In order to grant such an exemption, the Commissioner must be satisfied that (1) the agreement is made for the purpose of protecting the environment and that (2) it is not likely to prevent or lessen competition substantially.
  • Market Studies. Bill C-56 introduces a formal market study regime. As initially proposed, Bill C-56 would only allow the Minister of Science, Innovation and Technology to initiate a market study (after consultation with the Commissioner). However, as of second reading, the bill provides that either (1) the Commissioner can initiate a market study after consulting with the Minister or (2) the Minister can direct the Commissioner to do so. Once initiated, the Bureau is empowered to seek a court order to compel the production of information from market participants to facilitate the study. The Bureau will have 18 months to complete the study, subject to a possible three month extension at the discretion of the Minister, after which the findings must be made publicly available. This was a power that the Commissioner was keen to obtain, and it is expected that this will greatly increase his use of section 11 subpoena powers to compel parties to provide documents and data, as well as answer questions under oath.
  • Reprisal Actions. Bill C-59 introduces a civil regime to protect those who assist the Commissioner from retaliatory conduct intended to “penalize, punish, discipline, harass or disadvantage” them for their cooperation. The provision is intended to encourage impacted parties to come forward and/or cooperate with the Bureau in its investigations, without fear of retribution. Either the Commissioner or a person whose business is substantially and directly affected (in whole or in part) by a reprisal action may file an application to the Federal Court (or provincial superior courts) seeking a prohibition order and/or an AMP, though no damages for private parties are available.
  1. Conclusion

Given the dual track amendment process underway through Bills C-56 and C-59, the Act can be expected to evolve somewhat gradually, with the more limited changes in Bill C-56 likely to be passed relatively shortly and debate over the more substantial reforms set out in Bill C-59 likely to continue into the new year.

While Bill C-59 may yet evolve as it works its way through Parliament, it is clear that the government is intent on implementing meaningful reform to the Act and that the Canadian competition law landscape will be reshaped over the coming year. These reforms will create new risks for businesses, but will also introduce new opportunities for redress. Businesses of all sizes and across all industries should assess the amendments’ implications, as they relate to both day-to-day operational practices and to strategic initiatives, such as mergers and joint ventures.

For more information, please consult our Competition/Antitrust & Foreign Investment Group.

competition Competition Act Competition Act Amendments amendments Bill C-59 Bill C-56 Abuse of Dominance Anti-Competitive Collaborations mergers