Recent Developments in Canadian Competition and Foreign Investment Law
There has been a range of recent developments across the Canadian competition law landscape, but a common thread through many of them has been the Competition Bureau’s sustained focus on digital economy enforcement cases[i] and its efforts to foster innovation. These areas continue to be top priorities for the Bureau because of their impact on consumers and businesses.[ii] Included in these efforts, for example, are the Bureau’s recently produced reports on “Big Data”[iii] and “FinTech”[iv]. The Bureau’s “Big Data” report draws from its recent abuse of dominance investigations involving big data considerations, and also considers US and European developments in order to identify challenges raised by “Big Data” in the context of criminal cartels, mergers, and misleading advertising cases. Another significant development dealing with “Big Data” was the much-anticipated Court of Appeal decision in the Toronto Real Estate Board (TREB) case, in which TREB was found to have abused its dominant position. TREB is precedent-setting for a number of reasons. While raising numerous competition law issues, this case fundamentally determined that an organization could be found to be engaged in an anti-competitive practice when it restricts access to data. From a “Big Data” perspective, the case has the potential to be a significant factor driving the opening up of data sources in other sectors, notably financial services.
These and other recent developments in Canadian Competition and Foreign Investment Law are discussed below.
Recent Developments in Canadian Competition and Foreign Investment Law
The Bureau’s recent enforcement actions cover a broad spectrum of misleading advertising (from performance claims to product labelling), including million dollar penalties for ordinary selling price contraventions, with much of this activity impacting digital economy enforcement. The Bureau continues to focus on online and mobile advertising as well as Competition Act provisions that specifically prohibit misleading representations in electronic messages, which came into force as part of Canada’s Anti-Spam Legislation (CASL).
For detailed discussion see: Misleading Advertising
MERGERS (COMPETITION ACT)
A number of proposed mergers across a variety of industries resulted in remedy negotiations between the parties and the Competition Bureau, ultimately leading to merger consent agreements. Companies considering a merger will want to be aware of these recent mergers, as well as deals where clearance was obtained without remedies. One of the most notable deals recently cleared is the acquisition of Canexus Corporation, which was allowed without remedies on the basis that the expected efficiencies gained from the transaction would significantly outweigh the likely anti-competitive effects of the transaction. Understanding the enforcer’s competition law concerns, as highlighted by these mergers, will allow prospective parties to better prepare for and navigate potential obstacles in their own merger review process.
New amendments to the Competition Act that expand the affiliation rules may result in a greater number of transactions being subject to mandatory pre-merger notification.
For detailed discussion see: Mergers (Competition Act)
MERGERS (INVESTMENT CANADA ACT — FOREIGN INVESTMENT REVIEW)
Recent events signal an increased willingness to encourage foreign investment. These events include an increase to one of the most commonly applicable pre-closing review and approval thresholds under the Investment Canada Act (to C$1 billion in 2017), the introduction of a new C$1.5 billion review threshold for private sector trade agreement investments, new guidelines that shed some light on the circumstances that may draw foreign investors and parties involved in an investment into the realm of a national security review, and the setting aside of the prior Federal government’s decision requiring a foreign investor to divest its investment in a Canadian business due to national security concerns.
For detailed discussion see: Mergers (Investment Canada Act – Foreign Investment Review)
Fundamental and controversial changes may be on the horizon for Canada’s immunity program. Many have expressed concerns that the proposed revisions will result in uncertainty and place a significant burden on immunity applicants, which would have the effect of deterring cooperation in Canada. Another area that looks to be on the cusp of change is the introduction of a deferred prosecution agreement (DPA) regime to address corporate criminal liability in Canada. A report on the public consultation conducted in the fall of 2017 (on whether Canada should adopt a DPA regime, how such a regime should be constructed, and how DPAs would interact with the federal Integrity Regime) is expected later in 2018. Also in line for possible enhancement later this year is the federal Integrity Regime (under which a corporation that is convicted or pleads guilty to a cartel or bid-rigging offence is automatically debarred for a period of at least five years). There are also a number of updates on the Competition Bureau’s cartel and bid-rigging cases. Guilty pleas have been secured in connection with a number of Bureau investigations, including motor vehicles components, retail gas, sewer and water services, information technology services, and ventilation systems. The Bureau’s bread price-fixing investigation came to light when search warrants were executed at a number of major grocery retailers and a bread wholesaler in the fall of 2017 with respect to alleged arrangements involving the coordination of retail and wholesale prices of some packaged bread products.
For detailed discussion see: Cartel Enforcement
ABUSE OF DOMINANCE
A major abuse of dominance case moved one step closer to its conclusion with the long-awaited Federal Court of Appeal decision confirming the decision of the Competition Tribunal, which found that the Toronto Real Estate Board (TREB) was abusing its dominant position by preventing its members from offering data through innovative brokerage models. Among other things, this case set an important precedent, as it confirms that in some cases the burden of proof on the Commissioner of Competition to prove anti-competitive effects in an abuse of dominance case can be met solely by adducing qualitative evidence (as opposed to quantitative evidence). The case is also significant in how it deals with Big Data arising from the court’s determination that an organization could be found to be engaged in an anti-competitive practice when it restricts access to data (in this case, home sales data). The Bureau has touted its case against TREB as one that “clearly underscores that crucial link between competition and innovation and the Bureau’s role in upholding both”. On the investigation side, the Bureau recently closed four high-profile abuse of dominance investigations (Loblaws, Apple, the TMX Group and Google). With respect to new enforcement activity, the Bureau initiated a case against the Vancouver Airport Authority for restricting in-flight catering services.
For detailed discussion see: Abuse of Dominance
PRIVATE TRIBUNAL APPLICATIONS
The Competition Act provides for private parties to seek leave to bring certain applications before the Competition Tribunal if they are affected by certain restrictive trade practices. However, recent cases reveal the Tribunal’s strict approach, which brings into question whether this right has practical application for parties seeking access to remedies under the Competition Act.
For detailed discussion see: Private Tribunal Applications
A number of recent court decisions and events will impact the scope of potential liability facing class action defendants. The Ontario Court of Appeal recently held that the “discoverability” principle applies to the limitation period for civil damage claims that can be brought for criminal anti-competitive conduct. On the topic of whether “umbrella plaintiffs” have a cause of action against alleged cartelists, Canadian courts have issued contrasting views.
In other news, the Canadian Government’s decision to suspend the coming into force of the private right of action provisions in Canada’s Anti-Spam Legislation (CASL) provides at least some temporary relief to legitimate advertisers who would have been exposed to potentially significant damage claims for immaterial misrepresentations that cause no harm.
The Competition Bureau has issued an information bulletin affirming its position that it will not voluntarily provide information from its investigative files to private litigants.
An Ontario court held that class action plaintiffs improperly circumvented procedural rules when they sought an ex parte order from a U.S. court compelling a non-party to submit to discovery in the U.S. for purposes of the Ontario proceeding.
For detailed discussion see: Class Actions
[i] The Bureau has investigated 80% more digital economy cases compared to previous years. Digital economy cases are defined as those that “support innovation and the competitiveness of the digital economy (including but not limited to e-business, online promotions, sales and transfers, infrastructure support) by deterring anti‑competitive conduct such as impeding new entrants, products or services and stopping deceptive marketing practices online including activities that engage the CASL provisions” from Competition Bureau Year at a Glance, Performance Update for Fiscal Year 2016-2017, May 24, 2017.
[ii] The Bureau has referenced innovation as a driving theme in numerous publications and speeches, including the Bureau’s last two annual plans: 2017‑2018 Annual Plan: Competition is key—Creating the conditions for innovation and 2016‑17 Annual Plan: Strengthening Competition to Drive Innovation. According to its 2017‑2018 Annual Plan, the Bureau has 53 active digital economy enforcement cases.
[iii] The Bureau recognizes that competition enforcement needs to “strike a balance” that does not stifle innovation driven by the collection and use of data and legitimate competition. The Bureau considers that the existing legislative framework under the Competition Act is largely effective in meeting the new challenges posed by big data. Nonetheless, given that the use of big data is new and developing at a fast pace, the white paper titled “Big data and Innovation: Implications for competition policy in Canada” identifies challenges of analyzing big data cases under the Act. For further detail, see our article: Competition Bureau Releases Big Data White Paper for Public Comment.
[iv] See our article: Canadian Competition Bureau Releases Final Fintech Report.