Significant first-round amendments to the Competition Act come into force

9 minute read
28 June 2022

On June 23, 2022, legislative amendments to the Competition Act ("Act") that were introduced through Bill C-19, better known as the Budget Implementation Act, 2022, received royal assent and became law. According to Budget 2022, the amendments are a preliminary phase of modernizing Canada's competition regime and are designed to address perceived shortcomings in the Act by fixing loopholes, tackling practices harmful to workers and consumers, modernizing access to justice and penalties, and adapting the law to today's digital reality.

While further reform of the Act is anticipated, the first-round amendments are significant and wide-ranging in their own right, and already greatly expand the scope of the Act towards broader prohibitions, stricter penalties and enhanced enforcement. 

The Competition Bureau ("Bureau"), which administers and enforces the Act, welcomed the new amendments, noting that they will strengthen the Bureau's ability to protect Canadian consumers, businesses and workers from anti-competitive conduct. The Bureau also committed to hosting public information sessions to inform stakeholders about the new provisions to the Act, and to publishing updated enforcement guidance to promote transparency and predictability for the business and legal communities.

The following summarizes the key amendments to the Act:

Criminalization of wage-fixing and no-poach agreements

The amendments expand the criminal conspiracy provision in the Act by creating a new criminal offence for unaffiliated employers to enter into agreements or arrangements to fix, maintain, decrease or control salaries, wages or terms and conditions of employment (e.g., wage-fixing agreements), or to not solicit or hire each other's employees (e.g., no-poach agreements). 

Importantly, the ancillary restraints and regulated conduct defences remain available for wage-fixing, no-poach and other employment-related agreements, and all other buy-side agreements (such as joint purchasing agreements) remain reviewable only under the civil provisions of the Act. 

Unlike most of the other amendments to the Act that became law on June 23rd, this prohibition will only come into force on June 23, 2023, one year after Bill C-19 received royal assent. 

Increased fines and monetary penalties

The amendments introduce the potential for considerably higher monetary penalties for criminal conspiracies, abuse of dominance and deceptive marketing practices. 

Contraventions of the criminal conspiracy provisions in section 45 of the Act (including the new prohibition against wage-fixing and no-poach agreements) will be subject to a fine in the discretion of the court, rather than being capped at $25 million. This aligns section 45 with the penalties available under the bid-rigging provisions found in section 47 of the Act. However, the amendment (like the prohibition on wage-fixing and no-poach agreements) will only come into force on June 23, 2023, in order to provide businesses with additional time to ensure they comply with the law.

More dramatically, the maximum administrative monetary penalties ("AMPs") available as a remedy for abuse of dominance and deceptive marketing practices were markedly increased. Whereas AMPs for these provisions were previously capped at $10 million (for a first offence by a corporation, and $15 million for subsequent violations), the new maximum penalty that could be ordered is the greater of: (i) $10 million (or $15 million for each subsequent violation); and (ii) three times the value of the benefit obtained from the deceptive conduct or, if this cannot be calculated, 3 per cent of annual worldwide gross revenues.

Expanded scope and enforcement for abuse of dominance

The amendments clarify and expand the scope of what constitutes a practice of anti-competitive acts for purposes of establishing abuse of dominance by:

  • Defining an anti-competitive act as not only one that is intended to have a predatory, exclusionary or disciplinary negative effect on a competitor (as was established by case law prior to the amendments), but also any act intended to have an adverse effect on competition generally (which is far broader and captures any acts intended to cause wider competitive harm but that may be advantageous for competitors); and,
  • Adding a further example to the non-exhaustive list of potential anti-competitive acts set out in section 78 of the Act: "a selective or discriminatory response to an actual or potential competitor for the purpose of impeding or preventing the competitor's entry into, or expansion in, a market or eliminating the competitor from a market."

The amendments also extend, for the first time, private access to the Competition Tribunal ("Tribunal") for abuse of dominance cases by allowing private parties to apply directly to the Tribunal to seek leave to bring forward an abuse of dominance case. Previously, only the Commissioner of Competition could enforce the abuse of dominance provision, although private access was available in respect of certain other civil provisions of the Act.

The expanded scope of the abuse of dominance provision and the ability for private enforcement are significant developments that may lead to more enforcement actions. However, it is important to remember that the requirement to demonstrate that the impugned conduct is or is likely to substantially lessen or prevent competition remains unchanged, and corporations with a strong market position can still defend against an allegation of abuse of dominance based in part on a legitimate business justification for the conduct at issue.  Private enforcement actions may also be somewhat muted by the inability to seek monetary damages for the harm suffered as a result of the alleged abuse of dominance, although surprisingly the Tribunal could still award AMPs in private actions.

Drip pricing explicitly recognized as misleading advertising

Drip pricing involves offering a product or service at a price that is unattainable because consumers must also pay additional charges or fees to buy the product or service. The Bureau has long taken the position that drip pricing is misleading advertising and has successfully taken enforcement action against the practice using the civil false or misleading representations provision of the Act.

The amendments confirm that representing a price that a consumer cannot actually attain because of mandatory fixed additional charges or fees (other than those that are entirely government imposed, such as sales taxes) is a false or misleading representation contrary to both the criminal and civil provisions of the Act.

Expanded factors for consideration in mergers and non-criminal competitor collaborations

The amendments expand on the existing list of factors that the Tribunal may consider in cases involving mergers and civil reviewable competitor collaborations to determine whether there is or is likely to be a substantial lessening or prevention of competition. The new factors that were added – such as network effects, the possible entrenchment of a leading incumbent's market position, effects on both price and non-price competition (such as quality, choice or consumer privacy), and the nature and extent of change and innovation in the relevant market – were included to address potential competitive harms in digital markets, but they are applicable more broadly as well.

Anti-avoidance rule for merger notifications

All proposed merger transactions that meet certain financial thresholds set out in the Act are subject to mandatory pre-notification and clearance under the Act prior to closing. The amendments introduce an anti-avoidance provision that ensures that mandatory merger notification requirements will apply to any transactions and proposed transactions structured to avoid notification under the Act.

Expanded evidence-gathering tools

The amendments clarify that a person must provide information under a court order obtained by the Bureau if they carry on business in, or sell into, Canada, regardless of whether the person is located in or outside of Canada. They also add a new power to compel written information from both foreign and domestic affiliates of a corporation where the affiliate has or is likely to have records or information relevant to the inquiry.

Should you have any questions about this article or would like to discuss it further, please don't hesitate to contact the authors.

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