June 24, 2022
On June 23, 2022, Bill C-19 (Budget Implementation Act, 2022, No.1) received royal assent, introducing sweeping amendments to Canada’s federal Competition Act. The amendments include significant increases to the civil and criminal penalties under the Competition Act, new wage fixing and no poach offences, new prohibitions on drip pricing and expansion of private right of access to the Competition Tribunal (Tribunal) for abuse of dominance, among other things. Most of the amendments are now in force, with the amendments to the conspiracy provision (including the new wage fixing and no poaching offences) coming into force on June 23, 2023 to allow companies to adjust for the criminal conspiracy-related changes.
These initial Competition Act amendments (a second round of amendments is anticipated including potential changes to Canada’s mergers efficiency defence) follow the Competition Bureau’s submission on Examining the Competition Act in the Digital Era on February 8, 2022 (Competition Bureau Submission) and mark the most significant changes to the Competition Act since 2009.
The following is an overview of the key changes to the Competition Act.
Increased fines and penalties. According to the Competition Bureau Submission, the current fines under the Competition Act were “out of step” with that of other major jurisdictions and insufficient to achieve the Competition Act’s intended purpose to deter and punish anti-competitive conduct. Following the amendments, the maximum fine for criminal conspiracy (cartel) offences (section 45), which are currently capped at $25 million, will be replaced with a fine at the discretion of the court (i.e., with no upper limit). This amendment is consistent with the unlimited fine threshold for bid-rigging (section 47 of the Competition Act) and the higher penalty provisions of other foreign jurisdictions, particularly the United States and European Union.
In addition, the administrative monetary penalties for abuse of dominance (section 79) and for deceptive marketing (also commonly referred to as misleading advertising) for a corporation will increase from $10 million ($15 million for each subsequent offence) to the greater of $10 million ($15 million for each subsequent offence), three times the value of the benefit obtained from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the company’s annual worldwide gross revenues. The administrative monetary penalty for an individual for deceptive marketing will increase from $750,000 ($1 million for each subsequent offence) to the greater of $750,000 ($1 million for each subsequent offence) and three times the value of the benefit derived from the deceptive conduct if the latter amount can be reasonably determined.
Wage fixing and no-poach agreements. Under the new amendments, the criminal conspiracy (cartel) provisions of the Competition Act (section 45) will be expanded to prohibit agreements between employers to fix employee wages (wage fixing agreements) or to agree not to solicit or hire employees (no-poaching agreements). This amendment is consistent with labour market enforcement practices and policy change commitments in the European Union and the United States and was seen as a gap in Canadian cartel law. For more information on recent enforcement activity in relation to no-poach and wage-fixing agreements, see Competition Bureau, Competition Bureau statement on the application of the Competition Act to no-poaching, wage-fixing and other buy-side agreements and Competition Bureau Reiterates Narrow Enforcement Position For No-Poaching and Wage-Fixing Agreements Between Competing Employers.
Private access for abuse of dominance. According to the Competition Bureau Submission, private access complements public enforcement by the Bureau due to, among other things, increasing the number of cases before the Tribunal and developing case law under the Competition Act. Whereas previously only the Commissioner of Competition could commence Tribunal applications for abuse of dominance under section 79 of the Competition Act, the recent amendments will now also allow private parties to apply for leave to make abuse of dominance applications to the Tribunal. This new right of private access for section 79 is similar to that already available for private parties under sections 75 (refusal to deal), 76 (price maintenance) and 77 (exclusive dealing, tied selling, and market restriction) of the Competition Act. The lack of private access to the Tribunal under section 79 had been seen as inconsistent with the broader private right of access rights under the Competition Act for other civil reviewable matters. Also, given the limited litigation budget of the Bureau, expanding private access rights under section 79 will also allow private parties to seek remedies for abuse of dominance. However, private litigants will still have no right to monetary penalties under section 79 (i.e., only, if successful, Tribunal remedial orders, including for anti-competitive conduct to stop).
Drip pricing. The amendments to the Competition Act also add a new provision on drip pricing to both the criminal and civil provisions on false and misleading advertising under sections 52 and 74.01 (i.e., failing to state the full price of a product or service upfront, with the full price only disclosed at a later stage or at the check-out stage of an online purchase). Drip pricing has been one of the Competition Bureau’s deceptive marketing enforcement priorities, along with false or misleading performance claims, ordinary sale price claims and misleading testimonials/endorsements. The Bureau had cited evidential challenges associated with the enforcement of drip pricing given the lack of specific prohibitions under the Competition Act. Prior to the recent amendments, drip pricing was reviewable under the general criminal and civil misleading advertising provisions of the Competition Act, sections 52 and 74.01 if a pricing claim was either literally false or misleading (e.g., omitted a portion of the total price upfront).
Expanded factors to determine competitive effects. The amendments to the Competition Act also include new factors to be considered in assessing competitive effects for sections 79 (abuse of dominance) and section 90.1 (civil agreements between competitors). Regarding abuse of dominance, the new factors include: (i) network effects in relation to barriers to entry; (ii) quality, choice, or consumer privacy in relation to price and non-price competition; (iii) the nature and extent of change and innovation in a relevant market; and (iv) any other factor that is relevant to competition in the market that is or would be affected by the practice. Under section 90.1, the new factors include: (i) network effects in relation to barriers of entry; (ii) quality, choice, or consumer privacy in relation to price and non-price competition; and (iii) the possible entrenchment of leading incumbents’ market position.
Overall, the recent amendments to the Competition Act address a number of perceived gaps in Canada’s federal competition law, including increasing the civil and criminal penalties to align Canada with other major jurisdictions including the United States and European Union, adding new specific offences to allow particular anti-competitive conduct to be enforced (including no-poach and wage fixing agreements between competitors and drip pricing) and expanding the right of private access for abuse of dominance.
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