Canadian COMPETITION LAW

May 16, 2024

RECENT AND PROPOSED COMPETITION ACT
AMENDMENTS (BILLS C-56 AND C-59)

On December 15, 2023, Bill C-56 (An Act to amend the Excise Tax Act and the Competition Act), which introduced the first of two new significant rounds of amendments to the federal Competition Act, largely came into force.

This first new round of amendments to the Competition Act, which is intended to strengthen the ability of the Competition Bureau and private parties to enforce Canadian competition law and enhance competition generally in Canada, includes fundamental changes to Canadian competition law not seen since the last major amendments to the Competition Act in 2009.

In general, the amendments to the Competition Act under Bill C-56 include new broad powers for the Competition Bureau to conduct market studies, changes to the core substantive test for abuse of dominance under section 79 (creating new two-track tests for abuse of dominance), increased penalties for abuse of dominance, broadening the civil agreements provision (section 90.1) to include agreements between non-competitors (i.e., to also apply to vertical agreements, such as distribution/supply agreements) and repealing the efficiencies defences under section 90.1 and also for mergers under section 96.

These amendments increase the potential competition law risk for companies, trade and professional associations and other entities, particularly those without credible and effective competition law compliance programs and have not reviewed their business practices to reflect Canada’s new competition law.

For more information about the December 2023 amendments under Bill C-56, see: Significant Canadian Competition Act Amendments Come Into Force (Bill C-56). See also: Competition Bureau, Guide to the December 2023 amendments to the Competition Act.

BILL C-59

The amendments introduced by Bill C-56 in December 2023 are expected to be followed by a second and more significant round of amendments contained in Bill C-59, which is currently working its way through Parliament.

At the time of writing, Bill C-59 was currently at the report stage in the House of Commons following committee review. For the current status of Bill C-59, see: here.

If passed, Bill C-59 would be the most important amendments to Canadian competition law since the current modern Competition Act replaced the former Combines Investigation Act in the 1980s.

PROPOSED DECEPTIVE MARKETING LAW
AMENDMENTS TO THE COMPETITION ACT UNDER BILL C-59

The proposed deceptive marketing law related amendments to the Competition Act under Bill C-59 include the following:

Broadened Prohibitions on Drip Pricing

If passed, Bill C-59 would include drip pricing related amendments to strengthen the existing provisions of the Competition Act to provide that the only fixed and unavoidable amounts that can be excluded from upfront product/service price claims are the ones that are imposed directly on a purchaser by law (e.g., sales tax).

Currently, the criminal and civil drip pricing provisions of the Competition Act (sections 52(1.3) and 74.01(1.1)) do not stipulate on whom government fees must be imposed for the exemption to apply and, as such, the existing provisions are less restrictive than the revised drip pricing rules proposed under Bill C-59.

Following the June 23, 2022 Competition Act amendments, there has also been debate as to the scope of mandatory charges that are eligible for exemption from upfront price claims under the existing drip pricing provisions.

The proposed drip pricing related amendments under Bill C-59 would arguably require “all in” product/service pricing upfront in advertising/marketing, unless the limited exemption for government-imposed charges/fees applied.

Many of the drip pricing related challenges brought by the Competition Bureau in recent years, including in the event ticket and car rental sectors, as well as its drip pricing and product pricing related guidance generally, it has argued that advertising/marketing claims should state the total price of a product/service upfront. For more information, see: Drip Pricing and Price Claims.

New Environmental Performance Claim Provisions

Bill C-59 would amend the current general performance claims provision of the Competition Act (section 74.01(1)(b)) to add two new environmental related types of performance claims that, in addition to section 74.01(1)(b), would also require adequate and proper testing, the onus of which like the general performance claim provision would be on the person making the claim.

The first new environmental related performance claim provision would require adequate and proper testing for claims related to a “product’s benefits for protecting or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change”.

The second new environmental related performance claim provision would require adequate and proper testing for claims about the “benefits of a business or business activity for protecting or restoring the environment or mitigating the environmental and ecological causes or effects of climate change.”

For more information about the performance claims provision of the Competition Act, see: Performance Claims.

Reverse Onus for Ordinary Selling Price (OSP) Claims

Bill C-59 would amend one of the current ordinary selling price (OSP) provisions of the Competition Act (section 74.01(3)) relating to a seller’s OSP claims about its own product (or products) to require the seller, as opposed to the Competition Bureau, to prove that they have met either the volume or time tests under sections 74.01(3)(a) or 74.01(3)(b).

This proposed amendment is intended to create a new “reverse onus” on marketers making OSP claims about their own products to prove, on the civil standard (i.e., balance of probabilities), that their OSP claims comply with section 74.01(3) of the Competition Act.

In its submissions relating to the proposed Competition Act amendments, the Competition Bureau has cited evidential difficulties in establishing OSP violations and argued that the onus should be on sellers to prove that they have met the required volume or time related tests under section 74.01(3) before making such claims.

The Competition Bureau’s current OSP related guidance for complying with the OSP provisions of the Competition Act and validating OSP claims include adopting a credible and effective competition law compliance program, maintaining internal documents showing that “regular” prices were reasonable compared to competitors’ prices, records that a seller actually expected products to sell at the advertised “regular” prices and tracking the volume of products actually sold at the “regular” prices. See: Competition Bureau, Ordinary Selling Price and Enforcement Guidelines, Ordinary Price Claims.

For more information about the OSP provisions of the Competition Act, see: OSP Claims and Sales Claims.

New Private Access Right to the Competition Tribunal for
Civil Deceptive Marketing Practices

Bill C-59 would amend the Competition Act to allow private parties, with leave from the Competition Tribunal, to commence private access applications for civil deceptive marketing under Part VII.1 of the Act.

The Competition Tribunal would have the power to grant private parties leave to make applications for remedies under section 74.1 (the remedies provision for civil deceptive marketing practices under Part VII.1) where it was satisfied that it was in the public interest to do so.

Currently, private parties can commence civil damages actions for violations of the criminal offences of the Competition Act (under section 36), including violation of the criminal misleading advertising offence (section 52), but cannot commence private access applications to the Competition Tribunal for violations of the civil deceptive marketing practices provisions under Part VII.1.

For more information about civil deceptive marketing provisions of the Competition Act under Part VII.1, see: Advertising Law and Misleading Advertising.

IMPLICATIONS

The proposed deceptive marketing related amendments to the Competition Act would, if passed, make it easier, among other things, for the Competition Bureau to challenge product pricing claims, OSP claims (including in relation to sales) and environmental claims that were not based on adequate and proper testing.

These proposed deceptive marketing law amendments generally align with a number of the Competition Bureau’s advertising and marketing law related enforcement priorities, which include accurate and up-front product price claims, performance claims that are based on sufficient testing to substantiate the claims and green product claims that are not false or misleading.

These proposed amendments would also substantially expand access to remedies under the civil deceptive marketing practices provisions under Part VII.1 of the Competition Act by giving private parties the right, with leave from the Competition Tribunal, to commence private Tribunal applications seeking remedies under section 74.1 of the Act. Currently, only the Competition Bureau can commence Competition Tribunal applications for civil deceptive marketing practices and private parties are limited to filing Bureau complaints.

For companies that commonly engage in advertising/marketing law practices that are the focus of the Competition Bureau’s enforcement priorities and the proposed amendments under Bill C-59, including price claims, performance claims and environmental claims, it will be important to review both current business practices for compliance and existing competition law compliance programs.

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SERVICES AND CONTACT

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Our experience includes advising clients in Toronto, across Canada and the United States on the application of Canadian competition and regulatory laws and we have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.

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