Canadian COMPETITION LAW

July 1, 2024

OVERVIEW OF BILL C-59 AMENDMENTS
TO THE COMPETITION ACT

On June 20, 2024, Bill C-59 was passed, which introduced the third of three recent significant rounds of amendments to Canada’s federal Competition Act (together with amendments that were passed in June 2022 and December 2023).

This third round of amendments to the Competition Act completes a sweeping overhaul of Canada’s competition laws across virtually all key provisions of Canada’s competition legislation.

These amendments are also the most significant changes to Canadian competition law since the modern Competition Act came into force in 1986 replacing Canada’s former Combines Investigation Act.

In general, the amendments to the Competition Act over the past two years strengthen the Competition Bureau’s powers to enforce key deceptive marketing provisions of the Competition Act (e.g., relating to drip pricing, product performance claims and ordinary selling price (OSP) claims), strengthen private party rights to seek Competition Tribunal remedies (e.g., for civil deceptive marketing and violations of the civil agreements provisions of the Act), introduce new penalties (e.g., administrative monetary penalties for violating the civil agreements provision of the Act and for reprisal actions where individuals have been penalized for complying with the Act) and introduce a new clearance regime for environmental protection related agreements. The merger review regime was also substantially overhauled, eliminating the efficiency defence, introducing market share presumptions and a more restrictive remedial test for restoring competition.

For the Competition Bureau’s summary of the June 20, 2024 amendments to the Competition Act under Bill C-59, see: Guide to the June 2024 amendments to the Competition Act (June 25, 2024).

For more information about the Bill C-59 amendments, see also our posts: 2024 Competition Act Amendments (Bill C-59): Advertisers Must Now Back Up Product and Business Related Environmental Performance Claims and 2024 Competition Act Amendments (Bill C-59): Significantly Increased Penalties and Enforcement Options Across Key Areas of Canadian Competition Law.

DECEPTIVE PRICING RELATED AMENDMENTS:
INCREASED RISK FOR FALSE OR MISLEADING PRICE CLAIMS

The Bill C-59 amendments to the Competition Act introduced a number of new changes to the criminal and civil marketing related provisions of the Act, including to the civil and criminal drip pricing and civil ordinary selling price (OSP) claim provisions.

Drip Pricing

The Bill C-59 amendments strengthen the existing civil and criminal drip pricing provisions of the Competition Act (sections 52(1.3) and 74.01(1.1)) to provide that the only fixed and unavoidable amounts that can be excluded from upfront product/service price claims are those that are imposed directly on a purchaser by law (e.g., sales tax).

For example, section 74.01(1.1) of the Competition Act (the civil drip pricing provision) now reads as follows:

“(1.1) for greater certainty, the making of a representation of a price that is not attainable due to fixed obligatory charges or fees constitutes a false or misleading representation, unless the obligatory charges or fees represent only an amount imposed on a purchaser of the product referred to in subsection (1) by or under an Act of Parliament or the legislature of a province.”

Previously, the criminal and civil drip pricing provisions of the Competition Act did not stipulate on whom government fees must be imposed for the exemption to apply and, as such, the existing provisions were less restrictive than the amended drip pricing provisions under Bill C-59.

The new amended civil and criminal drip pricing provisions now arguably require “all in” upfront product/service pricing in advertising/marketing, unless the limited exemption for government-imposed charges/fees on buyers applies.

Competition Bureau Drip Pricing Challenges

In many of the drip pricing related challenges brought by the Competition Bureau in recent years, including in the car rental and event and theatre ticket 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.

More specifically, in the drip pricing cases that the Competition Bureau has brought to date, it has challenged, among other things, obligatory fees that were charged to buyers that were: (i) only disclosed later in online purchasing processes; (ii) only disclosed later in online booking processes; (iii) only disclosed in very small print in disclaimers that were not in close proximity to headline price claims; and (iv) created the general impression that the obligatory fees were government taxes, when they were in fact fees charged by the retailers.

There has, however, not been a decided case yet under the drip pricing provisions of the Competition Act since they were first enacted in June 2022.

The Competition Bureau is, however, currently challenging Cineplex before the Competition Tribunal for alleged drip pricing.

In this case, the Competition Bureau is challenging Cineplex’s price claims that include: (i) only disclosing obligatory booking fees in very small print in disclaimers that consumers must scroll down to the bottom of the page to read; (ii) including obligatory booking fees in subtotal figures without disclosing that the booking fees have been added to the original headline ticket price claims; and (iii) rolling in obligatory booking fees into total prices at the time of online checkout.

Also, in the Competition Bureau’s Deceptive Marketing Practices Digests (Volumes 1 and 5), the Bureau raises the following as potential drip pricing issues: (i) only revealing additional obligatory fees after consumers have responded to an advertisement; (ii) only disclosing additional obligatory fees in fine print or in disclaimers where consumers must scroll down a page to read the disclosure; and (iii) only disclosing additional obligatory fees later in an online reservation or purchasing process.

For more information about drip pricing under the Competition Act, see: Drip Pricing and Price Claims.

Ordinary Selling Price (OSP) Claims
(Sections 74.01(2) and 74.01(3) of the Competition Act)

Bill C-59 also amended one of the ordinary selling price (OSP) provisions of the Competition Act (section 74.01(3)), which applies to a seller’s OSP claims about its own product(s) and requires sellers, as opposed to the Competition Bureau, to prove, if challenged, that they have met either the “volume test” or “time test” under section 74.01(3) of the Competition Act.

This amendment is intended to create a new reverse onus on marketers making OSP claims about their own products to be able to prove, if challenged, 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 cited evidential difficulties in establishing violations of the OSP provisions of the Competition Act 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.

Advertisers that use “high / low” pricing strategies are well advised to monitor the Competition Bureau’s guidance as to how, in its view, advertisers should document discount and sale claims in their marketing in the event of a regulatory challenge.

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

NEW PRIVATE ACCESS RIGHTS UNDER THE
CIVIL DECEPTIVE MARKETING PRACTICES PROVISIONS

As a result of the Bill C-59 amendments, beginning on June 20 2025, private parties will also be able to seek leave from the Competition Tribunal to commence proceedings under the civil deceptive marketing practices provisions (Part VII.1) of the Competition Act with the only leave requirement for standing being that the proceedings are in the “public interest”.

This new private access right to the Competition Tribunal further increases the potential risk for advertisers that fail to comply with the civil drip pricing and OSP claim provisions of the Competition Act, as well as the other civil deceptive marketing practices provisions under Part VII.1 of the Act.

For more information, see: Misleading Advertising.

IMPLICATIONS OF AMENDED COMPETITION ACT
DRIP PRICING AND OSP CLAIM PROVISIONS

In general, the Bill C-59 amendments to the Competition Act make it easier for the Competition Bureau to challenge false or misleading product pricing claims and OSP claims (including in relation to sales).

These recent amendments also generally align with several of the Competition Bureau’s ongoing advertising and marketing law related enforcement priorities, which include accurate up-front product price claims.

These amendments also increase the private enforcement risk for advertisers that fail to comply with the amended drip pricing and OSP claim provisions, given that private parties will have the right, with leave from the Competition Tribunal, to commence private applications before the Tribunal seeking remedies under section 74.1 of the Act. Previously, only the Competition Bureau could commence Competition Tribunal applications for civil deceptive marketing practices and private parties were limited to filing Competition Bureau complaints.

For companies that use price claims and OSP claims as marketing strategies, it will be important going forward to review existing marketing practices for Competition Act compliance and, in the case of OSP claims, to ensure that either volume or time tests for making such claims are being met and, if challenged, that they can validate that their discount or sale claims comply with the OSP provisions of the Competition Act.

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