SWEEPING CANADIAN COMPETITION ACT
AMENDMENTS (BILL C-59) PASSED JUNE 20, 2024
On June 20, 2024, Bill C-59 was passed (the Fall Economic Statement Implementation Act, 2023), which introduced the third of three significant rounds of amendments to Canada’s federal Competition Act in two years (together with Bill C-19 and Bill C-56). This new round of amendments to the Competition Act completes a sweeping overhaul of the Competition Act 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 effect in 1986 replacing the former Combines Investigation Act.
The Bill C-59 amendments, among other things, strengthen the Competition Bureau’s powers to enforce key deceptive marketing provisions of the Competition Act (e.g., relating to drip pricing, 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 provisions of the Act and for reprisal actions penalizing individuals for complying with the Act) and introduce a new clearance regime for environmental protection related agreements. Canada’s Competition Act merger review regime was also substantially overhauled, eliminating the efficiency defence, introducing market share presumptions and a more restrictive remedial test for restoring competition.
These amendments, together with those enacted in June 2022 and December 2023 (Bill C-19 and Bill C-56), 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 that have not reviewed their business practices to reflect Canada’s new competition laws. For the Competition Bureau’s summary of the June 20, 2024 Bill C-59 amendments to the Competition Act, see: Guide to the June 2024 amendments to the Competition Act (June 25, 2024).
Our blogs will be updated to reflect these amendments.
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TRADE AND PROFESSIONAL ASSOCIATIONS
AND CANADIAN COMPETITION LAW
“A [compliance] program … plays a crucial role for trade associations because trade associations face unique compliance issues. Given that an association provides a forum where competitors collaborate on association activities, trade associations are exposed to greater risks of anti-competitive conduct. A number of past Bureau cases have involved trade associations that were engaged in agreements to harm competition. It is therefore critical that trade associations implement credible and effective programs with strict codes of ethics and conduct. Such programs may allow trade associations and [their] members to avoid improper actions and to protect themselves from being used as a conduit for illegal activities. They may also allow trade association members to fully benefit from the association’s activities while reducing the potential for inadvertent contraventions of the Acts.”
(Competition Bureau)
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“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
(Adam Smith)
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“Why does this problem keep recurring? What is it about trade associations that lends itself to antitrust violations? For those of you who have practiced in this area for any length of time, the answer is obvious. A trade association is by definition a group of competitors who get together to share common interests and seek common solutions to common problems. The members of a trade association, singly and as a group, are sitting on an antitrust powder keg! And the job you have signed up for as their antitrust counsel is to help make sure they don’t play with matches.”
(Anne K. Bingaman, former Assistant Attorney General, Antirust Division,
U.S. Department of Justice)
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OVERVIEW OF CANADIAN COMPETITION LAW
AND TRADE AND PROFESSIONAL ASSOCIATIONS
Trade and professional associations can serve many legitimate purposes, including promoting common interests to the public, lobbying and advocacy, research, member education and the promotion and improvement of product standards.
However, because association activities commonly involve the interaction of direct competitors, they can also in some cases raise serious competition law concerns under the federal Competition Act.
In general, some of the types of association activities that can raise competition law issues include those dealing with pricing, advertising, customers, territories, market shares, terms of sale and other key aspects of competition.
Some of the more specific trade and professional association activities that can raise competition law issues include:
1. Board of director and other association meetings (e.g., where competitively sensitive information may be exchanged between competing members).
2. Information exchanges (e.g., exchanges of competitively sensitive information, such as relating to fees, customers, suppliers, costs or bidding/tendering) during association activities.
3. Association rules, by-laws or codes of conduct that restrict competition (e.g., mandatory or suggested fee guidelines, advertising restrictions or restrictions on members’ business models).
4. Advertising or marketing restrictions (e.g., restrictions on members’ advertising and marketing in codes of ethics or association by-laws or other rules).
For more information, see: Association Activities.
Below is an overview of key Canadian competition laws that can apply to trade and professional association activities.
CANADIAN COMPETITION LAW
The Competition Act
Competition law in Canada is governed by the Competition Act, which is federal law of “general application” (i.e., applies to most businesses and industries across Canada with only limited exceptions). The Competition Act contains both criminal offences (e.g., price-fixing and other criminal conspiracies, bid-rigging and criminal misleading advertising) and civil reviewable matters (e.g., abuse of dominance, price maintenance, refusal to deal and civil misleading advertising).
The Competition Act is administered and enforced by the Competition Bureau, which is a federal enforcement agency based in Ottawa that is headed by the Commissioner of Competition.
Purposes
The Competition Act sets out four objectives of Canadian competition law that are not always easily reconcilable: (i) to promote the efficiency and adaptability of the Canadian economy, (ii) to expand opportunities for Canadian participation in world markets while recognizing the role of foreign competition in Canada, (iii) to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and (iv) to provide consumers with competitive prices and product choices.
As a practical matter, at least from the perspective of the Competition Bureau, the main overarching purpose of Canada’s competition laws is to ensure that consumers benefit from competitive markets.
Criminal Offences and Civil Reviewable Matters
The Competition Act contains a number of criminal offences. These include criminal conspiracies (section 45), bid-rigging (section 47), criminal misleading advertising (section 52) and deceptive telemarketing (section 52.1). These sections of the Competition Act are enforced by the Competition Bureau and in some cases by private litigants, prosecuted by the Public Prosecution Service of Canada and subject to potential criminal fines and imprisonment or civil damages in the case of private actions or class actions brought by private parties.
The Competition Act also contains a number of civil reviewable matters. These include the abuse of dominance (sections 78 and 79), civil misleading advertising (section 74.01), price maintenance (section 76), refusal to deal (section 75) and tied selling, exclusive dealing and market restriction sections (section 77). These sections are enforced by the Competition Bureau and private litigants, matters are heard before the Competition Tribunal or in some cases provincial or federal courts and subject to potential administrative monetary penalties (AMPs, which are in essence civil fines), orders to stop conduct and other civil penalties.
Enforcement
The Competition Act is primarily administered and enforced by the Competition Bureau, which is a federal enforcement agency headed by the Commissioner of Competition that investigates complaints by consumers and businesses and also commences matters based on its own market investigations.
The Competition Bureau and its predecessor competition enforcement agencies (e.g., the Restrictive Trade Practices Commission) have been investigating trade and professional associations in Canada for over a century. During this time, numerous Canadian associations and their members have been investigated or been the subject of criminal prosecution, civil challenges and paid civil and criminal penalties.
These have included associations of ambulance operators, banks, building contractors, business forms suppliers, coal dealers, corrugated box manufacturers, corrugated metal pipe manufacturers, electrical contractors, fruit growers, gypsum dealers and manufacturers, insurance salespersons, lawyers, mandarin orange importers, notaries, pharmacists, paper mills, plumbing contractors and suppliers, real estate agents and brokers, real estate boards, roofing contractors, softwood lumber dealers, surveyors and wholesale grocers, among many others.
For information about the Competition Bureau’s enforcement position on trade and professional associations, see: Trade Associations and the Competition Act and Compliance Hub.
Many international cartel cases have also involved associations either as the principal parties of a competition/antitrust law violation or in other cases for aiding or abetting competition law violations by their members (e.g., facilitating the formation of criminal conspiracy agreements, assisting with the exchange of competitively sensitive information between members or acting as the forum for the formation of illegal agreements).
Some representative Canadian association cases have involved the Saskatchewan Roofing Contractors Association (a bid-rigging case), The Canadian Real Estate Association (an abuse of dominance case) and The Toronto Real Estate Board (also an abuse of dominance case). Some associations have also been challenged for advertising related conduct, including restrictions on member advertising and misleading advertising.
The Competition Bureau’s enforcement tools under the Competition Act include the power to make voluntary information requests, obtain compulsory document production orders, search warrants, court orders to interview personnel under oath and injunctions for conduct to stop. The Competition Bureau may also apply to the federal Competition Tribunal for orders, including orders to stop conduct and pay civil penalties. The Bureau may also refer criminal matters to the Director of Public Prosecutions for criminal prosecution. Proceedings may be commenced by the Competition Bureau both based on its own investigations or as a result of information from industry or consumer complainants or whistleblowers.
In other cases, the Competition Bureau may commence investigations based on parties seeking immunity or leniency under the Bureau’s Immunity or Leniency Programs, which, if all the requirements of the respective Program are met, can lead to an applicant receiving full immunity from prosecution or a reduction in penalties for cooperating with a Bureau investigation.
In addition to Competition Bureau investigations and enforcement, private parties may in some cases commence civil actions or class actions where the criminal sections of the Competition Act are violated, including the criminal conspiracy and criminal misleading advertising sections. Private parties may also make private access applications to the Competition Tribunal for remedies, including under the refusal to deal, price maintenance and abuse of dominance provisions of the Competition Act.
In the context of trade associations, for example, civil actions (before the courts) and private access applications (before the Competition Tribunal) can be commenced by association members, competitors or customers as a result of the activities of an association.
The Competition Bureau has also issued guidance that sets out its enforcement and compliance approach to trade and professional associations. For more information, see: Competitor Collaboration Guidelines, Compliance Hub and Trade Associations and the Competition Act.
Penalties
Violating the Competition Act can result in significant penalties, lost time and negative publicity for companies and other organizations, including trade and professional associations and their personnel. Some of the potential penalties under the Competition Act include criminal fines, civil administrative monetary penalties, imprisonment, damages as a result of civil actions or class actions brought by private plaintiffs and prohibition orders or injunctions to stop conduct.
For example, the potential penalties for violating the criminal conspiracy offences under section 45 of the Competition Act (e.g., price-fixing and other illegal conspiracy agreements between competitors) include a fine in the discretion of the court (i.e., with no upper limit), imprisonment for up to 14 years or both.
Under section 79 of the Competition Act (abuse of dominance), under which the Competition Bureau has commenced a number of trade association related cases in the past, the Competition Tribunal may make an order prohibiting a person (or persons in the case of joint abuse) from engaging in the practice or conduct.
The Competition Tribunal may also, where it finds that a practice of anti-competitive acts amounts to conduct that prevents or lessens competition substantially in a market in which the person has a plausible competitive interest, order the person to take additional actions, including the divestiture of assets or shares, that are reasonable and necessary to overcome the abusive conduct in the relevant market.
In addition to the above, where the Competition Tribunal finds that a practice of anti-competitive acts amounts to conduct that prevents or lessens competition substantially in a market in which the person has a plausible competitive interest, it may (in addition to the above two types of orders) also order the payment of an administrative monetary penalty of up to the greater of $25 million ($35 million for each subsequent order), three times the value of the benefit derived from the abusive conduct or, if the latter amount cannot be reasonably determined, 3% of the person’s annual worldwide gross revenues.
In addition, there is also potential director and officer liability for Competition Act violations.
Directors, officers and executives of associations should also note that following significant amendments to the Competition Act made in June 2022 and December 2023, the penalties for a number of sections of the Competition Act that can apply to associations were substantially increased, including for criminal conspiracies and abuse of dominance, as well as for misleading advertising. As such, the potential criminal or civil risk for associations that fail to comply with the Competition Act has markedly increased.
A credible and effective competition law compliance program can significantly reduce the potential criminal and civil competition law risk for trade and professional associations and other organizations.
For more information about Competition Act enforcement and penalties, see: Enforcement.
KEY COMPETITION ACT SECTIONS
RELEVANT TO TRADE AND PROFESSIONAL ASSOCIATIONS
There are no specific sections of the Competition Act dealing exclusively with trade or professional association activities. However, some of the sections of the Competition Act that are particularly relevant to association activities based on common association activities and past Competition Bureau enforcement include sections 45 (criminal conspiracy), 47 (bid-rigging), 79 (abuse of dominance), 76 (price maintenance) and 52 and 74.01 (the general criminal and civil misleading advertising provisions).
These sections are discussed in more detail below.
Criminal Conspiracy
(Section 45)
Section 45 of the Competition Act (conspiracy), which is in many cases the most important section for trade and professional associations to understand and comply with, prohibits a number of types of criminal conspiracy offences including price-fixing agreements between competitors.
Following amendments to section 45 in June 2022, wage-fixing and no-poaching agreements between employers are also now criminal offences. These amendments came into force on June 23, 2023.
The investigation and prosecution of criminal conspiracies is a top enforcement priority for the Competition Bureau.
Under section 45 of the Competition Act, the following three types of “hard core” anti-competitive agreements between competitors or potential competitors are criminal offences:
1. Price-fixing agreements. Section 45(1)(a) of the Competition Act makes it a criminal offence for actual or potential competitors to fix, maintain, increase or control the price for the supply of a product (e.g., agreements to set prices, discounts, minimum prices or establish fee tariffs). “Price” is broadly defined to include discounts, rebates, allowances and price concessions. Based on the potential liability for price-fixing agreements, it is important that prices, discounts and other aspects of price are determined independently by trade and professional association members and that members do not discuss price or other competitively sensitive topics during board, association or other meetings (or virtually, such as in chat rooms, social media or e-mail exchanges).
2. Market allocation/division agreements. Section 45(1)(b) of the Competition Act makes it a criminal offence for competitors to allocate sales, territories, customers or markets for the production or supply of a product (e.g., agreements between competitors to not compete in relation to certain customers, groups or types of customers, in certain regions or market segments or in relation to certain types of transactions or products). As with price-fixing, it is prudent for members of associations to both not expressly enter into any market allocation/division arrangements and also avoid discussions of markets, market shares or dividing or allocating geographic markets, customers or product or service lines.
3. Output/supply restriction agreements. Section 45(1)(c) of the Competition Act makes it a criminal offence for competitors to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product including services (e.g., agreements to limit the quantity or quality of products supplied, reduce the quantity of quality of products supplied to specific customers, limit increases in production or discontinue supply to specific customers or groups of customers). This offence is also potentially broad enough that it may also apply to concerted refusals to deal or “boycotts” (agreements between competitors to refuse to deal with other marketplace participants).
In general, the risk for trade and professional associations under the criminal conspiracy section of the Competition Act is threefold: first, that a trade/professional association itself may become a party to an illegal conspiracy agreement; second, that an association aids or abets a criminal anti-competitive conspiracy agreement (e.g., by holding meetings between conspirators); and third, that trade/professional association members themselves may become parties to a conspiracy agreement (e.g., formed through association meetings or other activities).
To establish these offences under section 45, it is not necessary to prove that there have been any negative effects on a market (i.e., the offences are “per se” offences, which means that merely establishing the elements of the offence is sufficient without having to show that competition was actually harmed). It is also unnecessary to prove that an agreement was ever carried out (i.e., the offence is in the agreement and not in its implementation).
Importantly for trade/professional association activities, an agreement can also be established based merely on “circumstantial evidence”. In this regard, while the existence of a price-fixing or other illegal agreement must be proven beyond a reasonable doubt, an actual written or express agreement does not need to be proven and an agreement can be established by other types of evidence – e.g., meetings between competitors followed by a stabilization of prices or suggestions of price-fixing or other illegal acts in written documents or e-mails. As such, as discussed below, it is important for trade/professional associations to take precautions relating to member meetings (e.g., board, committee, task force and membership meetings) and in the context of information exchanged through the association.
Some common competition law compliance practices for trade/professional associations to reduce conspiracy risk under section 45 of the Competition Act include adopting conduct of meeting guidelines for board of director and other association meetings and adopting guidelines for industry surveys, benchmarking and other information exchange related exercises involving competing association members.
The potential penalties for violating section 45 of the Competition Act can be severe and include a fine in the discretion of the court (i.e., courts can establish fines with no legislatively prescribed upper limit), imprisonment for up to 14 years or both.
Private parties that have suffered actual loss or damage as a result of criminal conduct, including under the conspiracy provisions, may also commence private actions or class actions seeking damages.
Bid-Rigging
(Section 47)
The criminal bid-rigging offences of the Competition Act can also be relevant to trade and professional association activities – for example, where an association’s members are engaged in competitive bids or tenders (e.g., in the construction and Information technology (IT) sectors, etc.), where an association attempts to regulate or control competitive tendering processes or a trade/professional association aids or abets criminal bid-rigging activities engaged in by its members.
Section 47 of the Competition Act sets out three criminal bid-rigging offences as follows: (i) an agreement to not submit a bid or tender, (ii) an agreement to withdraw a bid or tender that has already been submitted; and (iii) submitting a bid or tender that is arrived at by agreement.
Like the conspiracy offences under section 45 of the Competition Act, bid-rigging is also “per se” illegal in that no anti-competitive market effects need to be proven. Also, like the conspiracy offences, all of the elements under section 47 need to be established on the criminal burden of proof (i.e., beyond a reasonable doubt).
Some common types of bid-rigging that can violate section 47 of the Competition Act include:
1. “Cover”, “courtesy” or “complementary” bidding. Some firms submit bids that are too high to be accepted or with terms that are unacceptable to the buyer to protect an agreed upon low bidder.
2. Bid suppression. One or more bidders that would otherwise bid agree to refrain from bidding or withdraw a previously made bid.
3. Bid rotation. Parties submit bids but take turns being the low bidder according to a systematic or rotating basis.
4. Market division. Suppliers agree not to compete in designated geographic areas or for specified customers.
5. Subcontracting. Parties agree not to submit a bid or submit a losing bid are awarded subcontracts or supply agreements from the successful low bidder.
The penalties for violating the bid-rigging provisions of the Competition Act can be severe and include unlimited fines (i.e., criminal fines in the discretion of the court with no legislatively prescribed upper limit), imprisonment for up to 14 years, or both.
Abuse of Dominance
(Sections 78 and 79)
The abuse of dominance provisions of the Competition Act (sections 78 and 79) can also apply to trade and professional association activities, where an association or its members possesses market power in a market. The Competition Bureau has relied on the abuse of dominance provisions in several of the leading trade association cases in the past, notably against Canadian real estate boards and associations (The Canadian Real Estate Association and the Toronto Real Estate Board).
Following significant amendments to the Competition Act that largely came into force on December 15, 2023, the substantive test to establish abuse of dominance was changed to establish several tests to prove abuse of dominance depending on the type of remedy sought (and lowering the burden to establish abuse of dominance and obtain a Tribunal order in some cases).
While evaluating whether conduct constitutes an abuse of dominance under the Competition Act can be highly complex and require significant analysis, in general, these amendments significantly increase the potential risk for companies, trade/professional associations and other entities that engage in a practice of anti-competitive acts (as defined by the Competition Act) or a practice of anti-competitive acts that prevent or lessen competition substantially in a market. For more information, see: Abuse of Dominance.
Some of the types of trade/professional association activities that can potentially raise abuse of dominance issues include refusals to deal or supply, boycotts, member discipline and initiatives to exclude competitors or make it more difficult for some members or competitors to compete.
The potential penalties for abuse of dominance under the Competition Act can be severe and include, among other things, AMPs of up to the greater of $25 million ($35 million for each subsequent order), three times the value of the benefit derived from the abusive conduct or, if the latter amount cannot be reasonably determined, 3% of the person’s annual worldwide gross revenues. For more information, see: Abuse of Dominance.
Price Maintenance
(Section 76)
The price maintenance section of the Competition Act (section 76) can also be relevant to trade and professional association activities.
In the past, price maintenance issues have arisen in the context of trade/professional associations where, among other things, association rules dictate (or attempt to dictate) the prices at which members sell products or refusals to deal based on some members’ low pricing policies.
The first type of price maintenance that is potentially relevant to trade/professional associations involves refusals to supply products (including services) or discriminate against other persons engaged in business based on their low pricing policy, where the conduct has an adverse effect on competition in a market.
The second type of price maintenance that can be relevant to trade/professional associations and their members involves inducing a supplier, by agreement, threat, promise or any like means, as a condition of doing business with the supplier, to refuse to supply to another person based on that other person’s low pricing policy.
Where all of the elements for price maintenance are established, the Competition Tribunal may make “remedial orders” for parties to cease the conduct based on applications commenced by the Competition Bureau or private parties (with leave from the Tribunal). For more information, see: Price Maintenance.
Misleading Advertising
(Sections 52 and 74.01)
The misleading advertising provisions of the Competition Act can also be relevant to trade/professional associations and their members. The misleading advertising provisions of the Competition Act can apply to a trade/professional association where it engages in false or misleading advertising with respect to its own products or services, false or misleading claims relating to members’ products or services (e.g., association-led industry marketing campaigns) and also where an association prohibits or restricts certain types of marketing or advertising engaged in by members (e.g., through association codes of conduct).
In general, for an advertising/marketing claim to be false or misleading in Canada under section 74.01 of the Competition Act, which is the general civil misleading advertising provision, it must be proven that the claim: (i) was made to the public, (ii) to promote a product or business interest, (iii) is literally false or misleading (or with a false or misleading general impression) and (iv) is “material” (i.e., likely to influence an average consumer into buying a product or otherwise altering their conduct).
Criminal misleading advertising under section 52 of the Competition Act is substantially similar, but requires, in addition to all of the above elements, that it also be proven that an advertising or marketing claim was made with intent (i.e., that it was made “knowingly or recklessly”).
Following amendments to the Competition Act that came into force on June 23, 2022, the maximum AMPs for deceptive marketing under section 74.01 increased as follows: (i) for individuals up to the greater of $750,000 ($1 million for each subsequent order) and three times the value of the benefit derived from the deceptive conduct if that amount can be reasonably determined; and (ii) for corporations up to the greater of $10 million ($15 million for each subsequent order), three times the value of the benefit derived from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenues.
The penalties for criminal misleading advertising include fines of up to $200,000 and/or imprisonment for up to one year (on summary conviction) or fines in the discretion of the court and/or imprisonment for up to 14 years.
In addition to the general misleading advertising provisions discussed above, the Competition Act also contains a number of other criminal and civil provisions that either prohibit (i.e., criminal offences) or civilly regulate specific types of advertising/marketing practices in Canada.
These include: bait and switch selling (section 74.02(2)), deceptive prize notices (section 53), deceptive telemarketing (section 52.1), double ticketing (section 54), drip pricing (sections 52(1.3) and 74.01(1.1)), some specific types of electronic advertising (section 74.011), multi-level marketing and pyramid selling schemes (sections 55 and 55.1), ordinary selling price (OSP) claims and sale claims (sections 74.01(2)-(3)), performance claims (section 74.01(1)(b)), promotional contests/sweepstakes (section 74.06), selling products above advertised prices (section 74.05) and testimonials and endorsements (influencer marketing) (sections 52, 74.01 and 74.02).
Based on the potential liability, it is important for trade/professional associations and their members to ensure that they do not engage in false or misleading representations in their business dealings and, for associations, that their rules and bylaws do not prohibit or restrict legitimate pro-competitive advertising and marketing by members.
TRADE/PROFESSIONAL ASSOCIATION ACTIVITIES
THAT CAN RAISE COMPETITION LAW RISK
Some of the specific trade and professional association activities that can potentially raise competition law concerns under the Competition Act include the following:
1. Board of director and other association meetings (e.g., where competitively sensitive information may be exchanged).
2. Information exchanges (e.g., exchanges of competitively sensitive information, such as relating to fees, customers, costs, bidding/tendering, etc., during industry surveys or benchmarking activities).
3. Association rules and bylaws (e.g., mandatory or suggested fee guidelines, advertising restrictions or restrictions on members’ business models).
4. Advertising or marketing restrictions (e.g., restrictions on members’ advertising and marketing in codes of ethics, association by-laws and rules, etc.).
For more information, see: Association Activities.
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