Canadian COMPETITION LAW

December 16, 2023

On December 15, 2023, significant amendments to Canada’s federal Competition Act were passed, including important changes to Canada’s abuse of dominance (federal monopoly) law. This post discusses the December 2023 amendments in general and the key changes to the abuse of dominance provisions of the Competition Act in particular under sections 78 and 79.

General Overview of the December 2023
Competition Act Amendments

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 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 (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 Canadian competition law in 2009.

In general, the amendments to the Competition Act under Bill C-56 include new broad powers for the Bureau to conduct market studies, changes to the core substantive test for abuse of dominance under section 79 (creating a new two-track test for abuse of dominance), new 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, vertical joint venture agreements, etc.) 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 doing business in Canada, particularly those without credible and effective competition compliance programs and have not adjusted their business practices to reflect Canada’s new competition law.

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

For more information about the December 2023 amendments, 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. For more information about Bill C-59, the second amending bill, which has not yet passed, see here.

Abuse of Dominance Related Amendments
Under Sections 78 and 79 of the Competition Act

The December 2023 amendments included changes to the substantive test for abuse of dominance (under section 79 of the Competition Act), a new anti-competitive act under section 78 and increased administrative monetary penalties (AMPs) for abuse of dominance. These abuse of dominance related amendments are discussed below.

Amended Tests for Abuse of Dominance
Under Section 79 of the Competition Act

Prior to the December 2023 amendments under Bill C-56, establishing abuse of dominance under section 79 of the Competition Act (section 79) required proving the following three elements: (i) a firm (or group of firms in the case of joint dominance) was dominant in one or more relevant markets; (ii) the firm(s) engaged in a practice of anti-competitive acts; and (iii) competition was prevented or substantially lessened in a relevant market.

Following the December 2023 Competition Act amendments, the substantive test for abuse of dominance now depends on the type of remedy being sought by the Bureau or a private party.

In this regard, the Competition Tribunal may make a prohibition order against a dominant firm (or group of firms in the case of joint dominance) if the firm(s) are either: (i) engaging in a practice of anti-competitive acts (under section 79(1)(a)); or (ii) conduct that has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market in which the person has a plausible competitive interest and the effect is not the result of superior competitive performance (under section 79(1)(b)).

A broader range of remedies, including AMPs under section 79(3.1), are available where all three of the following elements are met: (i) dominance in a relevant market; (ii) a practice of anti-competitive acts; and (iii) a prevention or substantial lessening of competition in a relevant market in which the person has a plausible competitive interest.

According to the Bureau, these changes to the substantive test for abuse of dominance under section 79 “will provide a way of stopping dominant firm conduct that has either subverted competition in the marketplace or was intended to do so.”

New Anti-Competitive Act Under Section 78 of
the Competition Act

In conjunction with section 79, section 78 of the Competition Act sets out a non-exhaustive list of acts that may be considered by the Competition Tribunal to be a practice of anti-competitive acts for the purpose of considering whether a firm has engaged in an abuse of dominance under section 79.

Following the December 2023 Bill C-56 amendments, the practice of “directly or indirectly imposing excessive and unfair selling prices” has been added to the non-exhaustive list of anti-competitive acts under section 78 of the Competition Act. Similar tests have been included in provincial/territorial consumer protection legislation in Canada, but this type of non-economic effects based test has not until now been included in Canada’s modern Competition Act. As such, it remains unclear how courts will interpret this new test.

Importantly, such a practice must also under section 78(1), as is the case with the other enumerated examples of anti-competitive acts, be “intended to have a predatory, exclusionary or disciplinary negative effect on a competitor, or to have an adverse effect on competition.”

Increased Penalties for Abuse of Dominance

Following the December 2023 amendments to section 79 (abuse of dominance), the Competition Tribunal may now make a prohibition order prohibiting a person (or persons in the case of joint abuse) from engaging in the practice or conduct. This remedy remains unchanged.

The Competition Tribunal may now 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 (or persons) have a plausible competitive interest and one of the above types of orders is not likely to restore competition in a market, order a 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, the Tribunal may (in addition to the above two types of orders) also order the payment of an AMP 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.

Both of the above two potential penalties incorporate elements from the former penalty provisions (e.g., structural remedies and imposition of monetary penalties), while also incorporating jurisprudence from case law (i.e., the TREB abuse of dominance case) that has now established that a dominant firm need not necessarily engage in anti-competitive conduct with a competitor as long as it has a “plausible competitive interest” in the affected market.

Through several successive rounds of Competition Act amendments in 2022 and 2023, the federal government has been ratcheted up both the potential criminal and civil penalties for violating the Competition Act, signalling a focus of enforcement in particular in relation to illegal conspiracy (cartel) agreements and abuse of dominance conduct.

For more information, see: Abuse of Dominance.

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