Canadian COMPETITION LAW

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).

*****************

Competition Bureau Preliminary Guidance on the Mergers
and Restrictive Trade Practices Provisions of the Competition Act

On November 7, 2024, the Competition Bureau issued preliminary guidance relating to the recent changes to the provisions on mergers and restrictive trade practices under the Competition Act – see:  here.

******************

THE COMPETITION ACT

Canadian competition law is largely governed by the Competition Act. The Competition Act is federal framework legislation that applies to most businesses and industries in Canada with limited exceptions and includes criminal offences and civil reviewable matters. The Competition Act is administered and enforced by the Competition Bureau, which is a federal enforcement agency based in Ottawa and headed by the Commissioner of Competition.

The Competition Act sets out four purposes: to promote the efficiency and adaptability of the Canadian economy; to expand opportunities for Canadian participation in world markets; to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy; and provide consumers with competitive prices and product choices.

In general, the Competition Act is consumer protection legislation intended to ensure that consumers benefit from competitive and undistorted markets.

CRIMINAL OFFENCES AND CIVIL REVIEWABLE MATTERS

The Competition Act includes both criminal offences under Parts VI and VII of the Act (e.g., price-fixing and other conspiracies between competitors, bid-rigging, wage-fixing and no-poaching agreements between employers and criminal misleading advertising) and civil reviewable matters under Parts VII.1 and VIII of the Act (e.g., abuse of dominance, price maintenance and refusal to deal).

Criminal Offences

Criminal offences under the Competition Act include bid-rigging, conspiracy (price-fixing, market allocation/division, supply/output restriction and wage-fixing and no-poaching agreements between employers), deceptive telemarketing, drip pricing, foreign directed conspiracies, some misleading advertising and pyramid selling schemes.

Some of the previous competition law offences (e.g., predatory pricing and price discrimination) were repealed in 2009 as part of sweeping amendments to the Competition Act. The conduct they related to, however, may still be subject to challenge under the abuse of dominance section of the Competition Act. Canada’s former criminal price maintenance offence (section 61) was also repealed in 2009 and since then has been a civil reviewable matter. For more information about the 2009 and other Competition Act amendments, see: Competition Act Amendments.

Criminal offences under the Competition Act are investigated by the Competition Bureau, prosecuted by the Public Prosecution Service of Canada (PPSC), tried in provincial criminal courts and subject to criminal penalties. The potential criminal penalties under the Competition Act include criminal fines, imprisonment, prohibition orders to stop or modify conduct and reprisal actions.

The Competition Bureau also has access to a broad range of significant and intrusive enforcement powers in relation to criminal Competition Act matters. These include the ability to obtain search warrants to search premises, wiretaps and court orders to compel the production of documents and conduct interviews under oath.

The Competition Bureau also regularly relies on its Immunity and Leniency Programs to detect criminal Competition Act violations and encourage parties to criminal offences to come forward and cooperate with investigations in exchange for full immunity from prosecution or, where full immunity is unavailable, leniency in sentencing. Criminal competition law violations are also brought to the Bureau’s attention by consumer, industry member and other complainants and internal whistleblowers.

Civil Matters

The Competition Act also contains a number of civil reviewable matters under Parts VII.1 and VIII of the Act. These include abuse of dominance, exclusive dealing, market restriction, mergers, some misleading advertising, ordinary selling price claims, performance claims, price maintenance, promotional contests, refusal to deal and tied selling.

Some of the types of conduct that the civil provisions of the Competition Act can apply to, among other things, include false or misleading advertising, refusals to supply or deal, abuses of dominance by firms with significant market power, exclusive supply agreements/arrangements (e.g., in distribution and supply agreements) and where suppliers maintain resale prices that adversely impacts competition.

Many of the civil provisions of the Competition Act (e.g., the abuse of dominance, refusal to deal and price maintenance provisions) address conduct that may be either pro-competitive or anti-competitive but require a closer examination of the potential market effects – for example, whether conduct has an adverse effect on competition or substantially prevents or lessens competition in a market.

For example, practices that may be common industry practice and innocuous when engaged in by small firms (e.g., exclusive dealing, below cost pricing or refusals to supply or deal) may be subject to Competition Act review and Competition Tribunal orders where a firm has market power and the practice is having significant effects on a market. That is to say that under many of the civil provisions of the Competition Act, conduct is not illegal per se, but requires an analysis of the relevant market(s), conduct and market effects to determine if the Competition Act may have been violated and a remedy available.

Like criminal offences under the Competition Act, reviewable matters can also be investigated by the Competition Bureau, may result in proceedings initiated by the Bureau or private parties in certain cases with leave from the Competition Tribunal, can be heard before the Competition Tribunal or in some cases also provincial or federal courts and are subject to a range of potential remedial orders and civil penalties.

Some of the potential penalties for violating the civil reviewable matters provisions of the Competition Act include court or Competition Tribunal orders to stop conduct, pay compensation (i.e. restitution) to consumers and administrative monetary penalties (AMPs) (e.g., under section 79 of the Competition Act, abuse of dominance, penalties include 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).

COMPETITION ACT ENFORCEMENT

The Competition Act is primarily enforced and administered by the Competition Bureau, which is a federal enforcement agency based in Ottawa and headed by the Commissioner. The Competition Bureau investigates potential competition law offences and civil reviewable matters under the Competition Act.

The Competition Bureau also engages in competition law advocacy in a range of sectors where it may not have direct enforcement powers (i.e., in federally or provincially regulated markets where the regulated conduct doctrine may apply) and conducts market studies in key consumer sectors (e.g., the gasoline, grocery and telecom markets). In addition, following 2023 amendments, the Competition Bureau was given new formal market study powers. For more information, see: Competition Law Enforcement.

In addition to Bureau enforcement, civil actions and class actions, as well as private applications to the federal Competition Tribunal (with leave from the Tribunal), are possible under some of the sections of the Competition Act.

Private parties may make applications to the Tribunal under sections 75 (refusal to deal), 76 (price maintenance), 77 (tied selling / exclusive dealing / market restriction) and 79 (abuse of dominance).

In addition, as a result of June 20, 2024 amendments to the Competition Act, as of June 20, 2025 (when this amendment comes into force), private parties will also be able to make applications to the Tribunal for orders under the civil deceptive marketing practices provisions (under Part VII.1 of the Competition Act), including the general civil misleading advertising, ordinary selling price (OSP), performance claims and civil drip pricing provisions, and section 90.1 (the civil agreements provision).

The Competition Bureau has significant powers to investigate potential violations of the Competition Act, including the ability to obtain court orders to search premises and seize documents, search and seize computer records, obtain wiretaps, compel individuals to testify under oath and require companies or individuals to produce documents or respond to written information requests. The Competition Bureau also has the power to investigate and refer criminal matters under Parts VI and VII of the Competition Act to the PPSC for criminal prosecution.

Criminal offences under the Competition Act include bid-rigging, conspiracy (price-fixing, market allocation/division, supply/output restriction and no-poaching and wage-fixing agreements), deceptive telemarketing, drip pricing, foreign directed conspiracies, misleading advertising and pyramid selling schemes.

While the Competition Bureau investigates potential violations of the Competition Act’s criminal offences, the responsibility for prosecutions lies solely with the PPSC. In practice, the Competition Bureau and the PPSC work closely together in criminal competition law prosecutions.

The Competition Bureau may also commence investigations and Competition Tribunal applications or court proceedings relating to potential contraventions of the civil reviewable matters of the Competition Act under Parts VII.1 and VIII. These include abuse of dominance, exclusive dealing, market restriction, mergers, misleading advertising, ordinary selling price claims, performance claims, price maintenance, promotional contests, refusal to deal and tied selling.

COMMENCEMENT OF
COMPETITION LAW MATTERS

Competition law proceedings in Canada may be commenced under the Competition Act by the Competition Bureau itself based on its own investigation, as a result of complaints from customers, competitors, whistleblowers or market participants and from persons or companies that may have committed a criminal offence under the Competition Act and are seeking immunity or leniency.

In addition to Competition Bureau investigations, private parties may also in some cases commence private actions or class actions under section 36 of the Competition Act for violations of the criminal sections of the Competition Act, including the criminal conspiracy, bid-rigging and criminal misleading advertising sections.

Private parties may also bring private access applications to the Competition Tribunal, with leave from the Tribunal, for orders under the abuse of dominance (section 79), refusal to deal (section 75), price maintenance (section 76) and exclusive dealing, tied selling and market restriction sections (under section 77).

In addition, as a result of June 20, 2024 amendments to the Competition Act, as of June 20, 2025 (when this amendment comes into force), private parties will also be able to make applications to the Tribunal for orders under the civil deceptive marketing practices provisions (under Part VII.1 of the Competition Act), including the general civil misleading advertising, ordinary selling price (OSP), performance claims and civil drip pricing provisions, and section 90.1 (the civil agreements provision).

COMPETITION ACT PENALTIES

Violation of Canada’s Competition Act can result in severe penalties, lost time and negative publicity for individuals, companies, trade and professional associations and other types of organizations and their executives and personnel.

Some of the potential penalties under the Competition Act include criminal fines (e.g., fines in the discretion of the court for bid-rigging under section 47 and price-fixing and other conspiracies under section 45), administrative monetary penalties (essentially civil fines), imprisonment, damages arising from private civil or class actions and court orders (e.g., injunctions or prohibition orders) to stop or modify conduct.

The record Canadian conspiracy (cartel) penalty to date is CDN $50 million, in a bread price-fixing investigation in which Canada Bread agreed to pay a $50 million fine after pleading guilty to fixing wholesale bread prices (see: here).

There is also potential director and officer liability under the Competition Act. In this regard, the Bureau commonly pursues individual executives as accused in criminal matters and plaintiffs routinely name directors and officers as defendants in Competition Act civil actions. For more information, see: Enforcement.

In addition, as a result of amendments to the Competition Act on June 20 2024 under Bill C-59, new provisions to prohibit reprisal actions were enacted. Under these new provisions, actions taken by companies and other types of organizations to penalize, punish, discipline, harass or disadvantage any person because of their communications or cooperation with the Competition Bureau will be subject to potential court orders and monetary penalties.

In this regard, under these new reprisal action provisions, an application can be brought by either the Commissioner or a person directly and substantially affected by an alleged reprisal action.

The potential penalties for violating these reprisal action provisions include prohibition orders to stop a person from continuing the conduct (section 107.2 of the Competition Act) and administrative monetary penalties of, for an individual, up to $750,000 ($1 million for subsequent orders) and, for corporations, up to $10 million ($15 million for subsequent orders).

COMPETITION LAW COMPLIANCE

In 2023, the Competition Bureau launched a new online competition law compliance resource (see: competition law compliance) setting out its position on what companies, associations and other types of organizations need to establish and train a credible and effective competition law compliance program. The Competition Bureau’s new online compliance resource, now called the Compliance Hub, has replaced its former 2015 Corporate Compliance Programs Bulletin.

In general, companies, trade and professional associations and other organizations that face competition law risks should adopt credible and effective competition law compliance programs, which should include a competition law compliance program, competition compliance policy, compliance guidelines for key activities (e.g., conduct of meeting guidelines, information exchange guidelines and search and seizure guidelines) and an employee certification letter.

It is particularly important for trade and professional associations, which have historically faced high criminal and other competition law risks, to implement effective competition law compliance programs. For more information, see: Associations and Association Compliance.

In addition, companies, associations and other organizations should conduct periodic training for key personnel at risk of violating the Competition Act and periodically carry out competition law compliance audits. It is also a good practice to provide competition law compliance training for new personnel, including new sales/marketing personnel, directors and officers and others that are either responsible for compliance or at risk of violating the Competition Act.

********************

SERVICES AND CONTACT

We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

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.

To contact us about a potential legal matter, see: contact

For more information about our firm, visit our website: Competitionlawyer.ca