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).

Our blogs will be updated to reflect these amendments.

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OVERVIEW OF REFUSALS TO SUPPLY OR DEAL
UNDER THE CANADIAN COMPETITION ACT

Refusals to supply or deal are not per se prohibited under Canada’s federal Competition Act.

Five provisions of the Competition Act can, however, apply to refusals to supply or deal if the specific test under each section is met:

1. Section 45 (Criminal Conspiracy Offences)

The criminal conspiracy offences under section 45 of the Competition Act can apply where a refusal to supply or deal involves concerted behavior (e.g., an agreement or arrangement between two or more competing suppliers to collectively refuse to deal or supply). Concerted refusals to deal are also sometimes referred to as “group boycotts”.

Under section 45 of the Competition Act, complaints can be made to the Competition Bureau, which can refer matters to the Director of Public Prosecutions for criminal prosecution. Private parties that have suffered actual loss or damage can also commence civil damages actions and class actions for concerted refusals to deal under section 45.

For more information, see: Conspiracy (Cartels).

2. Section 75 (Refusal to Deal)

The Competition Act contains a stand-alone civil refusal to deal provision (discussed in more detail below).

Under section 75 of the Competition Act, complaints can be made to the Competition Bureau for refusals to supply or deal, which may make applications to the Competition Tribunal for orders. Private parties can also, with leave, make refusal to deal applications to the Tribunal.

3. Section 76 (Price Maintenance)

The civil resale price maintenance provision of the Competition Act can also apply where there has been a refusal to deal based on another person’s low pricing policy.

Under section 76 of the Competition Act, complaints can be made to the Competition Bureau, which may make applications to the Competition Tribunal for orders. Private parties can also, with leave, make price maintenance applications to the Tribunal.

For more information, see: Price Maintenance.

4. Section 79 (Abuse of Dominance)

The civil abuse of dominance provisions of the Competition Act (sections 78 and 79) can also apply to refusals to supply or deal when engaged in by a dominant supplier.

Section 79 may also apply in some circumstances as the basis for competing suppliers to seek access to a competitor’s assets or facility.

Under the abuse of dominance provisions of the Competition Act, complaints can be made to the Competition Bureau, which may make applications to the Competition Tribunal for orders. Also, following June 2023 amendments to the Competition Act, private parties can now also commence applications to the Competition Tribunal for remedies for abuse of dominance.

For more information, see: Abuse of Dominance.

5. Section 90.1 (Civil Agreements Provision)

Section 90.1 of the Competition Act, which is the civil agreements provision, can also apply to collective refusals to deal involving agreements between two or more competitors. Also, as of December 15, 2024, section 90.1 may also apply to vertical agreements involving refusals to supply, once an amendment comes into force that will mean that section 90.1 may apply to both horizontal agreements (between competitors) and vertical agreements (between parties at different levels of a supply chain).

Under section 90.1, complaints can be made to the Competition Bureau, which may make applications to the Competition Tribunal for orders. Further, as a result of June 20, 2024 amendments to the Competition Act, which will come into force on June 20, 2025, private parties will be able to make private access applications to the Competition Tribunal for orders under section 90.1.

For more information, see: Conspiracy. See also: Significant Canadian Competition Act Amendments Come Into Force (Bill C-56).

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Each of the above criminal and civil provisions of the Competition Act requires that specific (and different) legal elements be proven, have different remedies available – for example, section 45 (conspiracy offences) allows damages actions to be commenced, while the other provisions do not – and are heard in different forums (i.e., provincial courts or federal Competition Tribunal).

As such, companies or other organizations seeking a competition law remedy for a refusal to deal or termination of supply need to consider both the nature of the conduct (i.e., whether it may fall under one or more of the relevant Competition Act provisions) and the desired remedy (e.g., civil damages, a remedial order for the conduct to stop, monetary compensation, etc.).

Similarly, it is incumbent on suppliers or distributors seeking to terminate supply or refuse to deal to consider the potential risk, both under the Competition Act and different areas of law (e.g., potential contract, tort or other legal liability) before terminating supply to a distributor, customer or other person.

Concerted refusals to supply or deal (i.e., agreements or arrangements between competitors to refuse to supply or deal) represent the highest level of risk under Canada’s Competition Act given that collective agreements to refuse to supply are criminal offences under section 45 of the Competition Act (criminal conspiracy agreements).

SECTION 75 OF THE COMPETITION ACT
(REFUSAL TO DEAL)

Canada’s federal Competition Act has a standalone civil refusal to deal provision (section 45).

Under section 45 of the Competition Act, a person whose supply of a product or service has been terminated may, where all of the elements of section 75 are met, have a competition law remedy in addition to other legal remedies (e.g., contractual rights under a distribution or supply agreement).

The refusal to deal provisions of the Competition Act were passed to address a concern that in some Canadian industries there may be relatively few suppliers and, as such, a customer that has been terminated may be unable to secure alternate sources of supply.

As a result of amendments to the Competition Act on June 20, 2024 (under Bill C-59 – the Fall Economic Statement Implementation Act, 2023) the first element under section 75 (discussed below) can now be met where a person is substantially affected by a refusal to deal in only part of their business.

Also as a result of these Bill C-59 amendments, the refusal to deal provisions under section 75 were also expanded to apply to allow the Competition Tribunal to order a supplier to provide a means of diagnosis or repair to customers or third parties (e.g., diagnostic maintenance, repair and calibration information, technical updates and diagnostic software).

Legal Test for Refusals to Deal

Under section 75 of the Competition Act, the Competition Tribunal may make orders where all of the following elements is proven on the civil burden of proof (i.e., on balance of probabilities):

1. A person is substantially affected in the whole or part of their business or precluded from carrying on business due to an inability to obtain adequate supplies of a product in a market on usual trade terms.

2. The person is unable to obtain adequate supply of a product because of insufficient competition among suppliers in the market.

3. The person is willing and able to meet the supplier’s usual trade terms.

4. The product is in ample supply or, in the case of a means of diagnosis or repair, can be readily supplied.

5. The refusal to supply is having or is likely to have an adverse effect on competition.

Enforcement and Remedies for Refusals to Deal

Both the Competition Bureau and private parties, with leave from the Competition Tribunal, can make applications to the Tribunal for orders under section 75 of the Competition Act.

Where the Competition Bureau or a private party is successful under section 75 in a refusal to deal application, the Competition Tribunal can order a supplier of a product, including a means of diagnosis or repair, to accept a person as a customer (or to make the means of diagnosis and repair available to a person) within a certain period and on terms that the Competition Tribunal considers appropriate.

Also, as a result of amendments to section 75 of the Competition Act on June 20, 2024, if the Competition Tribunal makes an order as the result of a private access application (i.e., by a private person as opposed to the Competition Bureau), it will also be able to order a supplier to pay an amount up to the value of the benefit derived from the conduct, to be distributed between the applicant and any other person affected by the supplier’s conduct.

Civil damages actions, however, are not possible for refusals to deal under section 75.

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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.

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