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).

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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.

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Criminal conspiracy (cartel) agreements between competitors are prohibited under section 45 of the Canadian Competition Act and have been a Canadian competition law enforcement priority since Canada introduced competition law more than a century ago.

In this regard, section 45 of the Competition Act makes it a criminal offence for two or more competitors to enter into agreements to fix prices, divide/allocate markets or restrict output (sections 45(1)(a)-(c) of the Competition Act).

In addition to section 45, Canada’s Competition Act also contains a standalone foreign directed conspiracy offence (section 46). In general, section 46 makes it an indictable offence for corporations doing business in Canada to implement a conspiracy directed by a foreign person.

As such, the three per se criminal offences under section 45 of the Competition Act are expressly extended to conspiracies formed abroad and directed to be implemented in Canada by a foreign person.

However, unlike section 45, liability under section 46 is narrower, in that the offence only applies to corporations and not other types of entities, such as partnerships.

OVERVIEW OF SECTION 46
OF THE COMPETITION ACT

Section 46 prohibits a corporation that carries on business in Canada from implementing a directive, instruction, intimation of policy or other communication to the corporation or any person from a person in a foreign country who can direct or influence the corporation’s policies to give effect to a foreign conspiracy that, if entered into in Canada, would violate section 45 of the Competition Act.

Section 46 of the Competition Act is directed at international cartel activities (e.g., international price-fixing conspiracies) where the conspirators are not located or incorporated in Canada where the cartel may have anti-competitive effects in Canada.

Section 46 also does not require that a Canadian corporation have knowledge of the foreign conspiracy or be affiliated with the person that is issuing the foreign directive, but merely that the person directing the corporation doing business in Canada be “in a position to direct or influence the policies of the corporation”.

The Federal Court of Canada has held that the elements of the foreign directed conspiracy section of the Competition Act (section 46) are as follows: (i) a conspiracy offence under section 45; (ii) a corporation carrying on business in Canada; (iii) the corporation implements a directive, instruction, intimation of policy or other communication; (iv) the directive, instruction, intimation of policy or other communication is from a person in a country other than Canada who is in a position to direct or influence the policies of the corporation; and (v) the directive, instruction, intimation of policy or other communication is for the purpose of giving effect to a conspiracy entered into outside of Canada that would violate section 45.

Like section 45 of the Competition Act, critical to establishing liability under section 46 is the existence of a conspiracy agreement. There must also be sufficient evidence that a Canadian company has implemented a foreign directed conspiracy, including at the direction of a corporate parent.

Like under section 45 of the Competition Act, however, an agreement can be established for the purposes of section 46 by circumstantial evidence alone if that evidence is sufficient to prove the existence of a conspiracy agreement (sometimes also referred to as “plus factors”).

The per se conspiracy offences under section 45 of the Competition Act (i.e., that do not require any negative market impact be proven) that are also illegal under section 46, assuming that the other elements of section 46 are met with respect to foreign direction of the conspiracy are as follows:

Price-fixing agreements. Agreements to fix, maintain, increase or control the price for the supply of a product (including services) (section 45(1)(a) of the Competition Act).

Market allocation/division agreements. Agreements to allocate sales, territories, customers or markets for the production or supply of a product (section 45(1)(b) of the Competition Act).

Output/supply restriction agreements. Agreements to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product (section 45(1)(c) of the Competition Act).

Canada’s Competition Bureau has issued guidelines (Competitor Collaboration Guidelines) that set out its enforcement position relating to the criminal conspiracy offences under section 45 of the Competition Act.

For more information about the conspiracy offences under the Competition Act, see: Conspiracy (Cartels) and Conspiracy FAQs.

PENALTIES

Violation of section 46 of the Competition Act is an indictable offence punishable by a fine in the discretion of the court (i.e., a fine with no prescribed statutory limit).

IMMUNITY & LENIENCY PROGRAMS

The Competition Bureau has established formal Immunity and Leniency Programs under which applicants may receive full immunity from prosecution if granted full immunity under the Immunity Program or, where full immunity is not available, reductions in penalties under the Leniency Program for cooperating with an investigation.

The Bureau’s Immunity and Leniency Programs are its top conspiracy (cartel) detection tool. They are also very important for companies or individuals that may have participated in illegal conspiracy agreements under sections 45 or 46 of the Competition Act (conspiracy or a foreign directed conspiracies) to minimize potential criminal risk associated with investigations and prosecutions.

For more information about the Bureau’s Immunity and Leniency Programs and Competition Act complainants, see: Immunity & Leniency, Whistleblowers, Whistleblower FAQs and Complaints.

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SERVICES AND CONTACT

We are a Toronto 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