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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“’Limited time offers’ and ‘countdown clocks’, types of urgency cues, could create the false or misleading impression that consumers must purchase a product quickly prior to the end of a promotion when, in fact, the promotion is renewed or replaced by another. The ordinary selling price provisions of the Competition Act aim to ensure that when products are promoted at sale prices, the deals are not based on inflated regular prices.”

Competition Bureau
(News Release (September 27, 2023),
“The Dufresne Group to pay $3.25 million penalty
to settle Competition Bureau
concerns over marketing claims”)

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“Consumers win when retailers offer aggressive discounts, but savings claims must be substantiated. When comparisons are made between regular and sale prices, consumers respond to the implied savings. As such, it is important that businesses make accurate and truthful claims when advertising the price of a product.”

Competition Bureau
(Michael’s OSP case)

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In addition to the general criminal and civil misleading advertising provisions of the Competition Act (sections 52 and 74.01), the Act also sets out certain misleading advertising related criminal offences (under Part VI of the Act – Offences in Relation to Competition), which are subject to fines and imprisonment, and reviewable matters (under Part VII.1 of the Act – Deceptive Marketing Practices), which are subject to civil penalties including administrative monetary penalties (AMPs, which are essentially civil fines).

These include provisions relating to deceptive telemarketing (section 52.1), deceptive prize notices (section 53), double ticketing (section 54), drip pricing (sections 52(1.3) and 74.01(1.1)), multi-level marketing (section 55), pyramid selling schemes (section 55.1), performance claims (section 74.01(1)(b)), misleading or unauthorized use of tests and testimonials  (section 74.02), bait and switch selling (section 74.04), the sale of products above an advertised price (section 74.05) and promotional contests  (section 74.06).

ORDINARY SELLING PRICE (OSP) PROVISIONS

In addition to the above, the Competition Act also includes standalone civil ordinary selling price or “OSP” provisions (sections 74.01(2)-(5)).  These sections are generally intended to prevent inflated claims relating to a seller’s regular prices or the regular prices in a market generally.

Claims relating to the ordinary or regular price of a product cannot be made unless one of two statutory tests set out in the Competition Act are met:

The “Volume Test”: A substantial volume of the relevant product must have been sold at the claimed regular price (or higher) within a reasonable period of time either before or after the claim has been made (depending whether the regular price claim referred to a past or future price). The Competition Bureau’s (Bureau) view is that a substantial volume is more than 50% of sales at or above the referenced ordinary price and a reasonable period of time is 12 months before or after the claim is made (though this may be shorter depending on the nature of the product – for example, in the case of seasonal products).

The “Time Test”: The product has been offered for sale in good faith at the regular price (or higher) for a substantial period of time before or immediately after the claim has been made (depending on whether the regular price claim referred to a past or future price). The Bureau’s view is that a substantial period of time means more than 50% of the six months before or after the claim is made (which, again, as under the volume test, may be shorter depending on the nature of the product).

In June 2024, section 74.01(3) of the Competition Act, which sets out the tests for a seller’s own OSP claims, was amended (under Bill C-59) to reverse the onus from the Competition Bureau to sellers to have to prove, if challenged, that an OSP claim has met either the time test or volume test for making such claims.

With respect to the “good faith” requirement for the “time test”, the Competition Bureau’s position is that some of the relevant factors may include whether: (i) the product was openly available in appropriate volumes; (ii) the reference price was reasonable in light of competition in the relevant market during the time period in question; and (iii) the reference price was one that the supplier fully expected the market to validate (whether or not the market did actually validate the price).

The Bureau has commenced OSP claim related enforcement in a number of industries, including in relation to retail craft supplies (Michael’s), online retailing (Amazon), department stores (e.g., Sears) and other retailers (e.g., sports and clothing retailers). Some of the penalties in OSP cases have ranged between $1.1 million and $3.5 million.

SALES CLAIMS

Importantly, aside from the standalone OSP provisions, false or misleading “sale” or other discount claims can also violate the general criminal or civil misleading advertising provisions of the Competition Act under sections 52 or 74.01 (e.g., where a product is always “on sale”, when there is no higher price, or a claim is made that a product is “on sale” when there has been no actual price reduction). For more information, see: Misleading Advertising.

POTENTIAL PENALTIES

Some of the potential penalties for violating the civil deceptive marketing practices provisions under Part VII.1 of the Competition Act include Competition Tribunal or court orders to stop the conduct, publish a corrective notice, pay restitution to consumers and AMPs.

Following 2022 amendments to the Competition Act, the maximum AMPs for civil deceptive marketing increased: (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; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order) or 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.

In addition, as a result of June 2024 amendments to the Competition Act (under Bill C-59), starting on June 20 2025, private parties will also be able to seek leave from the Competition Tribunal to commence proceedings under the civil deceptive marketing practices provisions (Part VII.1) with the only leave requirement for standing being that the proceedings are in the “public interest”.

The potential penalties for violating the general criminal misleading advertising section of the Competition Act (section 52) include, on indictment, a fine in the discretion of the court and/or imprisonment for up to 14 years and, on summary conviction, a fine of up to $200,000 and/or imprisonment for up to one year.

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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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