Federal Government to Significantly Overhaul the Competition Act

December 19, 2023

Written By Melanie Aitken, Randal Hughes, John Rook, Emrys Davis, Zirjan Derwa, Christina Skinner and Kolding Larson

Following several years of lively public discussion, two high-profile consultations and the introduction of several “interim amendments” to the Competition Act in 2022,¹ the federal government has now tabled two new bills (Bill C-56 and Bill C-59), which together, would introduce the most significant reforms to Canadian competition policy in several decades.

Overall, they grant the Commissioner of Competition (Commissioner) significant new powers and more lenient standards against which he can establish violations. In addition, the proposed expansion of private litigation under the Competition Act to enable applicants to obtain compensation for certain civil matters represents a fundamental shift in competition law in Canada.

Bill C-56 was passed by Senate on December 14, 2023, and came into force one day later. At the time of publication, Bill C-59 has completed its first reading and we anticipate it may come into force in early 2024 (with certain provisions coming into force a year after enactment as noted below).

1. Bill C-56

Originally tabled in the House of Commons on September 21, 2023, Bill C-56, as subsequently amended, reforms several sections of the Competition Act and provides the Commissioner with new information gathering powers for market studies.

Abuse of Dominance

• Bill C-56 expands the abuse of dominance provisions to apply to situations where a dominant firm has engaged in (1) a “practice of anti-competitive acts” (with anti-competitive intent) or (2) conduct that had, is having or is likely to have the effect of preventing or lessening competition substantially in a market in which the dominant firm has a plausible competitive interest, where such effect is not a result of “superior competitive performance”.
  
  Notably, the previous version of section 79 required proof that a dominant firm had engaged in both a “practice of anti-competitive acts” (with anti-competitive intent) and that the practice had, or was likely to have, the effect of substantially lessening or preventing competition. By splitting these two elements into separate independently sufficient prongs, these amendments significantly expand the scope of conduct caught by the abuse of dominance provisions of the Competition Act.
  
  In addition, by introducing a vague notion of 'excessive and unfair pricing' to the possible acts that could meet the conduct test, the message is clear: these amendments are designed to make it much easier for the Commissioner to pursue large companies perceived (at least at political levels) to be 'too big', against unknowable and non-economic standards—a very European and unprecedented approach for Canada.
  
  Finally, Bill C-56 increases the range of potential administrative monetary penalties (AMPs) for abuse of dominance to C$25 million for a first offence and $35 million for subsequent offences.² However, the Tribunal will only have the power to award an AMP where it finds that the practice of anti-competitive acts engaged in amounts to conduct that has had or is having the effect of preventing or lessening competition substantially in a market in which the person or persons have a plausible competitive interest (i.e., where both of the elements are satisfied).
  
  Notably, these changes to the abuse provisions go far beyond what even the Competition Bureau (the Bureau) has been advocating for in connection with its calls for competition reform.³ Indeed, the Bureau recognizes in its enforcement guidelines that conduct that falls under the scope of abuse of dominance is not inherently restrictive and can often be pro-competitive and efficiency-enhancing.⁴

Removal of the Efficiencies Defence for Mergers and Competitor Agreements

• Prior to the amendments, the Competition Tribunal (Tribunal) was prohibited from making an order under section 92 of the Competition Act where the efficiencies to be gained from a proposed merger were greater than, and would offset, the effects of any prevention or lessening of competition resulting from the merger. Bill C-56 repeals the efficiencies defence from section 96 of the Competition Act, as well as in the context of the civil agreements provision (s. 90.1).

Competitor Collaborations

• Bill C-56 expands the scope of the civil competitor collaboration provisions in s. 90.1 to include agreements and arrangements with a “significant purpose” to prevent or lessen competition in a market, notably, even where such agreement or arrangement was not entered into between competitors. This represents a notable departure from the previous civil agreements provision, which only applied to agreements between competitors.

Market Studies

• Bill C-56 provides the Commissioner with the ability to compel market participants to provide information for the purposes of informing an inquiry into the “state of competition in a market or industry”.⁵ This new power to compel information for market studies is broad and far reaching; the Commissioner can now require market participants to produce records and data, and to submit to oral examinations under oath and/or to provide written responses to questions under oath. Given the breadth of information that can be compelled by the Commissioner, this provision is likely to impose a significant burden on market participants in terms of the cost, time and internal resources required to comply with the production orders, notably, even in cases where the market participant is not itself the subject of an inquiry under the Competition Act.

2. Bill C-59

In addition to the changes contained in Bill C-56, the government recently tabled Bill C-59 as part of the Fall Economic Statement, which proposes several additional far-reaching amendments to the Competition Act.

Merger Control

• Pre-merger notification: Bill C-59 would amend the relevant thresholds to require pre-merger notification of more transactions. Changes include adding “sales into Canada” as part of the transaction size threshold⁶ and requiring the aggregation of assets and revenues for transactions where the acquiring party proposes to acquire both shares and assets of the target business.
• Increased weight given to structural factors in merger reviews: Bill C-59 will repeal section 92(2) of the Competition Act, which currently prohibits the Tribunal from making an order in respect of a merger “solely on the basis of evidence of concentration or market share”. Further, Bill C-59 would introduce “any effect from the change in concentration or market share that the merger or proposed merger has brought about”, as a factor to be considered in determining whether a merger is likely to prevent or lessen competition substantially.⁷ As such, structural factors including high market shares would become an explicit factor for the Tribunal to consider in determining whether a merger is likely to substantially lessen or prevent competition.
• Extended limitation period for non-notifiable mergers: Bill C-59 would extend the period during which the Commissioner may challenge a merger that is not formally notified. The Commissioner would now have three years to challenge a non-notified merger (previously, the Commissioner had only one-year). This change is in part intended to permit the Bureau to address 'killer acquisitions'—removing nascent competitors from the market. The current one year limitation period would continue to apply for mergers where the Bureau receives either a request for an advance ruling certificate, including for transactions that are not subject to mandatory notification, or a formal statutory notification filing.
• Explicit consideration of labour effects in merger reviews: Bill C-59 would require the Tribunal to consider whether a merger or proposed merger would substantially lessen or prevent competition in labour markets. This is a departure from the current language of the Competition Act, which does not give labour effects any explicit role in merger reviews. 
• “Automatic” interim injunctions: Bill C-59 would prohibit parties from closing a transaction while an application for an “interim order” to prevent closing is pending before the Tribunal; in other words, the Commissioner would get an automatic stay once he objects to a transaction, eliminating the ability of parties to close until the application for the injunction is disposed of by the Tribunal, irrespective of how long the Commissioner has had to review the deal and object to it.

Private Claims

• Monetary awards to private parties: The Competition Act currently allows private parties to commence actions for damages (often pursued by way of class action lawsuits) for violations of the criminal provisions of the Competition Act and to seek leave to bring applications to the Tribunal for certain reviewable practices (though no monetary awards).
  
  The amendments in Bill C-59 would allow the Tribunal to make “disgorgement” orders in private actions requiring the payment of “an amount not exceeding the value of the benefit derived from the conduct” to be distributed to the party who brought the application and “any other person affected by the conduct” found to violate certain civil provisions.⁸ The effect of these changes is to introduce new quasi class actions that would be heard by the Tribunal; such actions could be brought, in part, to benefit consumers who, for example, paid higher prices due to violations of the civil provisions of the Competition Act. These new disgorgement orders would be available for violations of the following provisions of the Competition Act: (1) abuse of dominance (s. 79); (2) civil agreements (s. 90.1); (3) refusal to deal (s. 75); (4) price maintenance (s. 76); and (5) exclusive dealing, tied selling and market restriction (s. 77). We note that these new provisions, if passed, will not come into force until one year after Bill C-59 receives royal assent.
  
  Notably, these quasi class actions would not be subject to the important procedural protections and requirements that class action proceedings are otherwise subject to in Canada, including class certification, a court-supervised settlement approval process, class-wide release for defendants, and court approval of plaintiffs' legal fees.
• Expanded right of private access: Bill C-59 would expand the right of private access to the civil deceptive marketing (s. 74.01) and civil agreements (s. 90.1) provisions of the Competition Act, though these new rights of access would also not come into force until one yearafter Bill C-59 receives royal assent.
• Easing of the standard to obtain leave for a private action: Bill C-59 would make it easier for private parties to obtain leave to bring applications before the Tribunal for violations of the civil provisions of the Competition Act. In particular, private applicants pursuing a claim under sections 75, 77, 79 or 90.1 would now have to demonstrate only that (1) they have been directly and substantially affected in the “whole or part” of their business by the impugned conduct,⁹ or (2) it is in the public interest that leave be granted. Currently, private parties must demonstrate that their entire business was directly and substantially affected by the impugned conduct to obtain leave; as such, Bill C-59 promises to significantly ease the burden on private parties seeking to obtain leave to bring a private action before the Tribunal.
• Commissioner approval of settlements: Where private parties reach a settlement in a private claim that has been brought before the Tribunal, the new legislation would require the parties to serve a copy of that settlement agreement on the Commissioner within 10 days of signing. The Commissioner would have the ability to challenge the settlement through an application to the Tribunal, which could then vary or rescind the agreement if it "has or is likely to have anti-competitive effects". Proposed penalties for failure to serve the Commissioner include an administrative monetary penalty of up to $10,000 per day.

Other Notable Changes

• AMPs for violations of the civil agreements provision: In both private applications and applications by the Commissioner, Bill C-59 would allow the Tribunal to order the payment of an AMP for violations of the civil agreements provision of the Competition Act (s. 90.1). The range of potential AMPs payable for violations of section 90.1 mirror those currently available under the abuse of dominance provisions—that is, the greater of (1) $10 million for a first order ($15 million for subsequent orders) and (2) three times the value of the benefit derived from the agreement or arrangement, or, if that amount cannot be reasonably determined, 3 percent of the person’s annual worldwide gross revenues.¹⁰
• New 'right to repair': Bill C-59 would expand the refusal to deal provisions of the Competition Act to allow the Tribunal, on application from the Commissioner or a private party granted leave under section 103.1, to make an order requiring a supplier of a product to "accept a person as a customer within a specified time on usual trade terms", if the Tribunal finds that the supplier has refused to supply a person with a "means of diagnosis or repair"¹¹ and certain other elements are established.¹²
• Environmental considerations: Bill C-59 would amend the civil misleading advertising provisions of the Competition Act to explicitly recognize representations regarding a product’s “benefits for protecting the environment or mitigating the environmental and ecological effects of climate change” as a misleading representation if it is not based on an adequate and proper test.
  
  Additionally, the amendments would allow the Commissioner to issue a certificate in respect of agreements or arrangements entered into for the purpose of protecting the environment where the Commissioner is satisfied that the agreement or arrangement is not likely to prevent or lessen competition substantially in a market. Where a certificate is issued, the agreement or arrangement would be immune from sections 45, 46, 47, 49 and 90.‍1 of the Competition Act.
• New penalties for non-compliance with a registered consent agreement: Bill C-59 would introduce new penalties of up to $10,000 for each day of contravention for parties that fail to comply with the terms of a registered consent agreement.
• Limiting the scope for cost awards against the Commissioner: Bill C-59 would prevent the Tribunal from making cost awards against the Commissioner, except in cases where (1) the award “is necessary to maintain confidence in the administration of justice” or (2) “the absence of an award would have a substantial adverse effect on the other party’s ability to carry on business”. The Commissioner's ability to seek costs would remain unchanged. This amendment appears to be in direct response to the Tribunal’s recent $13 million cost award against the Commissioner in the Rogers/Shaw/Videotron litigation.¹³  
• New prohibition on reprisal actions: Bill C-59 would introduce new provisions allowing a court to make an order against any person who is engaging or has engaged in a “reprisal action”.¹⁴ Orders under this provision may include the payment of AMPs of up to $750,000 (in the case of an individual) or $10 million (in the case of a corporation).¹⁵ Both the Commissioner, and any person directly and substantially affected by an alleged reprisal action, may seek an order under this new provision (though damages are not available).

3. Conclusion

Together, Bill C-56 and Bill C-59 represent the most significant reforms to Canadian competition policy in decades. These bills would significantly expand the ability of private parties to obtain leave (and receive payment) for violations of the Competition Act’s civil provisions, increase the number of mergers subject to pre-merger notification and review, provide the Commissioner with new information gathering powers, and make it substantially easier for the Commissioner (and in certain cases, private parties) to obtain orders in respect of anti-competitive conduct.

As noted above, Bill C-56 entered into force on December 15, 2023. Because there appears to be little political interest to scale back Bill C-59, we expect it to pass largely as drafted, although the precise timing remains unclear.

If you have any questions about these amendments, please contact the Bennett Jones Competition/Antitrust group.

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