Introduction

Bill C-56, The Affordable Housing and Groceries Act1 ("Bill C-56"), came into force over the holiday season and many of the Canadian Competition Bureau's (the "Bureau") wishes came true in the form of amendments to the Competition Act (the "Act").

As summarized in our recent bulletin, Bill C-56, introduces important amendments to the Act, resulting in the repeal of the efficiencies defence, an expansion of the Competition Tribunal's power to issue orders in respect of competitor collaborations and the introduction of formal market study powers. Bill C-56 represents the first of two sets of amendments proposed in 2023. Tabled in late 2023, Bill C-59 seeks to implement a broad range of measures stipulated in the Federal government's 2023 Fall Economic Statement. Bill C-59 received its first reading on November 30, 2023, and is moving steadily through the legislative process. If enacted, Bill C-59 will have noteworthy impacts on competition regulation in Canada.

In order to assist with understanding the implications of these new changes to the Canadian antitrust landscape, please keep an eye out for a series of bulletins that will be published over the next few months that will provide an analysis of these new amendments.

In this bulletin, we highlight the new powers that the Commissioner of Competition (the "Commissioner"2) has to conduct investigative "market studies".

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Executive Summary

The introduction of a formal market study regime was expected. The Commissioner, Matthew Boswell, has long advocated for formal information-gathering powers for market studies. Commissioner Boswell was recently reappointed for at least a further two years and it will come as no surprise if he seeks to exercise these new market study powers in the near future.

Here are the key takeaways:

  • Market studies, according to the Bureau, allow it to examine an industry or business sector from a competition perspective in order to identify relevant laws, policies, regulations or other factors that may impede competition.
  • While the Minister of Science, Innovation and Technology (the "Minister") will need to authorize any market study, we expect that Commissioner Boswell will be given a significant degree of latitude to initiate any study he considers justified (within reason).
  • The Bill C-56 formal market study regime allows the Commissioner to seek judicial orders to compel the disclosure of information, documents or data relevant to market studies. Complying with such orders will likely be costly and burdensome on industry participants.
  • A variety of market participants may be subject to a section 11 subpoena order regardless of their size, incumbency status, role as a customer or supplier, and their compliance with the Act.
  • The use of information and evidence obtained by the Commissioner and the Bureau may not be limited to the purposes of the market study, but can be used in subsequent enforcement actions (including investigations of criminal violations of the Act, such as price fixing, employee wage fixing and bid-rigging).
  • When faced with an order issued pursuant to the Act, respondents are not permitted to decline providing information or testifying on the basis that it might incriminate them.
  • It has therefore never been more important to ensure that your business' document retention program is up to date – this includes understanding the impact on a document retention program if an order under section 11 of the Act is issued for the collection of information, documents and data in respect of a market study.
  • Further, a business' general competition law compliance and education program remains an important element to mitigating compliance risk, especially given the wave of new amendments.

Background

The concept of a market study is not new. The Bureau considers market studies to be one of its important tools to promote and advocate for the benefits of a competitive marketplace. According to the Bureau, market studies involve in-depth examinations of a market, industry, or competition related topics to identify competition issues and suggest potential solutions. More broadly, the Bureau views market studies as an important to tool to understand the competitive dynamic in a given market or industry.

Indeed the Bureau has conducted market studies in the past, studying such industries as groceries, FinTech, beer, self-regulated professions, healthcare and generic drugs. In the Bureau's 2018 Market Studies Information Bulletin, the Bureau stated that market studies allow it to assess competition concerns, especially where "impediments to competition seem to arise from legislation, regulations, policies, structural barriers in a sector, or other factors that affect important aspects of competition (e.g. prices, production, entry, advertising, switching, product choice and quality)."3

Prior to Bill C-56, the Bureau would conduct market studies in reliance upon publicly available information, information already in its possession and information provided by stakeholders on a voluntary basis. While all of these sources will remain available to the Bureau, the critical change ushered in by Bill C-56 is that the Commissioner will be able to compel evidence from market participants by applying to the courts for orders requiring respondents to provide information or testimony, or both.

In the context of the Bureau's recent market study into the grocery sector, some say that it was marked by a lack of co-operation from the companies involved. As stated in the Bureau's 2022 Market Study Notice: Competition in Canada's Grocery Sector, a "lack of relevant information can impair the Bureau's ability to diagnose competition problems" and limit its ability to provide evidence-based advice to policymakers.4 Arguably, the outcome of the study may have been different if information, documents and data could have been compelled pursuant to court orders.

The New Market Study Regime

Under Bill C-56's market study regime, either (1) the Commissioner can initiate a market study after consulting with the Minister or (2) the Minister can direct the Commissioner to do so. The Commissioner is required to publish proposed terms of reference for the proposed inquiry and invite the public to provide comments during a period of not less than 15 days. Ultimately, the Minister must approve the final terms of reference before the Commissioner can proceed with the formal market study. While only time will tell, we anticipate that the Minister would likely approve any market study reasonably suggested by the Commissioner.

Once a market study is initiated – in addition to obtaining publicly available and voluntarily provided information – the Commissioner is empowered to seek a court order to compel the production of relevant information, documents or data. These powers already existed in section 11 for the purposes of enforcing the criminal and civil provisions of the Act (including, in the context of price fixing investigations and merger reviews). These orders can be obtained ex parte, whereby no involvement or notice need be given to the respondents. This was a power that the Commissioner was keen to obtain, and it is expected that this will greatly increase the use of section 11 subpoena powers to compel parties to provide information, documents and data, as well as answer questions under oath in relation to a market study. These powers apply even where the respondent is in full compliance with all applicable laws.

The Commissioner will have 18 months to complete the study, subject to a possible three-month extension at the discretion of the Minister, after which the findings must be made publicly available.

Before the report is published, the Commissioner must circulate a final or partial draft of the report to all the stakeholders compelled to participate in the inquiry. The new law provides that these participants will only have three working days from receipt of the draft report to identify inaccurate or confidentially sensitive information that should be redacted from the report. Notwithstanding this very narrow window to comment provided for by the new rules, we are hopeful that the Commissioner will grant more time to participants to respond.

Key Implications and Consequences

The introduction of a formal market study regime has important implications for Canadian businesses.

In granting the Commissioner powers to compel the production of information, documents or data otherwise unavailable to the public, Bill C-56 facilitates the Bureau's ability to initiate and conduct market studies. Given that the enactment of a formal market study regime allows the Bureau to overcome the limitations it previously faced, we expect not only an increase in the number of market studies undertaken, but also more comprehensive analyses and firm conclusions arising from such studies.

Ideally, the Bureau will continue to seek voluntary disclosure of information when conducting market studies and only resort to court orders where it is necessary to do so. Responding to a production order (which requires a response within fixed timelines and certification under oath) or preparation for oral examinations under oath will be burdensome and costly for respondents, not only in terms of resources but also business disruptions and possible reputational impact. To minimize the risk of a section 11 subpoena, we advise market participants to cooperate with the Bureau's general calls for information.

Furthermore, it is important to note that any information (whether written or oral) provided to the Bureau can be subsequently used for any enforcement purpose. There is no constitutional protection against self-incrimination in these circumstances. In fact, the Bureau's Market Studies Information Bulletin expressly recognizes this possibility, stating that "[i]n instances where a market study uncovers clear evidence that the Act may have been contravened, that evidence may be used in an enforcement action."5

It is therefore important to have a robust document retention program that is regularly updated. The document retention program should have the ability to institute what is often referred to as a "litigation hold", such that any activity related to deleting or destroying documents and data is put on hold in the event an order is issued pursuant to section 11 of the Act.

As always, Canadian businesses should be mindful of all laws that impact their activities, including the new amendments to the Act. There should be an effective compliance and education program in place to ensure that all members of the business are aware of and comply with applicable laws and policies.

Footnotes

1. Bill C-56 received Royal Assent on December 15, 2023.

2. As the Commissioner heads the Bureau, the terms "Commissioner" and "Bureau" are used interchangeably in this bulletin.

3. Competition Bureau, Market Studies Information Bulletin (September 19, 2018), available at: https://ised-isde.canada.ca/site/competition-bureau-canada/en/market-studies-information-bulletin.

4. Competition Bureau, Market Study Notice: Competition in Canada's Grocery Sector (October 2022), available at: https://ised-isde.canada.ca/site/competition-bureau-canada/en/how-we-foster-competition/education-and-outreach/market-study-notice-competition-canadas-grocery-sector.

5. Competition Bureau, Market Studies Information Bulletin (September 19, 2018), available at: https://ised-isde.canada.ca/site/competition-bureau-canada/en/market-studies-information-bulletin.

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