Competition law in Canada continues to expand in scope and importance. Given recent and pending reforms, a wider range of practices can be subject to investigations under the Competition Act (Act), penalties for non-compliance are more significant, and private parties will soon be able to bring disgorgement claims for practices that were otherwise considered relatively benign.
Since the beginning of 2022, the one constant for the Act has been expansion. The scope of the Act was expanded in 2022 and again in 2023. It will be further amended in 2024. These three waves of amendments amount to the most sweeping set of changes to the Act in a generation and will have broad implications for businesses in Canada.
The following is a summary of the most important recent and proposed amendments.
- 2022 Amendments — Higher Fines,
New Prohibition on Wage-Fixing and No-Poach Agreements.
Several important amendments to the Act were enacted and came into
effect on June 23, 2022. The amendments included increased
administrative monetary penalties (AMPs) for abuse of dominance and
misleading advertising, broadening the scope of abuse of dominance,
introducing a private right of access for abuse of dominance,
specifying "drip pricing" as deceptive marketing, and
introducing an anti-avoidance rule for merger notification. In
addition, wage-fixing and no-poach agreements became criminal
offences, and the C$25-million cap on fines for a breach of the
Act's criminal conspiracy provision was eliminated as of June
23, 2023. For more details regarding the 2022 amendments, see our
Blakes Bulletin: Proposed Competition Law
Amendments in Canada Set to Significantly Expand the Scope of the
Competition Act.
- 2023 Amendments — New Market
Study Powers, Expanded Scope of Abuse of Dominance Provision and
Expanded Competitor Collaboration Provision. The Act was
amended again to introduce a new market study power, eliminate the
efficiencies defence for mergers and overhaul the abuse of
dominance provision by (i) making it easier to meet the legal test,
(ii) introducing a new anticompetitive act relating to price
gouging ("directly or indirectly imposing excessive or unfair
selling prices"), and (iii) increasing, again, the AMPs for
abusive conduct. These amendments came into effect on December 15,
2023. In addition, as of December 15, 2024, certain collaborations
between noncompetitors could be subject to enforcement under the
civil collaborations provision, and the efficiencies defence for
civil collaborations will be eliminated. For more details regarding
the 2023 amendments, see our Blakes Bulletin: Competition Law Update:
Parliament Approves Next Wave of Competition Act
Amendments.
- 2024 Amendments (Proposed) — New Private Right of Action for Damages, Expansion of Pre-Merger Notification Regime. In late 2023, the government proposed further amendments to the Act that will, if enacted, significantly expand private parties' ability to sue and seek remedies for breaches of the Act, expand the possible remedies for anti-competitive civil collaborations (e.g., joint ventures) to include AMPs and divestitures, enhance both the merger notification regime and the Competition Bureau's (Bureau) ability to challenge mergers, and expressly capture greenwashing as misleading advertising. For more information regarding these proposed amendments, see our Blakes Bulletin: Revamping the Rules: Canadian Competition Act Update.
Future Implications
The most recent set of amendments is likely to become law in the early part of 2024. Additional amendments may be forthcoming, considering that the federal government's discussion paper, The Future of Competition Policy in Canada, and the Bureau's submission to the government's consultation on the Act, suggested additional reforms to the Act that are not reflected in any of the recent amendments.
As described below, the new competition law landscape creates a number of practical implications for businesses in Canada. At a high level, the key takeaways for businesses are:
- More complex and dangerous regulatory landscape. Risks for non-compliance with the Act are increasing, and companies should reassess their conduct in light of the new rules.
- Competition law compliance measures need to be updated. There are a number of substantive and procedural changes to provisions dealing with a wide range of business practices. Compliance measures should be updated to ensure that existing programs and protocols are up to date.
- Spectre of private enforcement. The forthcoming expansion of private enforcement of the Act (including monetary compensation for civil breaches of the Act) means that companies should pay more attention to complaints from competitors, customers and suppliers, and the possibility of strategic litigation based on competition law grounds.
Abuse of Dominance: Market Leaders Beware
The Act's abuse of dominance provisions are the only provisions that were subject to the three sets of amendments introduced to date. In 2022, a right of private access was introduced for abuse, the maximum AMPs were significantly increased and the scope of anticompetitive acts that could qualify for abuse of dominance were broadened. In 2023, the legal test for abuse was revised, AMPs were further increased and additional anti-competitive acts were introduced. In 2024, further amendments will introduce the ability for private parties to obtain compensation for successfully pursuing an abuse of dominance application. Key elements of the 2022 and 2023 amendments are outlined below:
- Revised legal test. Abuse of dominance previously required a finding of (a) dominance, (b) a practice of anti-competitive acts, and (c) a likely substantial lessening or prevention of competition. Now, the Competition Tribunal (Tribunal) can issue a prohibition order based only on a finding of (a) plus, either (b) or (c). However, all three elements must still be met for a mandatory order (e.g., divestiture) or AMP to be issued.
- Broadened anti-competitive acts. In 2022, a wider definition of an "anti-competitive act" was introduced, capturing any act intended to "have an adverse effect on competition," in addition to those intended to have a predatory, exclusionary or disciplinary negative effect on a competitor." In addition, two new anti-competitive acts have been introduced: "a selective or discriminatory response to an actual or potential competitor for the purpose of impeding or preventing the competitor's entry into, or expansion in, a market or eliminating the competitor from a market" and "directly or indirectly imposing excessive and unfair selling prices."
- Increased AMPs. The maximum AMP is the greater of C$25- million (C$35-million for repeat conduct), and three times the value of the benefit (or, if that cannot be reasonably determined, 3% of worldwide revenues). This is a significant increase from the maximum AMP of C$10-million (C$15- million for repeat conduct) at the beginning of 2022.
Key takeaways for businesses:
- Enforcement Increase. The Bureau and private parties will be incentivized to pursue abuse of dominance applications before the Tribunal given the broader scope of the offence and the ability for private parties to obtain compensation if successful.
- Conduct reassessment. Firms that may be dominant should reassess their conduct given changes to the legal test for abuse, the broadened scope of conduct that may be considered an anti-competitive act and significantly increased penalties for abuse.
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