SIGNIFICANT COMPETITION ACT AMENDMENTS CAME INTO FORCE
ON DECEMBER 15, 2023 (Bill C-56)
On December 15, 2023, Bill C-56 (An Act to amend the Excise Tax Act and the Competition Act), which introduces the first of two sweeping rounds of federal Competition Act (“Act”) amendments in Canada together with Bill C-59, received royal assent.
This first new round of amendments to the Act, which is intended, among other things, to strengthen the ability of private parties and the Competition Bureau to enforce the Act and competition in Canada overall, includes a number of fundamental changes to Canadian competition law. Bill C-59, once it is passed (expected in early 2024), will likely include a number of advertising/marketing law related amendments, including related to drip-pricing and green (environmental) claims.
These initial amendments under Bill C-56 include new broad powers for the Competition Bureau to conduct market studies, fundamental changes to the substantive test for abuse of dominance under section 79 of the Act (creating a new two-track test for abuse of dominance), new penalties for abuse of dominance, broadening the civil agreements provision (section 90.1) to include agreements between non-competitors, repealing the efficiencies provisions under section 90.1 and repealing the former efficiencies defence for mergers under section 96.
Our blog overview pages will be updated to reflect these important amendments, as well as the second round of amendments under Bill C-59, which are expected to come into force in early 2024.
For more information, see: Competition Bureau, Guide to the December 2023 amendments to the Competition Act.
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THE COMPETITION ACT
Canadian competition law is largely governed by the Competition Act. The Competition Act is federal framework legislation that applies to most businesses and industries in Canada, with limited exceptions and includes criminal offences and civil reviewable matters. The Competition Act is administered and enforced by the federal Competition Bureau (Bureau), a federal enforcement agency based in Ottawa and headed by the Commissioner of Competition (Commissioner).
PURPOSES
The Competition Act sets out four purposes as follows: (i) to promote the efficiency and adaptability of the Canadian economy; (ii) to expand opportunities for Canadian participation in world markets; (iii) to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy; and (iv) to provide consumers with competitive prices and product choices.
While it has been held that none of these four purposes is paramount, and the relevant purpose or purposes can vary according to the type of conduct, the Competition Act is in general consumer protection legislation meant to ensure that consumers benefit from competitive and undistorted markets.
For this reason, Canadian courts have long held that private gains by parties (e.g., parties to price-fixing or other cartel arrangements) are not relevant, but rather whether conduct distorts competition to the degree that it is either a criminal offence or may be subject to challenge under the civil reviewable matters sections of the Competition Act.
CRIMINAL OFFENCES AND REVIEWABLE MATTERS
Canada’s Competition Act includes both criminal offences (e.g., price-fixing and other conspiracies between competitors, bid-rigging and criminal misleading advertising) and civil reviewable matters (e.g., abuse of dominance, price maintenance and refusal to deal).
Criminal Offences
Criminal offences under the Competition Act include conspiracy (i.e., cartels, such as price-fixing, market allocation/division and supply/output restriction agreements between competitors) (section 45), bid-rigging (section 47), criminal misleading advertising (section 52), drip-pricing, deceptive telemarketing (section 52.1) and pyramid selling schemes (section 55.1).
New criminal offences for wage-fixing and no-poaching agreements between employers were enacted in June 2022 and came into force on June 23, 2023.
Some of the former criminal competition offences in Canada (e.g., predatory pricing and price discrimination) were repealed in 2009. The conduct they related to, however, may still be subject to challenge under the civil abuse of dominance provisions of the Competition Act (sections 78 and 79). Canada’s former criminal price maintenance offence (under former section 61) was also repealed in 2009 and made a civil reviewable matter with a competitive effects test (under section 76).
Criminal offences under the Competition Act are investigated by the Bureau, prosecuted by the Public Prosecution Service of Canada (PPSC), tried in provincial criminal courts and subject to criminal penalties. The potential penalties for violating the criminal offences of the Competition Act include criminal fines, imprisonment and prohibition orders to stop or modify conduct.
The Bureau also has access to a broad range of significant and intrusive enforcement powers in relation to criminal Competition Act matters. These include: the ability to obtain search warrants to search premises, wiretaps and court orders to compel the production of documents.
The Bureau also regularly relies on its Immunity and Leniency Programs to detect criminal violations of the Competition Act and encourage parties to criminal offences to come forward and cooperate with investigations in exchange for full immunity from prosecution or leniency in sentencing. Criminal competition law violations are also brought to the Bureau’s attention by consumer, industry member and other complainants and internal whistleblowers.
Civil Reviewable Matters
The Competition Act also contains a number of civil reviewable matters. These include price maintenance (section 76), civil misleading advertising (section 74.01), refusal to deal (section 75), abuse of dominance (sections 78 and 79), tied selling / exclusive dealing / market restriction (section 77) and mergers (section 92).
These civil sections, generally speaking, can apply to conduct such as false or misleading advertising, refusals to supply or deal, abuses of dominance by firms with significant market presence and where suppliers maintain resale prices that adversely impacts competition.
These civil sections also address conduct that may be pro- or anti-competitive, but require a closer examination of the potential market effects – for example, whether conduct is likely to result in an adverse effect on competition or substantially prevent or lessen competition.
For example, practices that may be common industry practice and innocuous when engaged in by small firms (e.g., exclusive dealing, predatory pricing or refusals to supply or deal) may be subject to Competition Act review and Competition Tribunal orders where a firm has market power and the practice is having significant adverse impacts on a market. That is to say that under most of the civil provisions of the Competition Act, conduct is not illegal per se but requires an analysis of the relevant market(s), conduct and market effects to determine if a remedy may be available.
Like criminal offences under the Competition Act, reviewable matters can also be investigated by the Bureau, may result in proceedings initiated by the Bureau or private parties in certain cases with leave from the Competition Tribunal, can be heard before the Competition Tribunal or in some cases also provincial or federal courts and are subject to a range of potential remedial orders and civil penalties.
The potential penalties for violating the civil reviewable matters provisions of the Competition Act include court or Competition Tribunal orders to stop conduct, pay compensation (i.e. restitution) to consumers and administrative monetary penalties (AMPs) (e.g., for abuse of dominance, the greater of $25 million, three times the value of the benefit derived from the conduct or, if the latter amount cannot be determined, 3% of annual worldwide gross revenues).
COMPETITION LAW ENFORCEMENT
The Competition Act is primarily enforced and administered by the Bureau, which is a federal enforcement agency based in Ottawa and headed by the Commissioner. The Bureau investigates potential competition law offences and civil reviewable matters under the Competition Act. The Bureau also engages in competition law advocacy in a range of sectors where it may not have direct enforcement powers (i.e., in federally or provincially regulated markets) and conducts market studies in key consumer sectors (e.g., the gasoline, grocery and telecom markets). In 2023, Bill C-56 introduced new formal market inquiry powers for the Bureau. See: Competition Law Enforcement.
In addition to Bureau enforcement, civil actions and class actions, as well as private applications to the federal Competition Tribunal, are possible under some of the sections of the Competition Act. See: Competition Litigation.
The Commissioner and the Bureau have significant powers to investigate potential violations of the Competition Act, including the ability to search premises and seize documents, search and seize computer records, obtain wiretaps, compel individuals to testify under oath and require companies or individuals to produce documents or respond to written information requests. The Commissioner also has the power to investigate and refer criminal matters under Part VI of the Competition Act to the PPSC for criminal prosecution.
Criminal Competition Act offences include conspiracy (e.g., price-fixing, market allocation/division, supply/output restriction and no-poaching and wage-fixing agreements between competitors or employers), foreign directed conspiracies, bid-rigging, criminal misleading advertising, deceptive telemarketing and pyramid selling schemes.
While the Bureau investigates potential violations of the Competition Act’s criminal offences, the responsibility for prosecutions lies solely with the PPSC. In practice, the Bureau and the PPSC work closely together in criminal competition law prosecutions.
The Commissioner may also commence investigations and Competition Tribunal applications or court proceedings relating to potential contraventions of the civil reviewable matters of the Competition Act under Parts VII.1 and VIII. These include price maintenance, civil misleading advertising, ordinary selling price claims, performance claims, promotional contests, refusal to deal, abuse of dominance, tied selling, exclusive dealing and market restriction.
COMMENCEMENT OF COMPETITION LAW MATTERS
Competition law proceedings in Canada may be commenced under the Competition Act by the Bureau itself based on its own investigation, as a result of complaints from customers, competitors or other industry participants or from persons that have (or may have) contravened the Competition Act and are seeking immunity or leniency under the Bureau’s Immunity and Leniency Programs.
The Competition Act also contains specific whistleblower provisions with protections for whistleblowers (i.e., employees or other personal that may detect activities that violate the Competition Act).
In addition to Bureau investigations, private parties may also in some cases commence private actions (under section 36 of the Competition Act) for violations of the criminal sections of the Competition Act, including the criminal conspiracy and criminal misleading advertising sections. Private parties may also make private access applications to the Competition Tribunal for Tribunal orders under the abuse of dominance (section 79), refusal to deal (section 75), price maintenance (section 76) and exclusive dealing / tied selling / market restriction sections (section 77).
PENALTIES
Violation of the Competition Act can result in severe penalties, lost time and negative publicity for individuals, companies, other types of organizations, as well as their executives and personnel.
The potential penalties under the Competition Act include criminal fines (e.g., fines in the discretion of the court for bid-rigging under section 47 and price-fixing and other conspiracies under section 45), AMPs (essentially civil fines), imprisonment, damages arising from private civil or class actions and court orders (injunctions or prohibition orders) to stop or modify conduct.
The record Canadian conspiracy (cartel) penalty to date is CDN $50 million, in a bread price-fixing investigation in which Canada Bread agreed to pay a $50 million fine after pleading guilty to fixing wholesale bread prices (see: here).
There is also potential director and officer liability under the Competition Act. In this regard, the Bureau commonly pursues individual executives as accused in criminal matters and plaintiffs frequently name directors and officers as defendants in civil actions.
COMPETITION LAW COMPLIANCE
In 2023, the Bureau launched a new competition law Compliance Portal setting out its position on what companies, associations and other types of organizations need to establish and train a credible and effective competition law compliance program. The Bureau’s new Compliance Portal replaces its former 2015 Corporate Compliance Programs Bulletin.
In general, companies, trade and professional associations and other organizations that face competition law risks should adopt credible and effective competition law compliance programs. These should generally include a competition law compliance program, compliance policy, guidelines for key activities (e.g., conduct of meeting guidelines, information exchange guidelines, search and seizure guidelines, etc.) and an employee certification letter.
In addition, companies, associations and other organizations should conduct periodic training for key personnel at risk of violating the Competition Act and competition compliance audits. It is also a good practice for companies, associations and other organizations to provide competition law compliance training to new personnel (e.g., new employees, directors and officers and new board members).
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SERVICES AND CONTACT
We are a Toronto based Canadian competition and advertising law firm that helps clients in Toronto, Canada and the United States practically navigate Canada’s advertising and marketing laws and offers Canadian advertising/marketing law services in relation to print, online, new media, social media and e-mail marketing.
Our Canadian advertising/marketing law services include advice in relation to anti-spam legislation (CASL), Competition Bureau complaints, the general misleading advertising provisions of the federal Competition Act, Internet, new media and social media advertising and marketing, promotional contests (sweepstakes) and sales and promotions. We also provide advice relating to specific types of advertising issues, including performance claims, testimonials, disclaimers, drip pricing, astroturfing and native advertising.
For more information about our services, see: services
To contact us about a potential legal matter, see: contact
For more information about our firm, visit our website: Competitionlawyer.ca