Since 2022, the Government of Canada has introduced three waves of amendments to the Competition Act (Act), making substantive changes to Canada’s competition laws, with the most recent amendments receiving royal assent on June 20, 2024. Our publication on the entirety of the amendments can be found here.
Among the amendments are several changes to the Act’s abuse of dominance provisions, the cumulative effect of which is a broadened provision, higher fines and potential damages to private parties. This bulletin is part of a series designed to help businesses understand and comply with their new obligations under the Act.
An expanded, but not new, list of factors for assessing competitive effects
In 2022, the abuse of dominance framework was expanded to include additional factors to be considered including network effects, effects on price and non-price competition (i.e., consumer privacy and choice), the nature and extent of innovation in a market and any other factors relevant to competition in the market.
While these factors are now set out in the Act, the Competition Bureau (the Bureau) has previously been able to consider, and has considered, factors of this nature in determining whether a substantial lessening or prevention of competition has occurred or is likely to occur. This amendment arguably does not drastically alter the scope of the abuse of dominance framework, although it does signal a growing interest in assessing anti-competitive effects in non-traditional markets, such as digital markets where consumer privacy, choice, and network effects are key.
Private parties can now bring abuse of dominance applications (with leave) and soon, damages will be on the table
A more significant development arising from the 2022 amendments to the Act is the possibility of private enforcement of the abuse of dominance provisions.
Private parties can now seek leave to bring applications to the Competition Tribunal (the Tribunal) for an alleged abuse of dominance – previously only the Commissioner of Competition (the Commissioner) could take any enforcement action. Now, in addition to enforcement by the Commissioner, the Tribunal can award administrative monetary penalties in private actions and grant interim relief to private parties.
To date, only two parties have made use of their private rights under the Act, however neither case has offered much insight into how the new abuse of dominance framework will work in practice:
- In one case, a large pharmaceutical company sought leave to bring an abuse of dominance application related to alleged practices that delayed the supply of a drug. However, the application for leave was discontinued shortly after it was brought.
- In the other case, the Registrar did not accept the filing of the application as the applicant had not followed the applicable rules.
In 2024, additional amendments were made that will allow private parties to seek damages up to the amount of the “benefit” derived from the conduct. Any damages awarded can be distributed between the applicant and any other affected person at the Tribunal’s discretion, and the Tribunal will be empowered to impose any necessary, related terms on the award.
Private parties have historically been able to seek leave from the Tribunal to make an application under the civilly reviewable trade practices provisions of the Act (sections 75, 76, 77, and more recently 79), however damages (beyond legal costs) have not previously been accessible.
The possibility of financial gain from pursuing an application before the Tribunal may incentivize market participants and other parties to seek leave, particularly in light of other amendments permitting the Tribunal to grant leave where it is in the “public interest” to do so.
There are some factors that may temper any rush to bring private applications:
- Access to damages in private actions is subject to a one-year delay, meaning that private parties cannot bring applications for damages until June 20, 2025.
- An application must be made no later than one year after the practice or conduct that forms the basis for the alleged abuse of dominance has ceased.
These factors offer businesses some time to assess their current practices before they are exposed to potential damages orders (although contraventions of these provisions currently exposes businesses to possible fines and other remedial orders).
It is now easier to obtain a prohibition order
Prior to the 2023 amendments, both anticompetitive intent and effects had to be shown to obtain a prohibition order. The Tribunal can now make an order prohibiting conduct of a dominant firm or group where either:
- there is a practice of anticompetitive acts intended to have a predatory, exclusionary or disciplinary negative effect on a competitor, or to have an adverse effect on competition, or
- conduct not resulting from “superior competitive performance” has had, is having or is likely to have, the effect of preventing or lessening competition substantially in a market.
Effectively, the evidentiary threshold for obtaining a prohibition order is now lower. However, administrative monetary penalties can only be levied where both anticompetitive intent and effects are established.
A new anti-competitive act: excessive and unfair selling prices
The non-exhaustive list of anti-competitive acts in section 78 of the Act has been amended to include “directly or indirectly imposing excessive and unfair selling prices.”
What is “excessive” or “unfair” is not defined in the Act, nor is the addition of this anticompetitive act one that was proposed by the Bureau as part of its recent advocacy on amendments to the Act. While not a concept in United States antitrust laws, excessive and unfair selling prices is found in European Union (EU) competition laws. This amendment seems to have been made based on the limited suggestion that Canada should align with the EU during the public consultations on amendments to the Act.
During the parliamentary hearing held for the 2023 amendments, the Commissioner noted that the provision would not make the Bureau “price regulators.” However, given the general lack of commentary on the new provision, it is uncertain how it will be interpreted by the Tribunal and courts and whether enforcement action (including private enforcement) could focus on regulating sellers’ prices.
Increasing penalties for non-compliance
In 2022, there was an increase in the administrative monetary penalties for abuse of dominance to the higher of (i) $10 million ($15 million for subsequent orders) or (ii) three times the value of the benefit derived from the conduct at issue, or if that amount cannot be calculated, 3% of annual worldwide gross revenues.
Just a year and a half later, further amendments increased the penalties for an abuse of dominance.
Now, fines can be an amount not exceeding the greater of (i) $25 million ($35 million on a subsequent order) or (ii) three times the value of the benefit derived from the anticompetitive practice or, if that amount cannot be reasonably determined, 3% of the business’ annual worldwide gross revenues. A single contravention of the abuse of dominance provisions can now cost a business $15 million more than the year before.
Takeaways
The incremental expansion of the abuse of dominance framework and the multiple increases to penalties highlights the continued importance of:
- proactively assessing compliance with the Act, including evaluating potential dominance in a market.
- carefully considering pricing strategies, in particular where pricing deviates significantly for the norm in the relevant product or geographic market.
- conducting regular risk assessments with respect to current and proposed business practices considering the expanded scope for both public and private enforcement actions.
The Bureau has announced its intention to consult Canadians as its guidelines are updated to account for amendments, however the timing or utility of such guidance is unknown and, in the interim, businesses face uncertainty with respect to potential private and public enforcement under a broadened abuse of dominance framework.
The authors would like to thank Sanjam Panag, law student, for her contribution to preparing this legal update.
