Change is coming: Federal government introduces major amendments to Canada’s Competition Act

In February 2022, consistent with trends toward antitrust reform in other jurisdictions, the federal minister of innovation, science and industry announced he would be reviewing the Competition Act (the Act) to evaluate and potentially improve its operation. On April 26, the federal government proposed several substantive amendments to the Act, which were revealed in an omnibus budget bill. Once these amendments are passed, they will significantly affect Canadian competition law.

Businesses should assume these amendments will become law and should proactively consider how they may affect their business activities. 

While several changes are proposed, the most significant are as follows:

Increased fines and penalties

The commissioner of competition (the Commissioner) has stated that more severe fines and penalties under the Act are necessary, claiming the current financial penalties lack the appropriate deterrent effect. 

The proposed amendments will increase the fines and administrative monetary penalties (AMPs) as follows: 

• Fines for criminal competitor agreements such as price-fixing will be increased from a maximum of $25 million to being “in the discretion of the court.”
• For contravention of the non-criminal misleading advertising provisions, AMPs can be as high as three times the value of the benefit of the anti-competitive practice or, if that amount cannot be reasonably determined, 3% of a corporation’s annual worldwide gross revenues. In contrast, under the current provisions, the AMPs for individuals are capped at $750,000, or $1 million for subsequent contraventions, and AMPs for corporations are capped at $10 million, or $15 million for subsequent contraventions.
• Under the abuse of dominance position provisions, AMPs can now be as high as three times the value of the benefit derived from the anti-competitive conduct, or 3% of a corporation’s annual worldwide gross revenues. In contrast, the current provisions limit AMPs to at most $10 million, or $15 million for subsequent contraventions. 

The rationale for increasing existing AMPs for abuse of dominance is unclear. The Commissioner rarely seeks AMPs in abuse of dominance cases and has only done so where there are significant aggravating factors. What is clear is that the increased financial consequences provide the Commissioner with more leverage for settlement discussions in all cases. Ultimately, the increased financial penalties may be counter-productive to the Commissioner’s overarching objective of promoting competition, as they may discourage firms from engaging in certain types of competitive behaviours, to the ultimate detriment of consumers.

Prohibiting wage fixing and no-poach/no-hire agreements

Unlike the US and other jurisdictions, which prohibit wage fixing and no-poach/no-hire agreements, these measures are currently permitted under the Act. The proposed amendments will criminalize these forms of employer-to-employer agreements.

This significant change may be relevant to Canadian franchisors who restrict their franchisees from soliciting or poaching employees from each other. While there are good arguments that the new law should not apply to these situations, it is unclear. Accordingly, franchisors should proactively consider how this prohibition might influence their franchise agreements, in particular where they also operate corporate stores.

Private abuse of dominance actions

The amendments will allow private parties to bring applications to the Competition Tribunal (the Tribunal) for alleged abuse of dominance. Currently, enforcing these provisions is the sole prerogative of the Commissioner. Importantly, as with private access rights under the Act generally, private parties will need leave to proceed to a hearing on the merits. This is an important safeguard against frivolous lawsuits.

Historically, the primary remedy under the Act’s abuse of dominance provisions has been behavioural (i.e., orders to cease or modify problematic conduct). While this remedy may be of value to some private litigants, the fact that damages are not a remedy for abuse of dominance likely limits the incentives for a private litigant to incur the significant costs of bringing an abuse of dominance case against a competitor. It remains to be seen whether the potential for the Tribunal to impose significant AMPs (which would go to the government) in such cases will provide sufficient encouragement for private litigants to bring abuse of dominance cases. 

Express prohibitions on drip pricing

Under the amendments, “drip pricing” will be expressly defined and prohibited under the Act’s misleading advertising provisions. Drip pricing is where an initial price is advertised but prior to completing the transaction non-optional fees are added by the vendor. Violations of this new provision will attract the increased penalties discussed above.

Broadened scope to the merger provisions

Currently, certain types of transactions that fall outside the specifications in the Act do not require corresponding merger notifications to be filed with the Bureau. The amendments will add an “anti-avoidance” provision to capture such transactions with a view to closing what the Bureau views as a “loophole” in the merger notification regime. 

Nod to digital enforcement

As part of the Commissioner’s commitment to adapt the Canadian competition law framework to tackle anti-competitive behavior in the digital economy, the amendments include new language intended to further this goal.

Specifically, under the amended Act, the Tribunal will be permitted to consider a variety of factors when conducting a competitive effects analysis under the abuse of dominance, competitor collaboration and merger provisions of the Act. These factors will vary depending on the specific provision of the Act, and include, among other things, the effect on barriers to entry, price and non-price competition, and the nature and extent of change and innovation in a relevant market. While potentially useful in assessing competitive harm in digital markets, it remains unclear how these amendments achieve the Commissioner’s purported goal of responding to competitive threats plaguing the digital economy. This is particularly so given that these factors have often been considered in past cases. 

Another change that may be intended to address digital economy concerns is expanding the definition of “anti-competitive act” to include any act intended to have a “negative effect on a competitor or have an adverse effect on competition.” While this provision has focused on conduct that affected competitors, the expansion to include conduct that could have an “adverse effect on competition” suggests an attempt to broaden the application of the abuse of dominance provisions.

Key takeaways

These proposed amendments are the most substantive changes to the Act in over a decade. Given the current Supply and Confidence Agreement between the minority Liberals and the NDP, under which the latter has formally agreed to support the government on budgetary and confidence votes, the amendments will very likely come into law in their current form. Although the omnibus budget bill containing the amendments will be debated and reviewed in committee in the House of Commons and Senate, with a short timeline and many other measures included in the bill, it is unlikely the amendments to the Act will receive meaningful scrutiny before becoming law.

The authors wish to thank Katarina Wasielewski, articling student, for her help in preparing this legal update.