Author:
Global | Publication | August 17, 2022
On June 23, 2022, significant amendments to the Competition Act (the Act) received royal assent as part of Bill C-19 made under the Budget Implementation Act, 2022. The Act’s amendments came into force immediately upon receiving royal assent, with the exception of the amendments to the criminal conspiracy provisions that will come into force on June 23, 2023. The amendments enacted are unchanged from those proposed in Bill C-19 on April 28, 2022. See our earlier update for a more detailed discussion of the proposed amendments.
The Competition Bureau (the Bureau) released a corresponding guide to the 2022 amendments, which provides a high-level overview of the changes but no insight as to how the changes to the Act will impact the Bureau’s enforcement approach. Importantly, this guide states these amendments are a “preliminary phase in modernizing Canada’s competition regime,” so there is an expectation that more significant changes may follow. The Bureau has also announced a public information session in September during which Bureau officials will discuss the amendments with stakeholders.
As a result of these changes, virtually all companies should update their internal competition law policies and compliance guidance to their employees. For some companies, the amendments may necessitate a broader compliance risk re-assessment and a review of their existing business practices.
Key features of the amendments include the following:
As of June 23, 2023, fines for violating the Act’s criminal conspiracy provisions will no longer be capped at $25 million, but will instead be “in the discretion of the court.” Contravening the abuse of dominance or deceptive marketing provisions will be fined at the greater 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, three percent of annual worldwide gross revenues.
Agreements between employers to fix wages or implement no-poaching policies will be criminal offences under the Act as of June 23, 2023. This aligns Canada’s approach with other jurisdictions such as the US where such agreements are criminal offences. Companies may wish to review any related practices before these provisions come into force to ensure there are no policies in place that will violate this new provision.
As a result of the amendments, private parties can now bring applications to the Competition Tribunal (the Tribunal) for an alleged abuse of dominance (previously, only the Commissioner of Competition could bring enforcement actions under the Act’s abuse of dominance provisions).
Private parties will need leave to proceed to a hearing on the merits (as is the case with other private access rights under the Act). Behavioural remedies (i.e., orders to cease or modify conduct found to be problematic) are the only remedy available to private parties (including the possibility of interim relief).
While the Tribunal will be able to impose administrative monetary penalties where it believes this is warranted, these are payable to the government – in other words, from a financial perspective, while successful private litigants may be able to recover some or all of their legal costs, there is no right to damages.
As there is no right to damages, there may be limited incentives for private parties to bring private abuse of dominance cases, as these cases are generally a costly, time-consuming undertaking. However, companies will need to consider the possibility of private enforcement when conducting their risk reassessment. The availability of a right of private enforcement may create incentives to bring strategic cases or be used as leverage in commercial disputes.
Several additional factors can now be considered under the abuse of dominance framework, including network effects, effects on price and non-price competition (i.e., consumer privacy and choice), nature and extent of innovation in a market, and any other factor relevant to competition in the market. Similar factors can also now be considered under the competitor collaboration and merger review frameworks.
The purpose of these amendments is to allow the Bureau to better address potential competitive issues in the digital economy. While new to the Act, many of these factors are not new to the Bureau’s historic analytical approach and have been considered in prior cases. Again, companies with a strong market position (in particular those whose business activities relate to the digital economy) should consider how these changes could affect their potential risk exposure.
Drip pricing is now expressly defined and prohibited under the Act’s criminal and civil 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. The increased penalties discussed above will apply to drip pricing cases. The Bureau has previously investigated and penalized companies for drip pricing activities. These amendments highlight the Bureau’s continued enforcement focus in this area.
The Act now contains a specific anti-avoidance provision designed to ensure the mandatory merger notification requirements will apply to transactions previously not caught by the merger notification regime. The goal of these provisions is to limit the ability of parties to structure transactions in a manner intended to avoid making a merger notification (for example, by structuring a merger as a series of smaller non-notifiable, independent transactions as opposed to a single notifiable transaction).
The amendments include some significant substantive changes, such as the increased fines and prohibition of employer-to-employer agreements regarding wages and solicitation of employees.
However, other changes, including those relating to drip pricing and the expanded list of factors to be considered when assessing the competitive effect of the conduct being challenged, are largely the codification of principles previously applied. Importantly, the amendments telegraph the Bureau’s thinking in terms of analytical approach, areas of enforcement priority and a desire to engage in more vigorous enforcement.
As stated above, all companies should consider updating their existing compliance policies to ensure alignment with the amendments. For some companies (for example, those with a significant market position, or who engage in practices directly targeted by the amendments) it may be prudent to re-evaluate their potential compliance risk in light of the amendments.
It is important to note that these are likely only the first phase of the government’s reform of the Act, and further amendments are expected as part of a broader “comprehensive review” of the competition framework in Canada.
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