Three years and three sets of amendments later: The state of Canada’s Competition Act

Starting in 2022, the Government of Canada has introduced three waves of amendments to the Competition Act (Act) resulting in the most significant revisions to Canada’s competition laws in over a decade.  The most recent suite of changes received royal assent on June 20, 2024.¹ The cumulative impact of these amendments fundamentally changes the Canadian competition law landscape and companies will need to assess how they apply to their business practices, mergers, joint ventures and advertising activities.

This article briefly summarizes the three waves of amendments, and sets out the current state of play of Canadian competition law – including new rights for private parties to bring applications directly to the Competition Tribunal (the Tribunal), strengthened greenwashing provisions, new prohibitions on wage fixing and no-poach agreements, and increased penalties for civilly reviewable matters. Separately, we will be publishing a series of focused bulletins detailing the effect of the amendments by topic to help businesses better understand how they may be affected and take proactive compliance steps.²

2022 Amendments

The first wave of amendments to the Act was proposed in April 2022 as part of Bill C-19, and received royal assent on June 23, 2022.³

The first wave of amendments included:

• Prohibiting wage-fixing and no-poach/no-hire agreements between unaffiliated employers⁴
  • It is now a criminal offence for unaffiliated employers to enter into agreements:
    • to fix, maintain, decrease or control salaries, wages or terms and conditions of employment (“wage-fixing” agreements); or
    • to refrain from soliciting or hiring each other’s employees (“no-poach” or “no-hire” agreements).
  • Employers who participate in illegal wage-fixing or no-poach agreements risk significant criminal penalties, including 14 years in jail or fines at the discretion of the court, or both. Employers also face potential civil lawsuits for damages under the Act. 
• Broadening the abuse of dominance framework to:
  • Expand the list of factors to target potential competitive issues in the digital economy
    • 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 factors relevant to competition in the market.
  • Significantly increased financial penalties (superseded by the 2023 amendments)
    • The 2022 amendments increased 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, three percent of annual worldwide gross revenues. These changes have since been superseded (see the discussion of the 2023 amendments, below).
  • Allow private parties (with leave) to bring abuse of dominance applications
    • 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 bring enforcement actions under the Act’s abuse of dominance provisions).⁵
• Codifying the prohibition against drip pricing 
  • Drip pricing is where an initial price is advertised but prior to completing the transaction non-optional fees are added by the vendor. This conduct is now expressly defined and prohibited under the Act’s criminal and civil misleading advertising provisions. 
• Increasing fines for contravening the civil misleading advertising provisions
  • Fines are now 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, three percent of annual worldwide gross revenues.
• Increasing fines for criminal cartel conduct
  • Effective June 23, 2023, fines for criminal competitor agreements such as price-fixing are uncapped and “in the discretion of the court.” Previously, the maximum fine was $25 million.
• Introducing merger notification anti-avoidance provisions
  • Anti-avoidance provisions now 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).

2023 Amendments

The second wave of amendments to the Act was proposed in September 2023 as part of Bill C-56 and received royal assent on December 15, 2023.⁶

The second wave of amendments included:

• Granting the Commissioner compulsory information gathering powers for market studies
  • Both the Minister of Innovation, Science and Industry and the Commissioner of Competition can now initiate a market or industry study where they determine if it is in the public interest. 
  • The Competition Bureau (Bureau) can now obtain a court order on an ex parte basis under Section 11 of the Act to compel businesses or individuals to provide information, including records and written responses to inquiries, and to attend examinations under oath for the purposes of a market study.⁷
  • Since being given these powers, the Bureau launched a market study on competition in Canada’s airline industry and the expectation is that it will seek to compel information from market participants.⁸
• Repealing the efficiencies defence for mergers and civilly reviewable agreements
  • Section 96 of the Act, otherwise known as the efficiencies defence, has been repealed. The efficiencies defence provided a defence for mergers that would have, or were likely to have, the effect of preventing or lessening competition where the merger has brought about or was likely to bring about gains in efficiency that would be greater than, and would offset, any anticompetitive effects.  
  • The civil agreements provision in section 90.1 of the Act previously contained an efficiencies exception. This has been repealed effective December 15, 2024.⁹
• Expanding the civil reviewable agreements provisions to include agreements between non-competitors that lessen or prevent competition 
  • The Tribunal will be able to make an order prohibiting parties from, or requiring them to, take any action if the Tribunal finds that a significant purpose of any agreement or arrangement, or any part of it, is to prevent or lessen competition in any market – even if none of the parties to the agreement or arrangement are competitors.¹⁰
  • This is a significant change since section 90.1 was previously limited to agreements or arrangements involving competitors (or potential competitors). This amendment does not come into force until December 15, 2024. 
• Further broadening the abuse of dominance framework to:
  • Lower the evidentiary requirements to obtain a prohibition order 
    • The previous framework required both anticompetitive intent and effects 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 (i) 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 (ii) 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.
      • The Bureau has already initiated a new abuse of dominance investigation that will test the new abuse of dominance provisions.¹¹
      • If only one of anticompetitive intent or effects is found, the Tribunal can make an order prohibiting the conduct, but only when both are established can the Tribunal order an administrative monetary penalty or other remedies. 
• Introduce a new type of anticompetitive act: excessive and unfair selling prices
  • Directly or indirectly imposing excessive and unfair selling prices is now listed in the Act as an example of an anticompetitive act for the purposes of determining whether an abuse of dominance has occurred. What is “excessive” and “unfair” is not defined in the Act, and it is uncertain how these terms will be interpreted by the Tribunal and the courts.
• Further increase penalties
  • A year and half after the first wave of amendments increased the abuse of dominance administrative monetary penalties, they are now higher. 
  • Penalties for contravention are now up to 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.

2024 Amendments 

The third wave of amendments was proposed in November 2023 as part of Bill C-59 and received royal assent on June 20, 2024. 

This most recent wave of amendments includes:

• Transforming the civil collaboration provision to:
  • Capture past agreements 
    • Under section 90.1 of the Act, the Tribunal can now consider whether an existing or proposed agreement or arrangement has prevented or substantially lessened competition in a market (i.e., in the past), in addition to considering whether it currently prevents or lessens competition, or is likely to prevent or lessen competition. 
  • Introduce new penalties
    • The Tribunal can now impose an administrative monetary penalty not exceeding the greater of (i) $10 million ($15 million for subsequent orders) or (ii) three times the value of the benefit derived from the agreement or, if that cannot be reasonably determined, 3% of the worldwide gross revenues. Prior to these amendments, the Tribunal was limited to ordering a behavioural remedy.
    • The Tribunal will also be able to make orders for the divestiture of assets or shares that are reasonable and necessary to overcome the anticompetitive effects of the agreement.
  • Introduce private applications for damages 
    • Private parties can bring applications to the Tribunal to challenge agreements and arrangements that contravene section 90.1 (previously, only the Commissioner could bring enforcement actions under section 90.1).
      • Private rights are subject to a one-year delay upon the amendments coming into force – meaning that there is no private right of action for alleged anti-competitive civil agreements until June 20, 2025.
    • Private parties will be able to seek damages up to the amount of the “benefit” derived from the conduct, to be distributed among the applicant and any other person affected by the conduct “in any manner that the Tribunal considers appropriate.” How this will be calculated (i.e., gross revenues, profit, etc.) is unclear. 
    • The Tribunal will also be able to impose any term necessary for the implementation of an order, including terms related to notifying potential claimants, specifying the time and manner for making a claim, specifying the eligibility of claimants, and specifying how unclaimed damages should be distributed.
      • Permitting the Tribunal to impose these types of conditions on the payment of damages may incentivize organizations or individuals to bring applications that seek to have damages paid to a group or class of individuals who have been harmed by the alleged conduct.   
• Expanding the test for private parties to seek leave to apply to the Tribunal for civilly reviewable conduct 
  • Private parties can seek leave to challenge civilly reviewable conduct even if it affects only part of their business. 
    • Currently, leave can only be granted where the applicant’s business is “directly and substantially affected” by the challenged conduct. The Tribunal has generally interpreted “directly and substantially affected” to mean an impact on the whole of the business, but the new language would serve to broaden this test by allowing businesses to challenge conduct even if it only affects part of their business.
  • Leave can also be granted if the Tribunal believes it is in the public interest to do so. What constitutes “in the public interest” in this context is not defined and will likely not become clear until there is a body of case law on the point.
  • The amendments to the test for leave are subject to a one-year delay upon the amendments coming into force – meaning the new leave test only comes into force on June 20, 2025. 
• Private rights to damages for civilly reviewable trade practices 
  • For private applications under the civilly reviewable trade practices, private parties will be able to seek damages up to the amount of the benefit derived from the conduct that is the subject of the order, to be distributed among the applicant and any other affected person at the Tribunal’s discretion. As with other amendments allowing private parties to seek damages, the Tribunal is also empowered to impose any necessary, related terms on a private damages award for civilly reviewable trade practices.
    • Access to damages are subject to a one-year delay upon the amendments coming into force – meaning that private parties cannot bring applications for damages in respect of these provisions until June 20, 2025.
  • Creating a “public interest” test for leave and providing for damages payable to individuals harmed by the conduct (who are not parties to the application) will likely incentivize NGOs and other public interest organizations, such as consumer advocacy groups, to bring applications on behalf of a class of affected individuals or businesses. Such applications may result in class action-like decisions and orders for civilly reviewable conduct, despite the fact that there is no formal process for bringing formal class actions before the Tribunal.
• Several changes to the civil misleading advertising provisions¹²
  •  Targeting net-zero and other general environmental claims under the civil provisions
    • This new “reverse onus” provision makes it reviewable conduct to, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever:
    • make a representation to the public with respect to the benefits of a business or business activity for protecting or restoring the environment or mitigating the environmental and ecological causes or effects of climate change that is not based on adequate and proper substantiation in accordance with internationally recognized methodology, the proof of which lies on the person making the representation.
    • The “internationally recognized methodology” standard is not defined and is unclear, which creates significant risk for many companies that make broad environmental claims regarding their business operations. 

• Adding a product-specific greenwashing civil provision 
  • Any representation to the public in the form of a statement, warranty or guarantee of a product’s environmental benefits where such representations are not based on proper and adequate testing is now expressly reviewable conduct under the Act. 
• Allowing private applications for civil misleading advertising  
  • Private parties can seek leave from the Tribunal to bring an application for alleged deceptive marketing or misleading advertising, including misleading environmental benefit claims. Leave can be granted where it is in the “public interest” to do so. 
    • Private rights are subject to a one-year delay upon the amendments coming into force – meaning that there is no private right of action until June 20, 2025.
  • Penalties available for private applications will include temporary orders, interim injunctions, prohibition orders, restitution orders, and payment of an administrative monetary penalty (to the government) – which could be up to 3% of worldwide gross revenues for corporations given the overlapping changes discussed above.
  • Private applications can also be resolved by consent agreements which can be entered into and filed with the Tribunal. 
  • The new private right of enforcement will likely be used by NGOs and other advocacy groups as a vehicle for strategic litigation, in particular under the new greenwashing provisions. 
• Expanding the merger review regime
  • Introducing new factors in merger assessment
    • In assessing whether a merger will result in a substantial lessening or prevention of competition, the Tribunal is now permitted to consider (i) any effect from the change in concentration or market share that a merger has or is likely to bring about, and (ii) the likelihood that the merger would result in excess or tacit coordination between competitors in the market.
      • Previously, the Act specified that the Tribunal shall not find that a merger or proposed merger prevents or lessens competition substantially solely on the basis of evidence of concentration or market share. 
    • The Tribunal is also directed to consider whether a merger or proposed merger is likely to prevent or lessen competition substantially in labour markets.
  • Imposing structural presumptions and a reverse onus on merging parties
    • If there is a significant increase in concentration or market share, the Tribunal “shall” find that the proposed merger results in a substantial lessening or prevention of competition “unless the contrary is proved on a balance of probabilities” by the merging parties. As such, there is now a reverse burden of proof on merging parties to prove why a merger that exceeds certain market share or concentration thresholds would be unlikely to substantially lessen or prevent competition.
    • A significant increase in concentration or market share is defined based on: (i) a concentration index increase of more than 100 and (ii) either the concentration index is likely to be more than 1,800 or the merged parties are likely to have a combined market share of more than 30%. These values can be changed by regulation. 
      • The latter threshold of 30% combined market shares throws into question the previous safe harbour threshold of 35% set out in the Merger Enforcement Guidelines published by the Bureau.
• Requiring that remedies restore competition 
  • Merger remedies must restore competition to the level that would have prevailed but for the merger. There is thus no longer a requirement that remedies should restore competition to the point where it can no longer be said to be substantially less than it was before the merger. 
  • The Tribunal may also prohibit a person from doing any act or thing that the Tribunal determines to be necessary to ensure that the merger does not prevent or lessen competition. The Tribunal will thus have the ability to address any anti-competitive effects of a merger, regardless of whether they are substantial. 
• Transactions paused when interim relief is sought
  • Parties are prevented from closing a transaction until any injunction application brought by the Bureau has been heard and disposed of by the Tribunal. This amendment is designed to prevent parties from closing in the face of Bureau opposition while an injunction is pending with the Tribunal. 
• Allowing for a longer period to challenge mergers that are not notified to the Commissioner 
  • The Commissioner is granted a three-year post-closing period to challenge mergers that are not notified to the Commissioner pursuant to the pre-merger notification provisions of the Act (Part IX notifications) or by a request for an advance ruling certificate (ARC). Previously, the Act permitted the Commissioner to challenge such mergers within one-year post-closing. The one-year timeline will continue to apply for transactions that have been notified to the Commissioner.
• Alignment of validity period for notifications and waivers from notification  
  • Merging parties who request an ARC and receive a waiver from having to file Part IX notifications will be required to renotify their transaction if it is not completed within one year. Previously, there was no time limit on the validity of such waivers. The amendment aligns the validity period for transactions for which a waiver from Part IX notifications has been received with transactions for which Part IX notifications are filed.
• Expanding the notification thresholds
  • A target’s revenues from “sales into Canada” now counts towards the size of the transaction financial threshold.
    • Previously, only sales in and from Canada are relevant. The change therefore means that more deals will surpass the relevant thresholds – though the target will still need to have a presence in Canada or directly or indirectly control an entity that has a presence in Canada.
  • Assets and revenues will need to be aggregated for transactions where both the assets and shares of a target business are being acquired, closing off the possibility for certain transactions to be structured to avoid notification requirements.
• Pre-clearance for agreements and arrangements related to environmental protection
  • Parties can now seek pre-clearance for proposed arrangements and agreements relating to environmental protection. Where parties satisfy the Commissioner that a proposed agreement or arrangement is not likely to prevent or lessen competition, and it is entered into for the purpose of protecting the environment, the Commissioner will issue a certificate that is registered with the Tribunal. 
  • Once an agreement or arrangement is the subject of a registered certificate, it is no longer reviewable under the Act’s criminal conspiracy and bid-rigging provisions (sections 45, 46, 47, and 49), and the civil collaboration provisions (section 90.1). However, such agreements could still be challenged under the other civil provisions of the Act (i.e., abuse of dominance). 
• Expanding the refusal to deal provision to include refusal to diagnose or repair
  • The refusal to deal provision (section 75) now includes refusals to supply the “means of diagnosis or repair,” which will be defined as “diagnostic and repair information, technical updates, diagnostic software or tools and any related documentation and service parts.” 
  • Additionally, a person’s business need only be affected in “whole or in part” to support a finding of a refusal to deal. 
• Prohibiting reprisal actions
  • Reprisal actions are defined as actions taken to “penalize, punish, discipline, harass or disadvantage another person” as a result of that person’s communications with the Commissioner or actual cooperation or expressed intention to cooperate with the Commissioner.
  • Courts can grant prohibition orders and impose administrative monetary penalties – in amounts in the discretion of the court but not exceeding $750,000 for individuals and $10 million for corporations – against parties engaging in reprisal actions. 
• Penalties for non-compliance with consent agreements
  • On application by the Commissioner, courts can now impose penalties on persons who, without good and sufficient cause, have failed to comply with a consent agreement under the Act. Proof of “good and sufficient cause” for non-compliance lies with the person subject to the consent agreement. 
  • Penalties for instances of non-compliance would include prohibition orders, prescriptive orders, and administrative penalties in an amount to be determined by the court and not exceeding $10,000 a day.
• Narrowing the circumstances where costs can be awarded against the Commissioner
  • The Tribunal is barred from awarding litigation costs against the Commissioner unless it determines that to not award costs would imperil confidence in the administration of justice or have a substantial adverse effect on the other party’s ability to carry on business. 

Takeaways

The transformative nature of these amendments will require businesses to re-assess their compliance with and risks under the Act. Businesses with strong market positions should pay particular attention to how these amendments will impact their business, including the increased litigation risk that may result from expanded private rights of action for damages for civilly reviewable matters. Businesses making net-zero and other environmental claims, meanwhile, will need to carefully scrutinize them in light of the new greenwashing provisions combined with the potential for private enforcement.

We anticipate that the Bureau will provide additional guidance on its approach to enforcing the new provisions of the Act, as it did with the wage-fixing and no-poach guidelines. However, the timing or clarity of any such guidance is unknown and the relevance of the Bureau’s guidance in the new era of private enforcement remains to be seen.

What is clear is that a new world of competition compliance is upon us.