Authors
The Canadian government has introduced major proposed amendments to the Competition Act (the Act) that will radically alter Canada’s merger control, abuse of dominance and competitor collaborations enforcement regimes.
We expect the government will want the proposed changes to be passed quickly as part of the Fall Economic Statement Implementation Act, 2023 (Bill C-59).
Amendments to the Act have been frequent since early 2022:
These latest proposed amendments, following closely on Bill C-56, are likely to dramatically increase public and private enforcement while at the same time creating significant legal uncertainty due to changes to substantive provisions in the legislation.
The proposed amendments will increase the number of reviewable mergers, make mergers easier to successfully challenge, and make defending merger challenges more costly.
The amendments also modify the Competition Tribunal Act, making it much more difficult for merger parties to get a costs award in the event they are successful in defending a government challenge.
The proposed amendments will permit private litigants to bring claims under the deceptive marketing and anti-competitive agreements provisions of the Act. Following the changes, private parties will be able to advance claims under every key enforcement area of the Act, other than merger review.
The changes would also relax the requirement that applicants must seek “leave” from the Competition Tribunal prior to starting a case. Currently, they must establish that their business has been “substantially affected” by the impugned conduct. The requirement is designed to prevent frivolous claims. The proposed amendments will permit leave where the impugned conduct substantially affects only part of a claimant’s business (rather than the whole business) or where it is in the public interest to do so.
The amendments will significantly change the way in which agreements that may lessen competition are remedied. At present, the Act contemplates cease and desist orders; under the new changes, businesses may have to divest shares or assets to remedy anti-competitive effects and pay penalties up to 3% of annual gross revenues.
In addition to the penalties proposed for anti-competitive agreements, contraventions of the abuse of dominance rules and other reviewable practices would be subject to “disgorgement” orders, as well as fines and other remedies. Under the terms of these orders, the Competition Tribunal may order a respondent “to pay an amount, not exceeding the value of the benefit derived from the practice … to be distributed among the applicant and any other person affected by the practice”.
The amendments also add penalty provisions for procedural non-compliance with the Act. Many of these penalty provisions relate to failure to comply with a consent agreement between the Commissioner or a private party. These penalties can be as high as $10,000 per day of non-compliance.
The amendments will create a process to facilitate arrangements between parties (even competitors) for the purpose of protecting the environment where such agreements do not otherwise substantially lessen competition. The process would provide the parties with a “certificate” that exempts the conduct from the application of the Act for renewable periods up to 20 years.
These amendments, along with those passed in 2022 and proposed as part of Bill C-56, represent the greatest expansion of competition law enforcement scope and power in decades.
The sum effect of the amendments to the Act will, put simply, increase the cost, complexity and regulatory uncertainty of doing business in Canada.
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This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.
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