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SIGNIFICANT COMPETITION ACT AMENDMENTS CAME INTO FORCE
ON DECEMBER 15, 2023 (BILL C-56)

On December 15, 2023, Bill C-56 (An Act to amend the Excise Tax Act and the Competition Act), which introduced the first of two new significant rounds of amendments to the federal Competition Act, largely came into force.

This first new round of amendments to the Competition Act, which is intended to strengthen the ability of the Competition Bureau (Bureau) and private parties to enforce Canadian competition law and enhance competition generally in Canada, includes fundamental changes to Canadian competition law not seen since the last major amendments in 2009.

The amendments to the Competition Act under Bill C-56 include new broad powers for the Bureau to conduct market studies, changes to the core substantive test for abuse of dominance under section 79 (creating new two-track tests for abuse of dominance), increased penalties for abuse of dominance, broadening the civil agreements provision (section 90.1) to include agreements between non-competitors (i.e., to also apply to vertical agreements, such as distribution/supply agreements) and repealing the efficiencies defences under section 90.1 and also for mergers under section 96.

These amendments increase the potential competition law risk for companies, trade and professional associations and other entities, particularly those without credible and effective competition law compliance programs and that have not reviewed their business practices to reflect Canada’s new competition law.

The amendments introduced by Bill C-56 in December 2023 are expected to be followed by a second and more significant round of amendments contained in Bill C-59, which is currently working its way through Parliament. If passed, Bill C-59 would be the most important amendments to Canadian competition law since the current modern Competition Act replaced the former Combines Investigation Act in the 1980s.

For more information about the December 2023 amendments, see: Significant Canadian Competition Act Amendments Come Into Force (Bill C-56). See also: Competition Bureau, Guide to the December 2023 amendments to the Competition Act. For more information about Bill C-59, the second amending bill, which has not yet passed, see here.

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THE COMPETITION ACT

Canadian competition law is largely governed by the Competition Act. The Competition Act is federal framework legislation that applies to most businesses and industries in Canada with limited exceptions and includes criminal offences and civil reviewable matters. The Competition Act is administered and enforced by the Competition Bureau (Bureau), which is a federal enforcement agency based in Ottawa and headed by the Commissioner of Competition (Commissioner).

The Competition Act sets out four purposes: to promote the efficiency and adaptability of the Canadian economy; to expand opportunities for Canadian participation in world markets; to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy; and provide consumers with competitive prices and product choices.

In general, the Competition Act is consumer protection legislation intended to ensure that consumers benefit from competitive and undistorted markets.

CRIMINAL OFFENCES AND CIVIL REVIEWABLE MATTERS

The Competition Act includes both criminal offences (e.g., price-fixing and other conspiracies between competitors, bid-rigging and criminal misleading advertising) and civil reviewable matters (e.g., abuse of dominance, price maintenance and refusal to deal).

Criminal Offences

Criminal offences under the Competition Act include bid-riggingconspiracy (price-fixing, market allocation/division, supply/output restriction and no-poaching and wage-fixing agreements), foreign directed conspiracies, criminal misleading advertising, drip pricing claims, deceptive telemarketing and pyramid selling schemes.

Some of the previous competition law offences (e.g., predatory pricing and price discrimination) were repealed in 2009 as part of sweeping amendments to the Competition Act. The conduct they related to, however, may still be subject to challenge under the abuse of dominance section of the Competition Act. Canada’s former criminal price maintenance offence was also repealed in 2009 and since then is now a civil reviewable matter. For more information about the 2009 and other Competition Act amendments, see: Competition Act Amendments.

Criminal offences under the Competition Act are investigated by the Bureau, prosecuted by the Public Prosecution Service of Canada (PPSC), tried in provincial criminal courts and subject to criminal penalties. The potential criminal penalties under the Competition Act include criminal fines, imprisonment and prohibition orders to stop or modify conduct.

The Bureau also has access to a broad range of significant and intrusive enforcement powers in relation to criminal Competition Act matters. These include the ability to obtain search warrants to search premises, wiretaps and court orders to compel the production of documents and conduct interviews under oath.

The Bureau also regularly relies on its Immunity and Leniency Programs to detect criminal Competition Act violations and encourage parties to criminal offences to come forward and cooperate with investigations in exchange for full immunity from prosecution or, where full immunity is unavailable, leniency in sentencing. Criminal competition law violations are also brought to the Bureau’s attention by consumer, industry member and other complainants and internal whistleblowers.

Civil Matters

The Competition Act also contains a number of civil reviewable matters. These include price maintenance, civil misleading advertisingordinary selling price claimsperformance claimspromotional contestsrefusal to dealabuse of dominance, tied selling, exclusive dealing, market restriction and mergers (merger control filings and substantive merger review).

Some of the types of conduct that the civil provisions of the Competition Act can apply to, among other things, include false or misleading advertising, refusals to supply or deal, abuses of dominance by firms with significant market presence, exclusive supply agreements/arrangements and where suppliers maintain resale prices that adversely impacts competition.

The civil provisions of the Competition Act address conduct that may be either pro-competitive or anti-competitive but require a closer examination of the potential market effects – for example, whether conduct is likely to result in an adverse effect on competition or substantially prevent or lessen competition.

For example, practices that may be common industry practice and innocuous when engaged in by small firms (e.g., exclusive dealing, below cost pricing or refusals to supply or deal) may be subject to Competition Act review and Competition Tribunal orders where a firm has market power and the practice is having significant effects on a market. That is to say that under most of the civil provisions of the Competition Act, conduct is not illegal per se, but requires an analysis of the relevant market(s), conduct and market effects to determine if the Competition Act may have been violated and a remedy available.

Like criminal offences under the Competition Act, reviewable matters can also be investigated by the Bureau, may result in proceedings initiated by the Bureau or private parties in certain cases with leave from the Competition Tribunal, can be heard before the Competition Tribunal or in some cases also provincial or federal courts and are subject to a range of potential remedial orders and civil penalties.

The potential penalties for violating the civil reviewable matters provisions of the Competition Act include court or Competition Tribunal orders to stop conduct, pay compensation (i.e. restitution) to consumers and administrative monetary penalties (AMPs) (e.g., under section 79 of the Competition Act, abuse of dominance, penalties include an AMP of up to the greater of $25 million ($35 million for each subsequent order), three times the value of the benefit derived from the abusive conduct or, if the latter amount cannot be reasonably determined, 3% of the person’s annual worldwide gross revenues).

COMPETITION ACT ENFORCEMENT

The Competition Act is primarily enforced and administered by the Bureau, which is a federal enforcement agency based in Ottawa and headed by the Commissioner. The Bureau investigates potential competition law offences and civil reviewable matters under the Competition Act.

The Bureau also engages in competition law advocacy in a range of sectors where it may not have direct enforcement powers (i.e., in federally or provincially regulated markets) and conducts market studies in key consumer sectors (e.g., the gasoline, grocery and telecom markets). In 2023, Bill C-56 introduced new formal market inquiry powers for the Bureau. See: Competition Law Enforcement.

In addition to Bureau enforcement, civil actions and class actions, as well as private applications to the federal Competition Tribunal (with leave from the Tribunal), are possible under some of the sections of the Competition Act. See: Competition Litigation.

The Commissioner and the Bureau have significant powers to investigate potential violations of the Competition Act, including the ability to obtain court orders to search premises and seize documents, search and seize computer records, obtain wiretaps, compel individuals to testify under oath and require companies or individuals to produce documents or respond to written information requests. The Commissioner also has the power to investigate and refer criminal matters under Part VI of the Competition Act to the PPSC for criminal prosecution.

Criminal Competition Act offences include conspiracy (e.g., price-fixing, market allocation/division, supply/output restriction and no-poaching and wage-fixing agreements between competitors or employers), foreign directed conspiraciesbid-rigging, criminal misleading advertisingdeceptive telemarketing and pyramid selling schemes.

While the Bureau investigates potential violations of the Competition Act’s criminal offences, the responsibility for prosecutions lies solely with the PPSC. In practice, the Bureau and the PPSC work closely together in criminal competition law prosecutions.

The Commissioner may also commence investigations and Competition Tribunal applications or court proceedings relating to potential contraventions of the civil reviewable matters of the Competition Act under Parts VII.1 and VIII. These include price maintenance, civil misleading advertisingordinary selling price claimsperformance claimspromotional contestsrefusal to dealabuse of dominancetied sellingexclusive dealing and market restriction.

COMMENCEMENT OF
COMPETITION LAW MATTERS

Competition law proceedings in Canada may be commenced under the Competition Act by the Bureau itself based on its own investigation, as a result of complaints from customers, competitors or other industry participants and from persons or companies that may have committed a criminal offence under the Competition Act and are seeking immunity or leniency or by whistleblowers.

In addition to Bureau investigations, private parties may also in some cases commence private actions or class actions under section 36 of the Competition Act for violations of the criminal sections of the Competition Act, including the criminal conspiracy and criminal misleading advertising sections.

Private parties may also bring private access applications to the Competition Tribunal, with leave from the Tribunal, for orders under the abuse of dominance (section 79), refusal to deal (section 75), price maintenance (section 76) and exclusive dealing, tied selling and market restriction sections (under section 77).

COMPETITION ACT PENALTIES

Violation of Canada’s Competition Act can result in severe penalties, lost time and negative publicity for individuals, companies, trade/professional associations and other types of organizations and their executives and personnel.

The potential penalties under the Competition Act include criminal fines (e.g., fines in the discretion of the court for bid-rigging under section 47 and price-fixing and other conspiracies under section 45), administrative monetary penalties (essentially civil fines), imprisonment, damages arising from private civil or class actions and court orders (e.g., injunctions or prohibition orders) to stop or modify conduct. The record Canadian conspiracy (cartel) penalty to date is CDN $50 million, in a bread price-fixing investigation in which Canada Bread agreed to pay a $50 million fine after pleading guilty to fixing wholesale bread prices (see: here).

There is also potential director and officer liability under the Competition Act. In this regard, the Bureau commonly pursues individual executives as accused in criminal matters and plaintiffs routinely name directors and officers as defendants in Competition Act civil actions. For more information, see: Enforcement.

COMPETITION LAW COMPLIANCE

In 2023, the Bureau launched a new online competition law compliance resource (see: competition law compliance) setting out its position on what companies, associations and other types of organizations need to establish and train a credible and effective competition law compliance program. The Bureau’s new online compliance resource, now called its Compliance Hub, replaces its former 2015 Corporate Compliance Programs Bulletin.

In general, companies, trade and professional associations and other organizations that face competition law risks should adopt credible and effective competition law compliance programs, which should include a competition law compliance program, competition compliance policy, compliance guidelines for key activities (e.g., conduct of meeting guidelines, information exchange guidelines and search and seizure guidelines) and an employee certification letter.

In addition, companies, associations and other organizations should conduct periodic training for key personnel at risk of violating the Competition Act and periodically carry out competition law compliance audits. It is also a good practice to provide competition law compliance training for new personnel, including sales/marketing personnel, directors and officers and others either responsible for compliance or at risk of violating the Competition Act.

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SERVICES AND CONTACT

We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.

Our experience includes advising clients in Toronto, across Canada and the United States on the application of Canadian competition and regulatory laws and we have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.

To contact us about a potential legal matter, see: contact

For more information about our firm, visit our website: Competitionlawyer.ca

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    WELCOME TO CANADIAN COMPETITION LAW! - OUR COMPETITION BLOG

    We are a Toronto based competition, advertising and regulatory law firm.

    We offer business, association, government and other clients in Toronto, Canada and internationally efficient and strategic advice in relation to Canadian competition, advertising, regulatory and new media laws. We also offer compliance, education and policy services.

    Our experience includes more than 20 years advising companies, trade and professional associations, governments and other clients in relation to competition, advertising and marketing, promotional contest, cartel, abuse of dominance, competition compliance, refusal to deal and pricing and distribution law matters.

    Our representative work includes filing and defending against Competition Bureau complaints, legal opinions and advice, competition, CASL and advertising compliance programs and strategy in competition and regulatory law matters.

    We have also written and helped develop many competition and advertising law related industry resources including compliance programs, acting as subject matter experts for online and in-person industry compliance courses and Steve Szentesi as Lawyer Editor for Practical Law Canada Competition.

    For more about us, visit our website: here.