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September 17, 2021

On September 9, 2021, the C.D. Howe Institute’s Competition Policy Council (Competition Council) issued a new Communiqué with recommendations for the next Canadian federal government to amend the Competition Act and other Canadian competition policy recommendations.

In its Communiqué, the Competition Council stated that competition law and policy have “recently been elevated to the main stage of the Canadian policy debate”. This enhanced focus is evidenced by discussions about amending the Competition Act during hearings of the House of Commons Standing Committee on Industry, Science and Technology in April 2021 and the federal government’s proposal in Budget 2021 to increase the Competition Bureau’s (Bureau) budget by fifty percent (by providing $96 million over five years, starting in 2021-22, and $27.5 million going forward).

The Competition Council’s Communiqué sets out several main recommendations for the next federal government for key reforms to Canadian competition law as follows:

First, the Competition Council recommends that Canada’s federal government consider creating a separate budget within that of the Innovation, Science and Economic Development (ISED) department and that Canada’s Commissioner of Competition (Commissioner) (rather than the Minister of Innovation, Science and Industry) be accountable to Parliament.  By creating a separate budget submission led by the Commissioner removed from potential other political priorities, the Competition Council’s position is that the Bureau may enhance oversight, transparency and accountability into its competition enforcement and policy work.

The Bureau’s enforcement efforts are currently limited by budgetary and resource (for example, personnel) constraints. As such, the Bureau can only commence a limited number of complex proceedings in resource-intensive areas, particularly effects-based civil reviewable matters (e.g., abuse of dominance proceedings under section 79 or competitor agreements and collaborations under section 90.1).

Second, the Competition Council recommends that the Bureau direct its additional resources to increase Competition Act enforcement and not for the government to grant the Bureau formal market study powers (in contrast, some international antitrust agencies, such as the United States Federal Trade Commission, have authority to use compulsory processes for market studies).

The Competition Council’s position, among other things, is that granting the Bureau formal market study powers is not likely to be effective in enhancing competition in Canada and would divert the Bureau’s limited resources away from enforcement.

Third, most members of the Competition Council’s position was that the efficiencies defence for mergers has become challenging for the Bureau and merging parties to apply based on the formalistic requirements imposed in the 2015 Supreme Court of Canada Tervita decision (Tervita Corp. v. Canada (Commissioner of Competition), 2015 CarswellNat 32 (S.C.C.) (Tervita)).

In Tervita, the Supreme Court formulated a two-part test for the efficiencies defence requiring that the quantitative merger efficiencies in a transaction be compared against its quantitative anti-competitive effects.  In the first test, if the quantitative anticompetitive effects outweigh the quantitative merger efficiencies, the defence will not apply.  In the second part of the test, qualitative efficiencies are balanced against the qualitative anti-competitive effects.

One of the Competition Council’s criticisms of the current approach to the efficiencies defence is that is has become an accounting exercise too narrowly considering static efficiencies but makes it difficult for the Commissioner to challenge mergers on the basis of dynamic effects (which can be hard to quantify, but particularly relevant in some types of mergers, such as in digital economy related transactions).  There was some support, but no consensus, by Competition Council members to amend the Competition Act to reject the quantification requirement from Tervita.  However, other members thought that the efficiencies defence in its existing form was working well.

Fourth, the Competition Council recommends expanding private rights of action for abuse of dominance (section 79), subject to leave requirements from the Competition Tribunal (Tribunal) consistent with existing private access applications under Part VIII of the Competition Act (for more information, see: Competition Litigation). The Competition Council noted that the Competition Act currently grants the Commissioner sole authority to bring cases under sections 79 (abuse of dominance) and 90.1 (the civil agreements provision of the Competition Act).

Currently, private parties can commence private access applications under some of the reviewable matters provisions of the Competition Act (refusal to deal (section 75), price maintenance (section 76) and exclusive dealing, tied selling and market restriction (section 77)). The Competition Council also supports adding damages under section 79 to increase the incentive for private plaintiffs to commence abuse of dominance related litigation (currently while civil administrative monetary penalties of up to $10 million can be imposed under section 79, only the Commissioner can commence abuse of dominance applications, which practically limits the number of abuse cases commenced in Canada and potentially deterrence for abuse of dominance conduct).

In coming to its conclusions, the Competition Council noted the relatively low number of litigated competition law cases in Canada and corresponding uncertainty that businesses face on how Canadian competition law will be interpreted by Canadian courts or the Tribunal.  While private actions can be commenced under the criminal provisions of the Competition Act and private access applications for certain civil reviewable matters provisions, there are currently gaps in the ability for private parties to seek remedies in cases where there may be significant anti-competitive effects in markets, with no apparent coherent legislative rationale, notably under sections 79 and 90.1.

Also, as the Competition Council correctly points out, one historic argument against expanding private rights of access under the Competition Act, namely the risk of an unwarranted number of frivolous cases or strategic litigation, has not developed under the existing private access regime.  In fact, in some key areas, such as refusals to deal under section 75, relatively significant substantive case law has developed because private access application rights were introduced.

Further, given the Bureau’s current budget and resource constraints, it typically has not recently commenced more than one or two cases under sections 79 and 90.1 per year.  This is compared, for example, to the significantly larger number of contested cases brought by private plaintiffs under section 45 of the Competition Act, particularly class actions, which have been a leading driver in developing Canadian case law under section 45 over the past 10-20 years.

Overall, the Competition Council’s Competition Act reform recommendations highlight recent interest by the federal government in Canadian competition law and policy matters.  Several of the Competition Council’s recommendations, including increasing the Bureau’s budget and allowing private enforcement under the abuse of dominance provision, would likely increase both the Bureau’s and private parties’ ability to enforce the Competition Act and create new and much needed competition law jurisprudence (and correcting market distortions in a market often characterized by competition concentrations).  Whether a new federal government will accept any of the Competition Council’s recommendations, however, remains to be seen.

For the C.D. Howe Institute’s Competition Policy Council’s full Communiqué, see: Twenty-first Report of the C. D. Howe Institute Competition Policy Council.

For more information on related competition law topics, see: Abuse of Dominance, Bureau Enforcement, Conspiracy (Cartels), Price Maintenance and Refusal to Deal.

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