A New Playing Field: Summarizing Sweeping Reforms to the Canadian Competition Act

On June 20, 2024, Bill C-59, known as The Fall Economic Statement Implementation Act[1], 2023, received royal assent, enacting further amendments to Canada’s Competition Act (the “Act”).  Over the last two years, the Act has been substantially reformed through three separate rounds of amendments.  Cumulatively, these changes represent the most significant changes to Canadian competition law since 1985, when the Act was enacted.

This article briefly summarizes these amendments, and sets the table for how the Competition Bureau (the “Bureau”) and its Commissioner of Competition (the  “Commissioner”), who were the main proponents for reform, will use the modernized Act to increase the Bureau’s enforcement and monitoring activities.  Separately, Miller Thomson will release a series of subject-matter focused bulletins detailing how the amendments may impact different aspects of your business and its day to day activities, as well as how to be proactive in safeguarding your business with robust compliance steps. The first of the series, focusing on changes related to environmental claims and greenwashing, is available on our website.

THREE ROUNDS OF AMENDMENTS

Bill C-59 builds on initial amendments to the Act that were first enacted in June 2022 (as part of Bill C-19) and secondary amendments that were enacted in December 2023 (as part of Bill C-56).  The initial amendments made wage-fixing and no-poach agreements between employers criminal offenses, broadened the definition of “anti-competitive acts” by dominant companies and allowed private parties to bring abuse of dominance cases to the Competition Tribunal (“Tribunal”).  They also created new stand-alone provisions related to “drip pricing” and anti-avoidance of pre-merger notifications[2].

The secondary amendments came into force on December 15, 2023 and included: adding a new framework alongside information-gathering powers for Bureau market studies, repealing the efficiencies defence for mergers, expanding the scope of civil reviewable agreements, introducing a new type of “excessive and unfair selling prices” as a new anti-competitive act, and restructuring the legal test for finding a violation of the abuse of dominance provisions and increasing its corresponding penalties[3].

The most recent amendments laid out in Bill C-59[4], among other things, introduce key changes to the merger review provisions, including changes to the notification thresholds, limitation periods for challenging completed mergers, and the ability for the Bureau to apply for an automatic injunction to stop certain mergers from closing. Bill C-59 also now allows for a private right of action to allow private parties to bring an application to the Tribunal to challenge agreements, arrangements, and trade practices that are civilly reviewable, and seek damages. The amendments also add a product-specific greenwashing civil provision allowing for private applications for alleged deceptive marketing or misleading advertising, including misleading environmental benefit claims.

AMENDMENTS & FOLLOW-UP BULLETINS

Miller Thomson will be releasing a summary of the cumulative amendments by subject-matter, that will include practical and important takeaways for your business. These bulletins will summarize the amendments based on the following subjects:

• “Greenwashing” & environmental benefit marketing claims
  • The definition for misleading advertising now specifically includes claims related to both a business product’s environmental benefits as well as a business’  environmental impact, where they lack adequate and proper substantiation. Within a year, private parties can request permission from the Tribunal to challenge deceptive marketing claims, including misleading environmental claims.
  • Important takeaways: Even if environmental claims do not influence purchasing decisions or product performance, they can still violate the Act. Therefore, marketing departments must ensure adequate and proper testing is completed prior to making environmental claims.  Businesses should use internationally recognized methodologies, and retain  third-party compliance experts if necessary, before making any such claims.
  • As noted above, our first article in this series is focused on these amendments, and the article  is already available on our website.
  • Of note, on July 22, 2024, the Bureau released a public consultation related to these changes, which will aim to inform its future guidance. The consultation is open until September 27, 2024. More details are available here. Some of the areas that it is interested in hearing about include: (i) details about the kinds of environmental claims that are commonly made; (ii) whether certain types of claims are less likely to be based on “adequate and proper substantiation”; (iii) what internationally recognized testing methods should the Bureau consider for evaluating these claims, and (iv) challenges that advertisers may face with compliance, among other questions.
  • The Bureau also released The Deceptive Marketing Practices Digest - Volume 7 on July 22, 2024, with guidance on making environmental claims. Given that its prior guidance document was archived in November 2021, this new Digest should be helpful in guiding businesses towards compliance and best practices.
• Merger & acquisition provisions
  • The amendments to the merger review process expand pre-merger notification thresholds to include more transactions, add new factors for assessing substantial lessening or prevention of competition (“SLPC”), and eliminate the efficiencies defense. The Tribunal will now consider impacts on labour markets and potential coordination between competitors, with a presumption that significant market concentration increases lead to SLPC. The Bureau can also now challenge non-notifiable mergers for up to three years post-closing, up from one year.
  • Important takeaways: Businesses must ensure their transactions meet notification requirements, and should consider voluntary notifications for non-notifiable deals. They should also  assess merger impacts on market share and labour, and account for closing prohibitions during Tribunal injunction hearings.
• Civil collaboration & civilly reviewable conduct provisions
  • The amendments to section 90.1 of the Act expand the scope of civil competitor collaboration provisions. Previously, these provisions allowed the Bureau to challenge potentially anti-competitive competitor agreements, but without the ability to impose fines, consider past agreements, remedy third-party harm, or hear cases not brought by the Commissioner. Now, the provisions allow the Tribunal to review non-competitor agreements that may create an SLPC and can cover past agreements up to three years. The Tribunal can impose fines up to $10 million ($15 million for subsequent orders) or 3% of worldwide gross revenues and seek structural remedies. Starting June 2025, private parties can bring applications to the Tribunal to challenge civilly reviewable conduct, even if it only affects part of the applicant’s business, with the Tribunal able to order disgorgement awards. Additionally, the Act’s “refusal to deal” provisions now include “right to repair” provisions.
  • Important takeaways:  These changes will likely increase class-action type actions against perceived unfair practices, and businesses should be aware of the Tribunal’s new authority to mandate the supply of diagnostic or repair means.
• Abuse of dominance provisions
  • The amendments to section 79 of the Act lower the threshold for finding abuse of a dominant market position, making it easier for the Bureau to investigate and enforce a wider range of conduct, especially in relation to the digital economy. The definition of an “anti-competitive act” now includes any act intended to harm competition or competitors, with “excessive and unfair pricing” added as an example. Penalties have been increased to $25 million for first offenses ($35 million for subsequent offenses) or up to 3% of annual worldwide gross revenues.
  • Important takeaways: Private parties can now apply directly to the Tribunal for abuse of dominance proceedings if they are directly and substantially affected. This change increases litigation risk and encourages more class-action lawsuits, so businesses with large market shares should ensure compliance.
• Reminder:  Commissioner’s new market study powers & criminal wage fixing/no-poach agreements offence
  • As a reminder, the Commissioner and the Minister of Innovation, Science and Industry can now initiate a market or industry study where they determine it is in the public interest to do so.  The Bureau can obtain a court order on an ex-parte basis to compel businesses or individuals (situated anywhere in the world) to provide: information, records, and written responses. These market studies have the potential to significantly strain the financial and human resources of any subject business. The Bureau has already launched market studies in the grocery and airline industry using these new provisions.
  • As of June 23, 2023, it is a criminal offense for two unaffiliated employers to agree on fixing wages or employment terms, or to refrain from hiring each other’s employees as part of a reciprocal agreement. Violators face fines, up to 14 years of imprisonment, or both. The Bureau’s 2023 enforcement guidelines provide further details on this offense.[5]

SAFEGUARDING YOUR BUSINESS

The cumulative amendments to the Act will bring about significant changes that will impact businesses across various industries and sectors. Businesses can alleviate any potential risk areas by reviewing their competition compliance strategies and programming in order to safeguard against the new risks brought about by the amendments. Those businesses with strong market positions should pay special attention to the increased litigation risk from expanded private rights of action. Additionally, businesses making environmental claims need to ensure their accuracy to avoid “greenwashing” allegations given the new provisions and potential for private enforcement.

Businesses should also evaluate the competitive impact of their strategies, considering the broader scope of what constitutes anti-competitive behavior. This includes assessing the potential effects on competition, responses to competitors, the creation of barriers to entry, and non-price competition factors such as quality, choice, and consumer privacy.

Miller Thomson will release further client bulletins to help you stay informed and proactive, so that your business can better navigate the evolving regulatory landscape and mitigate potential risks.

[1] Bill C-59, An Act to Implement Certain Provisions of the Fall Economic Statement, 1st Sess, 44th Parl, 2024, cl 236(1) (Assented to 20 June 2024)

[2] See: “First round of significant and expansive amendments to the Competition Act in effect”, July 27, 2022, online: https://www.millerthomson.com/en/published-articles/significant-expansive-amendments-competition-act/ and “Canada prohibits no poaching and wage-fixing agreements”, November 29, 2022, online: https://www.millerthomson.com/en/published-articles/canada-prohibits-no-poaching-no-wage-fixing-agreements/  and “Drip pricing practices prohibited under Canada’s Competition Act”, October 18, 2022, online:  https://www.millerthomson.com/en/published-articles/drip-pricing-canada-competition-act/

[3] Competition Bureau, “Guide to the December 2023 Amendments to the Competition Act”, December 18, 2023, online: https://competition-bureau.canada.ca/how-we-foster-competition/education-and-outreach/guide-december-2023-amendments-competition-act

[4] Competition Bureau, “Guide to the June 2024 Amendments to the Competition Act”, June 25, 2024, online: https://competition-bureau.canada.ca/how-we-foster-competition/education-and-outreach/guide-june-2024-amendments-competition-act

[5] Competition Bureau, “Enforcement Guidelines on wage-fixing and no poaching agreements”, last modified May 30, 2023, online: https://competition-bureau.canada.ca/how-we-foster-competition/education-and-outreach/enforcement-guidelines-wage-fixing-and-no-poaching-agreements