Canada: Canada’s Competition Law


Canada's Competition Act applies to all businesses and business activities in Canada. All companies doing business in Canada need to be aware of the Act, as penalties for breach of its provisions can be quite severe. For example, the maximum penalty for price fixing is a fine of up to $25 million and 14 years in jail.

The Competition Act applies to three main areas of business conduct that can harm competition: coordinated conduct among competitors, abuse of dominance, and mergers. The Act also includes misleading advertising provisions.

Conspiracies and other coordinated conduct among competitors

Hard-core cartels involving price fixing, market allocation, and output restriction agreements between competitors are per se criminal offences in Canada, as is bid rigging. Other agreements between competitors that lessen or prevent competition substantially can be annulled by a special court, the Competition Tribunal.

The conspiracy provision (s. 45) makes it an offence for competitors, or potential competitors, to agree to fix, maintain or control prices for the supply of a product; to allocate customers, territories or markets; or to fix maintain, control, prevent, lessen the production or supply of a product. There is an important exception for restraints that are ancillary to a broader and otherwise legitimate agreement.

Penalties are severe: the offence is an indictable offence punishable by up to 14 years in jail, or a maximum fine of $25 million, or both. Private parties that are harmed by a conspiracy can sue for damages. Canada's competition authorities offer immunity to the first cartel participant to self-report, and leniency to participants who cooperate subsequently.

Many conspiracies are international in scope. Despite the absence of an express long-arm jurisdiction provision, Canadian authorities routinely investigate and penalize foreign conspiracies that have effects in Canada. As well, the Act makes it an offence for a corporation to implement a foreign conspiracy in Canada (s. 46), even if it did not know it was implementing the conspiracy.

Bid rigging is dealt with in a separate provision (s. 47), and carries equally stiff penalties: up to 14 years in jail, or a fine in the discretion of the court. Private parties that are harmed by bid-rigging can sue for damages.

Other agreements between competitors can be prohibited by the Tribunal if they lessen or prevent competition substantially (s. 90.1). The Act mandates a competitive effects analysis, including factors such as foreign competition, barriers to entry, removal of a renegade competitor, and change and innovation. Efficiency gains that outweigh any competitive harm provide a complete defence. No penalties or damages can be imposed on parties to such anti-competitive agreements; the only remedy is an injunction.

Abuse of dominance

Canada's Competition Act deals with anti-competitive conduct by large firms through a number of discrete provisions. These include a general abuse of dominance provision, and several specific provisions, the most important of which deal with exclusive dealing, tied selling, market restriction, and refusal to deal.

Abuse of dominance (s. 78-79) occurs where a firm that has market power (dominance) engages in a practice of anti-competitive acts, causing a substantial lessening or prevention of competition. Conduct is considered anti-competitive if it is intentionally exclusionary, disciplinary, or predatory. Examples of anti-competitive conduct include: margin squeezing, pre-emption, exclusionary contracting practices, and predatory pricing.

The principal remedy for abuse of dominance is an injunction. Where an injunction is not enough, the Tribunal can order the parties to take steps to restore competition, including divestitures. The Tribunal can also impose an administrative monetary penalty (AMP) of up to $10 million ($15 million for repeat offenders).

Exclusive dealing, tied selling, and market restriction are not illegal in Canada unless they harm competition, in which case the Tribunal can issue an injunction prohibiting the practice under a specific provision (s. 77). Since these practices can also constitute abuse of dominance, AMPs may be available under the general abuse of dominance provision. No damages are available.

The refusal to deal provision (s. 75) allows businesses that are substantially affected by a refusal to deal to obtain an order from the Tribunal forcing a supplier to resume supply in certain very limited circumstances. No damages are available, however.

Mergers and pre-merger notification

The Competition Act provides substantive remedies for mergers that harm competition, and procedural requirements to notify the Competition Bureau of mergers that exceed certain thresholds before the merger closes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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W. Michael G. Osborne
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