Canada: International Suppliers And Retailers Get Two Lumps Of Canadian Competition Law Coal For The Holidays


On December 9, Industry Minister James Moore introduced Bill C-49, An Act to amend the Competition Act. Dubbed the Price Transparency Act, the Bill sets out proposed amendments to the Competition Act aimed at "geographic price discrimination." The Bill follows the Canadian government's announcement in last February's budget that it would be introducing measures to prohibit "unjustified" gaps between Canadian and American prices for the same consumer goods.

If enacted, the proposed amendments to the Competition Act would result in two unwelcome changes for international suppliers and retailers. First, the amendments authorize the Commissioner of Competition, the head of the Canadian Competition Bureau, to investigate, and name in a public report, international suppliers and retailers that sell products in Canada at higher prices than in the U.S. where the price difference is "unjustified." The price gap investigations (which the Bureau will be under political and public pressure to undertake) promise to be costly and disruptive, and a negative report could prove to be damaging to the goodwill of suppliers and retailers. Second, and of potentially greater concern, Bill C-49 purports to significantly expand the coercive investigative tools at the Commissioner's disposal, not only in respect of allegedly "unjustified" geographic pricing differences but in respect of alleged contraventions of any of the substantive enforcement provisions of the Competition Act.

Suppliers and Retailers to be Investigated, Named and Shamed

The proposed Competition Act provisions would significantly expand the Competition Bureau's mandate and responsibilities. The Bureau's mandate and focus historically have been driven by economic theory, at the heart of which lies the concept of a relevant market.1 Indeed, in recent hearings before a Canadian Senate Committee studying the potential reasons for price discrepancies for certain goods between Canada and the U.S, Bureau officials testified that "the Competition Bureau is not a price regulator and that Canadian businesses are free to set their own prices at whatever levels the market will bear, provided that these high prices are not the result of anti-competitive conduct such as price-fixing or abuse of a dominant position." The clear implication of this view, therefore, is that prices in each separate geographic market should find their own levels and that a price gap could very well result as a consequence. In contrast to and despite the Bureau's views on the issue, Bill C-49 squarely puts an element of price "regulation" on the Bureau's agenda.

The proposed amendments authorize the Commissioner to commence an inquiry (and, as discussed below, to obtain orders for oral examination, production and/or written returns, known as section 11 orders) where he or she has reason to believe that the price of a product (or class of products) is higher in Canada than the price of the same or similar product (or class of products) in the U.S. They also require the Commissioner to prepare a public report setting out the findings and conclusions of that investigation.

No penalties or remedies are available should a Bureau investigation uncover "unjustified" price differences. Other than reporting on its findings, the Bureau will have no new enforcement powers to address geographic price discrimination. The new regime appears to assume that the named supplier/retailer will respond to the negative publicity sparked by the Commissioner's report and eliminate the "unjustified" price differences.

New (Extraterritorial) Investigative Powers

Currently under the Competition Act, the Commissioner has significant investigative tools to carry out inquiries when he or she has reason to believe that a person has contravened the Act. Those tools include court orders under section 11 of the Competition Act compelling a party under investigation (or any other person who the Commissioner believes has or is likely to have information relevant to the investigation) to be examined under oath by the Commissioner, to respond to written questions under oath and/or to produce documents.

Under the current section 11(2), if the Commissioner obtains an order for the production of documents against a corporation inside Canada, he or she may also obtain an order compelling that company to produce documents held by a foreign affiliate (commonly, the parent corporation). This provision is controversial in light of the risk it creates that Canadian companies and their officers, directors and agents face potential criminal liability if foreign documents are not produced, even if compliance by the foreign affiliate is outside their control.

The Price Transparency Act promises to stoke this controversy by expanding the scope of section 11(2). The amended provision would authorize the Commissioner to seek orders compelling Canadian companies to produce not only foreign documents but also sworn answers to questions posed by the Commissioner seeking information in the power, possession and control of foreign affiliates.2 

Additionally, to further assist the Commissioner in investigating foreign corporations for alleged breaches of the Competition Act, the proposed amendments to section 11 also purport to enable the Commissioner to seek extraterritorial orders against persons outside of Canada compelling them to produce documents, provide written answers under oath and attend examinations under oath, as well as to deliver documents and information in the possession of any of their affiliates (also outside of Canada).

It bears emphasizing that the expanded powers under section 11 are not confined to investigations of "unjustified" price gaps but would, at least on their face, be available to the Commissioner in respect of investigations of alleged contraventions of any of the substantive provisions of the Competition Act, including criminal investigations under the hard-core cartel provision in section 45.3

Potential Implications

The proposed approach to "unjustified" price differences is more limited than many had feared when the Canadian government first announced its intention to introduce legislation "prohibit[ing] unjustified cross-border price discrimination." At the time, there was significant concern that the promised prohibition would be accompanied by fines. The Price Transparency Act should nonetheless be of significant concern to international suppliers and retailers, particularly in light of the absence of any guidance in Bill C-49 as to the circumstances in which higher Canadian prices might be found by the Commissioner to be "unjustified" or otherwise problematic. As discussed, that concern is heightened by the Bureau's significant new investigative tools under Bill C-49.

The Bureau has made it clear that it does not have resources to pursue every instance of geographic price discrimination. It is reasonable to expect that the Bureau will be strategic in its approach and will target a few high-profile sellers in industries that are characterized by high consumer awareness.

Consequently, most suppliers/retailers will not face an inquiry into their cross-border pricing practices. However, a large number of suppliers/retailers in high-profile industries face the risk that they (and/or their industry) will draw the "short straw" and they will be forced to "justify" their pricing practices. The unlucky few will likely be subject to a costly, time-consuming process. Businesses with cross-border sales should evaluate their pricing practices in light of these risks.


1. A relevant market has both a product dimension and a geographic dimension.  When two geographic areas are in separate markets, prices in those areas move independently.

2. The Bureau has also widened the definition of affiliates to ensure that it captures all possible forms of business arrangements between related entities.  It remains to be seen what practical impact this expended definition might have.

3. It remains an open question whether, as a matter of constitutional law, section 11 orders can properly be used by the Commissioner in furtherance of criminal investigations.

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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