Canada: Massive Amendments To Competition Act And Investment Canada Act Tabled Today

The Canadian Competition Bureau will be pleased today, as significant and far-reaching amendments to the Competition Act and the Investment Canada Act were included in the Budget Implementation, 2009 bill (C-10), which was tabled today in the House of Commons by the Canadian government (see Parts XII and XIII).

The proposed amendments to the Competition Act include provisions to strengthen the hand of enforcers in just about every area of the law:

  • the creation of a "per se" criminal conspiracy offence (Canada's conspiracy provision, unchanged since the 1890s, had required the Crown to show an "undue lessening or prevention of competition" and no such competitive impact need now be shown for certain kinds of agreements such as cartels to fix prices, allocate markets, etc.),
  • an increase of the penalties for criminal conspiracies to up to 14 years in jail and/or $25 million in fines,
  • removal of the criminal predatory pricing, price discrimination, promotional allowance and price maintenance provisions (the latter replaced by a provision allowing for civil review of price maintenance),
  • significant increases to penalties for misleading advertising,
  • extending bid-rigging to include not only undisclosed submission of bids arrived at by agreement or arrangement but to withdrawal of bids as well,
  • introduction of administrative monetary penalties (fines) for abuse of dominance of up to $10 million for a first offence and $15 million for subsequent offences,
  • deletion of the "abuse of dominance" provisions that had been applicable only to domestic airlines,
  • creation of a new provision for civil review of anti-competitive agreements between competitors that are not "per se" criminal but are nonetheless anti-competitive,
  • raising the "size of the target" threshold for advance merger notification to more than $70 million (Cdn) in assets in Canada or gross revenues from sales in or from Canada (to be indexed for inflation, unless otherwise specified), and
  • the introduction of a US-style two-stage merger review process, complete with a 30-day initial waiting period and a provision that "stops the clock" on the expiry of that waiting period until 30 days after the parties have complied with a second request for information (which can now be issued without judicial oversight). Fines for non-compliance with the waiting periods have also been significantly enhanced.

The Investment Canada Act is also to be significantly amended, with the threshold for review of direct acquisitions of control by WTO-member based investors increasing to C$600 million, based on the "enterprise value" of the Canadian business (as opposed to the current threshold based on book value), for the next two years after the bill enters into force, to C$800 million for the two years following, and to C$1 billion for another two years, to be indexed according to inflation thereafter. More importantly, a new "national security test" has been created, allowing the federal Cabinet to block investments on the basis that they threaten national security (with no minimum threshold for the size of investments potentially subject to such review), and the so-called "sensitive sectors" subject to lower review thresholds have been eliminated (other than "cultural businesses").

These proposed reforms represent the most significant overhaul of Canadian competition laws since the introduction of the modern statute in 1986. They provide the Commissioner of Competition with unprecedented new enforcement tools in all areas of antitrust law, from the prosecution of cartels, to penalizing firms that abuse dominant positions or engage in misleading advertising, to impeding those wishing to close mergers that raise antitrust issues. With these amendments, the Government has signaled a desire to get very serious about competition law enforcement in Canada. In light of its new powers, the Bureau will be under pressure to demonstrate stepped-up enforcement of the cartel and abuse of dominance provisions, and businesses should expect to see lengthier and more burdensome merger reviews for difficult cases.

With the creation of a CFIUS-style national security test for investments within the Investment Canada Act, the government's ability to block foreign investments on national security grounds is clarified and strengthened, even as the number of transactions subject to review for ensuring they will be of "net benefit" to Canada has decreased.

While the Bill has just been introduced to the House of Commons, and must still pass through several stages before it becomes law, by including these amendments within the budget implementation bill, the Government has potentially forestalled serious debate. Of course, anything is possible in a minority Parliament, as the events of the past few months have shown, and time will tell whether all of these amendments will be enacted. As unprecedented as the scope of the amendments, however, has been the Government's failure to publicly consult with stakeholders with respect to some of the proposed changes.

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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