Prime Minister Stephen Harper's Conservative Government has followed through with pre-election promises to amend Canada's competition and foreign investment laws.1 On February 6th, Bill C-10, An Act to implement certain provisions of the budget tabled in Parliament on January 27, 2009 and related fiscal measures, was tabled in the House of Commons and proposes fundamental changes to the Competition Act and Investment Canada Act.
The changes to the Competition Act envisaged by Bill C-10 are the most significant changes to that statute in decades. Such changes include:
Cartels – Dual Track for Agreements among Competitors
- establishing a dual-track approach to agreements between competitors, such that cartel-type agreements that fix prices, allocate markets and/or fix output will be reviewed under a per se criminal provision, while other (non-cartel) agreements between competitors that are likely to substantially prevent or lessen competition will be reviewed under a civil provision;
- establishing a defence to the per se cartel provision where the impugned conduct forms part of and is reasonably necessary for a non-offensive competitor collaboration;
- incorporating by reference as a defence to the new per se cartel provision, the common law regulated conduct defence ("RCD"), which is applicable in respect of the current section 45 conspiracy provision;2
Increasing Criminal Fines
- increasing potential fines and (curiously, in view of the relative rarity of prison sentences under the Act) dramatically increasing maximum terms of imprisonment for cartels, bid-rigging, obstruction of Competition Bureau investigations, criminal false or misleading representations, deceptive telemarketing, deceptive notice of winning a prize, and failure to comply with prohibition orders or production orders;
De-Criminalizing Certain Criminal Provisions
- repealing the criminal provisions of the Act that deal with price discrimination, predatory pricing and discriminatory promotional allowances, thereby subjecting such practices to review only under the civil abuse of dominance provisions of the Act;
- replacing the criminal price maintenance provision with a new civil resale price maintenance provision that will permit orders to be issued by the Competition Tribunal on application of the Commissioner of Competition, or a private person with leave, where the resale price maintenance is likely to have an adverse effect on competition;
Abuse of Dominance Provisions
- for abuse of dominance, introducing administrative monetary penalties ("AMPs") of up to C$10 million for a first order and up to C$15 million for subsequent orders;
- repealing the abuse of dominance provisions of the Act focused on the airline industry;
- increasing the thresholds for mandatory pre-merger notification: the size-of-transaction threshold will increase to C$70 million from the current C$50 million level and will be revised annually based on changes in national GDP;
- replacing the current 14 and 42 –day waiting periods for short-form and long-form notifications with a "second-request" type of process for merger notification and review that is analogous to that in the United States under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, whereby an initial 30-day waiting period applies but can be extended by the Commissioner of Competition requiring the production of additional information, in which case closing would be prohibited until 30 days after compliance;
- establishing a mechanism for the imposition of significant AMPs (up to C$10,000 per day) for failure to comply with the pre-merger notification regime;
- reducing the time the Commissioner of Competition has to challenge a merger before the Competition Tribunal to a period of up to one year after closing, down from the previous three year period;
Deceptive Marketing Provisions
- significantly increasing the maximum amount of AMPs for deceptive marketing – in the first instance, individuals and corporations could face fines of up to C$750,000 (up from C$50,000) and C$10 million (up from C$100,000), respectively. For subsequent violations, individuals and corporations could face fines of up to C$1 million (up from C$100,000) and C$15 million (up from C$200,000), respectively;
- for certain provisions of the Act dealing with representations to the public, clarifying that it is not necessary to establish that false or misleading representations are made to the public or in a place to which the public has access, and that the "general impression test" applies to all deceptive marketing practices prohibited under certain civil provisions of the Act;
- providing that a court may, in cases of false or misleading representations, require compensation of persons affected by the conduct and, to this end, may order injunctions to freeze assets;
Investment Canada Act
The significant changes to the Investment Canada Act include the following:
- changing the threshold for review of transactions by WTO investors from the current C$312 million based on book value of the assets of the business being acquired to C$600 million based on "enterprise value"3, with such threshold increasing to C$1 billion over time;
- introducing a national security test for the review of transactions, and allowing the Governor in Council to take measures to protect national security, including by blocking transactions; and
- allowing more information to be made public.
The proposed amendments to the Competition Act and the Investment Canada Act are part of the Government's long-term economic plan announced in 2007, and are heavily informed by the June 2008 findings and recommendations of the Competition Policy Review Panel – for further information, see our July, 2008 bulletin, "Competition Policy Review Panel Proposes National Competitiveness Agenda", online: http://www.fasken.com/competition_policy_review/.
Passage of the Bill into law will require the support of at least one opposition party. The New Democratic Party and Bloc Quebecois have publicly stated they will not support the Government's budget. The Liberal Party has, prior to the tabling of the Bill, made it known that it will not bring down the Conservative Government by voting against its budget. However, it is not yet known whether the Liberal Party would object to the Government's inclusion of fundamental amendments to the Competition Act and Investment Canada Act in the budget bill (which tend to be pushed through Parliament more quickly than other bills) and whether it would take action to have those amendments severed and introduced in a separate bill. On balance, we believe the prospects of Bill C-10 becoming law are quite high.
Generally, many of the amendments to the Competition Act and Investment Canada Act in Bill C-10 will come into force upon Royal Assent. However, the amendments to the Competition Act respecting the establishment of a dual-track regime for criminal per se offenses and civilly reviewable agreements that are likely to substantially prevent or lessen competition will not come into force until one year after Royal Assent. With respect to the amendments to the Investment Canada Act, Bill C-10 provides that, along with certain other provisions, the national security review mechanism, once it becomes law, is deemed to have come into force on February 6, 2009.
1 For further information, see our November 2008 bulletin, "Re-election of Conservative Government Brings Proposed Changes to Canadian Competition and Foreign Investment Laws Closer to Reality", online: http://www.fasken.com/november_2008_acm_bulletin/ .
2 Interestingly, the Supreme Court of Canada's decision in Garland v. Consumer's Gas Co.,  1 S.C.R. 629, may render the RCD inapplicable to the new per se cartel provision.
3 Bill C-10 does not define the term "enterprise value", but we expect the term to be defined in the regulations under the Investment Canada Act. The concept of "enterprise value" was introduced and explained in the final report of the Competition Policy Review Panel Report as follows: "Enterprise value is a measure used to evaluate the potential acquisition value of a business. It is equal to the sum of the price to be paid for the equity of an acquired business and the assumption of liabilities on its balance sheet minus its current cash assets."
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