Expanded scope for private enforcement, wider net cast for merger reviews, and other amendments in latest reform proposals
On November 28, 2023, the Canadian government proposed significant and wide-ranging amendments to the Competition Act (Act) that were previewed in the government's Fall Economic Statement. These additional reforms may be passed into law as early as the end of the year. They will not only affect businesses' conduct and their efforts to engage in transactions but substantially increase risks associated with non-compliance, and therefore, the approach to competition law compliance.
Among other things, these proposed amendments: significantly expand the rights and remedies available to private parties seeking to address anti-competitive or deceptive marketing conduct (private access); introduce administrative monetary penalties (AMPs) and the potential for merger-style divestiture orders with respect to joint ventures and other non-merger agreements; expand the scope of the merger notification requirements, the ability of the Competition Bureau (Bureau) to prevent transactions from closing and the period within which certain transactions can be challenged; and expressly address misleading environmental claims (known as "greenwashing").
Changes to the private access provisions of the Act will come into force one year after the amendments are passed. The remaining amendments will come into force upon passage.
Key takeaways for businesses include:
- Expanded private litigation.The proposed amendments would enable private parties to more easily bring cases before the Competition Tribunal (Tribunal) in respect of violations of many civil provisions of the Act, including abuse of dominance, refusal to supply and deceptive marketing, and obtain compensation if they are successful. Accordingly, non-compliance will introduce greater risks and competition law compliance will be increasingly important.
- Focus on anti-competitive collaborations.The Bureau would be empowered to review a wider selection of horizontal and vertical collaborations, short of a merger, and to seek significant financial penalties as well as merger-type divestiture orders.
- Enhanced merger review framework. The proposed amendments expand the scope of merger notification requirements to capture transactions where parties may have no operations in Canada but sales into Canada, and provide the Bureau with the ability to prevent transactions from closing upon merely filing an application to the Tribunal under s.100 or s.104.
- Targeting "greenwashing."Both the civil and criminal deceptive marketing provisions would explicitly include "greenwashing" — the making of misleading environmental and sustainability claims about a company's products.
A concise summary of these latest reform proposals is set out below.
1. Expanded Right of Private Access
The amendments would significantly expand the scope of conduct subject to private access and potential remedies available to private parties by:
Creating a new right of private access to the Tribunal under (i) the civil deceptive marketing provisions (s.74.1); and (ii) the civil competitor collaboration provisions (s.90.1).
Allowing private litigants to recover compensation for violation of the above provisions, as well as for restrictive trade practices, such as refusal to deal (s.75), price maintenance (s.76), exclusive dealing, market restriction and tied selling (s.77), and abuse of dominance (s.79). The new laws will allow the Tribunal to order payment to private applicants of an amount up to the benefit derived from the conduct at issue.
Lowering the threshold for private parties to obtain leave to apply to the Tribunal for relief under s.103.1 by requiring that the applicant's business only be substantially affected in whole or in part, or the private party shows it is in the public interest for leave to be granted.
Key takeaways: We expect to see an increase in private access applications to the Tribunal in light of these proposed amendments. Companies should update their competition law compliance programs and training to reflect the increased risk of private applications and compensation being awarded.
2. Enhanced Competitor Collaboration Provisions
The amendments expand the civil competitor collaboration (i.e., joint venture) provisions under s.90.1, by extending their application to "proposed" agreements and enhancing the risk of violating those provisions by:
Providing for merger-style divestiture remedies to address any substantial lessening or prevention of competition (SLPC) resulting from the collaboration;
Providing for AMPs of up to the greater of: (i) C$10-million (C$15-million for subsequent violations) or; (ii) three times the value of the benefit derived from the agreement or arrangement, or, if that amount cannot be reasonably determined, 3% of the person's annual worldwide gross revenue.
Key takeaways: The Bureau and now private litigants will be incentivized to increase their focus on collaborations between competitors or even vertical (i.e., supplier and customer) agreements which may be seen to have an impact on competition. Companies should seek legal advice on any planned or ongoing competitor collaboration, joint ventures or vertical arrangements in light of the expanded scope and heightened penalties under s.90.1.
3. Broader Scope for Merger Review
The amendments would expand the reach of the merger provisions of the Act by:
Including sales "into" Canada as part of the "size of transaction" notification threshold, capturing foreign mergers even where parties have no assets or sales in Canada but sales into Canada.
Extending the limitation period for Bureau review of mergers that are not notified to the Bureau in advance of closing the transaction to three years post-closing.
Preventing parties to a merger from closing a transaction simply upon the Commissioner filing an application to prevent closing because the Commissioner needs more time to conduct the inquiry (s.100) or is of the view that closing will harm competition (s.104) until the Tribunal disposes of such applications.
Including potential impacts in labour markets the determination of an SPLC under the merger review provisions in s.92(1).
Adding effects from increases in market share or concentration, as well as the likelihood that the proposed transaction will result in express or tacit coordination between competitors, as factors to be considered in determining whether a merger is likely to lead to an SPLC under s.93.
Key takeaways: Parties to transactions with sales into Canada should be aware of potential notification requirements, even where they do not have operations in Canada. Parties may consider notifying the Bureau of non-notifiable transactions to benefit from a shorter limitation period of Bureau review. The Bureau will have a heightened ability to prevent contested mergers from closing through the mere filing of injunction applications to the Tribunal, likely extending timelines for contested merger reviews.
4. Deceptive Marketing Practices
In addition to adding a right of private access for deceptive marketing practices, the amendments also:
Add "greenwashing" (i.e., making unsubstantiated claims regarding the environmental benefits of a product or service) to the list of misleading conduct under s.74.01.
Extend the availability of an interim injunction under s.71.111 to private litigants who have been granted leave by the Tribunal to challenge deceptive marketing conduct.
Add monetary penalties of up to C$10,000 for each day of non-compliance and potential prohibition or other orders for a failure to comply with a consent agreement related to deceptive marketing practices under s.74.12.
Key takeways: Companies should review their marketing practices in light of the proposed amendments and the risks that flow from expanded penalties and private litigation.
5. Other Changes
The amendments contain further changes, notably:
Reprisal Actions. Introducing AMPs or other remedies if a party engages in reprisal actions against a party as a result of their cooperation with the Bureau in the course of an investigation.
Right to Repair. Adding the ability for the Tribunal to order a supplier to provide a means for customers or their parties to diagnose or repair under the refusal to deal provisions (s.75), such as technical updates, diagnostic software or tools and any related documentation and service parts.
Environmental Collaborations. Permitting the Commissioner, on application by the parties, to issue a certificate certifying that an agreement or arrangement entered into for the purposes of protecting the environment is not likely to lead to an SPLC.
Key takeaways: The reprisal action amendments will reduce the barriers/risks for parties to cooperate with Bureau investigations. Companies should review their practices relating to diagnostics or repair in light of the potential for Commissioner-led or private enforcement of the Act's refusal to supply provisions. Parties to environmental collaborations may consider seeking Bureau approval of such collaborations to minimize risks under the Act.
These changes represent the most significant set of reforms to the Act since the statute was overhauled in 2009 and build upon other recent legislative initiatives such as the currently tabled Bill C-56, and recent 2022 amendments.
For more information on Bill C-56, see our September 2023 Blakes Bulletin: Canadian Government Introduces Important Amendments to the Competition Act. For more information on the 2022 amendment, see our April 2022 Blakes Bulletin: Proposed Competition Law Amendments in Canada Set to Significantly Expand the Scope of the Competition Act.
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.