Further And Significant Proposed Amendments To The Competition Act In The Areas Of Merger Review, Ordinary Sales Pricing, Drip Pricing And Environmental Claims



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On November 27, 2023, the Federal Government passed a Notice of Ways and Means Motion to introduce a bill entitled An Act to implement certain provisions of the fall economic...
Canada Antitrust/Competition Law
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On November 27, 2023, the Federal Government passed a Notice of Ways and Means Motion to introduce a bill entitled An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, which was tabled on November 30, 2023 as Bill C-59 (the "Bill"). The Bill proposes amendments that implement some of the goals discussed in the 2023 Fall Economic Statement, including significant and far-reaching amendments to Canada's Competition Act (the "Act").

The Bill was discussed and debated during several meetings before the House of Commons Standing Committee on Finance (the "Committee"), which included appearances by the Commissioner of Competition (the 'Commissioner"), representatives from the Department of Innovation, Science and Economic Development Canada ("ISED") and other commentators. Following these sessions, the Committee made a number of important amendments to the Bill, which will result in further significant and far-reaching amendments to the Act. The key amendments to the Act, which are reflected in both the revised version of the Bill dated May 2, 2024 (the "Amended Bill", which follows second reading and will be used at the report stage) and the Committee's report to the House of Commons presented on May 6, 2024, are discussed below. They are divided into four areas: merger review, ordinary sale pricing, drip pricing and environmental claims.

Merger Provisions

The Amended Bill includes two significant changes to the merger review process in Canada, including the introduction of rebuttable structural presumptions and changes to the remedial standard for anticompetitive mergers.

  • Rebuttable Structural Presumptions

In order to obtain a remedy from the Competition Tribunal (the "Tribunal"), the Commissioner must establish that the merger results in, or is likely to result in, a substantial prevention or lessening of competition (an "SPLC"). If the Commissioner is unable to meet this threshold, the Tribunal cannot order a remedy in respect of the merger.

The Bill has been amended to now include rebuttable structural presumptions, namely a presumption of anticompetitive effects for mergers where certain market share and HHI thresholds are exceeded. If and when demonstrated, the onus would shift to the merging parties to rebut the presumption of anticompetitive effects.

The Amended Bill includes the same structural presumptions found in the 2023 US Merger Guidelines, which are set out below.

Importantly, the Amended Bill also provides that "the Governor in Council may by regulation prescribe different values than those provided in [the Act]". This provision appears to address concerns that the structural presumptions are included in guidelines in the US (which can be changed relatively easily) and would be included in legislation in Canada (which is more challenging by way of process to alter).

Going forward, it will be necessary for merging parties to carefully review mergers to determine if either of the above thresholds is exceeded. While exceeding the above thresholds will not be fatal to a transaction, the merger review exercise to secure clearance from the Competition Bureau is expected to be more rigorous and challenging, particularly where concentration levels and/or market shares are high. In this regard, the 2023 US Merger Guidelines state that "[t]he higher the concentration metrics over these thresholds, the greater the risk to competition suggested by this market structure analysis and the stronger the evidence needed to rebut or disprove it". This approach may also be adopted in Canada.

  • Remedial Standard

The merger provisions allow the Tribunal to order a remedy where it finds that a merger results in, or is likely to result in an SLPC. Consistent with these provisions, the Supreme Court of Canada held in Southam that "[i]t hardly needs arguing that the appropriate remedy for a substantial lessening of competition is to restore competition to the point at which it can no longer be said to be substantially less than it was before the merger". Critics have argued that this standard is too lax and should be amended to require that competition be restored to levels that would prevail but for the anti-competitive merger, such that no lessening or prevention is permitted.

Through the Amended Bill, the remedies ordered by the Tribunal will need to restore competition to the level that would have prevailed but for the merger (in the case of a completed merger) or preserve the level of competition that would prevail but for the merger (in the case of a proposed merger). This represents a fundamental shift in the approach to merger remedies in Canada – a shift that merging parties will need to carefully consider when negotiating antitrust risk language in their transaction agreements.

Ordinary Selling Price Provisions

The ordinary selling price ("OSP") provisions prohibit a supplier from making materially false or misleading representations to the public as to the OSP of a product. The OSP is determined by using one of two tests: either a substantial volume of the product was sold at that price or a higher price within a reasonable period of time (volume test); or the product was offered for sale, in good faith, for a substantial period of time at that price or a higher price (time test).

Under these provisions, the Commissioner bears the burden of proving that advertised discounts are not genuine having regard to the volume test and the time test. Critics have argued that the burden of proof for OSP matters should be reversed, so that suppliers bear the burden of proving that advertised discounts are, in fact, truthful.

The amended Bill now shifts the burden to suppliers to prove that discounts from their own prices are genuine having regard to the volume tests and/or the time test (i.e., that the parties meet the volume or the time tests). Ultimately, this change reinforces the importance for suppliers to maintain sufficient price records to ensure that they can prove that advertised discounts are genuine when the advertised price is compared to their own ordinary prices. Failure to maintain such records could significantly increase risk under the OSP provisions.

Drip Pricing Provisions

On June 23, 2022, new drip pricing provisions were added to both the civil (section 74.01(1.1)) and criminal (section 52(1.3)) prohibitions on false or misleading representations in the Act. These provisions deem drip pricing as a false or misleading representation. Specifically, the provisions provide that offering a product or service at a price that is unattainable due to fixed obligatory charges or fees will be deemed to constitute a false or misleading representation, unless the obligatory charges or fees represent only an amount imposed by or under an Act of Parliament or the legislature of a province, such as a sales tax.

The Bill subsequently included amendments adding this same drip pricing provision to both the civil (section 74.011(3.1)) and the criminal (section 52.01(4.1)) electronic messaging provisions.

The Amended Bill now provides that the making of a representation of a price that is not attainable due to fixed obligatory charges or fees constitutes a false or misleading representation, unless the obligatory charges or fees represent only an amount imposed on a purchaser of the product by or under an Act of Parliament or the legislature of a province. Accordingly, the amendment appears to address concerns raised by critics about the ability of advertisers to drip their own costs for complying with various laws onto consumers in a way that consumers may not expect.

Environmental Claims

The Bill includes an explicit prohibition against making "a representation to the public in the form of a statement, warranty or guarantee of a product's benefits for protecting the environment or mitigating the environmental and ecological effects of climate change that is not based on an adequate and proper test". Notably, this provision only appears to apply to environmental statements regarding a product. It does not appear, on a plain reading, to apply to more general environmental representations (i.e. such as those relating to the environmental goals of a company or the sustainable nature of its operations).

The Amended Bill seeks to extend the greenwashing provision to general environmental representations, namely "representation[s] to the public with respect to the benefits of a business or business activity for protecting or restoring the environment or mitigating the environmental and ecological causes or effects of climate change". In these cases, and according to the Amended Bill, the representations would need to be "based on adequate and proper substantiation in accordance with internationally recognized methodology, the proof of which lies on the person making the representation".

Given these changes and lack of existing guidance, new guidance should be anticipated from the Bureau. We would hope that it is, among other things, principled, consistent and practical. The Bureau should strive to take a cohesive approach to guidance in this area, taking into consideration, among other things, consistency with other regulatory regimes and environmental disclosure standards.

The Fasken Team will continue to keep you posted on developments regarding amendments to the Act.

If you have questions about the ongoing Competition Act amendment process, you can reach out to any member of Fasken's Competition, Marketing & Foreign Investment group. Our group has significant experience advising clients on all aspects of Canadian competition law and consumer protection.

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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