The federal government has significantly enhanced the Canadian approach to both competition law and foreign investment, evidencing a growing focus on enforcement of Canada's competition laws and on national security considerations arising from foreign investment. Businesses need to be mindful of the increasing risk and exposure from these changes.
Specifically, the legislative framework governing competition law and business conduct in Canada as set out in the Competition Act (Act) has changed substantially. The application of these rules is also becoming more rigorous. We wrote about these pending changes last year. Some of these changes are already in effect. Others are coming into effect at the end of this year or in June 2025. Among other noteworthy developments, private rights of action are now available for contravention of certain provisions with monetary relief available as a remedy. The Act also now specifically includes greenwashing provisions, which we have addressed separately.
Beyond competition law, foreign investment has remained the subject of government attention. Like governments in many parts of the world, the Canadian government is increasing its focus on the potential national security implications of foreign investment in Canada. In 2025, it is anticipated that the federal government will finalize the Investment Canada Act (ICA) regulations necessary to establish Canada's mandatory pre-closing national security review regime. This new regime will apply to non-passive investments in sensitive sectors.
These changes foreshadow greater change and oversight to come.
The evolving approach to competition law
To assist the business and legal communities navigate the new landscape, the Competition Bureau (Bureau) has commenced consultations with a view to developing guidance on mergers review, the new deceptive marketing practices provisions targeting greenwashing and the impact of the dramatically expanded civil agreement provisions, which now extend to restrictive covenants in leases and other property controls.
Further draft guidance on other aspects of the amendments will be forthcoming in the coming months. While this guidance is welcome, the breadth of the changes and the expanded role for private litigants promise that a broad range of new interpretations and legal theories will come before the Competition Tribunal (Tribunal) and the courts, both of which will ultimately determine the scope of the new law.
The amendments represent the most dramatic expansion of private enforcement of Canada's competition laws in a generation.
We have previously written in-depth summaries and analyses of the changes about which businesses in Canada need to be aware.
Increased rigour in merger enforcement
The recent amendments to the Act that impact mergers and acquisitions are meaningful. They include the repeal of the efficiencies defence, a provision unique to Canada which allowed a transaction to proceed if the merging parties could prove that its efficiency gains outweighed its anti-competitive effects. New presumptions of anti-competitive harm place substantially greater weight on market structure, including post-merger market share and concentration levels. The amendments also expand the scope of the mandatory pre-closing notification regime and provide the Bureau with enhanced powers to prohibit closing of a reportable transaction. Further, the risk of a post-closing challenge to a merger not subject to the mandatory notification regime (and not voluntarily notified) now exists for three years following the closing.
To a large extent these changes, while consequential, align with the U.S. merger regime and practice. The amendments will have significant implications for transacting parties from both an implementation and a timing perspective. Parties will need to consider competition risk at early stages in their transaction planning. This, in turn, will affect transaction negotiation where competition risk exists and overall timing to secure the necessary clearance.
Expansion of private enforcement of competition laws
The amendments to the Act represent the most dramatic expansion of private enforcement of Canada's competition laws in a generation. Private parties will be able challenge a broad range of conduct and agreements.
Monetary relief payable to a claimant will now be available as a remedy for certain conduct, such as abuse of dominance and civil commercial agreements, with the value based on the benefit derived from the anti-competitive conduct. The amendments will create a new collective relief regime that may permit the Tribunal to hear and adjudicate the equivalent of modern class action litigation. Private enforcement actions can be initiated on an individual basis or, potentially, a collective basis in cases where the Commissioner has not taken enforcement action and the private parties obtain leave from the Tribunal.
These changes increase the incentive for a broad range of private litigants — consumers, customers, suppliers, rivals and even public interest organizations — to seek private enforcement of Canada's competition laws.
Given the significant nature of these changes, the new private rights of access do not come into effect until June 20, 2025. This period provides a window for businesses to assess their practices and for the Bureau and the Tribunal to provide guidance and consider rules to accommodate this new regime.
Increased competition law risk for leading firms and oligopolies
The Act's provisions on abuse of a dominant position, which are the principal non-merger civil provisions of the statute, have been amended, making abuse of dominance easier to establish. Notably, a prohibition order can now be made against a dominant firm, or against a group of firms that are found to be jointly dominant, based on a finding of either anti-competitive intent or anti-competitive effect where such effect cannot be attributed to the firm's "superior competitive performance". Previously, to find an abuse of a dominant position, the Act required a dominant firm (or firms) to have engaged in conduct that has both an anti-competitive intent and an anti-competitive effect. To obtain a remedy beyond a prohibition order, such as a structural remedy or a monetary penalty, each of dominance, anti-competitive intent and anti-competitive effect must still be established.
The monetary penalties have been significantly increased. Moreover, as of June 2025, private parties will be able to commence proceedings seeking monetary relief.
Dramatic expansion of civil agreements provision
The stakes are higher for parties to commercial agreements as a result of three significant changes to the civil agreements provision in the Act. Some of these amendments came into effect this past June and some will come into effect on December 15, 2024.
First, potential remedies now include penalties of up to $10 million. Previously, no monetary penalties existed for the breach of these provisions.
Second, as of December 15, 2024, agreements to which these provisions apply will include all commercial agreements between businesses regardless of whether they compete with each other where "any part of" the agreement has, as a significant purpose, the prevention or lessening of competition. This would include a covenant not to compete or an exclusivity provision. This expansion of the commercial agreement provision will, for the first time, expose a broad range of ordinary commercial agreements between non-competitors to potential scrutiny and liability where a substantial prevention or lessening of competition is likely to result from the agreement. Moreover, it is an open question whether, in certain circumstances, mergers could be the subject of an application by a private party under the restructured commercial agreement provisions.
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.
