Canadian Competition Law in Transition: Adapting Your Business to the New Normal
A series of amendments to the Competition Act (Act), beginning in 2022, have significantly altered the competition law landscape in Canada and represent the most significant overhaul of Canadian competition law in a generation. The amendments have primarily been directed at facilitating more effective enforcement under the Act by both the Competition Bureau (Bureau) and private parties and enhancing consumer protection. We expect the trend toward greater enforcement to continue in 2025, including through continued expansion of the private access regime under the Act. At the same time, however, recent political developments suggest that Canadian competition law enforcement may be entering a period of uncertainty as policymakers seek to balance multiple goals of consumer welfare and protection while also seeking to address lagging productivity in Canada. Key drivers of this uncertainty include a 2025 federal election in Canada and the threat of tariffs from the new administration in the United States, combined with ever-growing remonstrations regarding declining productivity in Canada. Regardless, 2025 will be a year of ongoing transition from the prior competition law regime to a brave new world of competition law with numerous practical implications for businesses in Canada. Here are some examples:
- Increased Regulatory Complexity and Enforcement Risk. Recent amendments to the Act have increased the stakes for non-compliance by broadening the scope of conduct captured in the Act, lowering thresholds for the Bureau and private parties to pursue enforcement action and increasing penalties for non-compliance. Companies should reassess their conduct and existing agreements in light of the new rules.
- Updating Competition Compliance Policies. The recent spate of amendments to the Act implicates both substantive and procedural changes to its provisions, impacting a broad array of business practices. Compliance policies should be reviewed and updated to reflect current laws and practices.
- Increased Likelihood of Private Enforcement. With the continued expansion of the Act's private access regime, including monetary compensation for civil breaches of the Act, the likelihood of private litigation has significantly increased. Companies should closely consider complaints from competitors, customers and suppliers and the potential for strategic litigation under the Act.
Private Access: Broadening the Net and Increasing the Stakes
The Act has long permitted private parties to seek leave from the Competition Tribunal (Tribunal) to bring an application under certain provisions of the Act relating to restrictive trade practices, such as the refusal to deal, resale price maintenance, exclusive dealing, tied selling and market restriction. Notwithstanding this ability, few of these applications have been brought, and leave has been granted only in a small number of cases. However, the Act's private access provisions have been significantly revised since 2022, and the private access regime will be substantially broadened starting in June 2025. Notable changes are outlined below:
- Expansion of the Private Access Regime. In 2022, the Act's private access regime was expanded to include the abuse of dominance provisions. In 2025, the regime will become available for claims under the Act's civil deceptive marketing and civil competitor collaboration provisions. Notably, this includes claims under the new greenwashing provisions, which have been the subject of significant attention since coming into effect in 2024.
- Lower Bar for Leave. The test for a private applicant to obtain leave to bring a claim will be lowered starting in June 2025. An applicant will only have to demonstrate that the alleged conduct affected its business 'in whole or in part' or that granting leave would be in the public interest. This is a lower threshold than the previous standard, which, in most cases, required that the conduct substantially and directly affected an applicant's entire business. This change will open the door for applicants to bring claims relating only to certain segments of their business or claims seeking to rely on the public-interest branch of the test.
- Monetary Remedies. Currently, private applicants cannot obtain any compensation under the Act's private access regime. Starting in June 2025, private parties who successfully bring an application for refusal to deal, resale price maintenance, exclusive dealing or tied selling, abuse of dominance or civil competitor collaborations will be able to benefit from a disgorgement remedy. The remedy may be in an amount up to the value of the benefit derived by the alleged conduct and is to be distributed among the applicant and any other persons affected by the conduct in a manner determined by the Tribunal. While private plaintiffs in civil misleading advertising cases, including greenwashing allegations, will not have a disgorgement remedy, they may be able to obtain restitution if they prove that the defendant made representations that are 'false or misleading in a material respect.'
- Potential Class-Like Proceedings. The introduction of monetary awards creates the possibility for class-action-type applications, whereby a private applicant can seek leave to bring an application, including in the public interest, and have disgorged funds or restitution paid out to a large group of affected parties. At this time, the procedural mechanisms for such actions are unclear, as many of the tools contained in class-action legislation are not present in the Act or the Tribunal's rules. The Tribunal is expected to provide practice directions or guidance on how its rules may be amended to manage these new private access applications starting in June 2025.
Key Takeaways for Business
- Increase in Private Litigation. The introduction of disgorgement remedies and the reduction of barriers to private access will likely spur an increase in private litigation beginning in June 2025, with the potential for quasi-class proceedings.
- Potential for Strategic Litigation. An expanded private access regime also presents increased opportunities for private parties to use the system to further their commercial goals.
Mergers Reviews: Are You Ready for the Paradigm Shifts?
The Bureau is seeking to utilize new tools obtained through recent legislative amendments. It is expected to take a more aggressive enforcement approach by undertaking more in-depth merger reviews and opposing more deals it views as anti-competitive. This includes enforcement for non-notifiable mergers, many of which it identifies through reviewing public sources, such as press releases and news coverage. Notable changes include the following:
- Expanding the Universe of Mergers Subject to Review. Two important changes will result in a greater number of transactions reviewed by the Bureau. First, the value of sales 'into' Canada is now included in determining whether the 'size of transaction threshold' for mergers has been met, increasing the number of transactions requiring premerger notification. Second, the period for the Bureau to challenge a merger that it has not been notified about has been extended from one year to three years, enhancing the Bureau's ability to review completed mergers. Mergers notified to the Bureau may only be challenged for up to one year post-closing.
- Hurdles for Clearance. The prohibition against
the Tribunal finding that a merger is anti-competitive solely based
on market share or concentration has been replaced with a
rebuttable structural presumption that a merger is anti-competitive
based solely on concentration and market share thresholds unless
the merging parties can prove otherwise.
- Under the structural presumption, a merger is presumptively anti-competitive if it increases the 'concentration index' by more than 100 and either (i) the post-merger concentration index is more than 1,800 or (ii) the parties' post-merger market share exceeds 30%. The concentration index is the sum of the squares of the participants' market shares in the relevant market.
- New Substantive Factors. The factors to be considered in assessing the effects of a merger have been broadened to expressly include labour market effects, effects from increases in market share or concentration, and the likelihood that a proposed transaction will result in express or tacit coordination.
- Raising the Bar for Remedies. Where merger remedies are required, they must now restore competition to the level that would have prevailed but for the merger. This is a higher threshold than the previous remedy standard, which required that the prevention or lessening of competition resulting from a merger merely be reduced to a level that was no longer substantial.
- Automatic Prohibition on Closing. Merging parties now face an automatic bar to closing their merger once the Bureau files an application with the Tribunal for an injunction to seek more time to complete its inquiry or block closing pending a challenge on the merits. The bar would remain in place until the Tribunal has disposed of the Bureau's application.
The recent changes to the merger provisions of the Act represent a sea change, which is likely to require adjustments to the Bureau's enforcement approach. In November 2024, the Bureau commenced a public consultation regarding updates to its Merger Enforcement Guidelines, which were last updated in 2011. The Bureau is expected to publish updated guidelines in 2025 reflecting the recent amendments to the Act and the Bureau's current practices in merger reviews.
Key Takeaways for Businesses:
- More Advanced Merger Planning. While most transactions will continue to be reviewed quickly, an increasing number of transactions will take longer for the Bureau to review, requiring more planning, including with respect to the negotiation of appropriate covenants and conditions in transaction documents. Parties to non-notifiable transactions need to carefully consider the implications of the extended three-year limitation period, including when negotiating risk allocation and deciding whether to notify the Bureau voluntarily to obtain the benefit of the one-year limitation period.
- More Sophisticated Analysis. With the new structural presumption, market definition will play an increasingly central role in merger analysis, necessitating more sophisticated, data-based analyses. The Bureau is likely to increasingly utilize court orders to obtain data from third parties to facilitate the determination of market definition and calculation of market shares and concentration changes. This will lead to an increase in the asymmetry of information between the merging parties and the Bureau. Internal documents, such as board presentations and strategic planning materials, will be a key consideration in merger reviews, providing insight into competitive dynamics, market definition, market shares and deal rationale.
- Increased Focus on Remedies. The new, more stringent remedy standard will necessitate a more rigorous approach to remedies, including increased upfront planning and closer scrutiny of remedy buyers to ensure remedies will restore competition. Remedy considerations should form part of transaction planning and negotiations, including adopting proactive solutions such as 'fix-it-first' remedies and extended outside dates to facilitate remedy negotiations.
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