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5 November 2024

Greenwashing, Mergers And Controls: Key Changes To Canada's Competition Act That Impact Businesses

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Fillmore Riley

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Fillmore Riley is a highly regarded and accomplished full-service Manitoba law firm. Since 1883, our lawyers have been entrusted to work on some of the most complex and sophisticated transactions and litigation involving Canada’s most prominent companies, institutions and individuals. As a result, market sources routinely recommend our lawyers for our proficiency in banking and finance, securities, taxation, real estate and property development and litigation. We advise a wide range of public and private sector clients, including large and small corporations, financial institutions, major national insurers, municipalities and professional organizations and associations on their mission-critical business transactions and commercial litigation. Fillmore Riley also advises individuals on their wills, trusts and estates, tax, family law and civil litigation matters.
Canada's economic landscape continues to evolve, and with it, the legal framework designed to promote fair competition. In June 2024, significant amendments to the Competition Act, RSC 1985, c C-34 came into force, marking the third set of reforms in as many years.
Canada Antitrust/Competition Law

Canada's economic landscape continues to evolve, and with it, the legal framework designed to promote fair competition. In June 2024, significant amendments to the Competition Act, RSC 1985, c C-34 (the Act) came into force, marking the third set of reforms in as many years. These amendments stem from the government's attempts to adapt Canadian competition laws to address the challenges posed by an increasingly complex and dynamic marketplace.

At a high level, the 2024 changes to the Act significantly strengthen Canada's competition law framework by enhancing merger control, expanding enforcement against anti-competitive agreements, and increasing the focus on deceptive marketing practices. These amendments also broaden access for private parties to bring cases to the Competition Tribunal (the Tribunal), introduce steeper penalties for civil violations, and empower the Competition Bureau (the Bureau) to conduct more proactive market studies.

First, a quick terminological note to highlight that the Competition Bureau and Competition Tribunal are different; as a rough way of thinking about it, the Competition Bureau is akin to the Department of Justice — an administrative and enforcement entity, in this case, one that pursues anti-competitive behaviour; while the Competition Tribunal can be thought of like a court — a quasi-judicial entity that adjudicates such matters.

This article examines key elements of the 2024 amendments and explores how they affect businesses operating in Canada — whether engaged in purely domestic commerce, mergers and acquisitions, consumer marketing, or cross-border trade.

A New Approach to Merger Control

Merger control has long been a cornerstone of competition law. Its purpose — to prevent market dominance and ensure that consumers benefit from healthy competition — is fundamental to the mission of the Bureau. Since its inception, the Bureau has been able to review any merger in Canada under the Act, and it must be notified in advance of mergers that exceed specific financial thresholds.

Before the 2024 amendments, Canadian competition law applied a more traditional approach to merger control, largely focused on the effect of mergers on product pricing and direct competition. The Bureau examined whether mergers would substantially prevent or lessen competition, but the burden of proof was on the Bureau to demonstrate this harm. Additionally, the review process primarily concentrated on market share and pricing, overlooking broader economic impacts such as labour market concentration or coordination among competitors.

The new 2024 amendments introduce a presumption that mergers resulting in significant increases in market concentration or share are inherently anti-competitive.

Under the new rules, mergers that elevate the concentration index by more than 100 points and lead to a post-merger concentration index exceeding 1,800 or a combined market share above 30% are now presumed to prevent or substantially lessen competition. This introduces a burden on the merging parties to provide clear and convincing evidence that the transaction will not harm competition — as noted, a significant shift from the previous regime, where the Competition Bureau had to prove harm.

What's particularly notable is the Bureau's newfound authority to scrutinize the broader economic impacts of mergers. The amendments mandate that merger reviews must now account for their effects on labour markets, innovation, and potential coordination between competitors. This holistic approach represents a marked departure from previous practices, ensuring that merger assessments go beyond traditional price-focused analyses. Businesses considering mergers or acquisitions in Canada should now prepare for more comprehensive and rigorous reviews.

Further, the Bureau can now challenge non-notifiable transactions more easily, and for a longer time horizon. The Bureau can now challenge transactions that occurred in the previous 3 years, a marked increase from the previous standard of 1 year. This includes deals that may not meet the financial thresholds for pre-merger notification but nonetheless pose risks to competition. Companies that engage in significant sales in Canada should pay special attention to these changes, as they are a notable shift from the past, and many transactions will be notifiable that would not have been under the previous regime.

Strengthened Prohibitions on Anti-Competitive Agreements

Prior to the 2024 amendments, Canadian competition law allowed the Bureau to tackle anti-competitive agreements, but its ability to pursue certain practices was more limited. Anti-competitive agreements between competitors (horizontal agreements), such as price-fixing or bid-rigging, were already per se illegal, but other forms of collaboration, especially vertical agreements between suppliers and customers, required proof of substantial lessening of competition.

Another critical reform in the 2024 amendments is the expansion of the Bureau's ability to address anti-competitive agreements. This includes both horizontal agreements (between competitors) and vertical agreements (between suppliers and customers) that could result in anti-competitive outcomes.

The amendments specifically target collaborations that harm competition, such as price-fixing agreements, market allocation, and bid-rigging. The previous framework limited enforcement against such practices, but now the Bureau has enhanced tools to crack down on what are, in their view, harmful business practices that distort competition.

These changes serve to strengthen civil provisions within the Act that prevent the entering into agreements that substantially prevent or lessen competition. As noted, they grant the Competition Bureau greater retrospective review powers (up to 3 years), and notably allow private parties (including other companies) to challenge anti-competitive agreements directly to the Tribunal (which was previously only done by the Bureau).

It's worth further noting that as part of 2023 reforms to the Act, the controversial "efficiencies defense," which allowed some anti-competitive mergers to proceed if the efficiencies gained outweighed the harm to competition, was repealed.

Increased Focus on Deceptive Marketing and Greenwashing

As consumer awareness of environmental and social issues has grown, so too has the focus on deceptive marketing practices, particularly "greenwashing" — where businesses exaggerate or falsely claim the environmental benefits of their products or services. The 2024 amendments reflect this trend, introducing stricter regulations around environmental representations.

Before the 2024 amendments, the Act already prohibited misleading advertising and deceptive marketing, but the rules around greenwashing were relatively vague. Businesses were required to ensure their claims were truthful, but the specifics of what constituted "misleading" or "deceptive" in the context of environmental benefits were not clearly defined.

The 2024 amendments introduce stringent new requirements for businesses that make environmental claims. Under the updated rules, businesses must substantiate any claims about the environmental benefits of their products or practices with clear, verifiable evidence. For claims about the environmental benefit of a product, this means adequate and proper testing. For claims about the environmental benefits of a business or business activity, this means adequate and proper substantiation in accordance with an internationally recognized methodology. This seems to be a direct response to increasing concerns that companies were overstating their environmental credentials to attract eco-conscious consumers without backing these claims with meaningful data.

This shift marks a departure from the pre-2024 era, where enforcement actions against environmental misrepresentations were relatively infrequent, and companies enjoyed a broader margin of flexibility in their claims. The Bureau can now take more consistent action on deceptive environmental claims. To assist businesses in complying with these new rules, the Bureau has initiated public consultations to provide guidance on how to properly substantiate environmental claims.

For businesses, this means a significant adjustment to marketing strategies. Companies can no longer rely on vague, generalized claims of environmental benefits and must now ensure that any such claims are backed by rigorous documentation and evidence. The amendments bring Canadian law more in line with international trends in combating misleading environmental marketing practices.

Expanding Access to the Competition Tribunal

Before the 2024 amendments, the enforcement of competition law in Canada was primarily driven by the Competition Bureau, with limited opportunities for private parties to bring their own cases before the Competition Tribunal. While private enforcement was possible, the barriers to filing such cases were high, and the types of cases that could be brought were narrowly defined.

The 2024 amendments expand the rights of private parties — including businesses, individuals, and organizations — to bring cases directly to the Competition Tribunal. This is a significant departure from the past, where private enforcement was largely confined to cases involving price maintenance, refusal to deal, and abuse of dominance (added in June of 2022). Now, private parties can bring cases related to far broader circumstances, including deceptive marketing and civil agreements that hinder competition. This broadening of access will likely lead to an increase in private litigation, complementing the Bureau's own enforcement actions.

However, even with this expanded access, certain barriers remain. For instance, private parties must still meet the leave test, which requires demonstrating that their application has a reasonable chance of success before it can proceed. This test seeks to ensure that frivolous or baseless claims do not overburden the Tribunal. Additionally, the full implementation of these changes will not occur until mid-2025 (coming into force on June 20, 2025), providing businesses with a transition period to prepare for this new era of private enforcement.

Increased Penalties for Civil Violations

Before the June 2024 amendments, a criticism of the Act was that the civil penalties for anti-competitive behaviour were not severe enough to effectively deter violations. While the Act has always empowered the Competition Bureau to impose penalties on companies engaging in civilly reviewable conduct, the fines were often not a real deterrent.

The 2024 amendments give the Tribunal the Competition Tribunal the authority to impose far more impactful financial penalties. The amendments introduce an administrative monetary penalty (AMP) structure that is considerably more stringent and capable of making anti-competitive practices financially unviable for companies. Under the new regime, the Tribunal can impose a monetary penalty not exceeding the greater of:

  • $10 million for a first order ($15 million for any subsequent orders), or
  • Three times the value of the benefit derived from the anti-competitive agreement or conduct, or
  • 3% of the company's worldwide gross revenues if the benefit from the anti-competitive behaviour cannot be reasonably determined.

Other Amendments That Will Impact Businesses

Refusal to Deal

The 2024 amendments to the Act have significantly strengthened the refusal to deal provisions, addressing gaps that previously allowed businesses to engage in exclusionary practices without sufficient legal recourse. Historically, Canadian businesses were generally free to choose their trading partners, with refusal to deal claims being difficult to establish. Before these changes, a business had to demonstrate that a refusal substantially affected the entirety of its business, making it challenging for companies with diversified operations to pursue legal action. As a result, businesses harmed by refusals that only impacted part of their operations often had no effective remedy.

The new amendments lower this threshold, allowing businesses to seek relief if a refusal substantially affects a part of their business, rather than the substantially affecting the entirety of the business. This shift expands the scope of potential claims, particularly in cases where a refusal disrupts a key product line, market segment, or revenue stream. For suppliers with market power, especially in industries where access to essential goods or services is controlled by a few dominant players, this means heightened scrutiny. Now, a refusal to deal that harms competition, even on a smaller scale, can be challenged.

Right to Repair

Also contained within the refusal to deal provision is a refusal to supply the "means of diagnosis or repair," which will be defined as "diagnostic and repair information, technical updates, diagnostic software or tools and any related documentation and service parts." This brings Canada more in line with broader international trends. Before the amendments, manufacturers could exert near-total control over the repair process.

Conclusion

The June 2024 amendments to Canada's Competition Act mark a significant shift in competition law, with notable changes impacting merger control, anti-competitive agreements, deceptive marketing, and enforcement mechanisms. Mergers that lead to significant increases in market concentration are now presumed anti-competitive, and the Competition Bureau can scrutinize their broader economic impacts, including labour markets and innovation. The repeal of the efficiencies defence and enhanced enforcement powers regarding both horizontal and vertical agreements aim to curb anti-competitive collaborations more effectively.

Additionally, businesses making environmental claims must now ensure those claims are backed by robust, verifiable evidence, as stricter regulations target deceptive marketing practices, particularly greenwashing. The amendments also open new avenues for private parties to bring cases to the Competition Tribunal, expanding enforcement beyond just the Bureau. Finally, the introduction of more severe penalties, including the ability to impose substantial monetary fines and order divestitures, further emphasizes the risk of not complying with these changes. The amendments, taken together, represent a modernization of Canada's competition law, with significant implications for businesses across all sectors.

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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