Key amendments to Canada’s Competition Act
On June 23, 2022, the Canadian government passed legislation amending the Competition Act. The key changes relate to: maximum fines and penalties; wage-fixing and no-poaching agreements between employers; drip pricing; evidence gathering; and merger review.
It is worth noting that these amendments were passed through a budget bill — the Budget Implementation Act, 2022, No. 1 — and accordingly did not benefit from meaningful debate or scrutiny. Despite this, the amendments will have a significant impact on entities doing business in Canada and the criminalization of wage-fixing/no-poaching agreements and drip pricing in particular give rise to new avenues for civil class actions whether in the face of or in the absence of enforcement action by the Competition Bureau.
Increased maximum fines and penalties
Fines for conspiracy
For criminal agreements between competitors to fix prices, restrict supply or allocate markets (referred to as “criminal cartel offences”), the court now has ultimate discretion to set fine amounts. Formerly, the limit was set at $25 million. This provision will not come into force until June 23, 2023, to allow businesses time to ensure they are in compliance with the law.
Administrative monetary penalties
Administrative monetary penalties for deceptive marketing practices and abuse of dominance have been increased. The new maximum penalty for corporations is the greater of:
- $10 million (or $15 million for each subsequent violation), and
- three times the value of the benefit derived from the deceptive or anti-competitive conduct, or, if that amount cannot be reasonably determined, three percent of the corporation’s annual worldwide gross revenues.
Previously, penalties for corporations were capped at $10 million, or $15 million for each subsequent violation.
Wage-fixing and no-poaching agreements
The wage-fixing and no-poaching agreement amendments make it an offence for employers to conspire with other employers to fix, maintain, decrease or control wages and other terms of employment (“wage-fixing agreements”) and to refrain from hiring or trying to hire one another’s employees (“no-poach agreements”). These provisions are added within the existing criminal conspiracy provisions, and are subject to the discretionary court imposed fines and administrative monetary penalties discussed above.
These provisions will not come into force until June 23, 2023.
Abuse of dominance
The abuse of dominance amendments include several changes relating to:
- clarifying and expanding the definition of an “anti-competitive act”;
- expanding the factors to be considered in determining if a practice has the effect of substantially preventing or lessening competition; and
- allowing private parties to apply for leave to the Competition Tribunal.
Definition of “anti-competitive acts”
The amendments clarify that an “anti-competitive act” means any act that is intended to have a predatory, exclusionary or disciplinary negative effect on a competitor, or to have an adverse effect on competition.
The amendments also add an additional example of an “anti-competitive act”: a selective or discriminatory response to an actual or potential competitor for the purpose of impeding or preventing the competitor’s entry into, or expansion in, a market or eliminating the competitor from the market.
What it means to prevent competition in a market
The amendments include new factors for the courts to consider when determining if a practice of anti-competitive acts has the effect of “preventing competition substantially in a market”, including:
- the effect of the practice on barriers to entry, including network effects;
- the effect of the practice on price or non-price competition, including quality, choice or consumer privacy;
- the nature and extent of change and innovation in a relevant market; and
- any other factor relevant to competition.
Private access to the Tribunal for abuse of dominance cases
Perhaps most notably, the amendments extend private access to abuse of dominance cases allowing private parties to apply to the Competition Tribunal if they are directly and substantially affected by the conduct of another party.
While this amendment may increase the number of abuse of dominance cases, the relief available to private parties is limited to injunctive relief. Though the administrative monetary penalties may be significant, they are payable to the government. It remains to be seen whether or not this amendment will incentivize private litigants to bring an abuse of dominance case against a competitor – however, the availability of this new remedy and the potential for significant monetary penalties will undoubtedly provide some leverage to private litigants.
New amendments expressly recognize – for both civil and criminal provisions – that it is a “false and misleading representation” to represent a price to a customer that is not attainable because of mandatory fixed additional charges or fees – usually revealed at later stages in the purchasing process (“drip pricing”).
Expanded evidence-gathering powers
These amendments are intended to enable more effective enforcement of the Competition Act offences in today’s digital economy:
- individuals, even located outside of Canada, must now provide information under a court order obtained by the Commissioner if they carry on business in (or sell into) Canada; and
- the Bureau can now compel written information, not just “records”, as the provisions formerly were limited to, from both foreign and domestic affiliates of a corporation. The circumstances in which the Bureau can exercise this power has also been expanded. Previously, it was necessary to show that the affiliate “has records” that are relevant to the inquiry, it is now sufficient that the foreign and domestic affiliate has, or is likely to have, records or information relevant to the inquiry.
Merger review changes and clarifications
A number of changes to the merger provisions of the Competition Act have also been enacted.
This article provides only general information about legal issues and developments, and is not intended to provide specific legal advice. Please see our disclaimer for more details.