With the passing of Bill C-56, the most recent in an ongoing series of amendments to the Competition Act have now been enacted (with more expected to follow). The Commissioner of Competition has been pushing for amendments to the Act for years, following several significant losses in front of the Competition Tribunal and Federal Court of Appeal.

The primary takeaways for businesses in Canada are:

  • Market studies. Businesses and individuals can now be compelled to provide data, documents or testimony for market studies, with potentially significant compliance costs.
  • Abuse of dominance. A re-written test makes it easier for the Competition Bureau or private parties to prove abuse of dominance, and fine amounts have increased. Further expected amendments will allow private parties to receive damages.
  • Efficiencies defence. Eliminated (RIP, 1986-2023).
  • Restrictions on anticompetitive agreements. Broadened to apply to agreements between parties that are not competitors if a significant purpose is to lessen competition in any market.

We unpack the significance of these changes in greater detail below.

Compelled production of information for market studies

Bill C-56 amends the Act to give both the Commissioner and the Minister of Innovation, Science and Industry the ability to initiate "an inquiry into the state of competition in a market or industry" including the ability for the Commissioner to compel production of related documents and testimony from market participants.

While the Commissioner has conducted eight such market studies since 2007, covering generic drugs, financial services, broadband internet, grocery stores, and other markets, until now the Commissioner did not have the power to compel companies to provide information or data in connection with those market studies. The Commissioner has complained that this limitation hinders his ability to carry out market studies effectively.

The amendments bring this new inquiry power within the scope of section 11 of the Act, which allows the Commissioner to apply for a court order to compel oral examinations, production of records, or written returns, meaning that companies or individuals may now be compelled to provide the Bureau with information in connection with a market study, even if it is not suggested that anyone has engaged in any conduct contrary to the Act.

Such market inquiries may last up to 18 months, but this period may be extended by the Minister for additional three-month periods, carrying the potential for a significant long-term financial burden for the targets of production orders.

Rewriting of the Act's abuse of dominance prohibition

The Government has re-written the test for an abuse of dominance under section 79 of the Act, introducing two separate standards for orders.

The Tribunal may now make a prohibition order if two conditions are met:

  • one or more persons substantially or completely control a class or species of business throughout Canada or any area of Canada; AND
  • those persons are engaged in conduct that (i) is a practice of anti-competitive acts OR (ii) had, is having or is likely to have the effect of preventing or lessening competition substantially in a market, and the effect is not a result of superior competitive performance.

In effect, the amendment collapses what since 1986 was a more rigorous three-part test to a two-part test for prohibition orders.

For administrative monetary penalties, divestitures and damages orders, the Tribunal will still need to demonstrate that (i) one or more persons substantially or completely control a class or species of business throughout Canada or any area of Canada, (ii) the person or persons had engaged in or were engaging in a practice of anti-competitive acts, and (iii) the practice had, or was like to have had the effect of preventing or lessening competition substantially in a market.

Prior to the amendment, the Tribunal was unlikely to make an order provided there was a legitimate business justification for the impugned conduct – now, the Tribunal may make an order under section 79 even if there is a legitimate business justification for the impugned conduct.

The amendments also increase the maximum administrative monetary penalties for abuse of dominance from $10 million to $25 million for a first order and from $15 million to $35 million for each subsequent order. Additional proposed amendments would also provide that if the Tribunal, after an application by a private party, finds a person is engaging in anti-competitive acts under section 79, it can order that person to pay an amount that is no more than the benefit gained from such conduct. This amount will be distributed among all parties affected by such conduct.

Finally, the amendments purport to make "unfair and excessive pricing" an anti-competitive act. It is now open for a private litigant to attempt to assert that the Tribunal should prohibit a firm with a large market share from charging an unfair and excessive price. While the Government appears already to be insisting that this does not amount to price regulation, it is possible that at some point in the future the Tribunal will be asked to decide whether a price is fair or unfair. This amendment seems particularly ill-advised and potentially unconstitutional: the unfair price of today is the fair price of tomorrow.

Repealed efficiencies defence under section 96 of the Act

Since 1986, the Act has included a "defence" for mergers that generate economic efficiencies (cost savings) that outweigh their anticompetitive effects. Even though a very small number of litigated merger cases have turned on the efficiencies defence under section 96, the Bureau and the Commissioner have long called for its repeal. The efficiencies defence has now been eliminated.

The efficiencies defence had been the subject of considerable debate over the years, including amongst prominent academics. We have written previously about the role of the efficiencies defence and will be writing further about the implications of its repeal.

Allow civil orders with respect to anticompetitive agreements between non-competitors.

Section 90.1, the civil provision restricting anticompetitive agreements, has been amended to allow the Competition Tribunal to make an order prohibiting any person from taking action under an agreement or arrangement between non-competitors if "a significant purpose of the agreement or arrangement, or any part of it, is to prevent or lessen competition in any market". Previously, only agreements between competitors were within the scope of this section. Also, unlike the amendments discussed above which are now in force, these changes are set to come into force on December 15, 2024.

As noted, the Canadian Government has introduced a series of additional amendments in recent months – we will continue to monitor these additional potential amendments and provide updates as they make their way through the legislative process.

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.