Proposed Competition Law Amendments in Canada Set to Significantly Expand the Scope of the Competition Act

Following recent announcements by the Minister of Innovation, Science and Industry, the Government of Canada has now proposed amendments that would significantly expand the scope of the Canadian Competition Act (Act). These amendments are included in the Canadian Government’s budget legislation and are therefore likely to be enacted by the end of June. The proposed changes and key takeaways for businesses are:

KEY CHANGES TO THE COMPETITION ACT

• Wage-fixing/No Poach Agreements: For the first time, the Act would contain specific criminal provisions to address agreements or arrangements between unaffiliated employers directed at fixing wages or other “terms and conditions of employment” or to not hire or solicit each others’ employees. Such agreements may result in maximum imprisonment of up to 14 years, a fine, or both. Breaches of this new offence would also be subject to private actions (including class actions) for damages. These provisions would come into force one year from the day on which the Act receives royal assent, to allow businesses to prepare to comply with the new law.

• Significantly Higher Financial Penalties: The proposed amendments will significantly increase the dollar amount of administrative monetary penalties (AMPs) potentially available to address conduct such as deceptive marketing and abuse of dominance, particularly for global firms doing business in Canada.  Whereas the current legislation has maximum amounts for AMPs (e.g., C$15-million for abuse of dominance), the new legislation allows AMPs for up to three times the financial benefits derived from the anti-competitive conduct or 3% of annual worldwide gross revenues (with no cap).

• Private Access for Abuse of Dominance: Private parties will be allowed to bring cases directly to the Competition Tribunal (with leave) for alleged anti-competitive conduct by dominant firms. This, coupled with the potential for significantly higher financial penalties as well as an expanded definition of conduct captured by the abuse of dominance provision, could result in substantially more “abuse” cases brought before the Competition Tribunal.

• Misleading Price Representations: The new legislation would enact specific criminal and civil provisions to address the practice of “drip pricing” representations (advertising a price that is ultimately not obtainable due to fixed obligatory charges or fees), defining the practice as false or misleading.

• New Anti-Avoidance Rule for Merger Notification: Pre-merger notification rules under the Act are based on objective financial thresholds that apply to particular transaction structures. While those rules would not change, there would now be a specific anti-avoidance rule designed to capture more mergers under the pre-merger notification regime.

KEY TAKEAWAYS FOR BUSINESSES

• The scope of the Act is being expanded significantly. This is very much in line with a movement – in Canada and globally – towards greater enforcement of competition laws, and a need for businesses to be even more vigilant about competition law compliance.

• Businesses will need to review their current compliance practices regarding discussions with competitors and ensure that their hiring practices and policies will be onside the new law. The proposed amendments would criminalize agreements or arrangements among employers to fix wages, salaries or other terms and conditions of employment, and agreements or arrangements not to hire or solicit each other’s employees.

• Companies doing business in Canada also need to carefully review their conduct in relation to their dealing with smaller competitors, merger notification and marketing practices. The  proposed legislation creates a new private right of access to the Competition Tribunal for abuse of dominance and significantly higher monetary penalties (encompassing a percentage of worldwide turnover) for abuse of dominance and deceptive marketing practices.

The proposed legislation envisages additional changes, including expanding the range of factors relevant to analyzing anti-competitive conduct, mergers and competitor collaborations in digital industries (e.g., network effects, non-price competition, innovation) as well as explicitly expanding the scope of production orders to persons outside of Canada that do business in Canada.

The full text of the proposed amendments is available here (starting at page 320).

For more information, please contact any member of our Competition, Antitrust & Foreign Investment group.