Competition Law Update: Parliament Approves Next Wave of Competition Act Amendments

Competition law reform in Canada is in full swing, with several important changes to the Competition Act (Act), including new rules relating to market studies, mergers and abuse of dominance now in effect. Additional amendments will come into force in December 2024. These changes were previewed in our Blakes Bulletin: Canadian Government Introduces Important Amendments to the Competition Act. However, the final legislation contains a number of important additional changes, all of which are summarized below.

Key Amendments in Effect as of December 15, 2023

• New market study powers. The Minister of Innovation Science & Industry and/or the Commissioner of Competition (head of the Competition Bureau (Bureau)) now have the power to launch market study inquiries. When conducting a market study, the Bureau can seek compulsory production orders for internal documents and data, as well as testimony, from participants in the targeted industries. Such orders were formerly reserved for specific enforcement matters and frequently impose a significant burden on businesses in complying, given the time and costs involved.

• Overhauled abuse of dominance:

  • Revised legal test. Previously, abuse of dominance was a three-part test requiring a finding of (a) dominance, (b) a practice of anti-competitive acts, and (c) a likely substantial lessening or prevention of competition. Now, a prohibition order can be made by the Competition Tribunal based only on a finding of (a) plus either (b) or (c). However, all three elements must still be met for a mandatory order (e.g., divestiture) or administrative monetary penalty (AMP) to be issued.

  • New anti-competitive act. “Directly or indirectly imposing excessive and unfair selling prices” has been added to the non-exhaustive list of anti-competitive acts which, if engaged in by a dominant firm, could be the subject of an abuse of dominance case. According to the Bureau’s guidance, such a practice must still be intended to have a predatory, exclusionary or disciplinary effect on a competitor, or to have an adverse effect on competition to contravene the Act.

  • Increased AMPs. Previously, the maximum AMP was the greater of C$10-million (C$15-million for repeat conduct) and three times the value of the benefit (or, if that cannot be reasonably determined, 3% of worldwide revenues). The C$10-million and C$15-million AMPs have been increased to C$25-million and C$35-million, respectively.

• Repeal of mergers efficiencies defence. The seldom-used efficiencies defence allowed mergers to proceed provided that efficiency gains resulting from the merger outweighed any anti-competitive effects. Mergers that were notified to the Bureau or that closed prior to December 15, 2023 are still allowed to benefit from the efficiencies defence.

Key Amendments Coming Into Force on December 15, 2024

• Civil collaborations expanded to capture agreements between non-competitors. Currently, only collaborations between competitors or potential competitors can be subject to enforcement under the civil collaborations provision. As of December 2024, collaborations between non-competitors (e.g., restrictive covenants) can be the subject of an enforcement action as well, if a significant purpose of all or part of the collaboration is to prevent or lessen competition.

• Elimination of civil collaborations efficiencies defence. In addition to the mergers efficiencies defence, there is an efficiencies defence that insulates collaborations if the anti-competitive effects are outweighed by the efficiency gains of the collaboration, which will be eliminated as of December 2024. Collaborations that may have relied on this defence should be re-evaluated prior to its repeal.

Other Recent and Proposed Amendments

These recent amendments are part of an evolving package of legislation constituting the most significant changes to the Act in over a decade. In particular:

• Several amendments to the Act were enacted in 2022, including the criminalization of wage-fixing and no-poach agreements (which came into force in June 2023), significantly increased AMPs, the addition of private access for abuse of dominance, explicitly specifying “drip pricing” as deceptive marketing, and the introduction of a merger notification anti-avoidance rule. For more details, see our Blakes Bulletin: Proposed Competition Law Amendments in Canada Set to Significantly Expand the Scope of the Competition Act.

• Further changes are on the horizon in 2024, with recently introduced legislation proposing significant additional changes to the Act, including expanded private litigation, further reform of the civil competitor collaborations provision, an enhanced merger review framework and an explicit prohibition on “greenwashing.” For more details, see our Blakes Bulletin: Revamping the Rules: Canadian Competition Act Update.

Key Takeaways

As the competition law landscape in Canada continues to evolve, companies need to be cognizant of these changes and the implications for their businesses, including the following:

• The new market study power exposes businesses, particularly those in consumer-facing industries, to the potential risk of being compelled to produce significant volumes of internal documents and data to the Bureau in the absence of any enforcement investigation.

• Firms considered to be dominant can be subject to prohibition orders for engaging in conduct that is either anti-competitive in nature or lessens competition substantially in a market.

• Though rarely relied on in practice, the efficiencies defence for merger reviews has been removed and, going forward, will no longer be available as a complete defence in a merger review by the Bureau.

• A broader range of agreements, including customer-supplier agreements, will become open to significantly more scrutiny in December 2024.

• Companies should review and update their current compliance policies to reflect changes in the law and the assessment of potential risks to their business.

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