On September 18, 2023, Bill C-352, which was introduced by Jagmeet Singh (leader of the NDP), had its first reading in the House of Commons (the “Singh Bill”). On September 21, 2023, Bill C-56, which was introduced by Chrystia Freeland (Deputy Prime Minister and Minister of Finance), also received its first reading in the House of Commons (the “Government Bill”). Each of these bills includes significant proposed amendments to the Competition Act in response to the ongoing public consultation and legislation review process regarding competition policy in Canada.
While each of the bills share some similarities (including, for example, the introduction of market study powers and removal of the efficiencies defence), the bills include a number of different proposals and the Singh Bill includes overall more substantive recommendations for amendments to Canada’s existing competition law regime.
Introduction of Market Studies
Each of the Singh Bill and the Government Bill introduces the ability for the Commissioner of Competition to undertake market studies under the Act. Notably, however, the proposed amendments in the Singh Bill allow the Commissioner to initiate market studies unilaterally, whereas the Government Bill would require that the Minister of Innovation, Science and Industry direct the Commissioner to initiate a market study when the Minister believes it to be in the public interest. Importantly, the Government Bill also proposes amendments which would create transparency and accountability for market studies, by requiring that the terms of the market study be published publicly for consultation prior to the market study being conducted, and requiring a report of the Commissioner’s findings be published publicly following the investigation. The Government Bill also requires that a market study last no longer than 21 months. The Singh Bill contains no such requirements.
Notably, under both bills, the Commissioner remains unable to impose regulations to remedy any concerns which are brought to light through the market study – and is simply able to make recommendations to the government on the basis of the findings of the market study.
Under the proposed amendments contained in each bill, the Commissioner may apply to a court for an order under section 11 of the Act (i.e. an order compelling the production of records, an oral examination under oath or a written responses to questions under oath) in connection with a market study. As such, these proposed amendments would give the Commissioner the ability to compel production of extensive, detailed information from third parties in connection with a market study.
As such, any business could be subject to a market study inquiry by the Bureau, and could potentially be required to respond to a substantive, mandatory information request related to such market study – regardless of its compliance with the Act. This has the potential to impose significant costs on businesses, and in particularly businesses which are active in areas which the Commissioner may be most interested in conducting market studies (such as online marketplaces, other aspects of the digital economy, AI and the grocery sector).
Expansion of Competitor Collaboration Provisions to Non-Competitors
The Government Bill includes proposed amendments which would expand the scope of the civil competitor collaboration provisions (section 90.1 of the Act). Currently, these provisions only apply to collaborations between competitors or potential competitors. The proposed amendments would expand the competitor collaboration provisions in the Act to also capture collaborations among parties which are not competitors, to the extent that a “significant purpose” of the collaboration is anticompetitive. (Notably, the proposed amendments do not elaborate on when an anticompetitive purposes would be considered a “significant purposes”.)
As such, section 90.1 could potentially apply to essentially any commercial agreement – including agreements between a firm and its customers or suppliers. That being said, the Bureau still bears the high burden of showing that a given agreement or arrangement prevents or lessens, or is likely to prevent or lessen, competition substantially in a market. In this regard, it bears noting that the Bureau has commenced only a limited number of applications under the current section 90.1.
It also bears noting that many agreements between firms and customers/suppliers can already be reviewed under other provisions of the Act, such as the abuse of dominance provisions which could apply to such “vertical” collaborations. That being said, these provisions require, in many cases, several complex elements to be made out. As such, the government may be signalling that it is looking for a “simpler” way to regulate vertical relationships – and that, in turn, it intends for closer scrutiny to be given to such collaborations moving forward.
If this amendment is adopted, businesses will need to be cognizant of any aspects of their contracting practices with customers and suppliers which could potentially be considered (or perceived) as intended to prevent or lessen competition and whether those practices in fact do, or are likely to, substantially prevent or lessen competition.
Removal of the Efficiencies Defense
Both the Singh Bill and the Government Bill propose to remove the efficiencies defense for merger review contained in section 96 of the Act.
The Singh Bill also proposes to explicitly make efficiencies one factor which may be considered when deciding whether or not a merger is likely to prevent or lessen competition substantially in a relevant market. While the Government Bill does not explicitly make efficiencies a factor, the Act does already contain a ‘catch-all’ provision which allows consideration of “any other factor that is relevant to competition in a market that is or would be affected by the merger or proposed merger” and, as such, efficiencies could be considered as a factor in merger review in any event. That being said, in practice, the weight given to efficiencies if it is considered as simply one factor in merger review may be minimal.
This proposed amendment to remove the efficiencies defence could have significant impacts on businesses. When contemplating mergers, businesses must be cognizant that efficiencies originating from such mergers will no longer be sufficient to save a merger which would otherwise be found to be harmful to competition.
Notably, the Singh Bill also removes the efficiencies defense from the competitor collaboration provisions (section 90.1) of the Act, and similarly makes efficiencies one factor in considering whether or not an agreement or arrangement between competitors is likely to prevent or lessen competition substantially in a relevant market. Interesting, the Government Bill does not contain similar proposed amendments.
Revision of Fine Amounts
The Singh Bill proposes to revise various fines and administrative monetary penalties under the Act. In particular:
- Criminal Cartel Provisions:The Singh Bill proposes that the potential fines for contravention of the criminal conspiracy provisions of the Act, including the no-poach and wage fixing provisions, should be capped at the greater of $25 million or three times the value of the benefit derived from the conspiracy, agreement or arrangement or, if that amount cannot be reasonably determined, 10% of the person’s annual worldwide gross revenues.
Notably, the fine for contravention of these provisions of the Act is currently not capped (it is within the discretion of the Court). As such, this proposed amendment would in fact limit the potential liability for contravention of the criminal conspiracy provisions of the Act. It bears noting that prior to the amendments contained in the 2022 Budget Implementation Act, which came into force last year, the potential fine for contravention of these provisions was capped at $25 million.
- Agreements among Federal Financial Institutions: The Singh Bill proposes that the potential consequences for contravention of section 49 of the Act (agreements or arrangements between federal financial institutions) be raised from a fine of $10 million or an imprisonment term not exceeding five years (or both) to a fine of $25 million or an imprisonment term not exceeding fourteen years (or both). This proposal would subject financial institutions to the same penalties as those who violate the other criminal cartel provisions (assuming that the fines under these other provisions are capped at $25 million).
- Abuse of Dominance: The Singh Bill proposes that the potential administrative monetary penalty for contravention of the abuse of dominance provisions of the Act be increased to the greater of (a) $25 million ($35 million for each subsequent order) or (b) three times the value of the benefit derived from the anti-competitive practice, or, if that amount cannot be reasonably determined, 10% of the person’s annual worldwide gross revenues. The existing monetary penalty under the abuse of dominance provision is currently capped at the greater of (a) $10 million ($15 millionfor each subsequent order) or (b) three times the value of the benefit derived from the anti-competitive practice, or, if that amount cannot be reasonably determined, 3% of the person’s annual worldwide gross revenues.
Excessive Pricing and Unfair Selling Prices
The Singh Bill includes proposed amendments which make the act of “directly or indirectly imposing excessive and unfair selling prices” an explicit example of an anti-competitive act for the purposes of the abuse of dominance provisions (section 79) of the Act. Currently, the enumerated practice of anti-competitive acts in the abuse of dominance provision does not encompass exploitive conduct of charging high or excessive prices.
Unfortunately, the Singh Bill does not provide guidance regarding what constitutes “excessive” or “unfair” selling prices. Current guidance from the Competition Bureau does discuss “supra-competitive” pricing as direct evidence of market power, but not as reviewable conduct on its own.
It is possible that “excessive” or “unfair” selling prices could be determined based on a competitive benchmark, or based on some multiple of a firm’s production costs (i.e. some type of price-cost comparison). Notably, this is the approach used in several European and other foreign jurisdictions. However, this would effectively make the Bureau a price regulator, and would represent a significant step away from the traditional approach to competition policy in Canada. The U.S. antitrust laws similarly do not currently contain excessive pricing provisions, although some states have adopted price gouging laws in the wake of the COVID-19 pandemic.
If this amendment is passed, businesses will need to exercise caution with respect to their pricing practices, including being cognizant of whether any such prices are significantly above market pricing, whether any of their products earn an unusually high margin, and whether any prices could be interpreted to be “excessive” or “unfair.”
Removal of “Effects” Requirement from Abuse of Dominance
The Singh Bill includes a proposed amendment to the abuse of dominance provisions of the Act, (section 79) which has the effect of allowing the Tribunal to find a contravention of section 79 without finding effects (i.e. without finding a substantial prevention or lessening of competition), as is currently required under the Act.
This would significantly lower the Bureau’s burden to demonstrate an abuse of dominance contravention, as the Bureau need only demonstrate (i) substantial or absolute control (i.e. dominance) in a relevant market) and (ii) a practice of anti-competitive acts. Notably, it is not uncommon for the effects element of the current provision to be the most difficult element for the Bureau to satisfy.
Pursuant to the proposed amendments in the Singh Bill, where only control and a practice of anti-competitive acts are found by the Tribunal, only limited remedies would be available. These remedies would include (i) a prohibition order and/or (ii) an administrative monetary penalty. In order for the Tribunal to order further remedies (such as divestiture of assets or shares, as are reasonable and as are necessary to overcome the effects of the practice in that market), the Bureau would also need to show anticompetitive effects.
However, the proposed amendments also significantly increase the potential administrative monetary penalty which could be ordered for a contravention of section 79 (as discussed above). As such, overall, the proposed amendments in the Singh Bill could significantly increase businesses potential liability under the abuse of dominance provisions of the Act.
The Singh Bill includes a proposed amendment which introduces the concept of structural presumptions into the merger review provisions of the Act, including:
- a prohibition on mergers which result in a combined market share of 60% or more; and
- a rebuttable prohibition on mergers which would result in a combined market share between 30% to 60%. In this case, where the merging parties can show that the merger would result in substantial procompetitive outcomes, the prohibition may not apply.
Currently, there are no structural presumptions in the Act. On the contrary, section 92(2) of the Act explicitly states that the Tribunal cannot find that a merger is likely to result in a substantial prevention or lessening of competition solely on the basis of evidence of concentration or market share. As such, under the current regime, the Bureau must show, regardless of the parties’ combined market share, that a proposed merger would likely lead to a substantial prevention or lessening of competition in a relevant market. The proposed amendment in the Singh Bill creates legal presumptions that remove this burden from the Bureau, and, in the case of mergers resulting in a 30% to 60% combined market share, place the burden on the merger parties to show that the merger will in fact be beneficial.
That being said, the Bureau would still bear the burden of defining markets and proving market shares, requiring the Bureau to demonstrate relevant product and geographic markets – issues which, even under the current regime, account for a significant amount of time and resources in merger reviews. In any event, this proposed amendment would be a significant change to the Act and could potentially impact future merges – particularly in concentrated industries.
The Singh Bill also includes a proposed amendment which introduces a rebuttable presumption that if a merger is found to lead to a “a significant increase in concentration or market share” it will also be presumed to lead to a substantial prevention or lessening of competition, unless otherwise proven by the merging parties. Where this is the case, the provision allows for the Tribunal to order certain remedies. Notably, the provision does not specify what would be a considered a “significant” increase. Depending on the interpretation of “significant”, this amendment could have a consequential impact on future mergers.
Extension of Limitation Period
The Singh Bill includes proposed amendments which increase the period during which the Bureau can challenge a completed merger from one year to three years. Notably, this would decrease certainty and predictability for parties to non-notifiable mergers and possibly mergers that are cleared through a “no-action letter”, which reserves the Bureau’s ability to challenge the merger post-closing (although, the Bureau does not have a history of challenging transactions post-closing once a “no-action letter” is issued). A key goal underpinning the extension of the post-closing period to challenge a merger is to enable the Commissioner to challenge so-called “killer” acquisitions, as the three year period may better allow the Bureau to gather actual evidence of harm (if any) rather than speculate regarding such harm. A further goal is to potentially enable more scrutiny of non-notifiable transactions that may not be brought to the Bureau’s attention in a timely way.
It bears noting that the Bureau has not brought a significant number of applications with respect to completed mergers. However, to the extent this limitation period is extended, it may signal that there may be an intention to increase scrutiny of non-notifiable mergers.
Removal of Costs Awards Against the Commissioner
The Singh Bill includes proposed amendments which remove the ability for the Tribunal to award costs against the Crown (i.e., against the Commissioner/Competition Bureau) in respect of reviewable matters under the Act. This proposal is not at all unexpected, particularly in light of the almost $13 million costs award against the Commissioner in the recent Rogers/Shaw proceedings. This may have the effect of incentivizing the Bureau to bring more applications before the Tribunal and otherwise accelerate enforcement activity. It may also incentivize settlements by respondents since respondents would not have the ability to recover costs from the Commissioner in the event they are successful at trial.