The re-election of the Conservative Party as the minority government of Canada may result in significant amendments to the Competition Act and Investment Canada Act — amendments that could have important implications for those doing business in Canada. The Conservative Party’s election platform promised to implement many of the significant changes to Canada’s competition and foreign investment laws recommended by the government-appointed Competition Policy Review Panel (Panel) in June 2008, on which we commented in our most recent Co-Counsel: Business Law Quarterly.
These changes include:
- introducing per se liability for “hard core” price fixing and increasing the maximum fine from $10 million to $25 million;
- introducing fines of up to $10 million for abuse of dominant position across all industries;
- significantly increasing the thresholds for foreign investment review; and
- allowing foreign investments to be analyzed on national security grounds.
The platform was silent on a number of other Panel recommendations.
1. Changes to the Competition Act
A. Reform of Criminal Provisions
- Per se Conspiracy Offence — The platform proposes to make “hard core” cartel activity, such as price fixing, illegal per se, that is, without proof of a negative effect on competition. Other agreements between competitors would be civilly reviewable but not subject to criminal sanction. This would move Canadian law closer to the US approach, and would make it easier for the Crown to successfully prosecute price-fixing cartels. It may also make it easier for civil plaintiffs to prove liability in follow-on class actions. This proposal is controversial but not new. Similar recommendations in the past have foundered on an inability to develop legislative language that would clearly distinguish “hard core” cartels from other potentially pro-competitive agreements among competitors.
- Increased penalties for conspiracy and bid-rigging — The platform proposed to fix the maximum fines for conspiracy (currently $10 million) and bid-rigging to (currently no maximum) $25 million. The platform also recommended increasing the maximum prison terms for both offences from five years to 14 years (although individuals are rarely imprisoned for such offences in Canada).
B. Abuse of dominant position
- Fines for abuse of dominance cases — The platform would provide for fines of up to $10 million (and up to $15 million for repeat offenders) for persons found to have engaged in abuse of dominance. This goes beyond the Panel’s recommendation of “modest” administrative monetary penalties (AMPs) of up to $5 million for abuse of dominant position. The Competition Act currently provides for AMPs of up to $15 million, but only against dominant air carriers. This new provision would apply across all industries, raising the risks for businesses with a significant market presence where the line between pro-competitive conduct and abuse may not be readily apparent.
II. Changes to the Investment Canada Act
- Increase in thresholds for investment review — The platform adopted the Panel’s recommendation to significantly increase the threshold for ministerial review of a proposed foreign acquisition of a Canadian business to $1 billion (enterprise value) from $295 million (with the exception of cultural businesses, where a low threshold will remain in place).
- Removal of some sector-specific thresholds — The platform also proposed to eliminate or revise lower sector specific investment thresholds for the foreign acquisition of control of an airline or uranium business (although other sector-specific investment requirements will continue to apply).
- National security review — The platform indicated that changes to the Investment Canada Act would include establishing a new national security review mechanism to ensure that foreign investments do not jeopardize Canada’s national security. III. Other Panel Recommendations While the platform sought to make some significant changes, it was silent on many other Panel recommendations ? most notably the controversial recommendation that Canada’s merger review regime under the Competition Act be changed to closely resemble the US’s “second request” system.