Last June, we reported that the Competition Policy Review Panel had recommended major changes to Canada’s Competition Act. These changes are now imminent. On February 6, the federal government tabled Bill C-10, which, in addition to implementing the government’s January 27 budget, will amend the Competition Act in a number of important areas. The most notable of the proposed changes, which we expect to become law within weeks, are the following:
Merger Notification and Review. The time period for the Competition Bureau’s review of notifiable mergers will be increased to a minimum of 30 days in all cases, and the Commissioner of Competition will be empowered to initiate a second-stage review that will extend the review period until 30 days following compliance with a “second request” for additional information.
Agreements Between Competitors. The existing conspiracy provision will be replaced with a new offence − with significantly increased criminal penalties − for agreements or arrangements between competitors to fix prices or to allocate customers, products or markets. And a new civil provision will be enacted that will permit the Commissioner of Competition to challenge other agreements and arrangements between competitors.
Pricing-related Offences. The criminal price discrimination, promotional allowances and predatory pricing provisions of the Act will be repealed and the criminal price maintenance provision will be replaced with a new civil provision.
New Fines for Abuse of Dominance. The Competition Tribunal will be empowered to impose administrative monetary penalties of up to $10 million (up to $15 million for “repeat offenders”) for abuse of dominant position.
We applaud a number of the proposed changes, such as the repeal of the current price discrimination provision, which has long been criticized as being out of step with modern economic thinking; however, the merits and implications of the changes to the merger, conspiracy and abuse provisions of the Competition Act are far from clear. It is also fair to say that many of the changes are controversial and that they have not received a level of public consultation that is either consistent with prior amendments or appropriate, given the fundamental changes to our competition law that will result from their implementation.
We expect the changes to the merger review regime to result in longer reviews for even the most straightforward mergers, and the new second-request process – which is similar to the much-criticized U.S. model – to result in longer reviews and significantly higher regulatory costs for businesses involved in more complex merger transactions.
The changes to the conspiracy provision will eliminate the requirement that the proscribed conduct − the limits of which are unclear − have an adverse economic impact before it will constitute a criminal offence. This is likely to result in increased enforcement activity, and may trigger a wave of litigation as defendants, faced with criminal fines of up to $25 million and jail terms of up to 14 years, test the boundaries of the new legislation. The new civil provision will significantly broaden the types of agreements and arrangements between competitors that will be subject to review and challenge by the Competition Bureau.
Monetary penalties for abuse of dominance have been widely debated in Canada, with no consensus as to their desirability. The concern is that it is often difficult to distinguish between vigorous but legitimate competition and abusive behaviour. In many cases, it is not possible to determine with certainty whether a firm has a dominant market position. Although monetary penalties for abuse are common in Europe, there has been concern in Canada that the prospect of heavy fines may chill legitimate competitive behaviour to the detriment of Canadian consumers.
Finally, by including the proposed Competition Act amendments in a budget implementation bill, which is expected to receive cross-party support, the government has effectively ensured that these changes will become law with limited, if any, meaningful debate.