On November 11, 2020, the United Kingdom introduced the National Security and Investment Bill (NSI Bill) directed at improving its national security screening regime for investments.   With the introduction of the NSI Bill, the UK joins a long list of nations, including Canada, Australia and the United States, that have altered their national security investment screening processes and/or policies since the COVID-19 crisis started.

The NSI Bill contemplates:

  • mandatory pre-closing notification requirements for transactions involving specific listed industry sectors;
  • a voluntary notification process for transactions not involving a listed sector but which still may raise national security concerns; and
  • a “call in” power to screen transactions either not requiring notification or, where notification has been made, a decision is made within 30 business days of filing that a more detailed assessment is required.

Continue Reading New UK National Security Investment Screening Regime

The Canadian Bar Association’s Competition Law Section held its Fall Online Symposium last week (October 20-22). Dozens of panelists, both from the public and private sector, addressed a variety of  exciting issues connected to competition law and foreign investment enforcement in the time of COVID-19. Some of the highlights of the Symposium were the key note speech by Commissioner Boswell, the panels on failing firms, expedited proceedings and foreign investment, and the Virtual Cocktail Event hosted by the Young Lawyers Committee. A key takeaway from the conference was the ongoing effort by professionals on all sides of the competition bar to strike a balance between the rigorous and strong enforcement required to protect the Canadian economy, and the efficiency and flexibility needed to face business challenges caused by the COVID-19 pandemic.

Key Note Speech by Matthew Boswell, Commissioner of Competition

Commissioner Boswell’s key note speech was consistent with the Bureau’s messaging throughout the COVID-19 pandemic. The Commissioner’s view is that competition is not an obstacle to Canada’s economic recovery. Instead, he views competition as critical to maintaining the affordability of products and services. Conference participants heard about:

  • how competition is key to a resilient economy;
  • how the pandemic is creating increased opportunity for consolidation and other anticompetitive actions that would deepen the economic downturn and hinder recovery; and
  • that the way to achieve strong competition is through a strong and principled approach to compliance and enforcement.

The Commissioner remarked that while some may argue for industry specific regulation, the Bureau stands by its view that the best protection for the Canadian economy is healthy competition He also pointed to the Bureau offering some flexibility in recognition of these uncertain times by highlighting the Bureau’s recently published statement on competitor collaboration during COVID-19. (The utility of these guidelines, however, has received mixed reviews from the private bar, and as of yet no private parties have made use of the Bureau’s rapid response team, which was meant to provide additional informal advice in connection with these guidelines).

Failing Firms

As discussed in our Refresher on the Failing Firm Defence, one of the factors the Bureau considers when reviewing a merger is whether the business, or part of the business, of a party to the proposed merger has failed or is likely to fail. Known as the ‘failing firm defence’, the loss of the competitive influence of a failing firm is not attributed to a proposed merger where such competitive influence would have been eliminated in any event by way of the firm’s failure (i.e., the merger would not eliminate an effective competitor).

The panelists highlighted the issue of forecasting market conditions in the current unpredictable and unprecedented context of the COVID-19 pandemic as one of the primary difficulties that competition lawyers and regulators are grappling with when representing, or evaluating the submissions of, failing (or flailing) firms.

While it has historically been reasonable to look at current conditions as the best forecast of future conditions, that assumption no longer holds true. The panelists noted that not only are regulators faced with the challenge of modeling the impact of the failing firm’s exit from the market, but also with the added difficulty of modeling how the market is changing generally, apart from the specific transaction, which is a difficult task.

These difficulties, in the opinion of the panelists, apply just as much if not more in the case of flailing firm arguments, as in failing firm arguments.

Interestingly, the panelists noted that they have not yet seen an appreciable increase in assertions of the failing firm defence. However,  given the increase in insolvency filings, it may be that we will see this in the future. As noted by Commissioner Boswell in his key note speech, the Bureau also expects to see an increase in these transactions. In that speech, the Commissioner stated that the Bureau will maintain the normal rigour and framework for assessing failing firms, while appreciating the need to be timely.

Expedited Proceeding

A panel discussion on expediting litigation and the need for speed in challenging times, moderated by Antonio Di Domenico, looked at recent use of private arbitration in a U.S. antitrust merger dispute and the first application of an expedited proceeding before the Competition Tribunal in Canada.

The panelists discussed the many benefits of arbitration, including decreased delay. Further, panelists discussed how parties benefit from increased certainty in arbitration, as they will know when the decision is scheduled to be released by the arbitrator. Arbitration also has the benefit of providing better, and less procedurally difficult, protection of confidentiality, as the proceedings are closed to the public.

The panel also discussed the first, albeit unsuccessful, application in Canada to use an expedited proceeding process before the Competition Tribunal. The panelists highlighted that the expedited process will not be granted unless it is reasonable and advisable, in light of the circumstances of the case. Further, the parties must show that benefits are to be gained which justify adoption of the process.

The diverse panelists agreed that adoption of new tools and process that allow for increased efficiency through expedited processes would benefit all sides involved, caveated by the need to ensure a balance is struck with the requirements of procedural fairness.

National Security and Foreign Investment

The panelists, including Andrew House, discussed the enhanced scrutiny for reviews under the Investment Canada Act that had been introduced due to the COVID-19 pandemic, as well as the extended timelines for national security reviews.

The panelists discussed the purpose of this new enhanced scrutiny. In their view, it was likely due, at least in part, to a fear of distressed Canadian businesses being taken advantage of on the global market by opportunistic investors. That is, by investors such as state-owned enterprises who do not face the same risks and impacts caused by the COVID-19 pandemic as such enterprises are not as vulnerable to the state of the market.

The panelists noted certain strategies to cope with the delay and uncertainty caused by long and drawn out review processes, such as the timing of notifications, early discussions with regulators and risk allocation between the parties to the transaction. This discussion showed the difficult balance that must be struck between the business impact of such enhanced measures and the increased importance of these reviews for protecting Canadian businesses.

Canada’s Competition Bureau (the “Bureau”) recently signed a new competition enforcement agreement, the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities (“MMAC”), with competition authorities in the U.S., the U.K., Australia and New Zealand.  The MMAC is intended to improve the Bureau’s ability to cooperate with its counterparts in cross-border investigations, competition policy development, competition advocacy and outreach, inter-organizational training and on special projects.

The Bureau advances international enforcement cooperation and convergence in three general ways. The first is through bilateral and multilateral relationships.  The Bureau has developed an extensive network of cooperation relationships with competition agencies around the world. Many of these are based on bilateral and multilateral cooperation agreements (many in the form of a Memorandum of Understanding).   In addition to the MMAC, the Bureau currently has cooperation instruments relating to Canada’s competition and consumer protection laws with 15 foreign jurisdictions.  It is interesting to note that the MMAC is the first direct cooperation agreement with the U.K.’s Competition and Markets Authority.

Other legal tools, such as the U.S.-Canada Mutual Legal Assistance Treaty, have permitted the U.S. Department of Justice and the Bureau to conduct joint and parallel investigations into criminal price-fixing investigations.  So called ‘second generation MOUs’, along with reciprocal information gateway provisions (such as section 29 of the Competition Act, which deals with the treatment of confidential information in the Bureau’s possession), address the exchange of confidential information between Canada and other jurisdictions, such as Hong Kong and Japan.  The MMCA is a second generation MOU that will permit the reciprocal exchange of confidential information and cross-border evidence gathering between the signatories. Continue Reading Competition Bureau Continues to Promote International Cooperation in Enforcement – Enters into a cooperation agreement with Five Eyes Counterparts

The Canadian Competition Bureau (the “Bureau”) released some informative statistics summarizing the number and characteristics of merger reviews started and concluded by the Bureau’s Mergers Directorate in its 2019-2020 fiscal year (ending March 31, 2020). In past years, similar information was presented by the Bureau at the Mergers Roundtable hosted by the Canadian Bar Association’s Mergers Committee and the Mergers Directorate, which did not happen this year due to COVID-19.

Non-Notifiable Mergers

About a year ago, the Bureau expanded the role of its Merger Notification Unit, now referred to as the Merger Intelligence and Notification Unit, to include a broader focus on active intelligence gathering on non-notifiable merger transactions that may raise competition concerns. These efforts have borne fruit, with the Bureau identifying and reviewing a number of non-notifiable transactions where the parties would not have otherwise engaged with the Bureau prior to closing. In one instance, the Bureau became aware of a non-notifiable transaction, Evonik Industries AG’s acquisition of PeroxyChem Holding Company LLC, and entered into a consent agreement with the merging parties which required the divestiture of assets in British Columbia to remedy competition concerns.

Number of Annual filings and reviews

There has been a slight increase in merger filings and reviews over the past year, although not outside the normal range for the past 10 years. Set out below is a chart outlining the total number of merger filings by year for the past 10 years.

image: Competition Bureau Canada

Continue Reading Merger Review by the Canadian Competition Bureau in 2019-2020: Breaking down the Numbers

The Canadian Competition Bureau (the “Bureau”) has released a toolkit – Strengthening Canada’s economy through pro-competitive policies (the “Toolkit”) – to assist regulators and policymakers, at all levels of government, in maximizing competition in Canadian industries. The Toolkit offers a five-step process for policymakers to assess the impact of new and existing policies on competition, and tailor those policies to maximize the benefits of competition across the Canadian economy.

The Bureau suggests engaging in a competition assessment each time a new policy is proposed or an existing policy is reviewed. The Bureau’s five-step competition assessment process is summarized below:

Step 1: Identify the policy. The first step is to specify the underlying goals that the policy is designed to achieve and the proposed measures to achieve those goals.

Step 2: Assess whether the policy impacts competition. The second step involves an assessment of the impact of the proposed measures on competition, with reference to the following four indicators of a competitive marketplace:

  • the ability of businesses to enter or expand in a market or operate across borders;
  • the ability of businesses to set the price, quality and quantity of the products or services sold;
  • the incentives for businesses to compete vigorously; and
  • the potential for consumers to switch between competing businesses.

Continue Reading Competition Bureau Seeks to Promote Consideration of Competition by Policymakers with New Toolkit

Never before have foreign investors faced the same level of scrutiny or uncertainty  

Bill C-20 has passed Canada’s Senate and received Royal Assent, becoming law on July 27, 2020. Part 3 of the Bill becomes the Time Limits and Other Periods Act (COVID-19) and will be of particular and urgent interest to non-Canadians contemplating the purchase of an interest in a Canadian business or the establishment of a new business in Canada.

The effect of the new law is to provide the Minister of Innovation, Science and Industry (the Minister chiefly responsible for the administration of the Investment Canada Act (ICA)) with authority to, among other things, temporarily extend time periods under the National Security Review (NSR) provisions of the ICA. The purpose of such an extension, according to the new law is to, “prevent any exceptional circumstances that may be produced by coronavirus disease 2019 (COVID-19) from making it difficult or impossible to meet … time limits… and …prevent any unfair or undesirable effects that may result from the expiry of those periods due to … exceptional circumstances.”

While the new statute says that, “this Act is to be interpreted in a manner that provides certainty in relation to proceedings and that respects the rule of law…” it is difficult to view the Act as anything other than a significant complicating factor for deal-makers. There are two primary reasons for taking this view:

  1. NSRs become most difficult for transaction proponents –especially in regard to publicly-traded corporations– when timelines become such that politicians and marketplace competitors become involved in a public debate about the transaction. Longer approval horizons propel controversy and will tend to override reasoned discussion about the actual security underpinnings of a deal; and
  1. Extensions may be applied retroactively to March 13, 2020. Any instance of retroactivity in a law creates uncertainty, making marketplace predictably more difficult to achieve. This will make Canada a less attractive destination for nervous capital, simply because investors can no longer be certain that once a deal is closed, it is truly closed — this is the nature of a law that purports to turn back the clock.

Luckily, the new law contains limits that some will find comforting: no timeline can be extended beyond December 31, 2020, and any decision on the extension of timelines –including on a retroactive basis– must occur by September 30, 2020. Investors and target companies would be well advised to seek both regulatory and government relations counsel as they contemplate deals during this period of unprecedented uncertainty created by the Government’s reaction to COVID-19.

Since the Supreme Court of Canada’s 2013 trilogy of decisions in Pro-Sys, Sun-Rype and Infineon, and its 2019 decision in Godfrey, plaintiffs have had considerable success certifying private antitrust/competition class actions in Canada.   Recent amendments to Ontario’s class action legislation may change that trend. As discussed more fully below, the most significant amendment to Ontario’s class action legislation is to the preferable procedure portion of the certification test that currently requires plaintiffs to prove that a class action would be the “preferable procedure for the resolution of the common issues”. The preferability requirements now include superiority and predominance elements akin to US Federal Rules 23(b)(3).  If interpreted like US Federal Rule 23(b)(3), certification judges will likely engage in a rigorous assessment of whether common questions of law or fact predominate over individual questions, which may, in turn, impair the certification of  private antitrust/competition class actions.

  1. Amendments to the Class Proceedings Act

As discussed in a prior blog post, Ontario Bill 161 Smarter and Stronger Justice Act, 2020 received Royal Assent on July 8, 2020. Bill 161 is omnibus legislation that includes amendments to Ontario’s Class Proceedings Act, 1993 (the “CPA”).  The amendments will apply to proposed class actions commenced after Bill 161 has been proclaimed in force. Bill 161 is not yet proclaimed into force but is expected to be so proclaimed soon in the future. Continue Reading The New Preferability Requirements in Ontario’s Class Action Legislation: Implications for Private Antitrust/Competition Enforcement

The recent decision of the Constitutional Court in Competition Commission of South Africa v Pickford Removals SA (Pty) Limited may have a material effect on the future prosecution of prohibited practices – including cartel behavior and abuses of dominance.

The Pickford decision relates to the interpretation of section 67(1) of the South African Competition Act as it stood before it was amended by the Competition Amendment Act, 2018.  The section said:

“…a complaint in respect of a prohibited practice may not be initiated more than three years after the practice has ceased

The main finding of the Constitutional Court was that section 67(1) of the Competition Act does not constitute a prescription provision, but a procedural time-bar provision, which in the event of non-compliance can be condoned.  The effect is essentially that a prohibited practice complaint does not necessarily lapse three years after a prohibited practice has ceased.

In its finding, the Constitutional Court set aside an order of the Competition Appeal Court (CAC) and the matter was remitted to the Competition Tribunal (Tribunal) for further hearing. Continue Reading Widening the net – the Constitutional Court’s softening of the time-bar defence under South African competition law

On July 6, 2020, the Competition Bureau (the “Bureau”) published its Annual Plan for 2020-21 titled “Protecting competition in uncertain times” (the “Annual Plan”). The Annual Plan provides specific action items for implementing the Bureau’s 2020-24 Strategic Vision (the “Strategic Vision”) published this February.

As discussed in our prior blog post, Competition Bureau Publishes Strategic Vision for 2020-2024, the Strategic Vision includes three broad objectives, namely: (i) protecting Canadians through enforcement, (ii) promoting competition in Canada, and (iii) investing in the organization. The Annual Plan sets out various action items for implementing each objective in the Strategic Vision.

Below we outline the salient features of the Annual Plan and the key take-aways for businesses.

I. Overview of the Annual Plan

A. Protecting Canadians through Enforcement

The Bureau will focus its enforcement efforts on key sectors of the economy, and, in particular, (i) digital services, (ii) online marketing, (iii) financial services and (iv) infrastructure. In response to COVID-19 the Bureau advised that it will be “actively monitoring the market” for COVID-19 related scams and deceptive marketing practices, and taking enforcement action accordingly.

The Bureau plans to enhance its enforcement capabilities at a practical level by:

  1. establishing a Monopolistic Practices Intelligence Unit to examine and analyze trends in the marketplace to proactively deter anti-competitive behaviour;
  2. enhancing its intelligence gathering techniques to detect anti-competitive activity earlier (e. advancing their bid-rigging detection tool using public procurement data and leveraging the bid-rigging tip line); and
  3. introducing new tools and innovative processes to optimize the Bureau’s ability to handle large volumes of data. Examples include:
    • increased automation to find efficiencies in reducing manual data entry; and
    • finalizing a cloud strategy to test new investigative tools and concepts.

In addition, the Bureau announced that it will be hosting its first virtual Digital Enforcement Summit, which seeks to enhance the Bureau’s effectiveness in the digital economy by exploring new solutions and tools, sharing best practices, and addressing emerging issues with the Bureau’s enforcement partners.

B. Promoting competition in Canada

The Bureau intends to promote competition in Canada through advocacy and international engagement. In particular, the Bureau:

  • plans to advocate for pro-competitive policy-making to advance Canada’s economic recovery;
  • will assume the presidency of the International Consumer Protection and Enforcement Network for the 2020-2021 term where it plans to focus on online advertising; and
  • plans to advocate for competition in the health and telecommunications sectors. For instance, it will continue to participate in the Canadian Radio-television and Telecommunications Commission’s review of mobile wireless services and wireline access prices.

C. Investing in the organization

The Bureau plans to enhance its digital expertise internally by:

  • training its workforce to develop and improve its proficiency in using existing and emerging technologies, such as artificial intelligence and new investigative applications; and
  • recruiting more data scientists and data engineers.

II. Implications for Businesses

Key take-aways arising from the Bureau’s Annual Plan include the following:

  • Doubling-Down on Digital Enforcement Tools: The Bureau is investing significantly in tools to pursue its enforcement priorities in the areas of digital services, online marketing, financial services and infrastructure. By establishing a Monopolistic Practices Intelligence Unit, introducing new tools for analyzing data (including finalizing a cloud-based investigative strategy and recruiting data scientists and engineers as Bureau officers) and introducing its first ever virtual Digital Enforcement Summit, the Bureau is not only signaling clear enforcement priorities but also doubling down on tools for such enforcement.
  • More Online Advertising Enforcement: With the Bureau assuming the presidency of the International Consumer Protection and Enforcement Network, we can expect the Bureau to lead by example in emerging online advertising matters, including “drip” pricing, native advertising/online reviews and privacy-related representations.
  • Performance Claims and Bid-Rigging: COVID-19 related enforcement is expected to continue not only in the areas of unsubstantiated performance claims but also in criminal enforcement. We can expect Commissioner Boswell, a former criminal prosecutor, to aggressively enforce alleged bid-rigging and price-fixing that may arise from a recessionary COVID-19 period.
  • Health and Telecommunications Advocacy: The Bureau is focusing its advocacy work on the health and telecommunications sectors. Market participants in those sectors should look out for the Bureau’s advocacy interventions and be prepared to respond.

The information and guidance provided in this blog post does not constitute legal advice and should not be relied on as such. If legal advice is required, please contact a member of Fasken’s Antitrust/Competition & Marketing group.

So-called “excessive price” prohibitions are premised on a theory of harm that is generally rejected in competition law. Indeed, Canada’s Competition Act does not even contain a prohibition against excessive pricing. Among the many reasons for not prohibiting excessive prices are that to do so would undermine investment incentives (both of firms already in the market and potential entrants). Further, the phenomenon of excessive prices, in the absence of exclusionary conduct, is generally viewed as a temporary phenomenon that will be corrected by the market. Also, the legal uncertainty associated with the vagueness of the ‘excessive’ element in the concept could easily result in regulatory overreach.

In the context of COVID-19, the traditional arguments against prohibiting excessive prices have given way to a more consumer-oriented approach with respect to those supplying consumers directly. In response to concerns that retailers may be incentivized to substantially increase prices for products critical to the COVID-19 response, three Canadian provinces (i.e. British Columbia, Ontario & Nova Scotia) have specifically prohibited selling essential goods at unconscionable prices, or at prices markedly higher than fair market value. Other provinces appear to be more actively seeking to enforce pre-existing price gouging prohibitions in their consumer protection legislation, particularly in regards to necessary goods.

Yet, as already noted, it is unclear what constitutes an ‘excessive’ or ‘unconscionable’ price. Despite the fact that some provinces have had prohibitions on price gouging in their consumer protection legislation for decades, those provisions have been rarely used and scarcely considered by Canadian courts. At the same time, failing to comply with these provisions can have serious consequences, including financial penalties, restitution and reputational harm – and in some cases criminal fines and jail time. There is also the possibility a class action lawsuit could be instituted by a consumer on behalf of a class of consumers. What follows is a description of the price gouging laws of each Canadian province, as well as a description of their enforcement approach, where available, in order to help businesses understand how to avoid liability in respect of this particularly vague area of law. Continue Reading Price Gouging Prohibitions across Canada