Federal Government Releases Proposed Bill relating to Fall Economic Statement – including Significant Competition Act Amendments
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Revised text of Bill C-56 Released
On November 27, 2023, the Federal Government passed a Notice of Ways and Means Motion to introduce a bill entitled An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, which was tabled on November 30, 2023 as Bill C-59 (the “Bill”). The Bill proposes amendments that implement some of the goals discussed in the 2023 Fall Economic Statement to strengthen competition in Canada (as discussed in our previous blog post).
The Bill includes many significant amendments, which could have a resounding and far-reaching impact on companies doing business in Canada. The key substantive changes proposed by the Bill and salient takeaways are outlined below:
- Private Rights of Access:
- Scope: The Bill extends private rights of access such that individuals can seek leave to bring actions before the Tribunal under section 90.1 (civil competitor collaboration) and section 74.1 (deceptive marketing) of the Act. Currently, private rights of access are only available with respect to sections 75 (refusal to deal), 76 (price maintenance), 77 (exclusive dealing, tied selling and market restriction) and 79 (abuse of dominance) of the Act.
- Leave Test: The Bill significantly amends the test that individuals must meet in order to bring an action before the Tribunal. Currently, the Tribunal may grant leave to make an application under the specified sections if it has reason to believe that the applicant is directly and substantially affected with respect to the entirety of its business.
With respect to leave for sections 75, 76, 77, 79 and 90.1, the existing leave test is maintained, but amended such that the applicant need only be directly and substantially affected with respect to part of its business. Notably, in the majority of leave applications to date, the applicant failed to prove it was substantially affected with respect to its entire business. Additionally, the Bill introduces a second potential leave mechanism for these provisions, such that the Tribunal may alternatively grant leave if it is satisfied that it is in the public interest to do so.
With respect to section 74.1 (the deceptive marketing portion of the Act), the Bill proposes that the Tribunal may grant leave if it is satisfied that it is in the public interest to do so.
- Remedies: The Bill creates the ability for plaintiffs to receive monetary relief where they are granted leave to bring an action before the Tribunal under section 75, 76, 77, 79 or 90.1 of the Act and they are successful.
Specifically, where a person who has been granted leave to bring an action before the Tribunal under these provisions is successful, the Tribunal can order that the person against whom the order is made pay an amount, not exceeding the value of the benefit derived from the conduct that is the subject of the order, to be distributed among the applicant and any other person affected by the conduct.
The inclusion of the phrase “and any other person affected by the conduct” suggests that this remedy may operate in a manner akin to a class action but without the certification requirements.
Notably, the above proposed amendments relating to private rights of access would not come into effect until one year after the Bill receives royal assent.
- Civil Competitor Collaboration: The Bill extends the application of section 90.1 of the Act to apply to past conduct. Currently, this provision applies only to existing or proposed conduct. That being said, the Bill limits the consideration of past conduct to conduct which has occurred in the last three years.
The Bill also creates new remedies which are available under section 90.1. Currently, the only remedies available under section 90.1 include a prohibition order or any other order on consent of the parties. The Bill introduces the ability for the Tribunal to order additional remedies, including administrative monetary penalties (“AMPs”), the divestiture of assets or shares, or any other action that is reasonable and necessary to overcome the effects of the agreement or arrangement in that market. This is similar to the remedies currently available elsewhere in the Act, such as under the abuse of dominance provisions, and is likely to result in more frequent reliance on section 90.1 by the Commissioner and private parties.
- Refusal to deal and Right to Repair: The Bill makes several changes to the refusal to deal provision of the Act. First, it amends this provision to include the supply of the means of diagnosis or repair, creating the ability for the Commissioner or an individual to compel a company to provide the means of diagnosis or repair in certain cases. Note however that this right is only conferred on businesses and only when an adverse effect on competition can be demonstrated.
Notably, so-called “right to repair” laws already exist in other jurisdictions that seek to ensure that consumers can have devices serviced or repaired by independent firms (that is, firms other than the original manufacturer). In other jurisdictions, these laws require, for example, that manufacturers make the parts, tools and documentation needed to diagnose, maintain and repair consumer electronic devices and appliances available to independent repair shops and consumers at fair and reasonable prices.
Second, the Bill changes the requirement for a person to be substantially affected in its entire business to a requirement that a person be substantially affected in whole or part of its business.
- Environmental Collaboration Approval: The Bill introduces a new mechanism whereby parties may apply for a certificate relating to proposed environmental collaborations. Where such a certificate is issued, sections 45, 46, 47, 49 and 90.1 of the Act will not apply to the agreement or arrangement to which the certificate pertains, so long as the certificate remains valid and registered. However, such a certificate could be varied or rescinded by the Tribunal on application by the Commissioner.
- Greenwashing: The Bill includes an explicit prohibition against making a representation to the public in the form of a statement, warranty or guarantee of a product’s benefits for protecting the environment or mitigating the environmental and ecological effects of climate change that is not based on an adequate and proper test.
Notably, this provision only appears to apply to environmental statements regarding a product. It does not appear, on a plain reading, to apply to more general environmental representations (i.e. such as those relating to the environmental goals of a company or the sustainable nature of its operations).
- Reprisal Actions: The Bill creates a new provision under the Act that prohibits any party from taking any action to penalize, punish, discipline, harass or disadvantage another person because of that person’s communications with the Commissioner or because that person has cooperated, testified or assisted in, or has expressed an intention to cooperate, testify or assist in, an investigation or proceeding under the Act. Remedies for contravention of this provision include prohibition orders and AMPs.
- Substantive Merger Review:
- Labour Considerations: The Bill introduces the explicit consideration of labour issues into substantive merger review. On a plain reading, the Bill clarifies that a product would include labour, such that impacts on the competitiveness of labour markets will be considered when evaluating mergers.
- Market Share: Currently, under the substantive merger provisions of the Act, subsection 92(2) states that the Tribunal shall not find that a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially solely on the basis of evidence of concentration or market share. The Bill removes this provision, suggesting that there could be an increased weight provided to market share (on its own) in future merger reviews.
Notably, this change does not introduce structural presumptions that would, depending on the market share, either shift the burden to the merging parties to prove that a merger does not result in a substantial prevention or lessening of competition or prohibit the merger, as proposed in Bill C-352, which was introduced by Jagmeet Singh (leader of the NDP) on September 18, 2023. However, this change would potentially allow the Tribunal to create structural presumptions in the jurisprudence, as the United States Supreme Court did in the Philadelphia National Bank case decided in 1963.
- Coordinated Effects: The Bill adds two new factors that may be considered when the Tribunal is evaluating a merger, which relate to a change in the concentration of a market and impacts on tacit coordination within a market.
As the factors to be considered by the Tribunal under this section are non-exhaustive and these “new” factors were previously considered by the Bureau to some degree, this is not a significant change to the law. However, it does signal that there may be an increased focus on coordinated effects in merger reviews – where, historically, the focus during merger reviews in Canada has been on unilateral effects.
- Limitation Period: The Bill changes the limitation period within which the Commissioner can challenge a completed merger. Currently, the limit is one year after closing. The Bill would leave the limit as one year where the transaction was notified to the Commissioner, but would raise the limit to three years in respect of any merger which is not notified to the Commissioner. This may create an incentive for merging parties to make a competition filing in advance of closing (in the form of an ARC request) in the case of smaller transactions that are not subject to mandatory pre-merger notification in Canada.
- Interim Interim Injunctions: The Bill amends sections 100 and 104 of the Act such that parties are enjoined from completing a merger where an application for an injunction under these sections has been filed until the Tribunal has disposed of the application for the interim injunction. In effect, this creates an automatic “interim interim” injunction, where an injunction has been sought in the merger context.
- Merger Notification:
- Size-of-Transaction Threshold: Currently, when calculating the size-of-transaction merger notification threshold, only assets in Canada or sales in or from Canada generated from those assets are included. The Bill proposes amendments that would revise the calculation of this threshold to include the value of sales in, from or into Canada generated from assets in or outside of Canada. This change could result in a merger of two foreign companies with limited assets in Canada being subject to pre-merger notification in Canada if the target has an operating business in Canada and sufficient sales into Canada.
- Effect of Waiver: Currently, there is an exception to the requirement to file a pre-merger notification where a waiver has been provided by the Bureau (in practice, this waiver would accompany the provision of a no-action letter). The Bill would amend this exception such that the waiver would only extend for one year. If the merger closes more than one year after the waiver is provided, a pre-merger notification (or a new waiver) would be required.
- Consent Agreement Remedies: The Bill sets out explicit remedies that are available where parties fail to comply with a consent agreement. Among other things, these remedies include a prohibition order, an order to take action to comply with the consent agreement and/or an AMP.
- Costs: The Bill creates a presumption that costs will not be awarded against the Commissioner, unless the Tribunal is satisfied (a) that an award is necessary to maintain confidence in the administration of justice; or (b) that the absence of an award would have a substantial adverse effect on the other party’s ability to carry on business.
Update to Bill C-56
On September 21, 2023, Bill C-56 was introduced by Chrystia Freeland (Deputy Prime Minister and Minister of Finance) and received its first reading in the House of Commons (“Bill C-56”). As discussed in our previous blog post, Bill C-56 includes various amendments to the Act, including the introduction of market studies, the expansion of competitor collaboration provisions to non-competitors and the removal of the efficiencies defense from merger review.
As discussed in the Thirteenth Report of the House of Commons Standing Committee on Finance (the “Report”), the Committee recently considered Bill C-56 and agreed to (and did) report it with the following amendments:
- Amending Bill C-56 such that either the Commissioner or the Minister may initiate a market study (Bill C-56 previously required that the Minister initiate such a study);
- Adding “excessive and unfair selling prices” as an explicit example of anti-competitive conduct in the context of abuse of dominance;
- Amending the abuse of dominance provisions of the Act (as discussed below); and
- Removing the efficiencies defense from the competitor collaboration provisions of the Act.
With respect to the abuse of dominance provisions, Bill C-56, as amended by the Report, proposes to change the elements of the abuse of dominance provisions of the Act such that it is only required to show either: (i) an anticompetitive act (which is defined as any act intended to have a predatory, exclusionary or disciplinary negative effect on a competitor, or to have an adverse effect on competition) or (ii) that conduct (that is not a result of superior competitive performance) has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market. In other words, the proposed amendment would only require either anticompetitive intent or effects. Currently, the Act requires both anticompetitive intent and effects.
The proposed amendments also change the remedies available under abuse of dominance. Where only one of anticompetitive intent or effects is proven, the Tribunal may order a prohibition order, but may not order the payment of an AMP. It is only when both anticompetitive intent and effects are proven that the Tribunal may order any other remedy, including the payment of an AMP. That being said, as noted above, on application by a person granted leave under section 103.1, the Tribunal can order that the person against whom the order is made pay an amount, not exceeding the value of the benefit derived from the conduct that is the subject of the order. As currently drafted, such a payment could be ordered where only one of anticompetitive intent or effects is proven.
The proposed changes also increase the size of AMPs available under the abuse of dominance provisions from $10 million ($15 million on a subsequent order) to $25 million ($35 million on a subsequent order).
The proposed amendments discussed above are subject to debate and further change as they advance through the legislative process. That being said, amendments included in omnibus bills, such as Bill C-59, often receive very little debate. As such, it is highly likely that the amendments to the Act included in Bill C-59 will be passed in their current form.
The Fasken Team will continue to keep you posted on these developments.
If you have questions about the ongoing Competition Act amendment process, you can reach out to any member of Fasken’s Competition, Marketing & Foreign Investment group. Our group has significant experience advising clients on all aspects of Canadian competition law.
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 Fasken’s Competition, Marketing & Foreign Investment group.