Bill C-59 (the "Bill") was introduced in the House of Commons on November 30, 2023 to implement certain provisions of the 2023 federal budget and 2023 fall economic statement. The Bill contains substantial amendments to the Competition Act (the "Act"), which are intended to complement other changes to the Act that were assented to last year in Bill C-56, also known as the Affordable Housing and Groceries Act.
The Bill received royal assent on June 20, 2024 and the competition-related measures proposed in the Bill mark the most significant changes to the Canadian law in decades. In fact, some senators and members of Parliament have even referred to the proposed changes to as "generational."
Some of the key areas of amendment include:
- New factors to be considered during merger reviews which will make it easier for the Competition Tribunal (the "Tribunal") to make a finding that a merger is likely to substantially lessen or prevent competition;
- A significant expansion of private actions under the Act, including empowering the Tribunal to make monetary awards to applicants;
- Inclusion of representations about the environmental benefits of a product, business or business interest in the civil misleading advertising provisions of the Act; and
- Additional circumstances in which administrative monetary penalties can be imposed, including civilly reviewable agreements between competitors and reprisal actions.
Many of the changes to the Act are effective immediately. While other amendments will not take effect until June 20, 2025, Canadian businesses should be aware of these immediate and impending changes to our federal system of competition regulation.
Mergers
A major focus of the amendments is broadening the scope of merger reviews through new powers available to the Commissioner of Competition (the "Commissioner") and additional factors to be considered by the Tribunal during its review. The merger-related amendments are in force effective immediately.
The new factors to be considered during a merger review include effects on labour markets, changes in market share/concentration index that are likely to be brought about by the merger (designed to mirror the Herfindahl-Hirschman Index (HHI) used by the U.S. Merger Guidelines), and the likelihood that the merger will result in express or tacit coordination between competitors in a market.
The consideration of market shares and concentration during merger reviews is being given increased weight. Under the previous regime, the Tribunal could not conclude that a merger is likely to substantially lessen or prevent competition solely because it is likely to result in significant increases to market share or competition.
This is no longer the case, as the Tribunal is now required to find that a merger substantially lessens or prevents competition if it finds that significant increases to market share or concentration will likely result from the merger, unless the parties to the merger are able to prove the contrary on a balance of probabilities. This introduces a "reverse onus" for merging parties to disprove the anti-competitive effects that might result from the increases to market share and concentration brought about by the merger and will effectively make it easier for the Tribunal to prevent a merger from proceeding.
Other important merger-related changes contained in the Bill include:
- Pre-merger notifications required for more transactions: the transaction size thresholds have been revised to include "sales into Canada" and to require the aggregation of assets and revenues in transactions where a party proposed to acquire assets and shares of another business.
- Extended limitation periods for non-notifiable mergers: for transactions not requiring a pre-merger notification or where an advanced ruling certificate is not obtained, the limitation period to review mergers increased from one to three years.
- Interim injunctions: if the Commissioner makes an application for an interim order preventing a merger from closing, the parties are prohibited from completing the transaction until the Tribunal disposes of the injunction application.
Private actions
The amendments to the Act expand the circumstances in which private parties can seek leave to commence actions to seek remedies for the civilly reviewable anti-competitive conduct of another person or a business. However, these changes will not come into effect until June 20, 2025.
Previously, private parties could only seek remedies in relation to the Act's "restrictive trade practices" provisions (sections 75, 76, 77 and 79), and these parties could not be awarded monetary relief. Under the amended provisions, private parties will also be able to commence private actions for deceptive marketing (s. 74.1) and anti-competitive agreements between competitors (s. 90.1).
The Tribunal will also be empowered to make monetary awards in amounts "not exceeding the value of the benefit derived" from the conduct, which are to be distributed to the applicant and other persons affected by the conduct. However, this monetary remedy will not be available in private applications commenced under section 74.1.
Other changes relating to private actions include:
- Relaxed standards to obtain leave to bring private actions: applicants will only be required to demonstrate that they have been affected in the "whole or part" of their business (sections 75, 77, 79 and 90.1), or that it is "in the public interest" that leave be granted (section 74.1).
- Approval of private settlements: agreements to settle private actions will be subject to approval by the Commissioner, who is empowered to apply to the Tribunal to challenge its terms.
Environmental claims
The amendments to the Act include revisions to the civil misleading advertising provisions of the Act to deem representations regarding the environmental benefits of a product, business or business interest to be a misleading representation, unless:
- In the case of representations about a product, such representations are based on "adequate and proper testing," the proof of which lies with the party making the representation; and
- In the case of representations about a business or business interest, such representations are based on "adequate and proper substantiation in accordance with internationally recognized methodology," the proof of which lies with the party making the representation.
These new misleading advertising provisions are among the amendments that are effective immediately.
If the Tribunal finds that a party has contravened the civil misleading advertising provisions, it may order the payment of the following administrative monetary penalties:
- For individuals, the greater of:
- $750,000 on first orders and $1 million on subsequent orders; and
- Three times the value of the benefit derived from the deceptive conduct, if that amount can be reasonably determined.
- For corporations, the greater of:
- $10 million on first orders and $15 million on subsequent orders; and
- Three times the value of the benefit derived from the deceptive conduct or, if that amount cannot be reasonably determined, 3% of the corporation's annual worldwide gross revenues.
While the Competition Bureau (the "Bureau") has not released any recent guidance or commentary to assist industry proponents in assessing its environmental representations, it is worth noting that the Bureau published a guide to environmental claims in the context of misleading advertising in 2008. While this 2008 Guide has since been archived, it may be a useful source to predict the contents of any future guidance published by the Bureau, as the 2008 Guide makes reference to standards published by the Canadian Standards Association and International Organization for Standardization regarding environmental labels and declarations.
Environmental Certificates Regarding Agreements or Arrangements to Protect the Environment
The amendments also introduce a new process that allows the Bureau to certify certain environment-related agreements and arrangements such that those agreements and arrangements will be exempt from the criminal and civil competitor collaboration provisions under the Act. The Commissioner may issue a certificate where satisfied that: (i) a party or parties propose to enter into an agreement or arrangement that is for the purpose of protecting the environment; and (ii) that the agreement is not likely to prevent or lessen competition substantially in a market.
Upon receipt of the request, the Commissioner has a duty to consider the request as soon as practicably possible, and the parties seeking the certificate have a duty to provide the Commissioner with any information related to the agreement or arrangement on request. Once issued (on terms or otherwise), the parties to the certified agreement or the arrangement will be exempt from the criminal and civil competitor collaborations provisions under the Act with respect to the certified agreement or arrangement for a period of 10 years (plus any renewal period).
This new certification process helps to provide some comfort to competitors that may wish to collaborate on legitimate environmental initiatives without concern that the criminal or civil provisions of the Act will be triggered by virtue of the collaboration itself.
Penalties
The amendments to the Act will expand the circumstances in which penalties can be imposed by the Tribunal and the Federal Court. These include penalties for civilly reviewable agreements between competitors, failing to comply with registered consent agreements, and reprisal actions. While the penalties for reprisal actions are effective immediately, the others will not come into force until June 20, 2025.
If the Tribunal finds that a civilly reviewable agreement between competitors is likely to substantially lessen or prevent competition, it will be authorized to order payment of the greater of:
- $10 million for first orders ($15 million for subsequent orders); and
- Three-times the value of the benefit derived from the agreement, or 3% of annual worldwide gross revenues of the benefit cannot be reasonably obtained.
If a party fails to comply with the terms of a registered consent agreement, administrative monetary penalties of up to $10,000 for each day of contravention may be imposed. Parties who fail to provide the Commissioner with a copy of a settlement of a private action would be subject to the same penalties.
The amendments will allow the Commissioner or persons "directly and substantially" affected by reprisal actions to apply to Federal Court for an order prohibiting persons from engaging in that action. The Court will be empowered to order administrative monetary penalties of up to:
- For individuals: $750,000 on first orders and $1 million on subsequent orders; and
- For corporations: $10 million on first orders and $15 million on subsequent orders.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.