In the last two years, most recently June 20, 2024, significant and substantial changes have been made to the Competition Act (Canada) (Act) pursuant to An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures (Bill C-19), which received Royal Assent on June 23, 2022, An Act to amend the Excise Tax Act and the Competition Act (Bill C-56), which received Royal Assent on December 15, 2023 and Fall Economic Statement Implementation Act, 2023 (Bill C-59), which received Royal Assent on June 20, 2024.1
The content of this article is intended to provide a general guide to the amendments. Specialist advice should be sought about any specific circumstances.
Criminal Offenses
Unlawful Agreements Between Employers
Effective as of June 23, 2023, it is criminally illegal under the new section 45(1.1) for unaffiliated employers to enter into agreements or arrangements with one another to fix, maintain, decrease or control salaries, wages or terms and conditions of employment, or to not solicit or hire each other's employees, even if the employers are not in the same business. Importantly, employers are entitled to rely on the ancillary restraints defence as is available to criminal conspiracies generally. As such, employers cannot be convicted of an offense under section 45(1.1) if they establish, on a balance of probabilities, that: (a) the agreement or arrangement: (i) is ancillary to a broader and separate agreement or arrangement that includes the same parties; and (ii) is directly related to, and reasonably necessary for giving effect to the objectives of the broader agreement; and (b) the broader agreement itself does not contravene section 45(1.1). For example, a non-solicitation clause in a purchase and sale agreement would very likely meet these requirements.
In its release of the Employer Conspiracy Guidelines on May 30, 2023,2 the Competition Bureau ("Bureau") defines "employers" to include directors, officers, agents or employees, such as human resource professionals. The Employer Conspiracy Guidelines further note that an agreement between an officer of a corporation and an officer or director of another corporation is considered to be an agreement between employers. In these circumstances, both the corporation as well as the individuals who enter into an agreement (whether or not the corporation is charged) may be subject to prosecution.
Fines at the Discretion of the Court
Violations of the criminal conspiracy provisions in section 45(1) and 45(1.1) are indictable offenses and offenders are liable on conviction to imprisonment for a term not exceeding 14 years or to a fine (or both). Prior to June 23, 2023, the fine could not exceed $25,000,000. Effective as of June 23, 2023, the fine is at the discretion of the court.
False or Misleading Representations – Drip Pricing
Section 52 was amended under Bill C-19, effective June 23, 2022, to make it clear that "drip pricing" constitutes a false or misleading representation. Drip pricing is defined as a representation of a price that is not attainable due to fixed obligatory charges or fees, other than amounts imposed under an Act of Parliament or the legislature of a province (for example, sales tax).
While this was clarified with respect to the person making the false or misleading representation, it was not clarified with respect to the false or misleading representations sent or caused to be sent in sender information or subject matter information of an electronic message or sent or caused to be sent in an electronic message, or in a locator, which are covered by section 52.01. Bill C-59 rectifies this so that it will be clear that drip pricing representations imposed on a purchaser of the product constitute false or misleading representations for the purposes of section 52.01.
Deceptive Marketing Practices
Drip Pricing
A person that makes a false and misleading representation could be charged criminally under Part VI of the Act, or the matter could be dealt with by the Commissioner of Competition (Commissioner) under the civil deceptive marketing provisions of the Act. Matters that are advanced under the civil deceptive marking provisions are reviewable by the Commissioner and the Competition Tribunal (Tribunal) and are not criminal offenses. On June 23, 2022, Bill C-19 clarified that drip pricing constitutes a false or misleading representation for the purposes of section 74.01. Bill C-59 further amends section 74.01 so that drip pricing must be imposed on a purchaser of the product. A seller who engages in reviewable conduct now has the onus under section 74.01(3) of proving its ordinary price by either: (a) selling a substantial volume of the product at that price or a higher price; or (b) offering the product at that price or a higher price in good faith for a substantial period of time.
Bill C-59 also amends section 74.011 to include drip pricing as false or misleading representations sent or caused to be sent in sender information or subject matter information of an electronic message or sent or caused to be sent in an electronic message, or in a locator, that are imposed on a purchaser of the product.
Environmental Claims
The deceptive marketing provisions of the Act have been amended under Bill C-59 to include two new deceptive marketing practices related to environmental claims.
The new provisions of the Act target: (i) environmental claims that promote the environmental, social and ecological benefits of using or supplying a product if the claim is not based on an adequate and proper test (Section 74.01(1)(b.1)); and (ii) more broadly, environmental claims that promote the environmental and ecological benefits of a business or business activity that are not based on adequate and proper substantiation in accordance with internationally recognized methodology (Section 74.01(1)(b.2)).
While the facts cited in the environmental claim must be appropriately tested or substantiated, that may not be enough. If the over-all impression of the claim to an average person implies a broader meaning, the implied broader meaning must also be tested or substantiated. Both sections place the burden of proof on the entity making the environmental claim to demonstrate compliance with the provision.
There is fairly clear case law on what is required to qualify as an "adequate and proper test". The test must be fit and suitable having regard for the risk or harm the product in question intends to prevent and must be conducted in controlled conditions that exclude external variables. When feasible, multiple independent samples should be used, and the results must reasonably show the product's significant effect. This test must be completed before making any related statements, warranties, or guarantees.
There is currently no case law on what is required to satisfy "adequate and proper substantiation in accordance with internationally recognized methodology". The term "internationally recognized methodology" is undefined in the Act. Various international, national, and sub-national standards exist, with some being voluntary and others being mandatory. As a result, the scope and meaning of Section 74.01(1)(b.2) are unclear.
Until the Bureau provides further guidance, every company that makes public representations and warranties with respect to the environment and/or climate change, will need to review the same (with the assistance of outside experts) and prepare to substantiate and/or amend them. While undertaking this review, the following should be considered:
- it is important to understand how the "over-all impression" test is applied since testing or substantiating facts alone may not be enough;
- the use of words and phrases, particularly by oil and gas companies, such as "clean", "sustainable", "green", "low-carbon", "climate leader", "carbon neutral", "climate friendly" and "net-zero" are fairly broad and vague terms that are open to various interpretations by the public. The use of such terms will likely be problematic and will invite greater scrutiny as the meaning they imply or portray will be difficult to substantiate;
- if your calculation of GHG emissions and emissions intensity are not verified by third party verifiers, consider doing so; and
- greater care will need to be taken by companies that wish to disclose their future plans and targets. Referred to as "forward looking statements", these statements are particularly vulnerable to attack unless the plan is detailed, clear and actionable, appropriate baseline measures and methodologies are in place to measure progress, the resources and technologies are effective and commercially available today, and there is evidence of action being taken and monitored.
AMPs
Administrative monetary penalties (AMPs) for violations of the deceptive marketing practices provisions of the Act were increased under Bill C-19 to provide for a monetary penalty that is intended to make conduct that contravenes the Act unprofitable. While there is a minimum penalty, the penalties have been revised as follows:
- for individuals, the greater of: (i) $750,000 for the first order, and $1,000,000 for any subsequent orders; and (ii) 3x the value of the benefit derived from the deceptive conduct if the amount can reasonably be determined; and
- for corporations, the greater of: (i) $10,000,000 for the first order, and $15,000,000 for any subsequent order; and (ii) 3x the value of the benefit derived from the deceptive conduct or, if that amount cannot reasonably be determined, 3% of the corporation's annual worldwide gross revenues.
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Footnotes
1. Unless otherwise stated, all provisions refer to the Act.
2. Competition Bureau, Enforcement Guidelines on Wage Fixing and No-Poaching Agreements (30 May 2023), online: https://competition-bureau.canada.ca/how-we-foster-competition/education-and-outreach/enforcement-guidelines-wage-fixing-and-no-poaching-agreements [Employer Conspiracy Guidelines].
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.