On June 20, 2024 the Fall Economic Statement Implementation Act, 2023 (the "Economic Statement") received Royal Assent and became law. The Economic Statement includes amendments to the Competition Act (the "Act"), and is the latest step in the Federal Government's plan to overhaul Canada's competition regime.1
For more information on the changes to the Act made to date, see our prior Thought Leadership pieces summarizing the amendments made in June 2022 and December 2023.
The changes to the Act in the Economic Statement are primarily targeted at:
- changing the merger review process;
- reducing deceptive marketing practices; and
- increasing access to the Competition Tribunal for private citizens.
Merger review process
The Competition Bureau will bring an action to Canada's Competition Tribunal to oppose a proposed merger of large businesses if it determines that the merger would result in, or is likely to result in, the substantial prevention or lessening of competition. The Economic Statement amends the Act in a number of ways that will make it easier for the Competition Tribunal to determine that a proposed merger meets this standard. The most substantial changes are discussed below.
Rebuttal presumption
The Economic Statement introduces the use of the Herfindahl-Hirschman Concentration Index (the "HHI") to determine the competitiveness of markets. The HHI is an American concentration index used to determine how uncompetitive, or concentrated, a particular market is. If certain market concentration thresholds are surpassed based on the HHI, there will be a rebuttable presumption that the proposed merger will result in a substantial prevention or lessening of competition in that market.
This is a complete turn from the prior wording of the Act, which indicated that evidence of market concentration was not, in and of itself, sufficient to determine that a proposed merger would substantially prevent or lessen competition.
Extended limitation period
If a merger was completed without notification to the Competition Bureau in accordance with the Act, the Competition Bureau previously had one year to challenge it post-closing. This window has been extended to three years.
Higher remedial standard
If the Competition Tribunal determines that a proposed merger will result in a substantial prevention or lessening of competition in a particular market following the transaction, the Act used to require that the appropriate remedy would be to reduce the prevention or lessening of competition to the point where it would no longer be "substantial". Following the Economic Statement, the required remedy is that competition in that market be returned to its pre-merger level.
The result of these amendments is that a proposed merger that would lessen competition in a market to a degree, but not substantially, will be able to proceed as proposed, but a merger that would substantially lessen competition will not be able to proceed in a market, even if measures could be taken by the acquiring party (selling particular assets or retail locations, for example) to lower the impact on competition to the point where it is no longer substantial.
Deceptive marketing
Companies that advertise in any form should take note that the Act now expressly prohibits advertising
(a) prices that are not attainable due to fixed obligatory charges or fees imposed on the purchaser, other than federal and provincial taxes, commonly referred to as "drip pricing"; and
(b) representations that a product or business activity has benefits for protecting or restoring the environment or mitigating climate change that is not based on an adequate and proper test, commonly referred to as "greenwashing".
Additionally, in relation to advertisements of discounted prices, the burden now rests on the advertiser (as opposed to the complainant) to show that the product or service truly was offered at the original price, such that the discounted price is truly a discount to the price at which the product or service can usually be obtained.
Note that both drip pricing and greenwashing would have been generally prohibited under the deceptive marketing provisions of the Act prior to the amendments, but their explicit inclusion indicates an increased focus on them by Parliament and the Competition Bureau.
Private access to the competition bureau
The amendments in the Economic Statement build on earlier amendments and introduce additions to the rights of private parties to file an action to the Competition Tribunal. Previously, direct access to the Competition Tribunal was restricted.
The Economic Statement relaxed the requirements for private parties to file an action to the Competition Tribunal and extended private action rights to deceptive marketing practices and anti-competitive agreements. The changes also allow the Competition Tribunal to grant monetary awards to successful private parties under the Act.
Increased penalties
The Economic Statement introduced a provision that allows the Competition Tribunal to impose an Administrative Monetary Penalty (commonly referred to as an "AMP") if it finds that a contract between two or more parties (even parties who are not competitors with each other in an industry or market) has anti-competitive effects. This provision is consistent with the penalties available under the Abuse of Dominance provisions of the Act and are limited to the greater of:
- $10 million for a first offence or $15 million for a subsequent offence, and
- three times the value of the benefit derived from the anti-competitive agreement, or, if that value cannot be determined, 3% of the party's gross global revenue.
Key takeaways
- More significant changes have been introduced to our country's competition law regime. These changes are the latest in a series of amendments by Parliament increasing competition regulation.
- It will be more difficult for companies subject to the merger review process of the Competition Act to complete mergers in the future because (a) Canada's longstanding rule that evidence of market concentration is not, in and of itself, sufficient to determine that a proposed merger would substantially prevent or lessen competition has been reversed, and (b) the remedial standard for potentially problematic mergers has been increased beyond and out of sync with the standard for initial merger review.
- Drip pricing and greenwashing are now explicitly targeted under the deceptive marketing provisions of the Competition Act.
- There is now a private right of action for individuals and businesses to make deceptive marketing complaints directly to the Competition Tribunal. Under the old regime, complaints would be made to the Competition Bureau, who would review and investigate the claim, involving the Tribunal only when necessary.
Footnote
1. The full text of the Economic Statement is available here. The Competition Bureau has published a guide to these new amendments that can be accessed here.
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.