Bill C-59 and its significant expansion of private competition litigation: Where are we now?
Recognizing the critical role of the Competition Act (the "Act") in promoting dynamic and fair markets, Canada's Minister of Innovation, Science and Industry, the Honourable François-Philippe Champagne, announced on February 7, 2022 that he would carefully consider ways to modernize and improve its operation. Following this announcement, significant competition law reform has taken place in Canada, including the passage of Bill C-19 on June 23, 2022, the passage of Bill C-56 on December 15, 2023 and the passage of Bill C-59 on June 20, 2024 (collectively, the "Bills").
The Bills include amendments that touch on virtually all facets of competition policy in Canada, including, without limitation, merger review, abuse of dominance, criminal cartels, competitor collaborations, deceptive marketing, private rights of action and market studies. All provisions of the Bills are now in force, with the exception of a select few amendments which will come into force later in 2024 and 2025.
According to the Government's 2023 Fall Economic Statement, these amendments are "generational changes" that "will help bring Canada into alignment with international best practices to ensure that our marketplaces promote fairness, affordability, and innovation". We would go further and describe these amendments as the most significant changes to the Act in almost 40 years – changes that fundamentally alter and transform the competition law landscape in Canada.
This blog post summarizes in one place the provisions in the Bills relating to private rights of access, which will likely create robust private litigation at the Competition Tribunal (the "Tribunal"), including what is potentially a form of a class action regime. In particular, these provisions will allow private access under more sections of the Act, possibly ease the leave test that must be satisfied by private parties wanting to bring a private action and permit the Tribunal to award monetary relief to successful applicants. Notably, with the exception of the provision allowing for private access under the abuse of dominance provisions (which came into force as of June 23, 2022), these provisions do not come into effect until June 20, 2025 (i.e., one year after Bill C-59 received royal assent).
Expanded Scope of Conduct Captured
The Bills have expanded the number of provisions under which private parties can seek leave to bring applications before the Tribunal. In this regard, Bill C-19 initially extended private rights of access to section 79 (abuse of dominance) and Bill C-59 further extended private rights of access to section 74.1 (deceptive marketing) and section 90.1 (civil competitor collaboration) of the Act. Prior to the passage of these Bills, private rights of access were only available with respect to sections 75 (refusal to deal), 76 (price maintenance) and 77 (exclusive dealing, tied selling and market restriction).
Perhaps the most significant types of conduct captured are the abuse of dominance and civil competitor collaboration provisions, the new stand-alone greenwashing provisions and other civil deceptive marketing practices and the new "right to repair" within the existing refusal to deal provision,
- Abuse of Dominance: Of significance, the abuse of dominance provision would only require a party to show that a "dominant" entity has engaged in either a practice of anticompetitive acts or conduct other than superior competitive performance that had, is having or is likely to have the effect of preventing or lessening competition substantially in a relevant market. This is in contrast with the prior version of the abuse of dominance provision, which requires both anticompetitive intent and effects. However, anticompetitive intent and effects need to be demonstrated in order for monetary relief to be awarded.
- Competitor Collaborations: This provision not only captures collaborations between competitors or potential competitors but also captures collaborations among parties that are not competitors, to the extent that a "significant purpose" of the collaboration is anticompetitive (notably, the amendments do not elaborate on when an anticompetitive purpose would be considered a "significant purposes"). As such, the competitor collaboration provision may apply to essentially any commercial agreement – including agreements with customers and suppliers.
- Greenwashing: These are stand-alone greenwashing prohibitions intended to address unsubstantiated environmental claims, whether relating to "a product's benefits for protecting or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change" or "the benefits of a business or business activity for protecting or restoring the environment or mitigating the environmental and ecological causes or effects of climate change". A person making an environmental claim must ensure that the claim is supported by "an adequate and proper test" or "adequate and proper substantiation in accordance with internationally recognized methodology", the proof of which lies on the person making the claim.
- Refusal to deal (and Right to Repair): These provisions make 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 a person to compel a company to provide the means of diagnosis or repair in certain cases. 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 the whole or part of its business. 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).
Leave Test
In order for private parties to bring a private right of action before the Tribunal, they must first apply for and obtain leave. Bill C-59 eases the test that private parties were previously required to meet in order to bring a private action before the Tribunal, other than the test applicable to section 76 (price maintenance) of the Act that remains unchanged.
Historically, the Tribunal could grant leave to bring an application under sections 75, 77 and 79 of the Act if it had reason to believe that the applicant was directly and substantially affected with respect to the entirety of its business. Going forward, the new leave test, which applies to sections 75, 77, 79 and 90.1 of the Act, provides that the applicant need only be directly and substantially affected with respect to part of its business. Notably, in many unsuccessful leave applications to date, the applicant has failed to prove it was substantially affected with respect to its entire business.
Additionally, Bill C-59 introduces a second potential leave mechanism for these provisions, where the Tribunal is satisfied that it is in the public interest to do so. Similarly, Bill C-59 permits the Tribunal to grant leave to bring a private application under section 74.1 of the Act where it is satisfied that it is in the public interest to do so. While the scope of public interest is currently unknown, a public interest test could open the door to representative-style proceedings and public interest litigants.
Private Monetary Relief
Bill C-59 creates the ability for applicants to receive monetary relief in connection with successful applications brought under section 75, 76, 77, 79 or 90.1 and the deceptive marketing provisions of the Act.
In the case of successful applications under these sections of the Act, 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 manner that the Tribunal considers appropriate". With this choice of language, the monetary amount that an applicant may seek is not damages. However, it resembles a form of disgorgement, the quantification of which can be significant in many circumstances.
Further, for Part VII.1 (deceptive marketing practices) and where representations to the public are found to be materially false or misleading, an applicant can seek "an amount, not exceeding the total of the amounts paid to the [advertiser] for the products in respect of which the conduct was engaged in, to be distributed among the persons to whom the products were sold... in any manner that the court considers appropriate". This choice of language (which is already contained in the Act but now available to private parties) is akin to restitution.
A Form of a Class Action Regime
Bill C-59 includes two amendments that suggest the creation of a form of a class action regime before the Tribunal.
First, the inclusion of the phrase "be distributed among the applicant and any other persons affected by the practice, in any manner that the Tribunal considers appropriate" suggests a broad discretion for the Tribunal to order monetary relief to a large group of persons (businesses and individuals) affected by the alleged conduct.
Second, Bill C-59 expressly gives the Tribunal the power to establish a payment, claims and notice process akin to the powers of courts in a class action context. These powers include: "specifying how the payment is to be administered", "the appointment of an administrator to administer the payment and specifying the terms of administration", "requiring that potential claimants be notified in the time and manner specified by the Tribunal", "specifying the time and manner for making claims" and "specifying the conditions for the eligibility of claimants".
Collectively, these features appear to give the Tribunal the power to order the payment of monetary relief to a significant group of affected persons and to manage the related notice, payment and claims process. This effectively creates a form of a class action regime, but with differences to the existing class action regime in the civil courts. Significantly, Bill C-59 does not create a certification process that has historically served as a procedural screening mechanism, where a court decides, at an early stage, whether a class action is the appropriate procedural mechanism to advance an action. However, the leave requirement may provide an opportunity to screen claims that should be disposed of at an early stage – although this remains to be seen in light of the significantly reduced leave test.
Implications for Business
Traditionally, competition risk in Canada has arisen from public enforcement by the Competition Bureau without meaningful private risk. However, the amendments change this, as they will likely create significant private enforcement risk for a wide array of business conduct ranging from vertical arrangements and horizonal collaborations to physical and non-physical repair restrictions and advertising and marketing. Given this risk, it is important that businesses implement and/or update their competition law compliance policies and processes.
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.