On September 20, 2023, the Department of Innovation, Science and Economic Development ("ISED") released a report summarizing the submissions received from the public relating to the ongoing competition law amendment consultation process (the "Consultation Report").
By way of background, as discussed in our previous blog post, the Honourable François-Philippe Champagne, Minister of Innovation, Science and Industry, launched the much anticipated public consultation for potential amendments to the Competition Act (the "Act") on November 17, 2022. The call for public engagement highlighted that the review would focus on the role and functioning of the Act, the role and powers of the Competition Bureau (the "Bureau"), the effectiveness of remedies and private redress mechanisms, addressing challenges of data and digital markets, and other pro-competitive policies.
The public consultation period concluded on March 31, 2023. The Consultation Report summarizes the feedback received and raises some considerations around what the government heard from stakeholders.
In total, according to the Consultation Report, ISED received over 130 submissions from identified stakeholders and more than 400 responses from members of the general public. The identified stakeholders included academic experts (7%); law practitioners (7%); labour unions, consumer groups and public interest organizations (18%); businesses and their associations (53%); government entities (5%); and others of varied background and experience (10%). Key issues raised in the Consultation Report include affordability, consumer protection, increasing concentration in certain sectors, and the need to maintain a framework conducive to investments and environmental sustainability.
Response from the General Public
The Consultation Report notes that the responses from the general public (as opposed to identified stakeholders) tended to be "of a more general nature and reflect the personal experience of members of the public". Overall, the responses communicated a general discontentment with the Act and the current level of enforcement, and a belief that the Act was failing to stop monopolies and oligopolies (calling out concentrated industries such as grocery and telecommunications), which in turn was leading to higher costs, reduced choice, decreased innovation and increased political power for large corporations. A number of responses called for new and stronger enforcement tools and regulations (particularly with respect to digital markets), for increased enforcement authority on the part of the Bureau, and for increased transparency and public input.
Responses from Identified Stakeholders
ISED received numerous, detailed submissions from identified stakeholders providing feedback on specific reform proposals. These responses were summarized in the Consultation Report into the following issues: (1) mergers, (2) unilateral conduct, (3) collaborations, (4) deceptive marketing, (5) administration and enforcement of the law and (6) other areas of comment. The key aspects of these responses are summarized below.
- Mergers: While overall there was consensus
with respect to the need for more competitive markets, there was
disagreement on the best ways to achieve this. Themes identified in
the Consultation Report included calls to address concentration in
critical industries, preserve affordability for customers, and
minimize administrative burden and unnecessary intervention. Many
respondents commented that the law focused too narrowly on
individual markets, specific firms, and short-term results, while
others noted there to be no other practical alternative.
In response to these concerns, the Consultation Report highlights that a goal of competition law reform should be to "[adjust] the parameters of merger review to better confront enforcement shortcomings, without letting go of a principled, evidence-based system". This suggests that future amendments may avoid bright line rules or structural presumptions (which many stakeholders called for and, as discussed in our prior blog post, are included in the private member bill recently introduced by the leader of the New Democratic Party) that do not require evidence of harm. With respect to structural presumptions, the Consultation Report also notes that the need for such amendments could potentially be avoided by, among other things, improved guidance to eliminate perceived gaps in the law.
With respect to amendments to the merger notification procedure, the Consultation Report recognized that these are technical issues – as argued by many stakeholders – and that further consideration and engagement with stakeholders may be required. As such, while changes to the merger notification regime may ultimately occur, it appears that these should not be expected shortly.
With respect to substantive merger review, the Consultation Report suggests that the substantive test could be amended with respect to future harms, allowing the Bureau to "act on less foreseeable harm before it is too late for any other recourse under the Act". It is presumed that this is to address concerns arising from "killer" acquisitions.
Additionally, with respect to injunctions, the Consultation Report notes that different types of temporary safeguards could potentially be considered – rather than revising the well established standard for granting injunctions.
- Unilateral Conduct: Concerns raised by
stakeholders pertaining to unilateral conduct centered on ensuring
that a small number of firms do not "dictate the terms of
Canada's economy". There was a clear divide between those
concerned with concentrated industries (including oligopolistic or
duopolistic markets) and those concerned that returning to the
"big is bad" approach is not based in evidence and could
ultimately lead to the protection of competitors, rather than the
competitive processes.
The Consultation Report notes that, while stakeholder feedback overall was "largely inconclusive" in many areas, clear calls for reform were received in some areas, and in particular, with respect to the test for abuse of dominance. As such, it amendments to the legal test for abuse of dominance should be expected.
Notably, the Consultation Report states that "intervention may be warranted in the name of protecting the public policy goal – in this case competition – even when affected parties may not be solely responsible, or specifically aiming, for the undesirable result". This suggests that the government may intend to strengthen or expand the concept of joint dominance under the abuse of dominance provisions, and may also be considering limiting the requirement that an effect of a party's action be intended or reasonably foreseeable. That being said, the Consultation Paper suggests that proactive government intervention may be one possible solution, as opposed to increased regulation and enforcement.
- Collaborations: Stakeholder responses to
issues regarding agreements or arrangements among firms that
substantially lessen or prevent competition, in contravention of
section 90.1 of the Act, were noticeably focused on principles and
the effectiveness of the law, as opposed to concerns regarding
ongoing market conditions which required remedying.
The Consultation Report highlights that Canada's approach to competitor collaborations are of "limited scope" and "noticeably out of step with international practice" – suggesting that the government may be interested in ways in which the competitor collaboration provision can be expanded.
The Consultation Report also notes that the government may be exploring whether new public interest exceptions should be considered under the competitor collaboration provisions. That being said, the commentary in the Consultation Report on this issue was relatively reserved, suggesting that perhaps amendments in this regard, if any, should not be expected any time soon.
- Deceptive Marketing: While some concerns were
raised by stakeholders targeted at deceptive marketing in the
digital economy and "greenwashing", few major concerns or
obvious conclusions were drawn from the stakeholder feedback. The
Consultation Report provides little detail regarding whether
reforms to the Act can be expected in this area, but notes that
efforts to establish external regulatory regimes against which
claims can be measured under the Act (such as the ongoing efforts
to develop plastic packaging and labelling rules for recyclability
and compostability) may be the best approach.
- Administration and Enforcement of the Law:
While stakeholders provided a diverse set of views with respect to
required reforms for the functions of the Bureau and enforcement
procedures, market study powers and private enforcement were the
most discussed topics. The Consultation Report notes that the
introduction of market study powers garnered a high level of
support from stakeholders, and considers that there is likely a
possible framework which would allow for market studies while still
"accommodating concerns of burden or overreach through
appropriate safeguards". In this regard, as discussed in our
prior blog post, Bill C-56, which was introduced by the Deputy
Prime Minister and Minister of Finance on September 21, 2023,
includes provisions allowing for the use of market studies.
With respect to private enforcement, the Consultation Paper notes that there is likely potential for reforms which balance the goals of private enforcement while still guarding against potential exploitative actions by private parties. As such, it appears serious consideration is being given by the government in regards to potential reforms to private enforcement under the Act.
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.
