Canada: A Guide To The Far Reaching And Substantive Changes To The Competition Act Pursuant To Bill C-19, Bill C-56 And Bill C-59

By Alicia Quesnel and Brittney LaBranche¹

In this Guide, we review several of the most significant changes to the Competition Act (Canada) (Act) made 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 is anticipated to receive Royalty Assent early in 2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about any specific circumstances.

This Guide will be updated when Bill C-59 comes into effect.

Criminal Offenses

Unlawful Agreements Between Employers

Effective as of June 23, 2023, one year following the date Bill C-19 came into force, it is criminally illegal under new section 45 (1.1) for 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, the new criminal conspiracy provisions involving 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.

Fines at the Discretion of the Court

Violations of the criminal conspiracy provisions in section 45(1) and 45 (1.1) are an indictable offense 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 of the Act 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 representation 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 of the Act. Bill C-59 rectifies this so that upon royal assent, it will be clear that drip pricing representations constitute false or misleading representations for the purposes of section 52.01 of the Act as well.

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 deceptive marketing provisions of the Act, which are matters that are reviewable by the Commissioner and the Competition Tribunal (Tribunal) and not criminal offences. Section 74.01 of the Act was amended by Bill C-19 on June 23, 2022 to clarify that drip pricing constitutes a false or misleading representation for the purposes of section 74.01. When it comes into effect, Bill C-59 will clarify that 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 74.011 of the Act, include drip pricing representations.

Environmental Claims

The deceptive marketing provisions of the Act will be amended under Bill C-59 to include, as a reviewable misrepresentation to the public, a statement, warranty or guarantee of a product's benefits for protecting the environment or mitigating the environmental and ecological effects of climate change that is not based on an adequate and proper test. This is notably a fairly narrow type of misrepresentation in that the representation must be specific to a product's benefits. It is not likely broad enough to capture general "greenwashing" claims related to a company's commitment to the environment or the steps it may be taking to reduce its carbon footprint.

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 designed to make conduct that violates the Act unprofitable. While there is a minimum penalty, the penalties have been revised to require the party to pay 3 x the value of the benefit they received as a result of the impugned, as follows:

1. for individuals, the greater of: (i) $750,000 for the first order, and $1,000,000 for any subsequent orders; and (ii) 3 x the value of the benefit derived from the deceptive conduct if the amount can reasonably be determined; and
2. for corporations, the greater of: (i) $10,000,000 for the first order, and $15,000,000 for any subsequent order; and (ii) 3 x 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.

Private Rights of Actions

On the first anniversary of the day Bill C-59 comes into force, private persons will be entitled to apply to the Tribunal for leave to bring a private action against a person for their deceptive marketing practices.

Refusal to Deal, Price Maintenance, Exclusive Dealing, Tied Selling and Market Restrictions

Section 75 (Refusal to Deal)

Bill C-59 will amend the refusal to deal provisions found in section 75 of the Act in two material respects. First, the amendments will make it easier to establish that the impugned conduct has occurred. Under the current provisions, a person must be substantially affected in their whole business by another person's refusal to deal. Under Bill C-50, the impugned conduct will be satisfied if a person is substantially affected in the whole or part of their business.

Second, Bill C-59 will amend section 75 to include a refusal to provide "diagnosis or repair" services. When Bill C-59 comes into force, the Tribunal will have the power to order a supplier of a product that is a means of diagnosis or repair (defined as diagnostic and repair information, technical updates, diagnostic software or tools and any related documentation and service parts) to accept a person as a customer on usual trade terms if the means of diagnosis or repair can be readily supplied.

Private Rights of Actions

Private rights of action are already applicable to sections 75 (Refusal to Deal), 76 (Price Maintenance) and 77 (Exclusive Dealing, Tied Selling and Market Restrictions).

On the first anniversary of the day Bill C-59 comes into force, private persons will be entitled to apply to the Tribunal for additional remedies that will come into force at that time.

Abuse of Dominance

Some of the most significant changes have been made under Bill C-56, and will be made under Bill C-59 to the abuse of dominance provisions of the Act (sections 78 and 79).

Anti-Competitive Acts

Bill C-19 amended section 78 of the Act to clarify that an anti-competitive act for the purpose of the abuse of dominance provisions of the Act, means an act intended to have a predatory, exclusionary or disciplinary negative effect on a competitor, or to have an adverse effect on competition. It also amended the illustrative list of anti-competitive acts to include the act of "a selective or discriminatory response to an actual or potential competitors for the purpose of impeding or preventing the competitor's entry into, or expansion in, a market or eliminating the competitor from a market".

Bill C-56 further amended the illustrative list of anti-competitive acts in section 78 by including the act of "directly or indirectly imposing excessive and unfair selling prices".

Test for Abuse of Dominance

Bill C-56 significantly expanded the scope of what constitutes abuse of dominance. Prior to Bill C-56 coming into force, a party that substantially or completely controls a class or species of business in any area of Canada had to be engaged in a 'practice of anti-competitive acts' in order to violate the abuse of dominance provisions. This is no longer the case. A person that substantially or completely controls a class or species of business in any area of Canada can be subject to an order of the Tribunal for abuse of dominance if the person is engaged in either:

1. a practice of anti-competitive acts; or
2. conduct: (i) that had, is having or is likely to have a substantial prevention or lessening of competition; and (ii) the effect is not the result of superior competitive performance.

Bill C-19 (which refers to practices, but which will be amended under Bill C-59 to refer to conduct) introduced several new factors for the Tribunal to consider when assessing conduct for abuse of dominance, including: (a) the effect of the practice (conduct) on barriers to entry; (b) the effect of the practice (conduct) on price or non-price competition, including quality, choice or consumer privacy; (c) the nature and extent of change and innovation in a relevant market; and (d) any other factor that is relevant to competition in the market that is or would be affected by the practice (conduct).

AMPs and Other Actions, Including Divestiture

The bifurcation of the test for abuse of dominance has also resulted in a bifurcation of the AMPs and other remedies available to be imposed by the Tribunal. The penalties are higher and more substantial if the impugned conduct involves a practice of anti-competitive acts that has had or is having a substantial prevention or lessening of competition in a market.

If the impugned conduct involves a practice of anti-competitive acts and the Tribunal finds that: (a) the practice has had or is having a substantial prevention or lessening of competition in a market where the person has a 'plausible competitive interest'; and (b) an order prohibiting that conduct is not likely to restore competition in that market, the Tribunal may:

1. in addition to, or in lieu of a prohibition order, make an order directing the person to take such actions as are reasonably and necessary to overcome the effects of the practice in the market, including the divestiture of assets or shares; and
2. order them to pay an AMP in an amount not exceeding the greater of: (i) $25,000,000 and, for each subsequent order, an amount not exceeding $35,000,000; and (ii) 3 x the value of the benefit derived from the conduct or, if that amount cannot reasonably be determined, 3% of the corporation's annual worldwide gross revenues.

If the impugned conduct does not involve a practice of anti-competitive acts, the Tribunal can order the person to pay an AMP in an amount not exceeding the greater of: (i) $10,000,000 and, for each subsequent order, an amount not exceeding $15,000,000; and (b) 3 x the value of the benefit derived from the conduct or, if that amount cannot reasonably be determined, 3% of the corporation's annual worldwide gross revenues.

Limitation on Action

As a result of the amendments included in Bill C-56, no action may be taken under section 79 of the Act in respect of a practice of anti-competitive acts or conduct more than 3 years after the practice or conduct has ceased.

Private Rights of Action

Bill C-19 extended private rights of action to abuse of dominance conduct.

On the first anniversary of the day Bill C-59 comes into force, private persons will be entitled to apply to the Tribunal for additional remedies that will come into force at that time.

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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.