In a budget implementation bill passed into law on June 23, 2022, the Canadian government made significant changes to Canada's Competition Act1 (Act). Perhaps the most extensive and consequential amendments are those relating to the abuse of dominance provisions. Notably, the government expanded the scope of the abuse of dominance provisions, added a new private right of access for abuse of dominance, and significantly increased administrative monetary penalties for contravention of the provisions.

Changes to the Abuse of Dominance Provisions

Specifically with respect to abuse of dominance, the amendments have broadened the substantive scope of these provisions by expanding the types of actions that can be considered abuse of dominance, and introduced a private right of application for persons (including competitors) that allege they have been harmed by such conduct to bring such cases before the Competition Tribunal (Tribunal). Previously, only the Commissioner of Competition (Commissioner) could apply to the Tribunal to enforce the abuse of dominance provisions.

A New Definition of Anti-Competitive Acts. The amendments expanded the definition of an anti-competitive act in section 78(1) to include "any act intended to have a predatory, exclusionary or disciplinary negative effect on a competitor, or to have an adverse effect on competition"2 in addition to the already existing non-exhaustive list in the Act.

This amendment was a response, in part, to arguments that the previous definition was under-inclusive due to its focus on the impact on competitors to the exclusion of acts that are harmful to competition but not competitors. As an example, the Competition Bureau (Bureau), in its submission to a recent consultation examining the Act in the digital era conducted by Senator Howard Wetston, argued that "the courts have interpreted elements of the abuse of dominance provision in a narrow manner that may fail to capture harmful forms of anti-competitive conduct" including a focus on "the intent of that conduct in relation to a competitor, rather than in relation to the competitive process."3

For context, abuse of dominance is made out when the three part test in section 79(1) of the Act is met:

  1. one or more persons substantially or completely control, throughout Canada or any area thereof, a class or species of business,
  2. that person or those persons have engaged in or are engaging in a practice of anti-competitive acts, and
  3. the practice has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market.

As noted above, the Act sets out in section 78(1) a non-exhaustive list of acts which can constitute an anti-competitive act for the purposes of section 79(1)(b). This element of the test was also judicially interpreted in Canada (Commissioner of Competition) v. Canada Pipe Co.4 , where the court stated that to be anti-competitive, "an act must have an intended predatory, exclusionary or disciplinary negative effect on a competitor"5 in a market that the dominant firm substantially or completely controls, although the competitor and dominant entity need not necessarily be in the same market.

Some commentators have expressed concern that the new definition may be an over-correction, as it may capture competition on the merits by larger firms in an industry that results in unintended consequences on various aspects of the Canadian economy, including competition, innovation and dynamism.6 For example, selective responses to actual or potential competitors attempting to expand into new markets, or a competitor attempting to take market share from an incumbent, may be considered to have a negative impact on competition, because it could prevent or limit the range of options available to consumers without having a clear negative impact on a given competitor.7

Regulators have already acknowledged that the line between aggressive competition and abuse of dominance can be difficult to identify. For example, in its Abuse of Dominance Enforcement Guidelines, the Bureau states that "it is often challenging to distinguish anti-competitive conduct from aggressive competition on the merits, as in many cases the goal of aggressive competition is to marginalize rivals or eliminate them from a market."8

This narrow distinction could be further complicated by the new private right of access, discussed below, which will allow private parties—such as smaller competitors of an aggressive market leader—to seek leave from the Tribunal to bring abuse of dominance claims. Commentators have warned that this could have a chilling impact on competition in Canada and negative outcomes for innovation and dynamism for Canadian markets.9 For example, the acquisition of start-up companies with complementary service offerings by incumbent technology firms could be a net positive for both companies, but construed as a killer acquisition and therefore constituting an anti-competitive act under the new definition. By contrast, the Bureau's submission to the Wetston consultation argues that private access to the Tribunal for abuse of dominance matters "serves as a complement to public enforcement by the Commissioner" and "will serve to more rapidly expand valuable case law" for the abuse of dominance provisions.10

A New Private Right of Access. As noted above, prior to the recent amendments, only the Commissioner could bring an abuse of dominance case before the Tribunal. A private right of access existed for certain other provisions of the Act, specifically, Sections 75 (Refusal to Deal), 76 (Price Maintenance), and 77 (Exclusive Dealing), whereby any person could apply for leave to bring an application, obligating the Tribunal to provide written reasons for its decision to grant or refuse leave.

Following the amendments, this private right of access has been extended to abuse of dominance cases. This could lead to an influx of cases before the Tribunal with, as noted above, competitors seeking to resort to the Tribunal to reduce the competitive intensity of larger firms.

Whereas the previous existing private rights of access did not provide the applicant the right to any form of monetary compensation, or the ability to request or impose penalties on the respondent, the amendments would permit the Tribunal to impose an administrative monetary penalty— payable to the federal government, not the applicant—in response to a private application. This would be the first context in Canadian law in which public penalties could be privately enforced.11 The Act still does not grant a direct right for private parties to recover damages for conduct within the scope of the abuse of dominance provisions in the same way that it does for conduct contrary to the criminal offences, such as price fixing among competitors. The primary benefit of the public penalties for abuse of dominance cases, whether at the request of the Commissioner or a private party, is the same: to deter businesses, including larger businesses, from engaging in anti-competitive conduct. In the event that a private party was successful in obtaining an order prohibiting the continuation of a challenged practice, the violation of said order would give rise to a right to recover damages under Section 36 of the Act. Finally, while a private litigant could seek costs if they were successful in bringing an abuse of dominance challenge before the Tribunal, costs are generally granted on a partial indemnity basis and more rarely on a substantial indemnity basis, such that while the award defrays the cost of ligation it would not make the plaintiff whole.

The Tribunal's approach to the private right of access to date for other reviewable matters suggests that strategic use of the abuse of dominance provisions may be limited, however. The Tribunal has very rarely granted leave to parties seeking to bring cases. In the first six years following the introduction of a private right of access for sections 75, 76 and 77, nineteen applications were made, of which thirteen were dismissed. Of the remaining six, four were never heard by the Tribunal: two settled, one was withdrawn, and one had the leave rescinded. Only two proceeded to a full hearing.12

When seeking leave, private applicants must meet a two-part test: they must be "directly and substantially affected" by the practice, and the practice in question must be one "that could be subject to an order" under one of the sections which permits a private right of access.13

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Footnotes

1. Competition Act, R.S.C., 1985, c. C-34 (Can.).

2. Bill C-19, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures, 1st Sess, 44th Parl, 2022 (assented to 23 June 2022) at 261

3. Competition Bureau Canada, Examining the Canadian Competition Act in the Digital Era (2022), https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04621.html, at Section 3.1

4. Canada (Commissioner of Competition) v. Canada Pipe Co., [2006] F.C.A. 233 (Can.).

5. Id. at para 68

6. C.D. Howe Institute Competition Policy Council, Undue Haste: Rushed Competition Act Reforms Warrant Further Examination, 23rd Report (2022), https://www.cdhowe.org/sites/default/files/2022-06/For%20release%20Communique_2022_0609_CPC_0.pdf.

7. Id. at 3.

8. Competition Bureau Canada, Abuse of Dominance Enforcement Guidelines (2019), at para ix.

9. CD Howe Report, supra note 6 at 3.

10. Competition Bureau Canada, Examining the Canadian Competition Act, supra note 3 at Section 3.4

11. CD Howe Report, supra note 6 at 3-4

12. Paul-Erik Veel, Private Party Access to the Competition Tribunal: A Critical Evaluation of the Section 103.1 Experiment, 18 Dalhousie J.L. Stud. 1, 4 (2009).

13. Bill C-19, supra note 2, at Section 103.1(7).

Originally Published by Antitrust Magazine Online

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