On September 21, 2023, Deputy Prime Minister and Finance Minister Chrystia Freeland introduced Bill C-56 in Parliament, which includes amendments to the Competition Act (the Act).[1] Prior to the introduction of the bill, Prime Minister Justin Trudeau stated that the forthcoming amendments were designed to “enhance competition across the Canadian economy, with a focus on the grocery sector, which would help drive down costs for middle-class Canadians.”[2]
Key amendments to the Act
The key proposed amendments to the Act include:
- Formal market study powers: Bill C-56 will provide the Minister of Innovation, Science and Industry (the Minister) authority to direct the Competition Bureau (the Bureau) to conduct market studies in the “public interest.” Any such market study could not last longer than 18 months unless authorized by the Minister. To support these studies, the Bureau would be able to seek a court order to compel parties to produce information. At present, participation in market studies is voluntary. The Bureau is unable to compel parties to provide information and does not have the option of seeking a court order. In the public consultations by Innovation, Science and Economic Development Canada (ISED), ISED noted there were concerns expressed that mandatory market studies may result in “potential overreach” and “politically-motivated fishing expeditions” against parties who would not be alleged to have contravened the Act.[3] The requirement of a court order to compel information mitigates this risk.
- Competitor collaborations: The bill would also permit the Bureau to seek a prohibition order in respect of an anti-competitive agreement even where the Act’s existing requirement that the challenged agreement be between at least two competitors is not met, provided that “a significant purpose” of that agreement is to prevent or lessen competition. The Prime Minister had stated that, with this change, the Government is targeting circumstances where large grocers prevent smaller competitors from establishing operations nearby, although this amendment is not restricted to the retail grocery industry nor to restrictive covenants in real estate transactions.[4]
- Repeal of the “efficiencies defence”: Since the introduction of the Act’s merger notification and review provisions in 1986, the efficiencies defence has been available to permit transactions that would otherwise be blocked where their efficiency gains outweigh their anti-competitive effects. According to the Prime Minister, the efficiencies defence “allows anti-competitive mergers to survive challenges if corporate efficiencies offset the harm to competition, even when Canadian consumers would pay higher prices and have fewer choices.”[5] Bill C-56 would repeal the efficiencies defence available to merging parties, but the defence would still be available for specialization agreements and non-criminal agreements between competitors. The availability of the statutory efficiencies defence has been a relatively unique feature of Canadian merger law and its existence and proposed repeal have been the subject of significant debate. The reference to the promotion of “the efficiency and adaptability of the Canadian economy” would remain in the purpose clause of the Act, but Bill C-56 does not propose to add efficiencies to the (albeit non-exhaustive) statutory list of factors to be considered in determining whether a transaction results in a substantial lessening or prevention of competition in a market, as might have been expected.[6]
The past year has been marked by significant changes to the Act and the release of new Bureau guidance.[7] The Government recently released a report summarizing the submissions it received in the course of the Future of Competition Policy in Canada consultation and the press release accompanying Bill C-56 stated that the Government of Canada, “plans to introduce comprehensive legislative reforms to the Act in the coming months.”[8] As such, it appears that further changes to the Act are being considered. In that regard, ISED’s consultation report suggests a number of further amendments that may be on the Government’s agenda, including:
- Changing the review thresholds to capture further mergers of “interest”;
- Extending the one-year limitation period for merger challenges, especially for non-notifiable transactions;
- Lowering the burden on the Bureau to obtain an interim injunction when challenging a merger;
- Amending the anti-competitive threshold to obtain merger remedies to account for potential “prospective” competitive harm and/or to account for labour market harm;
- Permitting private parties to seek damages for non-criminal conduct;
- Creating bright line rules for “dominant” businesses;
- Considering algorithmic coordination to constitute an agreement for the purposes of the Act;
- Requiring or permitting certain agreements to be notified to the Bureau, including pharmaceutical patent settlement agreements; and
- Expanding criminal cartel conduct to include buyer-side coordination (beyond the existing prohibition on wage-fixing and no-poach agreements in the employment context).[9]
Dentons is here to help our clients understand and prepare for these changes. For more information, please contact a member of our team: Adam S. Goodman, Simon Kupi, Sandy Walker, Barry Zalmanowitz, KC or Camila Maldi.
[1] Bill C-56 had its first reading on September 21, following the first reading of Bill C-352, a private member’s bill which was introduced by NDP leader Jagmeet Singh on September 18, 2023. Bill C-352 also proposes amendments to the Act, albeit more numerous and more wide-ranging.
[2] Press Release, Prime Minister’s Office, “Fighting for the middle class” (September 14, 2023) [Press Release], online: https://www.pm.gc.ca/en/news/news-releases/2023/09/14/fighting-for-the-middle-class
[3] “Future of Canada’s Competition Policy Consultation – What We Heard Report” [Report] at section 9, online: https://ised-isde.canada.ca/site/strategic-policy-sector/en/marketplace-framework-policy/competition-policy/consultation-future-competition-policy-canada/future-canadas-competition-policy-consultation-what-we-heard-report
[4] Press Release.
[5] Press Release.
[6] Report at section 4.
[7] “Enforcement Guidelines on wage-fixing and no poaching agreements” (May 30, 2023), online: https://ised-isde.canada.ca/site/competition-bureau-canada/en/how-we-foster-competition/education-and-outreach/enforcement-guidelines-wage-fixing-and-no-poaching-agreements
[8] Press Release
[9] Report.
