December 18, 2023
Important amendments to the Competition Act became law on December 15, 2023, following Royal Assent of Bill C- 56, An Act to amend the Excise Tax Act and the Competition Act. The Government of Canada has made these amendments to the Competition Act as a part of the ongoing modernization of Canada’s competition regime.
This guide provides an overview of these changes, including in the areas of market studies, merger reviews, collaborations between firms, and abuse of dominance.
This guide is not a legal document and does not replace legal advice. The Competition Bureau will be reviewing and updating its enforcement guidance to ensure transparency and predictability for the business and legal communities.
On this page:
- Adding a new framework and information-gathering powers for market studies
- Removing the efficiency defence in merger reviews
- Expanding the scope of reviewable collaborations between firms
- Removing the efficiency defence for anti-competitive collaborations
- Restructuring the legal test for abuse of dominant position
- Adding excessive and unfair selling prices under abuse of dominant position
- Increasing the maximum penalties for abuse of dominant position
Adding a new framework and information-gathering powers for market studies
As part of its mandate, the Competition Bureau uses a wide range of tools to promote and advocate for the benefits of a competitive marketplace. Market studies are one of these tools. They involve in-depth examinations of a market, industry, or competition-related topic to identify competition issues and suggest potential solutions while improving our understanding of the competitive dynamics at play.
The amendments establish a new framework under the Competition Act for undertaking market studies with information-gathering powers. The new framework allows the Commissioner of Competition or the Minister of Innovation, Science and Industry to initiate such a study, and sets out the framework through which it must be conducted.
Following the amendments:
- Under this new framework, the Commissioner, on their own initiative or at the direction of the Minister, can start an inquiry into the state of competition in a market or industry (subsections 10.1(1) and 10.1(2)).
- Before starting such an inquiry, the Commissioner must:
- Publish proposed terms of reference for the inquiry and allow at least 15 days for public comment (subsection 10.1(3)); and
- After considering those comments, submit final terms of reference to the Minister for approval and publication (subsection 10.1(4)).
- While conducting an inquiry, the Commissioner is granted additional information-gathering authorities:
- Under this new framework, the Commissioner may apply for a court order to compel a legal person to provide relevant information (section 11).
- All persons subject to such a court order must receive a complete or partial draft of the study’s report before it is published and may, after having received the draft and within three working days, relay concerns regarding factual inaccuracies or confidential information (subsection 10.1(7)).
- The timeframe for an inquiry – including the publication of a final report – will be specified by the Minister. Unless extended by the Minister, that timeframe is not to exceed 18 months, and extensions are not to exceed 3 months (subsections 10.1(5) and 10.1(6)).
Historically, the Bureau has carried out market studies under various other authorities in the Competition Act, including sections 7, 125 and 126. In conducting these market studies, the Bureau has relied on publicly available information, information already in its possession and information provided by stakeholders on a voluntary basis. The amendments do not restrict the Bureau from continuing to undertake market studies under these authorities and the Bureau will continue to do so in appropriate cases.
Removing the efficiency defence in merger reviews
Effective merger control is essential for Canadians to receive the benefits of a competitive marketplace. Anti-competitive mergers can lead to real harm in the economy, including higher prices, fewer choices, and lower levels of innovation.
The Competition Act’s efficiency exception, commonly known as the “efficiency defence”, prevented the Competition Tribunal from making an order against an anti-competitive merger where parties could demonstrate that efficiency gains outweighed the merger’s anti-competitive effects. This allowed mergers that are harmful to Canadians to proceed.
The amendments repeal the efficiency exception under the merger review provisions of the Competition Act (section 96) so that it is no longer available going forward.
- The efficiency exception will, however, continue to apply to proposed transactions for which notice was given to the Commissioner before December 15, 2023, or to mergers that were substantially completed before that date.
Expanding the scope of reviewable collaborations between firms
Collaborations between firms, such as joint ventures and strategic alliances, can enable them to combine capabilities and resources. They can help firms lower the costs of production, improve product quality, and reduce the time it takes to bring new products to market.
However, the Competition Act contains provisions against firms entering into agreements that substantially prevent or lessen competition in a market or are likely to do so. For example, an anti-competitive agreement could enable the parties involved to charge higher prices or hinder the development of future competition.
Previously this provision was limited to agreements involving competitors. The amendments expand the scope of this provision to apply to agreements that are not between competitors if it can be shown that a “significant purpose” of the agreement, or part of the agreement, is to harm competition and the agreement has the effect of preventing or lessening competition substantially.
This change will come into force one year after Royal Assent on December 15, 2024.
Removing the efficiency defence for anti-competitive collaborations
Similar to the provisions for merger review, the Competition Act has also included an efficiency exception under the competitor collaborations provisions. This exception prevented the Competition Tribunal from remedying anti-competitive collaborations where parties could demonstrate that efficiency gains outweighed the collaboration’s anti-competitive effects. The amendments repeal this efficiency exception under the competitor collaborations provisions of the Competition Act (subsections 90.1(4)-(6)). This change will come into force one year after Royal Assent, on December 15, 2024.
Restructuring the legal test for abuse of dominant position
In some cases, dominant firms act to undermine competitive market forces. In these instances, the Competition Bureau uses the provisions of the Competition Act to protect the competitive process.
Prior to the amendments, an abuse of dominant position occurred under the Act (section 79) when a dominant firm (or group of firms) engaged in an intentional practice of anti-competitive acts, with the effect of substantially lessening or preventing competition. To constitute an abuse of dominant position, all three elements needed to be established: dominance, anti-competitive intent, and anti-competitive effects.
Following the amendments, the Competition Tribunal may make a prohibition order against a dominant firm (or group) if their conduct meets either the anti-competitive intent or effect requirement. This will provide a way of stopping dominant firm conduct that has either subverted competition in the marketplace or was intended to do so.
A broader range of remedies, including administrative monetary penalties, are available for instances where all three elements, i.e., dominance, anti-competitive intent and effects, are present.
Adding excessive and unfair selling prices under abuse of dominant position
For the purposes of establishing the anti-competitive intent of an abuse of dominance, the Competition Act enumerates a non-exhaustive list of acts that may be considered a practice of anti-competitive acts when engaged in by a dominant firm (section 78). Following the amendments, the practice of "directly or indirectly imposing excessive and unfair selling prices" has been added to this list.
Importantly, such a practice must be intended to have a predatory, exclusionary or disciplinary negative effect on a competitor, or to have an adverse effect on competition.
Increasing the maximum penalties for abuse of dominant position
Administrative monetary penalties play an important role in ensuring compliance with the Competition Act by providing a financial incentive for businesses to comply with the law.
When a company is found to have violated the abuse of dominance provisions of the Competition Act, the Competition Tribunal has a number of remedies at its disposal, including imposing a monetary penalty.
- For violations of the abuse of dominance provisions of the Act, the new maximum penalty is the greater of:
- $25 million for the first violation and up to $35 million for any subsequent violation; or
- three times the value of the benefit derived from the anti-competitive practice, or, if that amount cannot be reasonably determined, 3% of the company’s annual worldwide gross revenues.
- Previously, penalties were capped at the greater of $10 million ($15 million for each subsequent violation) or three times the value of the benefit derived from the anti-competitive practice, or, if that amount cannot be reasonably determined, 3% of the company’s annual worldwide gross revenues.