The Competition Act, which is Canada’s antitrust legislation, restricts anti-competitive business practices. The Act is designed to ensure fair competition in the Canadian marketplace. Over the last 26 years, the Act has evolved to become more responsive and flexible with regards to the identification and prevention of anti-competitive business behaviour. Companies considering doing business in Canada need to be aware that certain business practices are prohibited.
Companies and individuals engaging in prohibited practices may incur significant penalties ranging from costly monetary fines to the imprisonment of culpable individuals. Conversely, the enforcement of these penalties offers protection for (among others) foreign companies entering the Canadian market for the first time.
There are both criminal and civil offences under the Competition Act. Criminal offences are investigated by the Competition Bureau and, if referred by the Commissioner of the Bureau, are further investigated by the Director of Public Prosecution who may also prosecute. Civil offences are heard by the Competition Tribunal, which is a specialized, independent adjudicative body composed of both judicial and lay members. While the Minister of Industry is responsible for the Act, it has only a minor role in its administration.
Antitrust investigations have the potential to be expensive for companies and may also damage corporate reputations, even absent a conviction. For this reason, it is important to avoid conduct that could be seen as contravening the Act.
Part VI of the Act prescribes criminal penalties for conspiracy, bid-rigging, misleading representations and deceptive telemarketing. Along with many other jurisdictions, Canada has recently been more strictly enforcing these penalties and fining offenders. This emphasis on enforcement of the Act’s penalty provisions has also resulted in prison sentences for executives of offending companies.
The conspiracy provisions of the Act prevent competitors, including persons who would reasonably be likely to compete, from manipulating prices for the supply of a product; allocating territories or markets for the production or supply of a product; or reducing the production or supply of a product. The penalty for conspiracy is imprisonment for a maximum of 14 years or $25 million, or both.
Bid-rigging, whereby an agreement is made with another bidder prior to or during a call for tenders, unbeknownst to the person making the call for tenders, is also an offence. The penalty for bid-rigging is imprisonment for a maximum of 14 years or a fine determined by the court, or both.
The making of false or misleading representations to the public is also prohibited by the Act. Both the literal meaning and general impression conveyed by the person are taken into account when determining whether the representations were misleading. As with bid-rigging, the penalty for making misleading representations to the public is imprisonment for a maximum of 14 years or a fine determined by the court, or both.
To avoid the deceptive telemarketing provisions of the Act, proper disclosure must be made when making representations over the telephone. This includes, for example, disclosure of the number of prizes to be won in a contest or disclosing that in order to receive one low-priced product a person must buy another product. The penalty for deceptive telemarketing is imprisonment for a maximum of 14 years or a fine determined by the court, or both.
Civil Liability for Criminal Offences
Commission of any of these criminal offences also brings potential exposure to civil liability. Any person who has suffered damages as a result of these criminal offences may bring a private action to recuperate such damages. However, generally only damages that are proven to have resulted from the commission of the criminal offences are allowed. Other types of damages, such as punitive damages, are generally not allowed. These private party claims tend to be started in the form of class actions, and rely heavily on the criminal conviction of the company.
A foreign competition authority that is party to a mutual legal assistance treaty with Canada may request the assistance of the Commissioner in pursuing its own investigation. Anti-competitive business practices do not need to have taken place in Canada for the Commissioner to assist, nor is the consent of the person alleged to have engaged in anti-competitive practices necessary. However, an order of a judge is required for the evidence gathered in the Commissioner’s investigation to be sent abroad, to avoid abuse of these treaties.
Part VIII of the Act prescribes civil penalties for reviewable trade practices such as refusal to deal, tied selling, price maintenance and abuse of dominance. If the Tribunal finds that a person has engaged in a reviewable trade practice, it may make an order preventing the person from continuing the prohibited activity and require that person to take any action necessary to rectify the competitive harm caused by this activity. Failure to comply with an order of the Tribunal can result in criminal penalties.
Refusal to Deal
The refusal to deal provisions of the Act prevent suppliers from arbitrarily declining to sell goods to buyers who are willing and able to meet the usual trade terms of the supplier, if such action is likely to have an adverse affect on competition in the market. The Tribunal may order that the supplier accept the buyer as a customer.
Tied selling, which refers to a supplier supplying one product to a customer so long as the customer buys another product, may also be an offence if it results in a substantial lessening of competition. The Tribunal may order that a supplier, or all suppliers in an exclusive industry, refrain from engaging in this practice.
The price maintenance provisions of the Act restrict the ability of a person to artificially inflate or discourage the reduction of prices if such conduct will have an adverse affect on competition in the market. The Tribunal may order that a person stop engaging in this activity.
Abuse of Dominance
Abuse of a dominant position is also restricted by the Act. Persons who substantially control a class of business throughout Canada and are engaging in anti-competitive business practices may be prohibited from engaging in such practices. In addition to making an order prohibiting abuse of a dominant position, the Tribunal may also impose an administrative penalty of $10 million ($15 million for repeat offenders).
Parties That May Bring a Complaint
Private parties, as well as the Bureau, may bring a complaint to the Tribunal concerning these civil offences. The only exception is an allegation of abuse of dominance, an investigation into which may only be initiated by the Bureau.
Canada is one of the fairest and most transparent countries in the world in which to do business. This insistence on fairness helps to protect companies interested in coming to Canada to do business. Canadian regulatory authorities will not hesitate to enforce the provisions of the Act where companies are engaging in unfair business practices. Complying with Canadian competition legislation can be a difficult task for companies unaccustomed to these rules. In particular, companies should be careful to avoid committing the criminal offences of conspiracy, bid-rigging, misleading representations and deceptive telemarketing, as well as the civil offences of refusal to deal, tied selling, price maintenance, and abuse of dominance.
Bennett Jones’ Antitrust, Competition & Foreign Investment Group
Our antitrust and competition group is committed to providing every client with best-in-class competition advice and representation. Our group includes internationally recognized practitioners including several former Competition Bureau and Department of Justice officials. We draw on our extensive depth and breadth of expertise in advising clients on the most complex domestic and international competition matters.