The Government of Canada has now passed significant amendments to the Competition Act via its Budget Implementation Act, 2022, No. 1 (the “BIA”), which received Royal Assent on June 23, 2022. The inclusion of these changes in the BIA – a budget bill – ensured that there was no opportunity for meaningful debate on their merits and indeed there was not even a prospect of making modest revisions to the proposed language, which has been passed exactly as it was introduced. While the private sector had no ability to shape or influence these changes, it must now adapt to them.
Remarkably, this marks the second time running that the Competition Act – a core piece of economic legislation in Canada – has been substantially amended via a budget bill. This mirrors the experience of 2009, when the then Conservative government adopted the same approach, an approach that at the time generated considerable criticism from many quarters, including from the then Liberal opposition, which, now in government, has done the very same thing.
The details of the changes are summarized in our prior post. We do not revisit each of the changes herein; readers are encouraged to review these details.
Abuse of Dominance Amendments
In our view, the changes that are most likely to have a meaningful impact on large business in Canada are the amendments to the abuse of dominance provision.
In short, it is now possible for private litigants, with leave, to commence litigation against larger companies alleging that they are dominant and are engaged in anti-competitive conduct having the effect of substantially lessening competition. In so doing, such private litigants will be able to seek financial penalties – payable to the government – of up to triple the amount of the benefit gained by the dominant firm, or, where that amount cannot be determined, 3% of that firm’s global revenues. It is entirely plausible that, in certain circumstances, these sought-after penalties may amount to tens or hundreds of millions of dollars. It is of course less clear at the moment how inclined the Competition Tribunal will be to issue such penalties.
This all stands in marked contrast with how the law of abuse of dominance has operated in Canada since it was last amended in 2009 and indeed since its creation in 1986. More particularly, the Competition Bureau itself has, until now, always served an important “gatekeeper” function as the only party who had standing to bring such a case. And the Competition Bureau, notwithstanding its tremendous expertise in such matters, its extensive information-gathering powers and its considerable resources, was extremely judicious in bringing such cases, with the result that most Canadian businesses would generally not have viewed an abuse of dominance proceeding as a very likely occurrence, in part because, in many cases, following a detailed investigation, and following discussion with the firm(s) in question, the Competition Bureau exercised its expert judgment not to commence litigation. This state of affairs has been fundamentally disrupted by the amendments and we would expect in the coming years, or even months, to see private litigants bring or threaten to being abuse of dominance cases, incentivized by the leverage the new penalties may give them in settlement discussions.
Also of note is that the enhanced, unlimited fines for criminal cartel offences (also described in our earlier post) will only take effect a year from now. The practical effect of this delay is likely to be minimal as cartel offences are already subject to large fines, imprisonment and class-action liability, such that there are already enormous disincentives from engaging in such conduct.
Finally, it should be recalled that the amendments include the criminalization of wage-fixing and no-poach agreements, also to take effect one year from now. Employers in Canada will soon have to exercise extreme care that they are not engaged in any agreements or arrangements with each other that could be said to fix or control salaries, wages or other terms of employment or not to solicit or hire each other’s employees.
The Next Round
It is widely understood that the government has in mind further significant amendments to the Competition Act. The Commissioner of Competition has been calling for an overhaul of the Competition Act – much, but not all, of which will have been accomplished via the BIA amendments. The most notable major area only minimally impacted by the BIA is the merger area, including the efficiencies defence, which we would expect to be an area of heavy focus in any subsequent amendments.
It is also understood that the government will engage in a form of consultation before proceeding with further changes. The nature of such consultation and the willingness of the government to allow its proposals to be shaped and influenced by the Canadian competition bar and the private sector more broadly remains to be seen, however. In our view, particularly following two successive rounds of forcing through changes in budget bills, it is imperative that Canada gets these next changes right and that can only be done through in-depth engagement with stakeholders outside the federal government who can bring their informed and diverse perspectives to bear.