Important Changes to the Competition Act

Introduction

On September 21, 2023, the Minister of Finance tabled Bill C-56 "An Act to amend the Excise Tax Act and the Competition Act" (Bill C-56). This comes as part of the federal government's proposed comprehensive over-haul to the Competition Act (the Act) and shortly following the most recent changes to the Act which came into force in June 2023.

The proposed amendments to the Act in Bill C-56 closely follow Prime Minister Justin Trudeau's announcement of measures that the federal government would take to address the rising costs of groceries in Canada. Francois-Phillippe Champagne, the Minister for Innovation, Science and Industry, reiterated in a follow-up statement that the federal government is committed to take actions to stabilize food prices for Canadian consumers and improve competition in Canada.

The proposed changes to the Act would, amongst other things:

• give the Competition Bureau the power to conduct an inquiry into the state of competition in a market or industry;
• allow the Competition Tribunal to make certain orders where an agreement or arrangement among parties that don’t compete prevents or lessens competition in any market; and
• repeal the exception in section 96 of the Act for efficiencies gains brought about by mergers.

Each of these proposed amendments to the Act are examined in more detail below:

Market Studies

New section 10.1 permits the Minister, following consultation with the Commissioner of Competition, to direct the Commissioner to conduct an inquiry into the state of competition in a market or industry. The market study amendments are a formalization of a practice that the Competition Bureau has undertaken in the past, most recently in the grocery sector, and provides the Bureau with powers under the Act to compel industry participants to provide information.

The inquiry will be treated similarly to a formal investigation. Of particular note for corporations and their directors and officers:

a.     The Commissioner is authorized under section 11 of the Act to obtain a court order to have persons likely to have information relevant to the inquiry to be examined under oath or to produce documents specified in the order. This is proposed to be an ex parte order meaning the Commissioner can apply to court without the persons subject to the order receiving notice.

b.     Every person that fails to comply with an order under Section 11 is guilty of an offense and may be liable on summary conviction to a fine not exceeding $100,000 or imprisonment for a term not exceeding two years (or both) or to conviction on indictment to a fine in the discretion of the court or to imprisonment for a term of 2 years (or both). 

c.     If a corporation commits an offence, any officer, director or agent of the corporation who directed, authorized, assented to, acquiesced in or participated the offense may be liable to the punishment for the offence, whether or not the corporation has been prosecuted.

Agreements or Arrangements Between Parties that do not Compete

Section 90.1(1) currently permits the Competition Tribunal (Tribunal), on application by the Commissioner, to nullify agreements or arrangements between competitors that prevent or lessen competition substantially in a market. These provisions will be expanded to apply to agreements or arrangements between persons that do not compete in the relevant market if the Tribunal finds that a significant purpose of the agreement or arrangement, or any part of it, is to prevent or lessen competition in any market.

Under new Section 90.1(1.1), if the Tribunal finds that a significant purpose of the agreement or arrangement, or any part of it, is to prevent or lessen competition in any market, the Tribunal may make an order under Section 90.1(1) nullifying the agreement or arrangement even if none of the persons to the agreement or arrangement are competitors. While the scope of application of these amendments remains to be seen, vertical arrangements between suppliers and customers, previously subject to limited review under various other provisions of the Act, will be subject to review under these new provisions.

Efficiencies Defence

The "efficiencies defence" under section 96 of the Act, to a merger that would otherwise be found to be anti-competitive under Section 92 of the Act, is repealed. As a result, the Tribunal may make an order under section 92 of the Act if it finds that a merger or proposed merger prevents or lessens or is likely to prevent or lessen competition substantially in a market, even if the merger will bring about gains in efficiency (including gains resulting in a significant increase in the real value or exports or substitution of domestic products for imported products) that will be greater than, or offset, the anti-competitive impact. Notably, the amendments only cover efficiencies in mergers. The efficiencies defence also applies to competitor collaboration agreements, which have not been addressed by Bill C-56.

Takeaways

The proposed amendments under Bill C-56 have a limited scope but are not insignificant. We note that Bill C-56 was tabled only a week after Prime Minister Trudeau announced the federal government's intention to amend the Act to address grocery prices and enhance competition. The second reading of the bill is anticipated to occur within a week, with the amendments expected to be law in relatively short order.

As we have indicated previously, the federal government is undergoing an ongoing review of the Canadian competition legislation and is expected to propose additional amendments in the coming months. We will continue to monitor and provide updates on the changing competition law landscape.

If you have any questions about the proposed amendments to the Act or competition law in Canada generally, please reach out to any member of our Competition and Foreign Investment Group.