Commissioner of Competition Calls for Modernization of Canadian Competition Law

Practical Law Canada Legal Update w-033-1365 (Approx. 5 pages)

Commissioner of Competition Calls for Modernization of Canadian Competition Law

by Practical Law Canada Competition

This Legal Update discusses a recent speech by Canada’s Commissioner of Competition advocating for more competition in Canada, including the modernization of Canadian competition laws. The Update discusses the Competition Act, R.S.C. 1985, c. C-34 amendment recommendations made by the Competition Bureau, recent calls by other commentators to amend Canada’s competition laws, and the potential implications of these amendments for competition in Canada and Canada’s ability to compete internationally.

On October 20, 2021, the Competition Bureau (Bureau) issued a new speech by the Commissioner of Competition (Commissioner), Matthew Boswell, advocating for increased competition in Canada, including the modernization of Canadian competition laws (see Commissioner of Competition advocates for more competition in remarks to Canadian Bar Association, Competition Bureau, October 20, 2021).

The Commissioner’s speech, delivered at the Canadian Bar Association’s Competition Law Fall Conference, follows other recent calls for reforms to Canadian competition law, including the C.D. Howe Institute’s Competition Policy Council and other commentators, for stronger Bureau enforcement powers (for example, to investigate Big Tech and anti-competitive upstream agreements between competitors) (see Distilled Wisdom: Top Legal and Economic Experts on the Most Needed Competition Reforms, C.D. Howe Institute, September 9, 2021, and Opinion: “Why Canada’s toothless Competition Bureau can’t go after Big Tech", National Post, March 26, 2021). See also Legal Updates, Canadian Competition Law Recommendations for Next Government Made by the C.D. Howe Institute’s Competition Policy Council and Competition Bureau Reiterates Narrow Enforcement Position on No-Poaching and Wage-Fixing Agreements Between Competing Employers.

In his speech, the Commissioner affirmed that the Bureau’s budget will increase by $96 million over the next five years and by $27.5 million annually after that, which was proposed under the Canadian federal government’s Budget 2021, A Recovery for Jobs, Growth and Resilience, April 19, 2021.

The Commissioner also outlined three broad areas for investment of a newly increased five-year budget:

Increasing the Bureau’s capacity to investigate complex anti-competitive conduct, particularly in digital markets and creating a new Digital Enforcement and Intelligence Branch.
Strengthening the Bureau’s internal and external enforcement teams.
Enhancing the Bureau’s capacity to advocate for pro-competitive regulatory and policy changes by Canadian governments.

The Commissioner also discussed some of the current specific deficiencies of the Competition Act, R.S.C. 1985, c. C-34, including the following:

Weak maximum available criminal fines and civil penalties that don’t meaningfully deter anti-competitive conduct. The maximum fines and administrative monetary penalties under sections 45 and 79 of the Competition Act (conspiracy and abuse of dominance) are currently $25 million and $10 million respectively. This is compared to, for example, the United States, where corporations are subject to fines of up to USD100 million under the Sherman Act, and the European Union, where potential fines are up to 10% of a company’s turnover for the preceding business year (Council Regulation (EC) No 1/2003). For more information, see Practice Notes:
Gaps in private enforcement rights under the Competition Act (for example, for abuse of dominance). While private parties can make applications to the Competition Tribunal for refusal to deals, price maintenance, exclusive dealing, tied selling, and market restrictions (under sections 75, 76, and 77), there is currently no right of private access for abuse of dominance under section 79. This is in contrast to, for example, the United States, where private plaintiffs can enforce section 2 of the Sherman Act through sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26, which allow for treble damages and injunctive relief. There is no clear policy rationale for restricting private access applications for abuse of dominance. In this regard, while frivolous litigation has sometimes been the argument for limiting private remedies under the civil reviewable practices provisions of the Competition Act, this has not occurred in reality with the existing private access rights (that is, under sections 75, 76, and 77). In fact, a significant number of the decided cases in recent years, particularly under section 75, have resulted from private access rights (including greater clarity in the law). For more information, see Practice Notes, Abuse of Dominance (Sections 78 and 79 of the Competition Act) and Private Access Applications to the Competition Tribunal.
Gaps in Canadian cartel law. This includes, for example, section 45 of the Competition Act arguably not applying to upstream agreements between competitors allowing, for example, competing employers to fix employees’ wages and restrict workers’ job mobility. This is in contrast to, for example, the United States, where explicit no-poach agreements between employers are per se illegal under the Sherman Act (see Justice Department and Federal Trade Commission Release Guidance for Human Resource Professionals on How Antitrust Law Applies to Employee Hiring and Compensation, United States Department of Justice, October 20, 2016). There is also no clear policy rationale for restricting section 45 to only per se downstream agreements. In this respect, there was no such limitation under the former conspiracy provision of the Competition Act prior to the 2009 amendments and no clear rationale for excluding upstream agreements with no pro-competitive justifications from criminal enforcement. For more information, see Practice Note, Canadian Conspiracy (Cartel) Law. See also Legal Updates, Competition Bureau Reiterates Narrow Enforcement Position on No-Poaching and Wage-Fixing Agreements Between Competing Employers and Federal Court Holds That Section 45 of the Competition Act Does Not Apply to Buy-Side Agreements Between Competitors in Hockey Leagues Class Action Decision.
Overly strict and impractical legal tests to prevent anti-competitive mergers. In this respect, the Commissioner highlighted two key issues in particular: first, the high bar that must be met at the injunction stage for mergers to prevent the consummation of a potentially anti-competitive merger; and, second, the repeated hurdle that the efficiencies defense under the Competition Act poses on the Bureau in its attempts to police anti-competitive mergers. For more information, see Practice Notes:

According to the Commissioner, what Canada needs is a comprehensive review of the Competition Act to better protect and promote competitive markets and Canada’s long-term economic prosperity (as well as helping Canada compete internationally).

The Commissioner points to the United States, United Kingdom, and Australia as some of the leading jurisdictions currently working to modernize their competition laws to increase competition in their economies. In this respect, the last major amendments to the Competition Act were now twelve years ago in 2009.

Implications

As the Bureau and a number of commentators over the past few years have now argued, Canada’s Competition Act is in strong need of being amended to update the penalties for anti-competitive conduct, expand the enforcement tools available to the Bureau and private parties, and align Canada’s competition law with Canada’s major trading partners (particularly, the United States and European Union).

The need to protect competition in Canada is also arguably even greater currently considering the impact of COVID-19 on small- and medium-sized enterprises, which, according to the Commissioner, were among the hardest hit by the pandemic.

An updated Competition Act, which included, among other things, greater rights of private access (for example, for abuse of dominance) may also result in greater jurisprudence and clarity for marketplace participants. Whether Canada’s new federal government will follow the recommendations of the Bureau and private commentators, however, still remains to be seen.

End of Document

Also Found In

General Competition Law

Resource ID w-033-1365

Published on 27-Oct-2021

Resource Type Legal update: archive

Jurisdiction

Federal (Canada)