On 21 September 2023, the Government of Canada introduced Bill C-56 or the Affordable Housing and Groceries Act (“Bill C-56“), broad legislation that includes amendments to the Competition Act that, if adopted, will repeal the efficiencies defense in mergers, expand the scope of agreements and arrangements subject to the civil competitor collaboration provision, and permit public interest market studies. The proposed amendments to the Competition Act align with the Prime Minister’s recent announcement that the federal government would take action to enhance competition and drive down prices for Canadians, with a special focus on the grocery sector.
In late 2022, the Government of Canada initiated a formal legislative review of the Competition Act, including a public consultation, in an effort to modernize Canadian competition law and policy. Bill C-56 proposes targeted amendments to the Competition Act that have been previously raised as key issues throughout the legislative review and public consultation processes.
Bill C-56 proposes three amendments to the Competition Act:
- Efficiencies defense for mergers repealed. Parties to an alleged anti-competitive merger can currently rely on the longstanding efficiencies defense to prevent the Competition Tribunal from issuing an order where a merger has or is likely to bring about efficiency gains that are greater than and offset the anti-competitive effects of the merger. The proposed amendment will repeal, in its entirety, the efficiencies defense for mergers. Significantly, the proposed amendments diverge from the recommendation the Competition Bureau made as part of the public consultation on Canadian competition law reform to eliminate the efficiencies defense and then introduce efficiencies as one of several factors to be considered in the competitive effects analysis for a merger. It is possible that efficiencies may be introduced as one of the factors to be considered as part of future amendments. Other provisions of the Competition Act that incorporate an efficiencies defense, including specialization agreements and competitor collaborations, will not be repealed. The proposed amendment will take effect immediately once Bill C-56 is passed; however, mergers that have been substantially completed or already notified to the Bureau before the amendments come into effect may, in principle, still rely on the efficiencies defense.
- Civil competitor collaboration provision expanded. The civil competitor collaboration provision permits the Commissioner of Competition to seek a prohibition order for agreements or arrangements between competitors in the same market that substantially prevent or lessen competition. This civil provision for anticompetitive agreements is distinct from per se criminal prohibitions against certain types of competitor agreements. The proposed amendment will permit the Competition Tribunal to issue a prohibition order where a significant purpose of the agreement or arrangement, or any part of it, is to prevent or lessen competition in any market, even if none of the parties to the agreement or arrangement are competitors. This will expand the Commissioner’s ability to challenge agreements or arrangements at different levels of trade. This amendment will take effect only one year after Bill C-56 comes into force.
- Public interest market study powers introduced. The proposed amendment will grant the Minister of Innovation, Science and Industry the ability to direct the Commissioner to conduct a public interest inquiry into the state of competition in a market or industry. The Commissioner will not have the independent power to compel parties to produce information but will be able to seek court orders to compel the production of documents, data, and witnesses for examination. Compliance with these court orders as part of merger reviews and civil investigations is typically cost and time-intensive for parties. This amendment will take effect immediately upon Bill C-56 coming into law.
The proposed amendments will significantly impact parties’ strategy and risk assessment for certain complex mergers, collaborations among unaffiliated businesses that may impact competition at another level of trade, and businesses operating in markets that could become the focus of public policy scrutiny. As these amendments represent only piecemeal changes to the Competition Act, the Government of Canada will likely soon introduce additional amendments that will more comprehensively modernize Canadian competition law.
- On 18 September 2023, the leader of the federal New Democratic Party also introduced a private member’s bill, Bill C-352 or the Lowering Prices for Canadians Act (“Bill C-352“), which proposes the following amendments to the Competition Act and the Competition Tribunal Act:
- Creating “bright line” presumptions for mergers that will increase market shares and a “pro-competitive outcomes” defense that the parties to the merger must prove on a balance of probabilities
- Repealing the efficiencies defense for mergers and introducing efficiencies as a factor to be considered as part of the competitive effects analysis, but requiring that the gains in efficiency be more than a redistribution of income between two or more persons
- Substantially increasing the available penalties under the criminal agreements and abuse of dominance provisions
- Expanding the illustrative list of anti-competitive acts under the abuse of dominance provision to include directly or indirectly imposing excessive and unfair selling prices
- Repealing the efficiencies defense from the competitor collaboration provision and re-introducing it as one of the factors considered under the competitive effects analysis
- Repealing the Competition Tribunal’s ability to order costs against the Government of Canada.
Although Bill C-352 incorporates some of the Bureau’s recommendations on modernizing Canadian competition law, it is rare for private member’s bills to become law. Bill C-352 may be a peek behind the curtain for the future amendments that the federal government will introduce.
- The Minister of Innovation, Science and Industry’s Future of Canada’s Competition Policy Consultation – What We Heard Report was released on 20 September 2023 and summarizes the information the Canadian government received from stakeholders and citizens through its public consultation. The report’s findings were used to inform the amendments proposed in Bill C-56 and will also factor into any forthcoming amendments to the Competition Act.