On 12 March 2009 the Canadian Parliament passed legislative amendments that constituted a major overhaul of Canada’s competition law bringing it more in line with US antitrust law. The amendments also included significant changes to Canada’s foreign investment review regime.
These developments directly impact companies that are doing business or planning to do business in Canada. The amendments come hot on the heels of the June 2008 final recommendations of the Competition Policy Review Panel, a panel appointed by the Canadian government to study the impact of Canada’s competition and foreign investment laws on Canadian competitiveness.
New Merger Review Process
The amendments replace the existing merger review process with one that closely resembles the US procedure for merger review. Under the previous statutory provisions, in Canada, the maximum waiting period was 42 days from the date of filing after which the Commissioner of Competition (the Commissioner) was required to seek injunctive relief from the Competition Tribunal (the Tribunal) in order to obtain more time to review the transaction unless the parties voluntarily agreed to provide the Commissioner with more time.
Under the amended statutory provisions, there is an initial 30-day waiting period followed by a demand for more detailed information in cases where further information (and time) is required for the Commissioner to conduct their review. The parties are not permitted to close the transaction until 30 days after compliance with the demand for additional information. The Commissioner’s right to challenge a merger before the Tribunal is now, however, limited to a period of up to one year after closing, as opposed to the previous three years.
In recommending these changes, the Competition Policy Review Panel noted that a US-style merger review process was appropriate for Canada given the closeness of the US and Canadian economies.
Fundamental Changes to Criminal Conspiracy Provisions
The amendments also fundamentally change provisions dealing with agreements between competitors.
Under the previous statutory provisions, agreements that lessened competition in a material way or unreasonably enhanced the price of a product were potentially subject to criminal sanctions. Under the amended statutory provisions there are now two enforcement tracks for agreements between competitors:
- Hardcore cartels or other price-fixing activities are subject to serious criminal sanctions and private actions for damages.
- Other agreements or arrangements between competitors that lessen or prevent competition substantially are subject to civil investigation by the Competition Bureau (the Bureau) and potential remedial action by the Tribunal, although no fines or private damages can be awarded. The new standards for agreements between competitors come into force after one year (ie on 12 March 2010).
Notwithstanding the significant changes to Canada’s competition law, domestic cartels and bid-rigging remain at the top of the list of enforcement priorities, as conveyed in the Competition Bureau’s Priorities At-a-Glance 2007 to 2009. For example, consistent with its enforcement mandate, on 17 February 2009 the Bureau announced that criminal charges have been laid against 14 individuals and seven companies accused of rigging bids to obtain government of Canada contracts for IT services. The Bureau found evidence indicating that several IT services companies secretly co-ordinated their bids in an illegal scheme to defraud the government by winning and dividing contracts related to IT professional services provided to the Canada Border Services Agency, Public Works and Government Services Canada, and Transport Canada. Continued vigorous enforcement by the Bureau of domestic cartels and bid-rigging is to be expected in the future.
Significant Administrative Monetary Penalties for Abuse of Dominance
Canada’s abuse of dominance (monopolisation) laws have also been amended; most significantly, these provisions now allow the Tribunal to impose administrative monetary penalties of up to $10m (and up to $15m for repeat offenders) for violations of the abuse of dominance provisions. Previously, the only remedy effectively available for abuse of dominance in Canada was to prohibit the abusive conduct on a going-forward basis.
The issue of administrative monetary penalties for abuse of dominance has been debated in Canada for some time. While it is designed to deter anti-competitive conduct by companies that occupy a dominant presence in the marketplace, concerns have been expressed that it may in fact have a chilling effect on vigorous competition.
Changes to Distribution and Pricing Laws
The amending legislation also repealed Canada’s separate provisions dealing with price discrimination and predatory pricing, which were both previously criminal offences. These practices are now dealt with exclusively under the civil provisions of the statute dealing with abuse of dominance (monopolisation), which require that there be a showing of substantial competitive effects for a contravention to occur.
In addition, Canada’s laws regarding resale price maintenance now more closely resemble the law in the US after the US Supreme Court’s decision in Leegin Creative Leather Products, Inc v PSKS, Inc [2007]. Previously, resale price maintenance was a criminal offence in Canada that did not require any showing of material anti-competitive harm. The amended legislation replaces the previous criminal provision with a new civil provision designed to address only situations where resale price maintenance has an adverse effect on competition.
New ‘National Security’ Provision under the Investment Canada Act
The Investment Canada Act has been amended to provide, for the first time, a new review requirement for transactions that raise national security concerns in Canada. The term ‘national security’ is, however, left undefined, which has raised concerns that the new review mechanism could be applied extremely broadly.
The new review regime provides the Governor in Council (members of the Federal Cabinet) with broad powers over investments that raise national security concerns, including the power to block transactions.
In addition, the Canadian government recognised the need for greater transparency and predictability and thus accordingly amended the Investment Canada Act to provide for public reporting on the operation of the legislation.
By Brian Facey, partner, Navin Joneja, partner, and Julie Soloway, partner, Blake Cassels & Graydon LLP. E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; This e-mail address is being protected from spambots. You need JavaScript enabled to view it .