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The future of competition law in Canada

Will sweeping changes to the law, including an expansion of private litigation, succeed in deterring anti-competitive conduct?

Private competition litigation

According to Keldon Bester, co-founder and executive director of the Canadian Anti-Monopoly Project, Bill C-56, passed into law and Bill C-59 (still under debate) represent the most significant amendments to the Act since its introduction in 1986, signaling a positive shift in addressing long-standing issues with the law.

He says many of the changes ultimately strengthen enforcement powers and penalties under the Act. They also address long-standing issues, including the removal of the efficiencies defence for mergers, new provisions on anti-competitive agreements and bolstering the ability of the Commissioner of Competition to conduct market studies independently.

"The one that has the biggest opportunity to change the future of competition law going forward is opening up meaningful private access including damages to deter anti-competitive conduct, de-centralizing enforcement, keeping the Bureau prominent, but allowing individual companies to bring suits," Bester says. "The Bureau can't be everywhere, and the Bureau brings its own institutional thinking to how it approaches the law, so de-centralizing that is very important."

James Musgrove, a partner at McMillan LLP in Toronto, says that claims by private litigants are likely to resemble class actions.

"There will be remedies for those injured, including the person who applies and anyone else affected," Musgrove says. "Whether there will be meaningful differences, including how compensation for 'class counsel' might work is an open question in my mind. That's relevant obviously to the number and significance of cases brought. If the reward is richer, there will be more, and if the reward is not as rich, less so."

Musgrove adds that regardless of whether there is any additional compensation for counsel beyond normal costs, the incentives are clearly there.

Getting leave from the Tribunal will be easier, and the law provides for administrative monetary penalties (AMPs). Also, the damages are likely to be significant. Less certain are the implications for companies, Musgrove says. While one can reasonably anticipate the types of cases the Competition Bureau will likely pursue, private enforcement is much more unpredictable. Definitions under the Act have also been amended, which makes it harder to advise clients.

"We have a much-expanded set of conduct that might be challenged under these provisions, without much, if any, case law guidance, and a much easier potential private challenge" Musgrove says. "And we have incentives for private challenge. Taken together, it'll make for a big change."

The big question is whether the Competition Tribunal will be able to handle an increased workload under its current structure.

"This is a very centralized system," Bester says. "It is possible that the Tribunal will become a bottleneck. There is a question of whether the body is able to handle the volume." Members of the Competition Tribunal are appointed from among the judges of the Federal Court, so they have other responsibilities, Bester notes. There are also concerns that a small circle of judges "are shaping the direction of competition law."

Bester says that the Federal Court could take on more responsibility, as in the U.S., which would require more appointments with competition law experience. Or the agency will need to build out its capacity to handle more volume and increase the diversity of its membership.

A more diverse competition bar will likely emerge from the changes in time. There will be lawyers interested in acting for plaintiffs rather than following the traditional path of defending clients against the actions of the Bureau.

"When you have a different group of actors who are motivated for an effective law, that has the potential to have a positive effect over the coming years," Bester says.

Bester expects more activity from smaller or niche markets that the Bureau never had the resources to focus on. He says we can expect more cases that address specific questions rather than broad categories of conduct. "The problem with abuse of dominance is that it is very rarely enforced," he says. "What I think we're going to have are potentially more regional, or more excitingly, more novel theories being tested, and really exposing something that is considered 'business as usual' conduct in a lot of markets." There are now tools for participants to reshape the balance with dominant players in their markets, he says.

C-59 also narrows the circumstances by which the Tribunal can impose a cost award on the Bureau. Last year, the Tribunal ordered the Competition Commissioner to pay $13 million to Rogers Communications Inc. and Shaw Communications Inc. in legal fees, on the grounds he engaged in "unreasonable behaviour" in a legal challenge of their proposed merger.

This change could free the Bureau's hand to take bigger swings at some files, allowing it to expand its reach rather than being constrained by cost awards.

With the changes to the abuse of dominance provisions, Bester says the Bureau could revisit past investigations that stalled, particularly with web giants like Amazon or Google.

"Are there cases that were on the shelf that they thought were a no-go?" Bester wonders. "I think there will be a period of settling and understanding, and then it will be quite exciting for both public and private parties to test the water with these new powers."

Also, the assessment of abuse of dominance used to involve a three-part test that has been paired down to a more manageable two, which lowers the hurdle, says Musgrove. The Tribunal will likely have to offer guidance because the change could encompass certain practices not intended to be captured. "In the interim, people aren't going to know what they can and can't do, and plaintiffs are going to try stuff on," he says. "We're going to get some guidance, but this is Canada—it won't happen overnight."

There are also provisions about charging excessive or unfair prices that have been added to the list of anti-competitive acts, which are foreign to Canadian or American antitrust law.

"I suspect it's been thrown in there without much thought," Musgrove says, given past wrangling between the Liberal government and the NDP, who insisted on these changes as part of their support for the bill.

The way the process unfolded was unexpected, says Elisa Kearney, a partner at Davies Ward Phillips & Vineberg LLP in Toronto, and chair of the CBA's competition section. 'We would have been expecting a much more standard legislative process where there was an opportunity for discussion in both the House and the Senate," she says. "The fact that it was rolled out in three different parts in a bit of a disjointed fashion as a result of political compromises was not at all what was expected when the consultation was launched."

Kearney says the section generally supports the direction of the amendments. Still, there are areas where consultation and discussion may have improved the bill, such as Section 90.1 provisions on agreements between non-competitors, which risk capturing several ordinary-course agreements in the marketplace. She also worries about marketplace uncertainty and stiff penalties during the transition period as businesses figure out what are acceptable practices.

Additionally, the changes provide the Bureau with increased investigative authority concerning claims related to "greenwashing."

It is the first time that the environment and climate change are folded into the deceptive marketing provisions of the Act. Tanya Jemec, a lawyer with Ecojustice, welcomes the crackdown on greenwashing. But more must be done to ensure that misleading green claims aren't duping consumers or skewing the market. The new provisions will also have to be tested.

It's sometimes challenging to distinguish what is considered good from what isn't, to understand the intended meaning of a certain term, Jemec says. What's more, the greenwashing provisions are limited to claims about products. "What we're seeing in the marketplace are entities advertising green attributes, whether it's about water, waste, net zero, that are more broadly about their business or brand or an activity, and not necessarily a product."

Those entities should also provide proof of their activities' green attributes, says Jemec. "We're seeing other jurisdictions take harder stances to protect their consumers and the marketplace more than our regulators are doing at this time," she says. The EU has an unfair commercial practices directive, where specific environmental claims are prohibited because they are false and misleading in all circumstances.