Canada First: Sound Policy Must Prevail over Groupthink

February 28, 2022

Written By Melanie Aitken, Zirjan (Zee) Derwa and Christina Skinner

The calls to reform Canada's antitrust framework are growing louder.

On February 7, 2022, the Minister of Innovation, Science and Industry, Francois-Philippe Champagne, announced a comprehensive review of the Competition Act. Minister Champagne characterized several areas of concern he proposes to evaluate in his pending review, specifically: addressing wage-fixing agreements, drip pricing, and loopholes in the Act's framework; improving access to justice for those harmed by anticompetitive conduct; modernizing the law to adapt to today's digital economy; and amending the Act’s penalty regime to provide for an appropriate level of deterrence against harmful conduct. This language could undoubtedly support a wide range of amendments and, appropriately, there is no indication it should be construed as exhaustive. 

Legislative Review

At this preliminary stage, it is unclear what direction this legislative review (and any resulting amendments) may take. Numerous constituencies have surfaced with input for proposed changes to the Act, including Professor Edward Iacobucci, the Competition Bureau, and several others in response to Senator Howard Wetston's consultation inviting comments on Canada's competition policy framework. Similarly, it is not at all clear what role the input from these stakeholders will play in directing and informing the reform process. 

The Minister has hinted that there may be one, or possibly two, phases to his review and possible amendment action. If a two-phase approach is taken, there may be certain proposals with hard-to-arrest momentum behind them that, whether advisable or not, may proceed with a more minimal review process (e.g., criminalizing wage-fixing and no poach agreements). In contrast, other issues may receive more extensive consultation with stakeholders (e.g., any changes to the substantive competition tests or other fundamental changes such as burden-shifting). 

While some of the proposed amendments seem quite likely to proceed and appear on their face to be relatively uncontroversial, careful consideration must be given to the formulation of even these changes to ensure they do not lead to unintended harmful consequences for the Canadian economy and its participants. The same can be said, with greater emphasis still, about the more controversial proposals. 

The Bureau's Recommendations—A Departure from Past Positioning

The day after the Minister's announcement, the Bureau published its own recommendations for legislative reform to the Act (the Bureau Submission). Until very recently, the Bureau has maintained that Canada's competition framework is well-equipped to effectively regulate today's economy, including its broadly digitized character. Significantly, the Bureau Submission reflects a total departure from that view of the Act's efficacy. The opportunity potentially presented by the Minister's current interest in competition may simply have been too much for the Bureau to resist. 

To wit, the Bureau Submission lists no fewer than 35 recommendations that the Bureau frames as necessary to bring Canada's competition framework in line with its international counterparts and address pressing issues relating to emerging industries and the digitization of the economy. Notably, the Bureau Submission includes the following recommendations:

• Merger review—The Bureau proposes several changes, including eliminating the efficiencies defence, new rules to address so-called "killer acquisitions," and shifting the burden of proof onto merging parties to prove why a concentrative merger would not substantially lessen or prevent competition—a dramatic change that would substantially relieve the Bureau from having to prove its case. The Bureau also proposes extending the limitation period for the Commissioner of Competition to challenge a merger from one year to three.
• Abuse of dominance and other anti-competitive conduct—The Bureau proposes amending the abuse of dominance provisions to capture conduct intended to harm competition, and not just conduct intended to harm a competitor. Similar to merger review, the Bureau proposes new standards to address anticompetitive conduct directed at emerging competitors in our digitized economy, all easing the Bureau's burden to bring a case.
• Market representations—The Bureau proposes certain changes to the deceptive marketing provisions of the Act, including explicitly recognizing "drip pricing" as harmful, and—significantly—shifting the burden of proof onto businesses to prove that advertisements are true and not misleading.
• Cartels—The Bureau proposes amending the Act to explicitly provide an ability for the criminal prosecution of harmful buy-side conspiracies, including wage-fixing and no-poaching agreements.
• Investigations and Litigation—The Bureau proposes simplifying and accelerating litigation wherever possible, albeit with no particulars as to how this would be accomplished in a fair and balanced manner. It also proposes blanket immunity for itself from any potential cost awards.
• Other—The Bureau proposes allowing private access to the Competition Tribunal for abuse of dominance and competitor collaboration cases. It also recommends significant increases to the monetary penalties across various provisions, and providing the Commissioner with the power to compel the production of information relevant to "market studies" (by definition non-enforcement activities).

Discussion of the Recommendations

The Bureau's 180

While this is not the focus of the Minister's announcement, the increasing prevalence of digitally-enabled business models, and technological change generally, has stimulated calls for potential antitrust reform. While agencies in other major jurisdictions have advocated amending their antitrust framework through a populist lens for several years, the Bureau was a notable holdout. For example, in a series of publications in 2017 and 2018, the Bureau consistently argued that the current Canadian competition framework is sufficiently robust to deal with the issues presented by the digitized economy, and other challenges presented by today's market structures.

With the release of the Bureau Submission, it is clear that the Bureau has completely resiled from this position, justifying sweeping proposed reforms as "necessary" to align itself with many of its key trading partners and discharge its mandate. This "about face" is consistent with the Commissioner's only quite recent aggressive support for amendments to the Act (and more significant funding) to address the challenges identified as being driven by the emergence of "digital markets," and is remarkable for its contradiction. 

What is particularly notable is the breadth and fundamental nature of some of these recommendations, many of which, although not all, the Bureau links to technological advances. While it is certainly possible that the Bureau is simply throwing many darts at the board with the hope that some stick—should Parliament entertain a number of these recommendations, the result could be a fundamental shift in Canada's competition framework.

Importance of Careful Consideration

As previously noted, some of the recommendations, such as expanding the scope for private enforcement of abuse of dominance, are somewhat less controversial and, in fact, if one considers the practices in our sister jurisdictions, long overdue. However, even for these less controversial items, there are quite significant possible variations (such as whether private litigation rights would be confined to the Competition Tribunal or extended to broad-based class actions). Depending on the model adopted, there could be a material impact on competition policy in Canada, underscoring the importance of considered thought as to consequence.

Moreover, others among the Bureau's recommendations represent a fundamental departure from the longstanding model where the Bureau is required to establish a basis for devoting public resources to challenging otherwise perfectly lawful action. As such, these proposals should be very thoroughly debated and carefully considered: are these reforms about international alignment or merely about lowering the Bureau's burden to bring home a win? For example, introducing structural presumptions to shift the burden onto the merging parties for concentrative mergers, customizing new standards for purported "killer acquisitions," and removing traditional procedural and substantive safeguards to promote procompetitive behaviours could materially affect how business is conducted in Canada and, in fact, are not broadly seen in our trading partners' enabling legislation. Parliament should exercise considerable caution before adopting such wholesale changes to the Act; we otherwise risk serious harm to Canada's long-term economic growth.

Next Steps

Minister Champagne's announcement that Parliament will engage in a detailed review of Canada's competition laws, along with the Bureau Submission and expressed interest from other parties, suggest that, unless more pressing political priorities sideline the process, amendments to the Act are forthcoming. One hopes that Minister Champagne's initiative follows prudent and measured study, and resists those among the Bureau's proposals which have the potential to shift enormous power into the Bureau's hands, effectively gifting the Bureau the unilateral call on the bounds of competitive conduct.

A review of Canada's competition laws is welcome; it is essential that Canada's competition policy framework remains effective and that the Bureau is adequately equipped to fulfill its mandate. While there are some clear advantages to aligning Canada's competition laws with those of its major trading partners in some respects (and when the characterization as "alignment" is accurate), this value cannot displace other important Canadian economic goals, and we must guard against groupthink in place of good policy. In particular, Parliament must resist calls, however well-intentioned, to make overly-broad changes to the Act to pursue goals not suited to antitrust regulation that risk inhibiting innovation and Canada's economic recovery and growth.

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