Defining a new path for competition law in Canada

A discussion paper on possible changes to the Competition Act is attracting attention from the legal community practising in this area. Many lawyers question how the issues the changes hope to address can be handled through the lens of competition law.

In November, François-Philippe Champagne, the federal minister of Innovation, Science and Industry, put out a consultation on the future of competition policy in Canada to hear Canadians’ views on broader changes to Canadian competition legislation. The consultation comes after significant amendments to the Competition Act came into force in June 2022 through an omnibus bill. Critics suggested that this process allowed for no meaningful output from outside stakeholders during the legislative process.

On the new suggestions, one recent analysis of the latest proposed changes, put together by McMillan LLP, puts the critics’ views this way: “By way of justification for possible changes to the Competition Act, the [ISED] discussion paper notes, amongst other things, concerns about affordability and the cost of living, market concentration, the emergence of digital giants, and inequality.”

However, “It does little to tie these problems, to the extent that they are true problems, with the need for reform to the Competition Act. For instance, no thoughtful analysis suggests that the inflationary pressures Canada and much of the world is experiencing are a result of antitrust issues. Nor growing economic inequality – and indeed, the evidence … suggests that Canada, as opposed to some other societies, is not experiencing meaningfully increased economic inequality.”   

As well, the McMillan paper says, “nor indeed is there any conclusive evidence for increased market concentration,” as there has been a rise in large digital firms, lots of entry, much change, innovation and disruption, but no clear evidence of any antitrust problem if we define antitrust problems as we traditionally have – as related to consumer  welfare.”                                                                                                                 

It adds that a cynic might suggest “that we are considering upending a significant framework statute, which has served Canada well because it is a trendy thing to do, the neighbours are doing it, and change is in the antitrust zeitgeist” – not necessarily because “a thoughtful case has been articulated for the desirability of such wholesale change.”

One of the authors of the McMillan report, Hannah Johnson, an associate in the competition, antitrust and foreign investment practice at the firm, says there’s a trend in the media and the general conversation to think that the Competition Act changes will address this wide array of social issues, “but that is not what the Competition Act was designed to do.”

_{Hannah Johnson}

“The act’s purpose,” she adds, “was to create the necessary conditions to arrive at a competitive economy, which is very narrow and more about fostering economic development through strong competition. It’s not meant for these broader issues.”

James Musgrove, a partner with the same practice at McMillan, adds that while the concerns raised in the discussion paper are legitimate, “there is no evidence that overturning competition laws would achieve the desired goals.”

_{James Musgrove}

The discussion paper asked for responses by March 31 to several areas of competition law.

These include:

• merger review, such as pre-merger notification rules, extending the limitation on the review period for non-notifiable mergers to three years or tying it to a voluntary notification regime, easing the conditions for the commissioner to obtain interim relief in challenging mergers; restricting the application of the “efficiencies defence” and revising the standard for a merger remedy to better protect against prospective competitive harm or account for labour market effects 
• abuse of dominance provisions  
• competitor collaborations  
• deceptive marketing tools addressing modern forms of business, possibly in the form of better defining false or misleading conduct 
• administration and enforcement tools that increase the efficiency of competition law

A Norton Rose Fulbright Canada LLP report on the possible changes says the proposals to lower the burden of proof and create presumptions of anti-competitive behaviour make “little reference to the importance of preventing over-enforcement.”

And while the government’s desire to review the act and Canada’s competition law framework is well-intentioned, “It is critical to ensure that the desire to make change is informed by facts and sound policy objectives, as opposed to making change for change’s sake.”

Navin Joneja at Blake Cassels & Graydon LLP says that the proposed changes are directed at expanding the powers of the Competition Bureau, including the ability to conduct general market studies before any particular issue or complaint has been made.

_{Navin Joneja}

“I think there is a risk that it goes too far. And part of the conversation now is whether competition law should be addressing areas such as privacy and data, labour, and even, to a certain degree, environmental standards.”

He adds that Blakes’ submission on the bureau’s discussion report focuses on the need for changes based on evidence and “actual cases and problems.” He says competition laws are best used when “there is a predictable and analytical framework, so if we are considering competition law reform, it shouldn’t be too open-ended, too unpredictable, too broad, and bring in other factors that are maybe a bit more discretionary and harder to get your arms around.”

Joneja’s colleague at Blakes, David Dueck, expresses a similar sentiment. In considering potential changes, he says, “The Canadian government should be mindful of the risk of potential over-enforcement because, in many cases, activities can be pro-competitive or anti-competitive, depending on the circumstances. The risk, if there’s no predictability or no certainty for Canadian businesses about what is pro-competitive or anti-competitive, what’s covered and what’s not covered, is that over-enforcement can potentially chill activity that could actually be pro-competitive, and that’s ultimately not good for society as a whole.”

_{David Dueck}

As for the efficiencies defence – when a merger is allowed even if it compromises competition because the merging partners can argue the efficiencies from the deal are ultimately beneficial for the sector – Dueck and Joneja acknowledge that this provision is somewhat unique compared to competition law in other parts of the world. They say it may be necessary because of Canada’s large size and relatively large population.

Says Dueck: “The efficiencies argument gets a lot of attention, but it isn’t used that often. It is just one factor that is part of the review of a proposed merger.”

Adds Joneja: “It helps our companies compete globally and has the scale to adapt to changing economic environments.”

David Elder, a partner in the privacy and data protection group at Stikeman Elliott LLP, points out that regulatory overlap can be “problematic.” Elder notes that the privacy commissioner acknowledged in his submission to the ISED proposals the increasing overlap in competition and privacy issues and advocated that this trend requires “greater cooperation between the various privacy and competition agencies.” The Office of the Privacy Commissioner cannot collaborate formally with the bureau in investigations or share relevant information.

_{David Elder}

However, Elder says, “There is “the risk of double jeopardy if, for example, you’re an organization with two different regulators coming at you with a slightly different shade of argument on the same issue.”

COMPETITION BUREAU CHALLENGES BY THE NUMBERS

Transactions reviewed by Competition Bureau since 2009: 3,000

Transactions challenged by Competition Bureau: 9

Results of the challenges

Deals settled: 4 (Air Canada, Parkland, Aucerna, GFL)
Deals allowed by Competition Tribunal following trial: 3 (Parrish & Heimbecker, Secure, Rogers-Shaw)
Deals abandoned because of US competition issues: 1 (Staples)
Deals allowed following SCC decision based on efficiencies defence: 1 (Tervita)

Times efficiencies defence explicitly stated as the reason for not challenging a merger: 4
(Chemtrade / Canexus, Superior Plus / Canexus [abandoned],  Superior Plus / Gibson Energy, CN / H&R)

COMPETITION BUREAU PERFORMANCE STATISTICS

_{Source: https://ised-isde.canada.ca/site/competition-bureau-canada/en/competition-bureau-performance-measurement-statistics-report-2021-2022#highlights-term1-box2}