Competition law in Canada: overview

A Q&A guide to competition law in Canada.

The Q&A gives a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures. In particular, it covers relevant triggering events and thresholds, notification requirements, procedures and timetables, third party claims, exclusions and exemptions, penalties for breach, and proposals for reform.

To compare answers across multiple jurisdictions visit the Competition law Country Q&A tool.

This Q&A is part of the PLC multi-jurisdictional guide to competition and cartel leniency. For a full list of jurisdictional Competition Q&As visit www.practicallaw.com/competition-mjg.

For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-mjg.

Robert E Kwinter, Evangelia L Kriaris and Kevin H MacDonald, Blake, Cassels & Graydon LLP
Contents

Merger control

1. What (if any) merger control rules apply to mergers and acquisitions in your jurisdiction?

Regulatory framework

The Canadian Competition Act (Competition Act, R.S.C. 1985 c. C-34) sets out the regulatory framework for mergers (as defined in section 91). Two parts of the Competition Act apply to mergers and are independently applicable:

  • Part IX sets out the notification provisions for notifiable transactions.

  • Part VIII sets out the substantive merger review provisions.

Even if a transaction is not subject to notification under Part IX because it does not meet the prescribed thresholds, it is still subject to substantive review under Part VIII and subject to challenge by the Commissioner of Competition (see Question 2).

Regulatory authorities

The Commissioner is an independent law enforcement official who is responsible for the administration and enforcement of the Competition Act. The Commissioner is the head of the Canadian Competition Bureau, an independent branch of the federal Department of Industry which investigates civilly reviewable matters (such as mergers) under the Competition Act.

The Competition Tribunal is a specialised court responsible for adjudicating applications relating to civilly reviewable matters (including mergers) and operates independently of any government department.

See box, The regulatory authorities.

 

Triggering events/thresholds

2. What are the relevant jurisdictional triggering events/thresholds?

Triggering events

All transactions that satisfy the prescribed thresholds, irrespective of form (for example, share or asset acquisition , merger, joint venture, amalgamation), and regardless of whether there is a change of control, are subject to notification and cannot be completed until the parties have complied with Part IX of the Competition Act. Transactions that do not satisfy the relevant thresholds are still subject to substantive review (Part VIII, Competition Act) and can be challenged by the Commissioner of Competition within one year of closing.

Thresholds

Notifications are required under the Competition Act where both the "size of transaction" and the "size of parties" thresholds are met. For 2013, these thresholds are as follows:

  • The size-of-transaction threshold. This is satisfied if the target has assets in Canada, or revenues in or from Canada, generated by assets in Canada, which exceed Can$80 million. The threshold is adjusted annually for inflation and published in the Canada Gazette.

  • The size-of-parties threshold. This is satisfied if the parties to the transaction, including all affiliates, have combined assets in Canada or revenues from sales in, from or into Canada in excess of Can$400 million.

In the case of an acquisition of the equity of a corporation or non-corporate entity, the "size of equity" threshold must be met in addition to the size-of-transaction and size-of-parties thresholds. The notification requirement is triggered by the acquisition of any of the following:

  • More than 20% of the voting shares of a public company (or, if the acquirer already owns more than 20%, more than 50%).

  • More than 35% of the voting shares of a private company or more than 35% of the interests in a non-corporate entity (or, if the acquirer already owns more than 35%, more than 50%).

 

Notification

3. What are the notification requirements for mergers?

Mandatory or voluntary

All transactions that exceed the relevant thresholds (see Question 2) are subject to mandatory notification unless the parties have received an advance ruling certificate (ARC) or a waiver exempting them from compliance with the notification provisions. An ARC is issued where the Commissioner of Competition is satisfied that there are not sufficient grounds to challenge the transaction before the Competition Tribunal. The issuance of an ARC is discretionary. In practice, it is only issued in non-complex transactions which do not raise any competition law concerns.

Timing

A notifiable transaction cannot be completed until the expiry of the applicable statutory waiting period. While the Competition Act does not prescribe a time for filing the notification, the notification should be submitted to allow sufficient time for the applicable statutory waiting period to expire prior to closing. Where parties submit notifications prior to the transaction becoming public, and request that the Commissioner refrain from making market contacts until the transaction is made public, the Commissioner takes the position that the waiting period will not commence until such time as the parties notify the Commissioner that he can begin making market contacts.

Formal/informal guidance

The parties can approach the Competition Bureau prior to filing notifications, to engage in informal discussions and seek initial guidance. However, in practice, the Bureau does not provide any guidance until the parties have either submitted a request for an ARC or filed notifications.

Responsibility for notification

Both parties to the transaction must file complete notifications to commence the statutory waiting period. In a share transaction, the "parties" are defined as the acquiring party and the corporation whose shares are to be acquired.

There is one exception: in the case of a hostile takeover, the waiting period begins to run from the date the proposed acquirer files its notification rather than the date on which both parties file complete notifications.

Relevant authority

Notifiable transactions must be notified to the Commissioner.

Form of notification

The regulations to the Competition Act set out the information that must be included with the notification (Notifiable Transactions Regulations, SOR/87-348, available at http://laws-lois.justice.gc.ca/eng/regulations/SOR-87-348/index.html).

The notification must include:

  • Information relating to the nature of the parties' businesses and affiliates.

  • Principal suppliers and customers of the parties and their affiliates.

  • General financial information.

The parties must also submit all documents evaluating the proposed transaction with respect to competitive factors as well as the transaction agreement(s).

In practice, the parties submit notifications with a written submission requesting that the Commissioner issue an ARC or a "no-action" letter in respect of the transaction. A no-action letter confirms that the Commissioner has no present intention to commence an application to challenge the transaction before the Tribunal. This submission generally includes all of the following:

  • A description of the parties.

  • A description of the parties' Canadian operations.

  • The relevant product and geographic markets.

  • The competitive effects of the transaction in Canada.

  • Other information to assist the Bureau in conducting its review.

Filing fee

There is a Can$50,000 filing fee for notifiable transactions. Responsibility for payment of the filing fee is a matter for negotiation between the parties.

Obligation to suspend

A notifiable transaction cannot close until the parties to the transaction have received an ARC from the Commissioner or have filed notifications with the Bureau and waited until the applicable waiting period has expired, been waived, or been terminated.

 

Procedure and timetable

4. What are the applicable procedures and timetable?

The receipt of completed notifications from both parties to a transaction commences an initial 30-day waiting period. Within this period, the Competition Bureau may issue a supplementary information request (SIR) if it decides that further information is required to complete its review. The information requested by the Bureau can be quite broad (for example, any additional information that is relevant to the Commissioner of Competition's assessment of the proposed transaction). The issuance of a SIR to one or more of the notifying parties triggers a second 30-day waiting period which commences when the Commissioner has received both parties' compliance with the SIR. A proposed transaction cannot close until the expiry of this second waiting period (subject to certain exceptions). The statutory waiting period is separate from the duration of the Commissioner's review. The Commissioner has up to one year from closing to challenge a merger.

The waiting period can be terminated earlier if the Commissioner issues an advance ruling certificate (ARC) or notifies the parties he does not intend, at that time, to make an application to the Competition Tribunal under the substantive merger provisions. A request for an ARC, however, does not start the waiting period (so, where timing is important, parties will file notifications to start the statutory waiting period). Where issued, an ARC is generally granted within the initial 30-day waiting period.

The waiting period can be extended if the parties have agreed with the Commissioner to defer closing or if the Commissioner is granted an order from the Tribunal to delay closing.

For an overview of the notification process, see flowchart, Merger notification flowchart: Canada (www.practicallaw.com/7-504-5311).

 

Publicity and confidentiality

5. How much information is made publicly available concerning merger inquiries? Is any information made automatically confidential and is confidentiality available on request?

Publicity

Information provided to the Competition Bureau must be treated confidentially, subject to certain exceptions where the Bureau has the discretion to communicate information (section 29, Competition Act):

  • To a Canadian law enforcement agency.

  • For the purpose of the administration or enforcement of the Competition Act.

  • That has been made public.

  • With the authority of the person who provided the information.

It is the general policy of the Bureau to minimise the extent to which confidential information is communicated to third parties (Information Bulletin on the Communication of Confidential Information Under the Competition Act (Confidentiality Bulletin) available online at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/info-bulletin-confidential-info-e.pdf/$FILE/info-bulletin-confidential-info-e.pdf). The Bureau does not publish the fact that a notification has been made and does not usually comment on transactions that it is reviewing unless the parties have consented to disclosure or the information has otherwise become public.

Procedural stage

Once the Bureau has completed its review and reached a decision, it provides limited information to the public by posting information to an online merger registry and, less frequently, by publishing a position statement.

Online merger registry. In February 2012, the Bureau began publishing the results of its reviews to an online merger registry. The registry includes the following information:

  • The parties to the transaction.

  • The relevant industry.

  • The outcome of the review, that is, whether the Bureau issued either an ARC or a no-action letter, or whether the transaction resulted in the execution of a consent agreement or a judicial decision.

The merger registry lists all transactions where the parties have requested either an ARC or a no-action letter (both notifiable and non-notifiable), or have filed notifications.

Position statement. In addition to the merger registry, the Bureau occasionally publishes position statements following the completion of its review of certain mergers, summarising its review and main findings. Position statements are typically issued where:

  • The transaction is high-profile.

  • The Bureau's review involves complex or important issues.

  • The Bureau employs novel analytical tools.

Position statements reflect an effort by the Bureau to provide transparency to industry stakeholders and the anti-trust community.

The Bureau can share information it has learned with foreign anti-trust agencies (for example, in multi-jurisdictional mergers). In addition, where the Commissioner challenges a merger, information obtained by the Bureau may be used in its application before the Competition Tribunal.

Automatic confidentiality

All information provided to the Bureau in the context of its review of a transaction is confidential, subject to certain exceptions (see above, Publicity).

Confidentiality on request

See above, Automatic confidentiality.

 

Rights of third parties

6. What rights (if any) do third parties have to make representations, access documents or be heard during the course of an investigation?

Representations

Third parties can make representations to the Competition Bureau regarding a proposed transaction (irrespective of whether the transaction is notifiable).

Document access

Third parties do not have an automatic right to access documents provided to the Bureau in the context of its review of a transaction. However, they can seek a court order to obtain disclosure.

Be heard

During its review of a proposed merger the Bureau will contact third parties (for example, customers and suppliers of the merging parties, competitors and other stakeholders) to elicit their views on the transaction. Parties not contacted by the Bureau can contact the Bureau on their own and provide their views. While third parties do not have the right to challenge a proposed merger, they can complain to the Bureau about a proposed merger which may result in the Bureau examining the merger more closely.

 

Substantive test

7. What is the substantive test?

The substantive statutory test applied to all mergers (whether notifiable or not), is whether the merger is likely to prevent or lessen competition substantially (SPLC) in a relevant market. There is an express efficiency defence to anti-competitive mergers, which applies to cases where the efficiencies from the merger are likely to be greater than and offset any effects of the prevention or lessening of competition (section 96, Competition Act).

 

Remedies, penalties and appeal

8. What remedies can be imposed as conditions of clearance to address competition concerns? At what stage of the procedure can they be offered and accepted?

Where the Commissioner of Competition decides that a proposed merger is likely to prevent or lessen competition substantially (SPLC), the Commissioner can either:

  • Apply to the Competition Tribunal to challenge the merger under section 92 of the Competition Act.

  • Negotiate an appropriate remedy with the merging parties to resolve the competition concerns (typically by registering a consent agreement under section 105 of the Competition Act).

  • Elect not to bring an application at that time, but notify the parties that the:

    • Competition Bureau will continue to monitor the market; and

    • Commissioner could exercise his statutory right to challenge the merger within one year of its completion.

As a matter of practice, the Commissioner will first seek to negotiate a remedy with the parties (via a consent agreement) before resorting to litigation. However, if a resolution cannot be reached, the Commissioner can apply (either before or up to one year following completion) to the Tribunal seeking an order that:

  • In the case of completed mergers, it:

    • dissolves the merger;

    • disposes of assets or shares; or

    • takes any other action with the consent of the person against whom the order is directed (in addition to or in lieu of the above).

  • In the case of proposed mergers, it prohibits the completion of a whole or part of the merger in addition to or in lieu of :

    • prohibitions being imposed as to whether the merger be completed in whole or in part, to ensure there is no SPLC; or;

    • taking any other action with the consent of the person against whom the order is directed.

Only the Commissioner has the statutory right to challenge a merger before the Tribunal, third parties do not (see Question 6).

Remedies can be offered at any stage of the procedure, including "fix-it first" remedies which can be offered at the time that notifications are submitted.

Where remedies are required, the guiding principle in determining an appropriate remedy is that it should " restore competition to the point at which it can no longer be said to be substantially less than it was before the merger." (Canada (Director of Investigation and Research) v Southam Inc., [1997] 1 S.C.R. 748).

The Bureau's policy documents state a preference for structural remedies, such as divestitures, over behavioural remedies (Information Bulletin on Merger Remedies, 22 September, 2006: www.competitionbureau.gc.ca/epic/site/cb-bc.nsf/vwapj/Mergers_Remedies_PDF_EN1.pdf/$FILE/Mergers_Remedies_PDF_EN1.pdf):http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/Mergers_Remedies_PDF_EN1.pdf/$FILE/Mergers_Remedies_PDF_EN1.pdf

  • Structural remedies are considered to be:

    • more clear and certain;

    • less costly to administer; and

    • readily enforceable.

  • Behavioral remedies are viewed as inadequate due to, among other things:

    • difficulty in monitoring the remedy;

    • determining the appropriate duration for the remedy;

    • associated costs.

The Bureau has, however, accepted stand-alone behavioural remedies in some matters , such as the recent case of Commissioner of Competition v The Coca-Cola Company, September 27 2010 available at: www.ct-tc.gc.ca/CMFiles/CT-2010-009_Registered%20Consent%20Agreement_2_45_9-27-2010_5925.pdf.

Where behavioural remedies are granted, the Tribunal order (whether issued on consent or in a contested hearing), will include a reporting obligation requiring regular reports to the Commissioner to ensure compliance.

 
9. What are the penalties for failing to comply with the merger control rules?

Failure to notify correctly

Failure to file a notification "without good and sufficient cause" is a criminal offence, punishable by a maximum fine of Can$50,000.

Where the party that fails to notify the transaction is a corporation, its officers, directors or agents can also be liable, in certain circumstances.

Individuals are liable to the same punishment as the corporation whether or not the corporation has been prosecuted or convicted.

Implementation before approval or after prohibition

Where the parties close a transaction prior to the expiry of the waiting period, the Commissioner of Competition can apply to the court for a range of remedies, including fines of up to Can$10,000 per day for each day that the parties have closed prior to the expiry of the applicable waiting period.

Failure to observe

Breach of an order of the Competition Tribunal or registered consent agreement is a criminal offence subject to either:

  • On summary conviction, a fine of up to Can$25,000 and/or imprisonment for up to one year.

  • On conviction on indictment, a fine at the court’s discretion and/or imprisonment for up to five years.

 
10. Is there a right of appeal against any decision? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties or only the parties to the decision?

Rights of appeal and procedure

If the Commissioner of Competition challenges a transaction before the Competition Tribunal, the Tribunal's decision can be appealed to the Federal Court of Appeal, as of right, as regards questions of fact (and with leave, questions of law). Decisions of the Federal Court of Appeal can be appealed to the Supreme Court of Canada with leave.

Third party rights of appeal

There are no third party rights of appeal. Only the parties to the decision have a right of appeal (see Questions 6 and 8).

 

Automatic clearance of restrictive provisions

11. If a merger is cleared, are any restrictive provisions in the agreements automatically cleared? If they are not automatically cleared, how are they regulated?

A decision by the Commissioner of Competition not to challenge a merger does not automatically clear restrictive provisions in transaction agreements. While restrictive provisions may not raise competitive concerns at the time of merger review, changes in the market can make the provisions problematic in the future. As a result, these may be subject to review at a future time.

 

Regulation of specific industries

12. What industries (if any) are specifically regulated?

The Competition Act is an act of general application. However, mergers in certain industries are subject to review under sector specific legislation in addition to, or in lieu of, review under the Competition Act. For example, mergers:

  • Between transportation undertakings such as airlines and railways require approval under the Canada Transportation Act.

  • In the broadcasting industry are reviewed by the Canadian Radio-Television Communications Commission under the Broadcasting Act.

  • Between financial institutions may be reviewed under various statutes, including the:

    • Bank Act;

    • Insurance Companies Act;

    • Co-operative Credit Associations Act; or

    • Trust and Loan Companies Act.

 

Restrictive agreements and practices

Scope of rules

13. Are restrictive agreements and practices regulated? If so, what are the substantive provisions and regulatory authority?

Restrictive agreements and practices are regulated under Part VIII of the Competition Act, which specifically prohibits:

  • Refusal to deal (section 75). This involves a refusal by a supplier to supply a customer with an adequate supply of a product, which results in an adverse effect on competition in a market.

  • Price maintenance (section 76). This is where a supplier "by agreement, threat, promise or any like means" influences upward or discourages the reduction of the price at which a customer (or any other person to whom the product comes for resale), supplies, offers to supply, or advertises a product within Canada, which results in an adverse effect on competition in a market. A refusal to supply a product to, or otherwise discriminate against, any person engaged in business in Canada because of that person's low pricing policy may also amount to price maintenance (where it results in an adverse effect on competition in a market).

  • Exclusive dealing, tied selling and market restriction (section 77). These practices apply as follows, where the result is that competition is likely to be substantially lessened:

    • exclusive dealing: the practice of requiring or inducing a customer to deal only or primarily in products of the supplier by means of more favourable terms or conditions;

    • tied selling: the practice of requiring or inducing a customer to buy a product as a condition of supplying the customer with another product;

    • market restriction: the practice of requiring a customer to sell a product only in a defined market as a condition of supplying that product.

  • Competitor collaborations (section 90.1). These are agreements or arrangements between competitors that do not contravene the criminal cartel provisions of the Competition Act, but are likely to prevent or lessen competition substantially (SPLC).

The Commissioner has the statutory authority to challenge restrictive agreements or practices before the Competition Tribunal.

The Competition Act has separate provisions that regulate criminal cartel behaviour, for example:

  • Conspiracy: section 45.

  • Bid rigging: section 47.

  • Implementing foreign conspiracy directives: section 46.

 
14. Do the regulations only apply to formal agreements or can they apply to informal practices?

A formal agreement is not required. The provisions regulating restrictive agreements and practices also apply to informal practices (see Question 13).

 

Exemptions

15. Are there any exemptions? If so, what are the criteria for individual exemption and any applicable block exemptions?

There are certain exemptions to the application of the reviewable provisions of the Competition Act to restrictive agreements or practices, including for example where:

  • Entities are affiliated (sections 76, 77 and 90.1).

  • Proceedings have been commenced or an order is being sought relating to the same conduct under other provisions of the Competition Act (sections 76 and 90.1).

 

Exclusions and statutes of limitation

16. Are there any exclusions? Are there statutes of limitation associated with restrictive agreements and practices?

Exclusions

There are specific exclusions where agreements and practices are not prohibited:

  • Price maintenance, where the customer and supplier are either:

    • in a relationship of principal and agent; or

    • where the customer:

      • used the product(s) as a loss leader;

      • used the products not to generate a profit but to attract customers to buy other products;

      • was making a practice of misleading advertising; or

      • did not provide the level of servicing that purchasers of the product would reasonably expect.

  • Exclusive dealing or market restriction, where the practice is carried on for a reasonable time, only to facilitate entry of a new supplier or a new product.

  • Tied selling, where the practice is reasonable, having regard to the relationship between the products.

  • Competitor collaborations, where:

    • the agreement/arrangement only relates to exports (with no effects in Canada);

    • the agreement or arrangement is subject to specific legislation (for example the Bank Act); or

    • gains in efficiency are greater than, and will offset, the effects of any substantial prevention or lessening of competition (SPLC) and would likely be lost if a Competition Tribunal order was issued.

Statutes of limitation

There are no limitation periods.

 

Notification

17. What are the notification requirements for restrictive agreements and practices?

Notification

There is no formal notification process in Canada.

Informal guidance/opinion

While restrictive agreements and practices do not need to be notified to the Commissioner of Competition, a party can apply to the Commissioner for an advisory opinion on the applicability of one or more provisions of the Competition Act or regulations to a proposed practice or conduct. Opinions are binding on the Commissioner if all of the material facts that have been submitted by or on behalf of an applicant are accurate and remain substantially unchanged. However, the Commissioner has the discretion to decide whether to provide an opinion.

Responsibility for notification

Notification is not required.

Relevant authority

A request for an opinion is submitted to the Commissioner.

Form of notification

Not applicable.

Filing fee

A request for a written opinion from the Commissioner requires the payment of a fee (plus applicable taxes) to be paid by the party requesting the opinion. The fee varies depending on the practice or conduct forming the subject of the opinion.

 

Investigations

18. Who can start an investigation into a restrictive agreement or practice?

Regulators

The Commissioner of Competition can commence an investigation on his own initiative.

Third parties

Third parties can complain to the Commissioner. He can then exercise his discretion and determine whether to launch an inquiry to investigate the matter. Investigations by the Competition Bureau are usually initiated as a result of complaints from third parties.

In addition, the Competition Act provides that the Commissioner must initiate an inquiry if he receives a formal complaint from six people who are:

  • Resident in Canada.

  • At least 18 years old.

  • Of the opinion that a business has engaged in conduct that may be subject to an order under Part VIII of the Competition Act (including restrictive agreements or practices).

 
19. What rights (if any) does a complainant or other third party have to make representations, access documents or be heard during the course of an investigation?

Representations

Third parties can make representations to the Competition Bureau regarding restrictive agreements or practices.

Document access

Third parties do not have an automatic right to access documents provided to the Bureau in the context of its review of restrictive agreements or practices. However, they can seek a court order to obtain disclosure.

Be heard

Third parties can make complaints and provide representations to the Bureau. Section 103.1 of the Competition Act also allows private litigants a limited right to seek relief directly from the Competition Tribunal, with leave, from certain restrictive agreements or practices (sections 75 to 77, Competition Act).

 
20. What are the stages of the investigation and timetable?

There are no formal timetables for an investigation. Where the Competition Bureau receives a complaint, it will decide whether an investigation is warranted. Once the Bureau has started an investigation, its length will depend on a number of factors such as:

  • The circumstances of the case.

  • The extent of co-operation provided by the party subject to the investigation.

  • The scope of the investigation.

During the course of the Bureau's investigation, the parties who are the target of the investigation can make submissions to the Bureau. At the end of the investigation, the Commissioner of Competition may decide to challenge a restrictive agreement or practice before the Competition Tribunal. The length of hearing before the Tribunal can take several months, depending on the complexity of the case, and can include testimony by third parties called as witnesses. In some cases, third parties can also be granted intervenor status to participate in the hearing.

The restrictive agreements and practices identified in Question 13, are part of the civil provisions of the Competition Act and are therefore subject to administrative sanctions only. These are different from practices which contravene the criminal provisions of the Competition Act (such as conspiracies and bid rigging, which are subject to criminal sanctions such as fines and imprisonment and a separate investigatory and enforcement procedure).

 

Publicity and confidentiality

21. How much information is made publicly available concerning investigations into potentially restrictive agreements or practices? Is any information made automatically confidential and is confidentiality available on request?

Publicity

Information provided to the Competition Bureau must be treated confidentially, subject to certain exceptions (section 29, Competition Act) (see Question 5).

Inquiries by the Bureau are conducted in private. However, once the Commissioner of Competition challenges a restrictive agreement or practice before the Competition Tribunal, information obtained during the course of the Bureau's investigation can be used in its application since it would be for the purposes of the administration or enforcement of the Competition Act (an exception to the confidentiality obligations under section 29 of the Competition Act). Such a challenge is usually accompanied by a press release issued by the Bureau.

Where the matter is settled formally through the registration of a consent agreement, the consent agreement will be filed with the Tribunal and a press release will usually be issued by the Bureau.

Automatic confidentiality

All information provided to the Bureau in the context of its review of a transaction is confidential, subject to the exceptions referred to in Question 5.

Confidentiality on request

See above, Automatic confidentiality.

 
22. What are the powers (if any) that the relevant regulator has to investigate potentially restrictive agreements or practices?

The Commissioner of Competition has extensive powers under the Competition Act to investigate reviewable practices. These include powers to make an application, on an ex parte basis, for an order (sections 11, Competition Act):

  • Requiring a witness to be examined under oath (or solemn affirmation).

  • Requiring the delivery of written responses to questions, under oath (or solemn affirmation).

  • Requiring the production of documents or other records.

 

Settlements

23. Can the regulator reach settlements with the parties without reaching an infringement decision? If so, what are the circumstances in which settlements can be reached and the applicable procedure?

Where the Commissioner of Competition has determined that a restrictive agreement or practice contravenes one of the provisions of the Competition Act, the Commissioner can seek to resolve the matter either:

  • Informally, by obtaining voluntary compliance from the parties.

  • Formally, through the negotiation and registration of a consent agreement with the Competition Tribunal, which has the same force and effect as an order of the Tribunal.

 

Penalties and enforcement

24. What are the regulator's enforcement powers in relation to a prohibited restrictive agreement or practice?

Orders

Where the Commissioner of Competition is unable to reach a settlement with the parties to a prohibited restrictive agreement or practice, he can file an application with the Competition Tribunal for an order to remedy the conduct. The Tribunal can make a variety of orders:

  • To prohibit a party from continuing to engage in the anti-competitive conduct.

  • To require that a party supply customers on usual trade terms where there has been a refusal to deal or accept a third party as a customer on usual trade terms in the case of price maintenance.

  • To prohibit any person from doing anything under the agreement or, with the consent of the person, requiring any person to take any other action, whether or not the person is a party to the agreement or arrangement in respect of conduct under section 90.1 of the Competition Act (see Question 13, Competitor collaborations).

Fines

Fines are not available for contraventions of sections 75, 76, 77 and 90.1 of the Competition Act.

Personal liability

See above, Fines.

Immunity/leniency

Not applicable.

Impact on agreements

The issuance of a Tribunal order which has the effect of prohibiting certain conduct can effectively result in rendering the application of an entire agreement (or certain provisions) void.

 

Third party damages claims and appeals

25. Can third parties claim damages for losses suffered as a result of a prohibited restrictive agreement or practice? If so, what special procedures or rules (if any) apply? Are class actions possible?

Third party damages

Where a third party has suffered loss or damage as a result of a prohibited restrictive agreement or practice, the party can either:

  • Launch a complaint with the Competition Bureau and ask the Commissioner of Competition to take action to stop the conduct (for example, by bringing an application before the Competition Tribunal).

  • Seek in the case of conduct covered by sections 75 to 77 of the Competition Act, the leave of the Tribunal to bring its own application under section 103.1 of the Competition Act.

The relief that the Tribunal can order is limited to that provided by the Competition Act under each section (see Question 24) and does not include an order for damages.

However, a third party may be able to seek damages under the limited circumstances allowed for under section 36 of the Competition Act which is triggered when the Tribunal makes an order. It provides that any person who has suffered loss or damage arising out of the failure of any person to comply with an order of the Tribunal, has the right to commence a private right of action to recover the damages suffered, plus legal costs. Where the Tribunal has issued an order under either sections 75, 76, 77 or 90.1 of the Competition Act and the person against whom the order was issued has failed to comply, a third party who has suffered damages can sue for recovery. The action is commenced before a Canadian court rather than the Tribunal.

Special procedures/rules

A claimant must establish all the following (section 36, Competition Act):

  • The elements of the offence on a balance of probabilities (the civil standard of proof). Where a party has been convicted or punished for failure to comply with a Tribunal order, the record of the court proceedings can be used as evidence in proving the failure to comply, in the absence of evidence to the contrary.

  • The actual loss or damage suffered (as a result of the failure to comply with the Tribunal order).

Class actions

An action under section 36 can be launched by a claimant acting either in an individual capacity or as a representative of a class of claimants in a class action.

 
26. Is there a right of appeal against any decision of the regulator? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties, or only to the parties to the agreement or practice?

Rights of appeal and procedure

Where the Commissioner of Competition has made an application to the Competition Tribunal, the Tribunal's decision can be appealed to the Federal Court of Appeal as of right, with respect to questions of fact, and with leave, with respect to questions of law. The Federal Court of Appeal's decision can be appealed to the Supreme Court of Canada, with leave. There is no right to appeal a decision of the Commissioner to not make an application to the Tribunal.

Third party rights of appeal

Where a third party has been granted leave to make an application to the Tribunal (under section 103.1 of the Competition Act), the third party can appeal the decision of the Tribunal to the Federal Court of Appeal (with leave in certain instances, discussed above), whose decision can in turn be appealed to the Supreme Court of Canada (see above, Rights of appeal and procedure).

 

Monopolies and abuses of market power

Scope of rules

27. Are monopolies and abuses of market power regulated under administrative and/or criminal law? If so, what are the substantive provisions and regulatory authority?

Monopolies and abuses of market power are regulated as administrative law matters under sections 78 and 79 of the Competition Act. The Competition Act is not intended to condemn a firm merely for having market power, but to ensure that the dominant firm(s) compete(s) on merit and not through abusing their market power. An abuse of market power (or abuse of dominance), will be found where each of the following three elements is established on a balance of probabilities (Canada (Commissioner of Competition) v Canada Pipe Co. (2006), 49 C.P.R. (4th) 241 (FCA)):

  • Dominance. One or more persons substantially or completely control(s) a market.

  • Anti-competitive conduct. The dominant firm (or firms) has (have) engaged in a practice of anti-competitive acts.

  • A substantial prevention or lessening of competition ( SPLC) . The anti-competitive conduct has had, is having or is likely to result in a SPLC in a relevant market.

Abuses of market power are determined by the Competition Tribunal. Where the Commissioner of Competition believes that an abuse of market power is taking place, he has the statutory authority to commence an application before the Tribunal alleging a breach and seeking remedies. Only the Commissioner has this right, third parties do not. However, third parties can complain to the Commissioner about conduct they believe to constitute an abuse of dominance (see Question 6).

 
28. How is dominance/market power determined?

To establish dominance, the Commissioner of Competition must prove that a dominant firm holds (or dominant firms jointly hold) market power; that is, the ability to profitably set prices above competitive levels for a considerable period of time within a relevant market. Market power can also be demonstrated from effects which are not related to price, such as reduced product variety, quality or innovation (Canada (Commissioner of Competition) v Canada Pipe Co. (2006), 49 C.P.R. (4th) 241 (FCA); Canada (Director of Investigation & Research) v Laidlaw Waste Systems Ltd., (1992), 40 C.P.R. (3d) 289 (Comp. Trib.) and Canada (Competition Act, Director of Investigation and Research) v Tele-Direct (Publications) Inc. (1997), 73 C.P.R. (3d) 1 (Comp. Trib.)).

Specific factors that will be considered in determining dominance include both direct and indirect indicators:

  • Direct indicators. These relate to the behaviour of the firm(s); that is, whether profits or observed patterns of conduct such as pricing policies and customer service are associated with firms that have market power.

  • Indirect indicators. These include, but are not limited to:

    • high market shares;

    • high barriers to entry;

    • the ability to punish competitors (for example, by flooding the market with excess production capacity).

Generally, a prima facie determination of market power will be established on the basis of high market shares.

The Competition Act does not provide a specific market share threshold to trigger a finding of dominance. In the Competition Bureau's Enforcement Guidelines on the Abuse of Dominance Provisions - Sections 78 and 79 of the Competition Act (September 20, 2012, available online at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03497.html), the Bureau considers that, in the case of single firm conduct, a market share of 50% or more will generally prompt further review (a market share between 35% and 50% will "generally only prompt further examination if it appears the firm is likely to increase its market share through the alleged anti-competitive conduct within a reasonable period of time.")

All of the contested abuse cases in Canada, to date, have involved market shares in excess of 80%. Moreover, two abuse of dominance applications launched by the Commissioner in December 2012 involved firms with market shares in excess of 70%.

The Competition Act also applies to abuses of joint dominance. The Competition Tribunal can issue an order where a group of unaffiliated firms are found to be jointly dominant, where all of the elements set out in section 79 are met. The Abuse of Dominance Guidelines provide that a combined market share equal to or exceeding 65% "will generally prompt further examination." None of the contested cases heard by the Tribunal under section 79 have considered an abuse of joint dominance. There is therefore no Canadian jurisprudence on what would constitute an abuse of joint dominance (for example, whether co-ordinated behaviour between firms is required or whether conscious parallelism would be sufficient).

 
29. Are there any broad categories of behaviour that may constitute abusive conduct?

For the Competition Tribunal to find an abuse of dominance, the Commissioner of Competition must prove that:

  • The dominant firm(s) has/have engaged in a practice of anti-competitive acts.

  • The anti-competitive conduct has had, is having or is likely to result in a substantial prevention or lessening of competition (SPLC) in a relevant market.

Anti-competitive acts

Section 78 of the Competition Act lists nine anti-competitive acts that trigger the application of the provision. The Tribunal has ruled that this list is not exhaustive and that conduct not specifically mentioned in section 78 can constitute an anti-competitive act where:

  • The anti-competitive conduct is part of a "practice", meaning more than an isolated act. Individual anti-competitive acts taken together may constitute a practice, as can a continuing agreement.

  • The conduct is anti-competitive, that is, for an anti-competitive purpose which is "predatory, exclusionary or disciplinary" against a competitor. The Tribunal has found the following to have constituted "anti-competitive acts" for the purposes of section 79:

    • contracting practices (for example, requiring or inducing exclusivity; long-term contracts; evergreen provisions; meet-or-release; most-favoured nation);

    • intimidation through litigation;

    • acquisition of competitors;

    • lengthy non-compete clauses (where competitors acquired);

    • tied selling; and

    • targeted price reductions against competitors.

SPLC

The Commissioner of Competition must demonstrate that the anti-competitive conduct has had, is having or is likely to result in a SPLC in a relevant market. The Tribunal must consider whether the practice is a "result of superior competitive performance" since the intention is not to penalise effectiveness as a competitor if this is not a result of anti-competitive conduct.

The Commissioner must prove that the alleged anti-competitive conduct will "preserve or enhance the dominant firm's market power." (Canada (Director of Investigation and Research, Competition Act) v NutraSweet Co. (1990) 32 C.P.R. (3d) 1 (Comp. Trib.)). In deciding the issue, the Tribunal considers whether the relevant markets in the past, present or future would be substantially more competitive but for the impugned practice of anti-competitive acts. The assessment is a relative one; it is not the absolute level of competition in a market which must be substantial, but rather the preventing or lessening of competition that results from the impugned practice.

 

Exemptions and exclusions

30. Are there any exemptions or exclusions?

There are some exceptions to the application of section 79 of the Competition Act:

  • Conduct in pursuit of the exercise or enjoyment of an intellectual or industrial property right under specific statutes (for example, the Copyright Act, Patent Act and Trade-marks Act).

  • Where proceedings have been commenced or an order is being sought relating to the same conduct under other provisions of the Competition Act.

 

Notification

31. Is it necessary (or, if not necessary, possible/advisable) to notify the conduct to obtain clearance or (formal or informal) guidance from the regulator? If so, what is the applicable procedure?

It is not necessary to notify the conduct to obtain clearance or guidance from the regulator. However, if a party wishes to obtain an advisory opinion from the Commissioner of Competition, it may do so (see Question 17).

 

Investigations

32. What (if any) procedural differences are there between investigations into monopolies and abuses of market power and investigations into restrictive agreements and practices?

Investigations by the Commissioner of Competition of abuses of market power follow the same procedure as investigations of restrictive agreements and practices.

Investigations are typically commenced following complaints made to the Competition Bureau. Where the Commissioner decides that conduct contravenes section 79 of the Competition Act, the Commissioner can seek to resolve the matter by obtaining voluntary compliance from the parties, through the negotiation and registration of a consent agreement with the Competition Tribunal.

Where the Commissioner is unable to reach a settlement, he can file an application with the Tribunal for an order to remedy the conduct.

The Bureau's investigation will become public when either:

  • The Commissioner uses formal investigative powers (for example, document production orders).

  • The matter is resolved through the registration of a consent agreement.

  • The matter is challenged before the Tribunal.

There is a limitation period. No application can be made in respect of anti-competitive acts more than three years after the practice has ceased.

 
33. What are the regulator's powers of investigation?
 

Penalties and enforcement

34. What are the penalties for abuse of market power and what orders can the regulator make?

A finding of an abuse of dominance by the Competition Tribunal can result in administrative penalties.

Order

The Tribunal can make an order prohibiting a party from continuing to engage in the anti-competitive conduct or where such an order would not be effective, it can direct the party to take certain specific actions (such as the divestiture of assets or shares).

Fines

In March 2009, the Competition Act was amended to allow the Tribunal to order administrative monetary penalties (AMPs) of no more than Can$10 million for a first order and Can$15 million for subsequent orders against the same party.

 

Third party damages claims

35. Can third parties claim damages for losses suffered as a result of abuse of market power? If so, what special procedures or rules (if any) apply? Are class actions possible?

Third party damages

Where a third party has suffered loss or damage as a result of an abuse of dominance, the party can launch a complaint with the Competition Bureau and ask that the Commissioner of Competition take action to stop the conduct (for example, by bringing an application before the Competition Tribunal). There is no third party right of action. The relief that the Tribunal can order is limited and does not include an order that damages be paid to the third party.

However, similar to the position of third parties in the context of restrictive agreements and practices, a third party may be able to claim damages under the limited circumstances allowed for by section 36 of the Competition Act (see Question 25, Third party damages).

Special procedures/rules

See Question 25, Special procedures/rules.

Class actions

See Question 25, Class actions.

 

EU law

36. Are there any differences between the powers of the national regulatory authority(ies) and courts in relation to cases dealt with under Article 101 and/or Article 102 of the TFEU, and those dealt with only under national law?

Not applicable.

 

Joint ventures

37. How are joint ventures analysed under competition law?

Joint ventures can be analysed under the merger provisions or section 90.1 of the Competition Act (see Questions 1 and 13).

 

Inter-agency co-operation

38. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to infringements of competition law? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information)?

The Competition Bureau co-operates with foreign regulatory authorities in connection with infringements of the Competition Act through the sharing of information. Where information is shared, the Bureau seeks to maintain the confidentiality of the information through either formal international instruments or assurances from the foreign authority regarding its protection, and also requires that the information be used solely for the specific purpose for which it was provided.

 

Proposals for reform

39. Are there any proposals for reform of competition law?

Significant amendments were made to the Competition Act in 2009. The authors are not aware of any current proposals for reform.

 

Online resources

Competition Bureau

www.competitionbureau.gc.ca

Description. Website of the Competition Bureau which includes Bureau guidelines, information bulletins, position statements relating to completed mergers and other background information.

Competition Tribunal

www.ct-tc.gc.ca

Description. Website of the Competition Tribunal which includes publicly available materials filed with the Tribunal such as applications, motions, background materials and orders of the Tribunal, including consent agreements.

Department of Justice

laws-lois.justice.gc.ca (www.practicallaw.com/2-106-4146)

Description. An online source of the consolidated Acts and regulations of Canada maintained by the federal Department of Justice. Information on the website is generally updated on a weekly basis.

Canadian Legal Information Institute

www.canlii.org

Description. A free public database providing access to Canadian legislation and decisions of Canadian courts and tribunals.



The regulatory authorities

Competition Bureau

Head. John Pecman, Commissioner of Competition

Contact details. 50 Victoria Street
Gatineau, Québec
K1A 0C9, Canada
T +1 800 348 5358 or +1 819 997 4282
F +1 819 997 0324
W www.competitionbureau.gc.ca

Outline structure. The Bureau is headed by the Commissioner of Competition. In addition to the Commissioner, there are nine deputy commissioners responsible for the following branches:

  • Civil Matters.

  • Compliance and Operations.

  • Economic Policy and Enforcement.

  • Public Affairs.

  • Legislative and International Affairs.

  • Mergers.

  • Criminal Matters.

  • Commissioner's Office.

  • Fair Business Practices.

Legal support is provided to the Bureau by:

  • Competition Bureau Legal Services (Department of Justice). Responsible for providing legal services to the Commissioner and for representing the Commissioner on all matters other than those for which the Public Prosecution Service of Canada is responsible.

  • Competition Law Section of the Public Prosecution Service of Canada (PPSC). Responsible for initiating and conducting criminal prosecutions on behalf of the Attorney General of Canada and for advising the Bureau on criminal investigations.

Responsibilities. The Bureau is responsible for the administration and enforcement of the:

  • Competition Act.

  • Consumer Packaging and Labelling Act.

  • Textile Labelling Act.

  • Precious Metals Marking Act.

Procedure for obtaining documents. Bureau materials including guidelines, bulletins and press releases are publicly available on the Bureau's website.

Competition Tribunal

Chairman. Mr Justice Donald J Rennie of the Federal Court

Contact details. Thomas D'Arcy McGee Building
90 Sparks Street, Suite 600
Ottawa, ONK1P 5B4, Canada
T +1 613 957 3172
F +1 613 957 3170
E tribunal@ct-tc.gc.ca
W www.ct-tc.gc.ca

Outline structure. The Tribunal is composed of up to six judicial members appointed from among the judges of the Federal Court and not more than eight lay members. The Governor in Council appoints judicial members from the Federal Court on the recommendation of the Minister of Justice. Lay members are appointed by the Governor in Council on the recommendation of the Minister of Industry. They provide expertise based on their individual backgrounds in economics, business, accounting, marketing and other relevant fields.

The members are appointed for fixed terms of up to seven years and may be re-appointed. One of the judicial members is appointed Chairman of the Tribunal by the Governor in Council.

Responsibilities. The Tribunal has jurisdiction to hear and dispose of all applications made under parts VII.1 and VIII of the Competition Act and any related matters. It also hears references filed pursuant to section 124.2 of the Competition Act.

Procedure for obtaining documents.Most documents are freely available on the Tribunal's website at www.ct-tc.gc.ca. Paper copies of documents may be obtained by contacting the Registry (T +1 613 957 3172).



Contributor profiles

Robert E Kwinter

Blake, Cassels & Graydon LLP

T +1 416 863 3283
F +1 416 863 2653
E robert.kwinter@blakes.com
W www.blakes.com

Professional qualifications. Admitted to the Ontario Bar, Barrister and Solicitor

Areas of practice. Competition and anti-trust; competition litigation; class actions; foreign investment

Evangelia L Kriaris

Blake, Cassels & Graydon LLP

T +1 416 863 3891
F +1 416 863 2653
E litsa.kriaris@blakes.com
W www.blakes.com

Professional qualifications. Admitted to the Ontario Bar, Barrister and Solicitor

Areas of practice. Competition and anti-trust; competition litigation; class actions; foreign investment

Kevin H MacDonald

Blake, Cassels & Graydon LLP

T +1 416 863 4023
F +1 416 863 2653
E kevin.macdonald@blakes.com
W www.blakes.com

Professional qualifications. Admitted to the Ontario Bar, Barrister and Solicitor

Areas of practice. Competition and anti-trust; competition litigation; foreign investment


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