Bill C-44 receives royal assent, raises foreign investment review threshold to C$1 billion

William Wu and Sara Shayan - 

On June 22, 2017, the 2017 budget implementation bill (Bill C-44) received royal assent, enacting amendments to Canada’s foreign investment regime, which raises the foreign investment review threshold for direct acquisitions of non-cultural Canadian businesses by a non-state-owned WTO investor to C$1 billion.

Under the Investment Canada Act (ICA), acquisitions of Canadian businesses by non-Canadian investors are subject to a pre-closing “net benefit” review if the value of the acquired Canadian business exceeds certain financial thresholds.  Currently, for direct acquisitions of non-cultural Canadian businesses by a non-state-owned WTO investor, the relevant financial threshold that triggers a review is C$800 million in enterprise value.  That threshold was not scheduled to change until April 2019, when it would have increased to C$1 billion.

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CASL confusion: what July 1 really signifies for marketers

David Elder - 

July 1, 2017 is not only Canada’s 150th birthday -- it is also marks three years since Canada’s Anti-Spam Legislation (CASL) has been in force.  While Canadian businesses are unlikely to celebrate the latter anniversary with barbecues and fireworks, July 1 will signify an important change in the way that CASL will apply. 

Unfortunately, there seems to be some confusion about what the approaching deadline really means for marketers.  From a CASL perspective, July 1 is important for 3 reasons:

Private right of action

Let’s start with what it doesn’t mean: July 1 will no longer mark the coming into force of the private right of action contained in the law.  This provision would have allowed civil suits to be filed against individuals and organizations for alleged violations of the law.  In addition to suing for actual damages, the provision also would have allowed plaintiffs to claim statutory damages (which need not be proved) of up to $200 – including for receipt of a non-compliant email message.

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Higher Foreign Investment Review Threshold expected to be in force by summer of 2017

William Wu - 

In November 2016, the Canadian government announced that it will significantly raise the financial threshold above which foreign investments into Canada are subject to a pre-closing “net benefit” review under the Investment Canada Act (ICA). All legislative amendments required to implement these proposed changes are now before Parliament and are expected to pass and come into force by the summer of 2017.

Currently, for direct acquisitions of non-cultural Canadian businesses by a non-state-owned WTO investor, transactions are subject to a pre-closing “net benefit” review where the enterprise value of the acquired Canadian business exceeds C$600 million. This threshold is scheduled to increase to C$800 million on April 24, 2017, and then to C$1 billion on April 24, 2019 (and indexed annually to GDP growth beginning in January 2021).

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Canadian Merger Control Thresholds for 2017: Competition Act and Investment Canada Act increases

Susan M. Hutton

Both the Competition Act and the Investment Canada Act thresholds for review of acquisitions involving Canadian businesses are expected to increase in 2017. The “size of target” threshold for Competition Act notification, if adjusted pursuant to the formula prescribed in the Act, will increase very slightly to C$88 million (from C$87 million in 2016), although this increase has yet to be confirmed by the Minister and is subject to his discretion.

The Canadian government has also announced that the threshold for review under the Investment Canada Act applicable to direct acquisitions by state owned or influenced WTO investors will increase to C$379 million for transactions closing in the remainder of 2017 (from C$375 million in 2016), based on the book value of assets. Other ICA thresholds remain unchanged at this time, although the government announced in the fall that the review threshold for private WTO investors ‒ based on enterprise value of the Canadian business ‒ will increase in April to C$1 billion rather than C$800 million as previously scheduled.

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Volkswagen and Audi settled environmental marketing claim with $15 million penalty

Vanessa Leung

On December 19, 2016, Volkswagen Group Canada Inc. (VW) and Audi Canada Inc. (Audi) entered into a consent agreement with the Commissioner of Competition to resolve the Commissioner’s concerns that VW and Audi had made false or misleading environmental marketing claims about certain of its 2.0 litre diesel vehicles. The consent agreement is one component of a broader Canadian settlement relating to VW’s and Audi’s allegedly misleading environmental claims.

The Bureau alleged that software installed in the affected VW and Audi vehicles could detect a test being conducted and alter the operation of the vehicle during the test to reduce nitrogen oxide emissions. The Bureau also alleged, however, that during normal use, the nitrogen oxide emissions would exceed the amounts at which the vehicle had been certified. The Bureau concluded that the statements, warranties and/or guaranties made about the performance or efficacy of these vehicles were false and misleading in a material respect, and were not based on adequate and proper testing, contrary to the Competition Act

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Government Releases much-awaited National Security Review Guidelines

Michael Kilby - 

On December 19, 2016, the Minister of Innovation, Science and Economic Development issued Guidelines on the National Security Review of Investments under the Investment Canada Act (ICA).

Overview of the Guidelines

Most significantly, the Guidelines list factors that will be taken into account by the government in determining whether foreign investments into Canada could be injurious to national security. These factors are:

  1. The potential effects of the investment on Canada's defence capabilities and interests;
  2. The potential effects of the investment on the transfer of sensitive technology or know-how outside of Canada;
  3. Involvement in the research, manufacture or sale of goods/technology relating to certain controlled goods noted in the Defence Production Act, including firearms, military training equipment, certain types of aircraft, weaponry and defence systems, etc.;
  4. The potential impact of the investment on the security of Canada's critical infrastructure. Critical infrastructure refers to processes, systems, facilities, technologies, networks, assets and services essential to the health, safety, security or economic well-being of Canadians and the effective functioning of government;
  5. The potential impact of the investment on the supply of critical goods and services to Canadians, or the supply of goods and services to the Government of Canada;
  6. The potential of the investment to enable foreign surveillance or espionage;
  7. The potential of the investment to hinder current or future intelligence or law enforcement operations;
  8. The potential impact of the investment on Canada's international interests, including foreign relationships; and,
  9. The potential of the investment to involve or facilitate the activities of illicit actors, such as terrorists, terrorist organizations or organized crime.
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Competition Bureau clears McKesson's acquisition of Rexall Health, subject to conditions

Gideon Kwinter and Mike Laskey

On December 14, the Competition Bureau entered into a consent agreement with McKesson Corporation in relation to its acquisition of Rexall Health from Katz Group. The agreement brings an end to the Bureau’s extensive review of the transaction, which was announced over nine months ago, on March 2, 2016.

Upon closing of the transaction, McKesson, the largest pharmaceutical product wholesaler in Canada, will acquire Rexall Health’s approximately 470 retail pharmacies. The Bureau determined that the acquisition would likely result in a substantial lessening or prevention of competition in the wholesale and retail of certain pharmacy products and services.

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Moose Knuckles resolves misleading "Made in Canada" representations

Vanessa Leung - 

On December 7, 2016, Moose International Inc. (Moose Knuckles) reached a consent agreement with the Commissioner of Competition. The consent agreement resolves the Commissioner’s concerns about deceptive marketing practices in respect of the “Made in Canada” claims on certain Moose Knuckles parkas.

According to the Bureau, Moose Knuckles claimed that its parkas are “Made in Canada” (both on its website, and on the interior of the parkas themselves). The Bureau alleged that, in fact, the parkas were imported from Vietnam and Asia in a nearly finished form. The Bureau concluded that Moose Knuckles’ advertising was therefore inconsistent with its (non-binding) “Made in Canada” guidelines, which have three key requirements:

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Canadian Government announces higher thresholds for Foreign Investment Review and more transparency for National Security Reviews

 Michael Laskey and Gideon Kwinter

In its 2016 Fall Economic Statement, the Government of Canada announced forthcoming changes to the review of foreign investments under the Investment Canada Act. Namely, the government intends to significantly increase the financial threshold above which foreign investments are subject to pre-closing “net benefit” review under the ICA, and provide additional guidance regarding the conduct of national security review.

Net Benefit Review Threshold

The ICA applies to every acquisition of control of a Canadian business by a non-Canadian investor. Transactions exceeding certain financial thresholds are subject to pre-closing “net benefit” review; these transactions cannot be completed until the responsible Minister or Ministers determine that the transaction will be of “net benefit” to Canada. Currently, for direct acquisitions of non-cultural Canadian businesses, transactions are typically subject to pre-closing review where the enterprise value of the acquired Canadian business exceeds C$600 million. Until recently, this threshold had been scheduled to increase to C$800 million in April 2017, and then to C$1 billion in April 2019 (and indexed annually to GDP growth beginning in January 2021).

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Bill C-25 broadens the Competition Act affiliation rules

William Wu - 

On September 28, 2016, the federal Minister of Innovation, Science and Economic Development introduced Bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act, and the Competition Act. Bill C-25 proposes to introduce a number of important changes to the Canadian corporate governance regime for federally-incorporated businesses and organizations. In relation to the Competition Act, Bill C-25 proposes to broaden the affiliation rules, which could potentially impact a wide range of competition law issues.

The proposed amendments to the affiliation rules in Bill C-25 are substantially the same as those previously included in the proposed Price Transparency Act (Bill C-49) in December 2014. The primary objective of Bill C-49 at the time was to address the perceived problem of unjustified cross-border price gap between identical or similar products in Canada and the United States, which was the focus of significant commentary and criticism from competition law practitioners, economists and academics. The proposed amendments to the affiliation rules were just an incidental part of the bill. Bill C-49 died on the order paper, along with it its proposed amendments to the affiliation rules (which themselves were not controversial). The current Bill C-25 revives substantially the same amendments to the affiliation rules as those included in Bill C-49. 

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Competition Bureau questions: Why don't we see more health care advertising?

William Wu and Vanessa Leung - 

Due to regulations by provincial governments and self-regulating professional bodies, Canadian health care professionals face significant restrictions on how they are permitted to advertise their services in the marketplace. For example, price advertising, where professionals advertise the prices they will charge for particular services, is often limited; comparison advertising, where a professional compares his or her services and skills to those of another professional, is generally prohibited.

On October 4, 2016, the Competition Bureau published a report assessing the effect of advertising restrictions on the health care marketplace. The report suggests that advertising restrictions, while well-intentioned, may result in unnecessarily high prices for consumers, and calls on regulatory bodies to begin collecting data to conduct further empirical studies on the effect of advertising restrictions.

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Template consent agreement for better transparency and predictability in merger remedy

Vanessa Leung and William Wu - 

On September 29, 2016, the Competition Bureau released a template for merger consent agreements.

As part of its enforcement mandate, the Bureau reviews certain proposed transactions to determine whether they will likely result in a substantial lessening or prevention of competition in a market. If the Bureau determines that the proposed transaction is likely to result in substantial anti-competitive effects, the Commissioner of Competition has the option to challenge the proposed transaction before the Competition Tribunal or negotiate appropriate remedial measures with the merging parties to address the proposed transaction’s likely anti-competitive effects. Such negotiated remedial measures are typically implemented by way of a consent agreement. Once registered with the Tribunal, the consent agreement has the force and effect of a court order. The Bureau, as well as merging parties, generally prefers to pursue negotiated consent agreements rather than formal litigation before the Tribunal, as Tribunal litigation is more costly, time-consuming and uncertain for both the Bureau and the merging parties.

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No more "unlimited" calling and Internet services: Comwave resolves misleading telecom service and price representations

William Wu and Vanessa Leung - 

On September 13, 2016, the Competition Bureau reached a consent agreement with Comwave Network Inc., which resolved the Bureau’s concerns over allegations of false or misleading advertising by Comwave in respect of representations made to public on its telecommunication services and prices.  The Bureau had three sets of concerns:

1. Comwave allegedly made representations to the public about the prices of the telecommunications services it provided, and then allegedly charged consumers additional fees that were only disclosed to consumers in fine print disclaimers and during its telephone sales intake process. The Bureau concluded that the disclaimers and the intake process were insufficient to alter the misleading general impression created by the prices advertised by Comwave, which were in fact not attainable due to the additional fees;

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CRTC gets frosted at Kellogg's over email violations

David Elder

In the fifth, and most recent, enforcement decision relating to compliance with Canada’s Anti-Spam Legislation, the CRTC has announced that Kellogg Canada has voluntarily entered into an undertaking respecting alleged non-compliance, which includes payment of $60,000 in penalties.

The undertaking resulted from an alleged failure to obtain consent from recipients prior to sending commercial electronic messages.  The alleged violations apparently occurred over an 11-week in late 2014.

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Avis and Budget reach settlement in alleged misrepresentation of fees and discounts

Vanessa Leung and Ashley Piotrowski

On June 2, 2016, the Competition Bureau reached a consent agreement with Aviscar Inc. and Budgetcar Inc. / Budgetauto Inc., over allegations of false or misleading advertising for prices and discounts on car rentals and associated products.  A Bureau investigation concluded that certain prices and discounts initially advertised were not attainable because consumers were charged additional mandatory fees that were only disclosed later when making a reservation. Pursuant to the consent agreement, the parties will pay a $3 million administrative monetary penalty, as well as $250,000 towards the Bureau’s investigative costs.  The parties have also agreed to implement a compliance program.

Background

In March 2015, the Bureau filed an application against the Aviscar Inc. and Budgetcar Inc. / Budgetauto Inc., alleging that the parties had made false or misleading representations to the public to promote the use of their rental cars and associated products, and that the parties had supplied their rental cars and associated products at a higher price than was advertised to consumer. The representations were made across a broad range of media including print, website, mobile applications, television commercials and electronic messages.

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