The Competitor : Canada Competition / Antitrust Blog by Stikeman Elliott Lawyers & Attorneys

The potential reforms  would affect four main  areas of the Act by:

• strengthening the Act's civil provisions;
• reforming the Act's criminal conspiracy provision;
• reforming the pricing provisions of the Act; and
• providing for industry inquiries into the state of competition.

A brief overview of the proposed amendments in respect of each of these categories follows.

Strengthening Civil Provisions

In an effort to "encourage businesses to refrain from anti-competitive practices" and to "promote international convergence,"[2] the White Paper identifies three significant potential reforms, each of which represents a dramatic departure from the current provisions of the Act. 

First, the White Paper raises the possibility of introducing administrative monetary penalties (AMPs) for civilly reviewable matters.  This proposal is apparently motivated by the notion that the current regime, in which remedies are limited to obtaining an order from the Competition Tribunal (the Tribunal) to stop anti-competitive conduct and/or restore competition,[3] provides "little incentive for businesses to comply with the Act."[4] The proposed reforms would allow the Tribunal to issue AMPs (the amount of which would be within the Tribunal's discretion,  based on specified criteria) for refusal to deal (section 75), consignment selling (section 76), tied selling (section 77), market restriction (section 77), exclusive dealing (section 77), abuse of dominant position (section 79) and delivered pricing (section 81).  Because of its proposed application to the Act's abuse of dominance provision, which is the broadest civilly reviewable conduct provision in the Act, this reform would be especially far-reaching insofar as it would expose a wide variety of practices to the threat of AMPs. 

The White Paper also  suggests significant amendments to the Act's misleading advertising and deceptive marketing provisions.  In particular, it raises the possibility of amending the Act to empower courts, on application by the Commissioner of Competition (the Commissioner), to order businesses or individuals who contravene the Act's misleading advertising and deceptive marketing provisions to provide restitution to consumers, possibly by the creation of a restitution fund or through an appointed fund administrator.  Restitution would be made available to all those in the class of persons likely to have been reached or affected by the conduct, and could be ordered in addition to any AMP imposed on the advertiser.      

Finally, the White Paper proposes a broadening of section 36, which creates a limited private right of action for persons who suffer damages as a result of breaches of either the Act's criminal provisions or of an order of a court or the Tribunal.  A proposed amendment to section 36 would allow for the recovery of losses or damages resulting from non-criminal conduct in respect of which a court or the Tribinual has made an order.  Thus, in addition to the Tribunal's ability to issue AMPs  for breaches of the Act's civil provisions, courts would also have the power to award compensation to any person (or class of persons) who has suffered loss or damage as a result of such conduct.  If enacted, this reform would expose businesses to the risk of monetary consequences on two fronts, which clearly represents a dramatic change from the current  situation, wherein breaches of most of the Act's civil provisions carry no risk of monetary penalty.

Reforming the Criminal Conspiracy Provision

The White Paper proposes a dual-track conspiracy provision, a notion that has been long debated in competition law circles.  As currently worded, section 45 of the Act makes it a criminal offence for anyone to conspire, combine, agree or arrange with another party to unduly lessen or prevent competition.  However, there is a concern that the criminal provision, as currently drafted, is simultaneously over-inclusive and under-inclusive in the sense that it may discourage pro-competitive strategic alliances yet fail to capture hard-core cartel behaviour.  In an effort to address this concern, the White Paper proposes creating (i) a per se criminal provision to address anti-competitive agreements such as price-fixing, market allocation, customer allocation and output restrictions between competitors or potential competitors, and (ii) a civil provision targeting all other agreements among competitors that, while generally pro-competitive, have the potential to prevent or substantially lessen competition in certain circumstances.  Conviction under the criminal provision would  carry a penalty of five years imprisonment or a fine in an amount determined by the court.  The civil provision would address instances of anti-competitive conduct by way of prohibition orders and AMPs issued by the Tribunal.

The White Paper also proposes a clearance procedure, under which the Commissioner  could provide an assurance to parties, in the form of a certificate, that a proposed course of conduct would not be prosecuted under the criminal conspiracy provisions, or that there would be insufficient grounds for the Commissioner to apply to the Tribunal for an order in respect of such conduct.  Such a procedure would resemble the system that already exists for mergers in the form of advance ruling certificates.  Implementation of a similar approach for the Act's conspiracy provision would, according to the White Paper, provide parties with certainty in respect of proposed strategic alliances, and thereby remove the "chilling effect" on pro-competitive alliances that would result from the threat of criminal sanctions.   

Reforming Pricing Provisions

The Act's pricing provisions deal with price discrimination, predatory pricing and promotional allowances and are subject to criminal sanction.  There is widespread consensus, however, that such practices are better addressed by a civil provision with a competition effects test.   Accordingly, the White Paper proposes that the criminal pricing provisions (sections 50 and 51) be repealed and that discriminatory or predatory pricing conduct be dealt with under the Act's abuse of dominance provision (section 79), and therefore be subject to the requirement that such conduct must have the effect, or likely effect, of substantially lessening or preventing competition before it attracts remedial action under the Act.  If other proposals for reform are implemented, the Tribunal would also have the power to order AMPs and injured parties would continue to have the ability to seek civil damages under section 36  for anti-competitive pricing practices. 

Inquiries into the State of Competition

The final proposed reform set out in the White Paper would allow the Commissioner to ask an independent body, such as the Canadian International Trade Tribunal, to inquire into the state of competition and the functioning of markets in any sector of the Canadian economy.  The Commissioner currently has no such wide-ranging  powers but rather  is restricted in this regard to launching an inquiry to investigate  allegations of anti-competitive conduct in respect of one or more businesses or individuals.   According to the White Paper, the introduction of more broadly based inquiries would "provid[e] thorough and valuable insights into various industry sectors, which would not be available otherwise."[5]

The proposed reforms represent a dramatic departure from the current state of the law in Canada, and signal far-reaching consequences for firms operating in Canada.  Perhaps of greatest significance to the business community is the prospect that penalties and damages would be imposable in a much broader range of circumstances than at present.

The Government is currently accepting comments on the White Paper, which should be submitted to the Public Policy Forum (a public policy research firm retained by the Competition Bureau to coordinate the consultations process).  Given the broad scope of the proposed changes and their potential impact, the White Paper is expected to generate considerable interest  and debate.Comments must be submitted by September 30, 2003.

[1] The full text of the White Paper is available from the Public Policy Forum's website at: http://www.ppforum.com/

[2]White Paper, at 5.

[3] The Act currently  permits civil damage awards  for breaches of its criminal provisions and of orders issued by a court or by the Tribunal.  It also allows the Tribunal to issue monetary penalties in two limited circumstances, namely abuse of dominance by airlines and deceptive marketing practices.

[4] White Paper, at 6.

[5] White Paper, at 22.