Amendments to Canada's Competition Act Could Pass this Spring
Susan M. Hutton and Patricia Martino
As reported in the March, 2005 edition of this newsletter, the House of Commons Standing Committee on Industry, Natural Resources, Science and Technology resumed consideration of Bill C-19 on March 9, 2005, after a hiatus of several months due to political skirmishing between opposition parties and the minority government members of the Committee. Further witnesses appeared on March 23, 2005. Although more witnesses may appear, it is still possible that Bill C-19 may become law this spring. So far, the Bill appears to have general all-party support, despite the opposition of some witnesses to certain aspects of the Bill.
Bill C-19 seeks to implement some long-debated - and in some cases controversial - amendments to Canada's Competition Act (the "Act"). The Commissioner of Competition (the "Commissioner") grouped the proposed amendments into five areas in her appearance before the Committee last Fall:
- Providing authority for the Tribunal to order restitution for consumer loss resulting from false or misleading representations under paragraph 74.01(1)(a) of the Act1;
- Enabling the Tribunal to issue an "administrative monetary penalty" (AMP), or fine, for abuse of dominance in any industry, to a maximum of $10 million for a first offence and $15 million for subsequent orders;
- Repealing the airline-specific provisions of the Act2;
- Increasing the level of AMPs for civil deceptive marketing practices (to maximums of $750,000 for a first offence and $1 million for subsequent orders against individuals; and to maximums of $10 million for a first offence and $15 million for subsequent orders against corporations); and
- Repealing the criminal pricing provisions in sections 50 and 51, leaving such practices as predatory pricing and price discrimination to be dealt with as instances of (civil) abuse of a dominant position.
As noted, while few of the proposals in Bill C-19 are without controversy, the Bill appears likely to pass - although speculation as to the exact timing of such passage is made interesting by the lack of a majority government in Ottawa.
With respect to restitution for victims of false or misleading representations, the Commissioner has noted that restitution can already be ordered for similar offences in other countries such as the United States and Australia. With both restitution orders and drastically increased fines in her arsenal, the Commissioner will seriously increase her leverage over prospective defendants. Million-dollar-plus penalties and voluntary settlements of the type agreed to by The Forzani Group Ltd. ($1.7 million) and Suzy Shier Inc. ($1 million) could well become the norm, even for civil offences.
One of the more controversial proposals in Bill C-19 is the introduction of fines for companies who have abused their dominant market positions. As noted, the Tribunal will be empowered to issue fines of up to $15 million (for repeat offenders). This exceeds the maximum fine available for criminal price fixing under the domestic conspiracy provision (section 45). With the Commissioner vigorously pursuing abuse cases such as that brought recently against Canada Pipe3this provision clearly raises the stakes for firms with large market shares in Canada.
The introduction of criminal-sized fines for abuse of dominance also significantly affects the impact of the repeal of the criminal predatory pricing, price discrimination and promotional allowance provisions. The repeal of these provisions has been widely supported, as they require no finding of dominance or anti-competitive effect. That said, firms with large market shares arguably will face more vigorous enforcement as a result of the lower civil burden of proof and the prospect of large fines for abuse of dominance.
FOOTNOTES:
1] Fines are currently available for both criminal and civil misleading representations. A private party harmed by the offence can also sue for damages caused by misleading representations that are "knowingly or recklessly made" (the standard of intent for the criminal offence), regardless of whether criminal charges have been laid.
2] Currently, amongst other things, there are airline-only definitions of "anti-competitive acts" under the abuse of dominance provisions, and the Tribunal is able to issue fines in respect of abuse of dominance only to dominant Canadian airlines. See sections 78 and 79 of the Act.
3] Commissioner of Competition v. Canada Pipe Company Ltd., 2005 Comp. Trib. 3 (Competition Tribunal). See the March 2005 edition of The Competitor for a description of the Tribunal's decision, which rejected the notion that the exclusivity rebates in question were anti-competitive. The Commissioner has appealed the decision.
