On November 2, 2004, by tabling Bill C-19, the Canadian government took the first step toward implementing some of the long-debated amendments to Canada's Competition Act (the Act). If Bill C-19 manages to weave its way successfully through Canada's minority Parliament, it will implement the most wide-ranging changes in decades to Canada's competition legislation. Likely the most significant of these is the introduction of the additional remedy of fines ("administrative monetary penalties") for abuse of dominance, which should cause leading Canadian businesses to re-evaluate the way in which they operate.
Background to Bill C-19
Bill C-19 had its genesis in the Government's June 2003 discussion paper, Options for Amending the Competition Act: Fostering a Competitive Marketplace. Very briefly, the discussion paper proposed changes to the Act in four broad areas. The first area - which is the subject of Bill C-19 - was the strengthening of the Act's civil provisions by introducing additional remedies for non-merger offences (i.e., abuse of dominance, exclusive dealing, tied selling, market restriction and refusal to deal). The discussion paper proposed a trio of new sanctions: administrative monetary penalties (fines), restitution in cases of civil misleading advertising and deceptive market practices, and a private right of action for damages (currently confined to damages for behaviour that is criminal under the Act).
Secondly, the discussion paper proposed reforming the Act's criminal conspiracy section, and replacing it with a dual-track provision. A per se criminal provision would apply to anti-competitive agreements, such as those involving price fixing, market allocation and output restrictions. Other agreements between competitors that are generally pro-competitive but have the potential to prevent or lessen competition substantially would be subject to civil review. The amendments proposed in the discussion paper would also have repealed the Act's criminal pricing provisions, instead addressing discriminatory and predatory pricing under the abuse of dominance provision . Finally, the discussion paper proposed allowing the Commissioner to ask an independent and impartial body with economic expertise, such as the Canadian International Trade Tribunal, to inquire into the state of competition in any industry.
In April of 2004, the Public Policy Forum, an independent non-profit organization mandated to conduct public consultations about the proposals put forward in the discussion paper, submitted its final report. Suffice it to say that the consultations revealed sharp divisions amongst stakeholders with respect to most of the proposed amendments, including the proposal to make civil conduct, such as abuse of dominance, subject to administrative monetary penalties.
Bill C-19: An Overview
Bill C-19 deals with the first and third areas listed above: strengthening of the remedies for the civil provisions of the Act, and de-criminalization of the pricing provisions. There are, however, some key differences between Bill C-19 and the discussion paper proposals in these areas.
The most significant amendment - permitting the Competition Tribunal to, in essence, impose civil fines in respect of abuse of dominance - as proposed in Bill C-19, covers only abuse and not the other civil non-merger provisions. Whereas the discussion paper contemplated unlimited fines, Bill C-19 caps them at C$10 million for first offences and C$15 million for each subsequent offence. Secondly, Bill C-19 seeks to increase the maximum amount of AMPs in respect of deceptive marketing practices (already provided for in the Act), in the case of individuals, to $750,000 for a first offence (now $50,000) and $1 million for repeat offences (now $100,000). The maximum "civil" fine for corporations guilty of "civil" deceptive marketing practices will (if Bill C-19 passes in its current form) be increased to C$10 million for a first offence (now $100,000) and C$15 million for repeat offences (now $200,000). If the public comments on the discussion paper proposals are any indication, the imposition of such serious penalties for non-criminal behaviour may well be controversial. Moreover, the "decriminalization" of the pricing provisions (including predatory pricing, price discrimination and promotional allowances in sections 50 and 51 of the Act), might be said to be a question of form over substance if the Tribunal has the power to impose fines at the same level as those available for criminal convictions. Indeed, the lower burden of proof inherent in civil proceedings will facilitate enforcement of these provisions (although, for price discrimination and promotional allowances, the requirement under the abuse of dominance provision that they be proven to substantially lessen or prevent competition may limit the circumstances in which such proceedings might arise).
As indicated in recent Bureau speeches, the creation of a per se criminal conspiracy offence in respect of so-called "hard core" cartels, and a civil track for other anti-competitive agreements, is the subject of continued study. It is our understanding that the Competition Bureau is working on revised draft language and that another round of consultations on such changes will be held. Accordingly, Bill C-19 leaves the conspiracy provisions untouched.
No mention has been made of the proposed "inquiry" procedure put forth in the discussion paper. As comments were generally opposed to such an amendment, however, it is quite possible that this amendment will not be heard of again.
Finally, the Bill does contain a set of new amendments not originally proposed in the discussion paper. Specifically, Bill C-19 will repeal all of the Act's airline-specific provisions, including the expanded definitions of anti-competitive acts for the purposes of abuse of dominance, and the ability of the Commissioner herself to issue injunctive-like cease-and-desist orders against an airline. The latter provision has been held unconstitutional by the Québec Court of Appeal.
Significance of Bill C-19
Given the import of an expanded AMPs regime under Bill C-19, those at the leading edge of Canada's business community will undoubtedly have to re-think the risks involved with being "too" successful. Whether or not Bill C-19 will have the effect of "chilling" vigorous and effective competition, as is feared by so many, remains to be seen.
Bill C-19 passed first reading in the House on November 2, 2004.
For more information about the contents of this newsletter, please contact the author, Kevin Rushton or the editor, Susan Hutton.