Canada Competition Regulation is Changing – How Can Organizations Prepare?
- 4 mins
Five years from now, the global competition landscape will look completely different. Accelerated changes are materializing all over the world. There has been a distinct shift in the scope and breadth of investigations by global competition regulators as more become tech savvy. Tactics are changing and the focus is on compliance and getting ahead of issues as aggressive enforcement ensues. Given the increasingly international component of corporate transactions, it is crucial to keep apprised of competition reforms that occur around the globe. Canada has followed these trends by amending the Canada Competition Act. Some changes became effective last year and others are scheduled to kick in this June. Additional reform is currently being considered as well.
Organizations doing business in Canada or that are part of an international deal need to take note of how these changes are kicking off enforcement trends in Canada.
In 2022 the Canadian Minister of Innovation, Science, and Industry launched a comprehensive review of the Competition Act. This was supplemented by a series of amendments announced in the 2022 federal budget that were largely technical in nature, but which provided an indication of the movement towards modernizing the Canadian competition regime. The expansive antitrust agenda launched by the Biden administration has influenced this activity in Canada, as merger filings and reviews are surging. Global regulators are seeing the value in cross-border collaboration to hone in on the real issues and effectuate meaningful change.
The Bureau’s evidence gathering powers under Section 11 have expanded, which means that there is higher potential for large amount of data requests during an investigation. Other significant updates apply to mergers and litigation.
Merger review: There are new non-price factors for the Competition Bureau to account for when investigating a potential merger. These factors are network effects within the market; potential for the merger to entrench the market position of the top competitors; and how the merger would influence price, quality, choice, and consumer privacy. There is also a new “anti-avoidance provision” that will ensure all required transactions are subject to the law’s pre-merger notification provisions. Some parties were circumventing this in the past by intentionally structuring deals in a way that would avoid notification and pre-closing approval.
Litigation: Three amendments are expected to increase the scope of private competition litigation and class actions – a new wage fixing/no-poaching agreement criminal offense; labeling drip pricing as a deceptive marketing practice; and expanded rights for abuse of dominance, including allotment for a private right of action and increased financial penalties.
The no-poach provision becomes effective this summer, so now is the time to review employment agreements and HR practices to ensure they are up to par. The amendments to the abuse of dominance provisions expands the types of conduct captured to include practices that “have an adverse effect on competition” or are “a selective or discriminatory response to an actual or potential competitor.”
Additionally, on March 15 the Bureau responded to the government’s request for public consultation on further reform to Canada’s competition landscape. The Bureau’s recommendations are lengthy and would essentially rewrite the current law. The changes would apply to merger review, unilateral conduct, competitor collaborations, administration and enforcement processes, and deceptive marketing. Some key changes proposed are increasing evidentiary burdens and restricting timelines during merger review, criminalizing buy-side agreements, and administrative penalties for competitor collaborations.
How to Prepare
With the current amendments and more likely on the horizon as Canada’s competition reform ensues, organizations need to prepare. Expect more focus on issues outside competition such as ESG concerns, as well as broader data requests.
Here are three lines of defense to implement to help remain compliant and ahead of the curve:
Prepare for the Increased Litigious Nature of the Bureau: Understand that Canadian competition regulators are operating under the mindset of: “what is the risk of not taking action?” The Bureau is building investigation and litigation capacity so that it is able to bring timely and evidence-based enforcement actions, focused on both traditional and digital marketplaces. Predicted trends are increased willingness to advance novel or aggressive theories of competitive harm, while being less accepting of remedies or modifications that parties suggest.
Parties need to be more cautious during negotiations. Consider the parameters of how far a deal can go and when the Bureau may intervene. Also keep in mind that regulators are now considering non-price factors when deciding whether to investigate.
Managing Increased Data Volumes: Global collaboration, expanded issue scopes, and aggressive enforcement against anti-competitive behavior inevitably results in more data being subject to an investigation. Organizations need to have a firm grasp on where data resides and how to follow communication trains in the hybrid environment. Focusing on compliance and being proactive will help spot issues earlier and better manage data overall.
Prepare for the Rise in Corporate Investigations: The Bureau recently launched a compliance portal to support organizations in building credible and effective compliance programs. The portal includes guidance around risk-based compliance assessments, compliance training and communication, monitoring, and ongoing compliance evaluation. Having a solid program will help tremendously if a competition investigation ensues. This can aid in quickly demonstrating diligence and persuade the Bureau to pursue a civil track offense rather than a criminal track offense; lower monetary penalties; and provide support for granting a leniency application.
Given the scope of amendments and what is on the horizon for the Canada Competition Act, organizations should be completing compliance program assessments now to make things more smoothly when enforcement efforts ramp up. Adopting a risk-based approach and underlining compliance as a key component of a company’s corporate culture helps it to maintain a good reputation, internally and externally, thus avoiding infringements by educating employees and mitigating risk factors before they occur. Training and open lines of communication are key enablers of this goal.
To create these defenses, organizations need to implement a tech-enabled strategy. This requires a probe into current processes and partnerships to identify areas that are lacking efficiency or missing potential issues. Start early and leverage AI to understand company data and risk factors. Implementing eDiscovery processes and tools can help with this feat and speed up the process. It is critical to partner with a provider who has bespoke and defensible solutions for collecting and analyzing different data sources. This will help keep pace in Canada and also before other global regulators that are ramping up competition enforcement efforts and changing approaches.
The contents of this article are intended to convey general information only and not to provide legal advice or opinions.