In brief
It has been a dynamic year for competition and foreign investment law in Canada, with significant long-term implications for both domestic and global businesses. In 2023, the Government of Canada focused on modernizing Canada’s Competition Act and Investment Canada Act, proposing and advancing legislation that will overhaul existing legislative frameworks. Looking forward, we expect the Government will continue its modernization agenda and the respective authorities will continue to take strong enforcement positions against perceived anti-competitive conduct and investments that raise potential national security concerns in 2024.
HIGHLIGHTS FROM 2023
Competition Law
- Major changes to modernize the Competition Act. On 21 September 2023, the Government of Canada introduced Bill C-56, the Affordable Housing and Groceries Act, and on 30 November 2023 introduced Bill C-59, the Fall Economic Statement Implementation Act, 2023. Both bills are broad legislation that includes targeted amendments to the Competition Act (“Act“). If passed, Bill C-56 will repeal the “efficiencies” defense in mergers, expand the scope of agreements and arrangements subject to the civil competitor collaboration provision and permit mandatory production orders to conduct public interest market studies. If passed, Bill C-59 will significantly update the Act to, among other things, reform the merger control regime, expand conduct subject to civil review for anticompetitive effects, introduce a “right to repair”, broaden access by private parties to the Competition Tribunal (“Tribunal“) to bring challenges to horizontal competitor agreements and permit private applicants to obtain financial compensation. The changes would also allow private challenges to misleading advertising and deceptive marketing, prohibit misleading greenwashing claims, and create a certification process for environmental protection agreements. The Commissioner of Competition (“Commissioner“) has been vocal in his support of modernizing the Act, including making submissions in response to the Government of Canada’s consultation on the Future of Competition Policy in Canada and hosting Canada’s Competition Summit 2023. If passed, Bills C-56 and Bill C-59 will have a significant and wide-ranging impact on companies doing business in Canada.
See our client alert on the proposed amendments to the Act under Bill C-56.
- 2023 Merger review trends. Mergers continued to be a key enforcement priority for the Competition Bureau (“Bureau“), with high-profile mergers in key sectors making headlines across Canada, including Rogers/Shaw, Sika/MBCC Group, and RBC/HSBC. While the year-over-year overall number of merger filings decreased in 2022-23, there was a significant increase in the number of complex mergers notified to the Bureau – 36% of concluded merger reviews in 2022-23 were designated as complex, compared to only 24% in 2022-21. Consistent with this increase, the number of consent agreements registered with the Tribunal rose. These statistics reflect not only the Bureau’s increased willingness to take enforcement action but also that the Commissioner and merging parties are working together to resolve the Commissioner’s competition concerns.
- Criminal prohibition on wage-fixing and no-poach agreements takes effect. On 23 June 2023, amendments to the Act came into effect that makes it a criminal offense for unaffiliated employers to enter into no-poach, wage-fixing or other agreements related to the terms and conditions of employment in Canada. The criminal prohibition applies to all unaffiliated employers and is not limited only to those in competing sectors or industries. Non-compliant employers risk incurring significant fines, the potential for imprisonment, or both and heightened private and class action litigation risk. Shortly before the amendments came into effect, the Bureau published its Enforcement Guidelines on Wage-Fixing and No Poaching Agreements, which describe how the Bureau will enforce the new prohibition and assess alleged contraventions.
See our client alert and video chats on the risks associated with non-compliance and what employers should consider going forward.
- Competition Bureau prioritizes pricing and greenwashing for deceptive marketing enforcement. The Bureau continued to focus on misleading pricing practices, including drip pricing, ordinary price claims, and greenwashing claims that impact Canadian consumers. The Act was amended in 2022 to explicitly identify drip pricing as a prohibited pricing practice. The Bureau subsequently took enforcement action against drip pricing of movie tickets on a mobile app and website. The Bureau has also taken aim at so-called “greenwashing” claims that overstate the environmental characteristics or benefits of a company or a product to encourage sales. The focus on misleading pricing practices and greenwashing claims reflects a mix of the Bureau’s own priorities and the increasing number of complaints to the Bureau, including “six-persons” applications that, once made, trigger a formal inquiry under the Act. For example, in response to a six-person application by an environmental organization, the Bureau announced in May 2023 that it is investigating the advertising of climate-related initiatives by oil sands producers. Proposed amendments in Bill C-59 will, among other things, expand drip pricing as an explicitly prohibited pricing practice both criminally and civilly, prohibit misleading greenwashing claims and grant private access to the Tribunal in respect of civil deceptive marketing claims.
See our client alert on Canadian pricing rules, particularly as they relate to savings and pricing claims, and our client alert on greenwashing claims and enforcement.
- Abuse of Dominance in the Spotlight. The Bureau published a draft Bulletin on Amendments to the Abuse of Dominance Provisions (“Bulletin“) for public comment, signaling how the Bureau intends to approach the 23 June 2022 amendments to the Act’s abuse of dominance provisions specifically, which included defining an “anti-competitive act” more broadly and granting private access to the Tribunal for the first time. The Bulletin explains how the Bureau will assess agreements between competitors, information sharing, contracts that reference rivals, and serial acquisitions as conduct that may be intended to harm competition. When the final version is published in 2024, the Bulletin will supplement the existing Abuse of Dominance Guidelines. The Bureau has also stated it expects to update its Abuse of Dominance Guidelines once the Act has been further amended (see Major Changes to Modernize the Competition Act, above).
See our article on Canada’s abuse of dominance framework.
Foreign Investment Review
- Major legislative reforms move ahead. On 7 December 2022, the Government of Canada introduced Bill C-34, the National Security Review of Investments Modernization Act. The proposed amendments in Bill C-34 are the most extensive reforms to the Investment Canada Act in more than a decade and are intended to support Canada’s ability to screen, review and impose conditions on foreign investments where necessary on national security grounds. Of note, Bill C-34 creates a new pre-implementation notification requirement for investments in prescribed business sectors (which will be identified in future regulations), and introduces new powers for the Minister of Innovation, Science and Industry to take interim measures during national security reviews and accept undertakings to mitigate an investment’s potential risk to Canadian national security. Bill C-34 is anticipated to receive Royal Assent before the end of 2023.
See our client alert on the key proposals under Bill C-34.
- Regulatory authority restructured. In 2023, the Investment Review Branch of Innovation, Science and Economic Development Canada was restructured as Foreign Investment Review and Economic Security (“FIRES“). The Investment Review Directorate (formerly known as the Investment Review Division) will sit within the FIRES branch. In addition to the re-naming, several national security experts were appointed to key roles in the FIRES branch.
- Foreign investment review by the numbers. In fiscal year 2022-2023, 1,010 applications for review and notifications were certified. The total number of filings decreased by 19.4% compared to 2021-2022. A record number of 32 investments were subjected to extended review on the basis of potential national security concerns, compared to 24 in the previous year, representing a 33.3% increase. Of the investments subjected to a national security review process, three resulted in divestment orders, eight were withdrawn by the investor, but 20 were permitted to proceed following an extended review period. The majority of investors subject to a full national security review originated from China and the majority of business activities related to mining and quarrying, computer systems design and services and scientific research and development services, reflecting the Government of Canada’s targeted focus on areas of heightened national security risk.
LOOKING AHEAD TO 2024
Drawing insight from competition law and foreign investment review developments in 2023, businesses should expect the following developments and impacts in 2024:
- Continued momentum to modernize the act. The Government of Canada will continue its efforts to modernize the Act in 2024. The Government will make efforts to pass Bill C-56 and Bill C-59, and potentially propose additional legislation, to ensure that, in their view, Canadian competition law is “fit for purpose.” Future amendments may further reflect feedback that the Government of Canada received as part of its consultation on the Future of Competition Policy in Canada, including feedback from the Commissioner.
- Stronger enforcement and advocacy for more competition in Canada. With an increase in funding and willingness to take enforcement risks in recent years, the Bureau will continue to take a strong enforcement stance and will be prepared to initiate criminal and civil cases alleging all manners of anti-competitive conduct. The Bureau will also continue to advocate for greater competition generally in Canada and will take advantage of opportunities to promote the need for and benefits of competition. As in past years, these activities may take the form of competition summits or forums, educational initiatives for Canadian consumers and businesses, and publishing analyses and reports. If Bill C-56 passes, we expect that the Bureau will quickly initiate market studies in industries that the Commissioner has previously expressed competition concerns about and will not hesitate to exercise its new powers to seek information production from industry.
- More mergers are subject to pre-merger notification rules and additional scrutiny in concentrated industries. Bill C-59 proposes amendments to how the pre-merger notification financial thresholds are calculated, which will increase the scope of transactions that are subject to pre-merger notification and review. We also expect the Bureau to continue its efforts to detect and investigate non-notifiable transactions that may raise competition concerns, including nascent competitor and roll-up acquisitions. If passed, Bill C-59 will extend the time period that the Bureau may review a non-notifiable merger from one to three years. We expect that the Bureau will continue to closely scrutinize mergers in concentrated industries and sectors of public interest, including, among others, financial services, health infrastructure, online marketing, and telecommunications.
- New regulations and guidance to strengthen national security reviews of foreign investment. Following the imminent anticipated passage of Bill C-34, we expect that the Government of Canada will consult with stakeholders to quickly develop the regulations that will implement the features of Bill C-34, including the prescribed business sectors that will require pre-implementation notification. Early indications are that the prescribed business sectors will be similar to and reflect the categories set out in the current Guidelines on the National Security Review of Investments.
