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Canada’s Competition Act Reform: Consultation Report Highlights Potential Further Changes to Unilateral Conduct Provisions

Zach Rudge and Valeska Rebello

Canada’s Competition Act Reform: Consultation Report Highlights Potential Further Changes to Unilateral Conduct Provisions
Bloomberg Creative Photos via Getty Images


The Canadian Competition Act (the Act) has been undergoing significant review as part of an overall effort by the Government to reform competition laws, including with respect to provisions addressing dominant firm conduct. In February 2022, the Government of Canada announced that it would examine ways to improve the operation of the Act. Since then there has been a flurry of activity in furtherance of reforming the Act. After swiftly passing a series of amendments last summer (2022 Amendments), the Canadian government launched a public consultation to gather input for further changes to the Act.

On September 20, 2023, the federal department of Innovation, Science and Economic Development (ISED) published a report titled “What We Heard Report on the Future of Canada’s Competition Policy Consultation” (the Report) summarizing the feedback they received on further amendments to the Act. The Report provides a balanced summary of the calls for and against change received during the consultation period, and raises considerations for future amendments.

This article provides an overview of the comments ISED received from stakeholders relating to the Act’s unilateral conduct provisions, and concludes with a brief reflection on the changes that lie ahead.

Unilateral Conduct: The Law Today

In Canada, unilateral conduct by dominant firms is addressed in a number of sections in the Act. The most significant provision addressing unilateral conduct is the broad civilly reviewable practice in section 79 addressing abuse of dominant position. Three elements must be established before the Competition Tribunal can issue a remedial order under section 79: (i) one or more persons has dominance in a market (defined as “substantially or completely control[ling], throughout Canada or any area thereof, a class or species of business”); (ii) that person or those persons must have engaged in a “practice of anti-competitive acts” (as statutorily defined and judicially interpreted); and (iii) the practice had, has, or is likely to have the effect of preventing or lessening competition substantially. If these three elements are demonstrated, the Tribunal may issue an order requiring the company that has violated the provisions to stop the anti-competitive practice, or to take actions to overcome the anti-competitive effects of the practice, including the divestiture of assets or shares. The Competition Tribunal can also impose an administrative monetary penalty, in an amount not exceeding the greater of: (a) $10 million for the initial violation, and up to $15 million for each subsequent violation; or (b) three times the value of the benefit derived from the anti-competitive practice, or if that value cannot be reasonably determined, 3% of the company’s annual worldwide gross revenues.

This provision also captures joint dominance, where two or more companies exercise their dominance together. However, as of the date of this publication, there is no jurisprudence establishing the elements required for a finding of joint dominance, and the concept of joint dominance has been the subject of policy debate for decades. In this regard, the Canadian Competition Bureau’s (the Bureau) Abuse of Dominance Enforcement Guidelines explain that “similar or parallel conduct by firms is insufficient, on its own,” to support a finding of joint dominance between firms. The Bureau’s recently released Bulletin on Amendments to the Abuse of Dominance Provisions suggests that jointly dominant companies could contravene the abuse of dominance provisions not just by adopting similar practices that harm competition, but by engaging in “different, but complementary, practices.”

The 2022 Amendments, which came into effect in June 2022, brought several changes to the abuse of dominance laws in Canada, including:

  • the introduction of a private right of action for parties seeking to challenge conduct under the abuse of dominance provisions;
  • an expanded statutory definition of “anti-competitive acts” to capture any act that is intended to have an adverse effect on competition (and not just a “competitor”);
  • an expanded set of factors to be considered in assessing the competitive effects of a practice of anti-competitive acts; and
  • substantially increased administrative monetary penalties (AMPs) for businesses found to be in non-compliance.

None of these changes have been tested before the Tribunal. However, as referenced above, the Bureau recently released a bulletin providing guidance on the Bureau’s enforcement approach to the 2022 Amendments.

Feedback Received by the Canadian Government on Modernizing the Abuse of Dominance Provisions

The Report consolidates more than 130 submissions from identified stakeholders and over 400 responses from the general public received by ISED as part of their consultation into reforming the Act. With respect to the unilateral conduct provisions, a common theme that emerges from the consultation is that “more countervailing power [i]s necessary to ensure that small numbers of firms could not dictate the terms of Canada’s economy.” Below, we summarize the Report’s findings on submissions relating to the Act’s abuse of dominance provision.

a) Dominance and Oligopoly

The Report notes that significant concern was expressed in the submissions about joint dominance in highly concentrated markets, where firms may not be dominant on their own, but “together exert substantial anti-competitive influence on the market.” To address these concerns, the Report indicates the government is considering amendments to clarify the definition of joint dominance that would capture instances of “de facto dominant behaviour” exerted by two or more firms acting in concert.

While the abuse of dominance provisions of the Act already contemplate the possibility of enforcement on the basis of joint dominance, the circumstances in which actions of individual firms should be assessed “jointly” has been the subject of ongoing uncertainty. Some commenters noted that the current law is primarily suited to address traditional monopolies, and it has not yet been used to thwart conscious parallelism or “soft competition” in oligopolistic markets (i.e., situations where firms do not compete vigorously against one another as a result of high concentration). Certain commenters advocated for an expanded definition of joint dominance to better address the concern surrounding this type of conduct in highly concentrated markets. According to the Bureau’s Bulletin on Amendments to the Abuse of Dominance Provisions, conduct by dominant firms that facilitates conscious parallelism may be considered an abuse of dominance.

By contrast, commenters opposing an expanded definition of joint dominance expressed concern that reforms attempting to address this concern might discourage desirable parallel conduct between firms, such as adhering to standard industry practices or competing aggressively by matching each other’s discounting activity. Some commenters also expressed that further defining joint dominance should be left to the courts (as has been the approach in the European Union and United Kingdom, where decisions from the European Commission and the Competition Appeal Tribunal have shaped the legal test for “collective dominance”). Instead of legislating a detailed definition, these commenters believe that existing guidelines are sufficient to guide business conduct.

b) Substantive Test

ISED’s consultation also requested feedback on whether the legal test for issuing a remedial order should be revisited. Presently, for the Competition Tribunal to issue a remedial order against a firm found to be dominant, the Commissioner or private party must establish that both: (i) the dominant firm intended to use its dominance against a competitor or to adversely affect competition; and (ii) its action had (or is likely to have) an anti-competitive effect on competition. Responses were split on whether such a standard is too onerous and should be lowered, or whether the status quo should remain intact.

One change suggested during the consultation process highlighted by the Report was removing the requirement for the Commissioner or private party to establish both anti-competitive intent and effect for a remedy to be ordered (establishing one or the other would be sufficient). An alternative suggestion by those favouring a less onerous test involved creating a presumption that shifts part of the burden onto the alleged dominant firm (e.g., if the Commissioner or private party establishes that a dominant firm engaged in a practice of anti-competitive acts , the burden would shift to the dominant firm to establish that the act did not substantially harm competition). The Bureau noted in its submission to the consultation that requiring the Commissioner to establish both intent and effect is out of step what what’s seen in the United States, European Union, and Australia.

Another notable change floated in the Report involves minimizing the role that business justifications may play in assessing whether a firm acted with anti-competitive intent. Currently, firms may counter allegations of anti-competitive intent by raising a “valid business justification” for their conduct, demonstrating a “credible efficiency or pro-competitive rationale” for the act in question. According to the Bureau’s Abuse of Dominance Enforcement Guidelines, business justifications could include, for example, reducing the firm’s production costs or improvements in processes that result in better product quality.

This potential reform aligns with the Bureau’s submission, which argues that recent jurisprudence has given “too much deference” to justifications proffered by firms, and that there should be a requirement on firms to prove that “its justification is objectively valid”.

Some commenters resistant to such changes cautioned that lowering the substantive test for abuse of dominance could chill aggressive pro-competitive conduct, as firms will exercise caution when facing legal uncertainty. In their view, requiring the Commissioner to prove both intent and effect serves as a “safeguard” against over-enforcement. Before pushing forward new amendments, these commenters suggested that the government should first observe how the 2022 Amendments improve enforcement action.

c) Bright Lines or Presumptions

Submissions received on presumptions and bright line rules were again divided along business and consumer group lines. Businesses and legal practitioners generally opposed instituting bright line tests, citing their potential to target behaviour that is not “inherently harmful”. For example, many submissions stated that self-preferencing is not inherently harmful. Those opposed to establishing bright line rules emphasized that self-preferencing in app platforms helps to solidify one’s own ecosystem, thereby leading to a more innovative and integrated product environment for end users.

However, in jurisdictions such as the European Union and the United States, self-preferencing has been a significant area of enforcement by competition authorities. In 2017, the European Commission fined Google €2.42 billion for abusing its dominant position by prominently placing its own comparison shopping service and demoting rival shopping services. In 2020, the European Commission opened an investigation into Amazon’s preferential treatment of its own retail business or of sellers that used Amazon’s logistics and delivery services, resulting in Amazon making several commitments to settle the investigation. Most recently, the Federal Trade Commission sued Amazon for allegedly maintaining monopoly power by using techniques such as self-preferencing to preference its own products over other, better quality products in search results.

Submissions by consumer groups expressed the view that the Bureau is presently ill-equipped to prevent dominant companies from engaging in harmful conduct. They highlighted that bright line rules and presumptions could increase predictability in this area. The Report mentioned that certain submissions also suggested reversing the burden of proof where defined market share thresholds are met, implementing mandates for data portability, and blocking serial acquisitions.

d) Separate Unilateral Conduct Provisions

The Act contains several other provisions addressing specific forms of unilateral conduct, such as refusal to deal, price maintenance, exclusive dealing and tied selling. The government consulted on whether these provisions have become redundant and whether they should be remodeled after the “unfair trade practices” regimes seen in other jurisdictions. On one hand, some submissions highlighted the practicality of combining the other forms of unilateral conduct into the abuse of dominance provision, thereby simplifying enforcement for the Bureau and compliance for firms. On the other hand, some believed that combining these provisions might result in a “loss of clarity and jurisprudence” in this area. Some submissions also supported the notion of specifically addressing after-market repair in abuse of dominance or as a new, separate provision.

e) Unfair Conduct

The government consulted on whether to introduce an unfair competition provision, citing the Australian unconscionable conduct provision as an example, as well as a provision addressing abuse of superior bargaining position seen in jurisdictions like Korea, Germany, and Japan. Currently, there are no equivalent sections in the Act.

Some submissions argued that introducing such provisions in the Act could protect vulnerable consumers, employees and small businesses. However, those that opposed these proposals argued that defining the limits of conduct considered to be “unfair” would be nearly impossible. They also pointed to the potential for overlap with consumer protection or sectoral regulation laws, which could expose such provisions to constitutional challenges under Canada’s federalist system. In Canada, the provinces are granted exclusive jurisdiction under the constitution to legislate on matters relating to property and civil rights in the province. Consumer protection and sectoral regulation laws generally fall within the purview of provincial powers.

Conclusion: The Future of Regulating Unilateral Conduct in Canada

Significant changes to Canada’s antitrust/competition legislation have already arrived since the release of the Report. One day after the release of the Report, the government tabled Bill C-56 before Parliament to amend the Act. When first introduced in the legislature, Bill C-56 proposed to:

  • create formal market studies powers, including the ability to compel information from businesses subject to the market study;
  • expand the civil provision on competitor collaborations to include vertical agreements between non-competitors that harm competition; and
  • eliminate the controversial “efficiencies defence” from merger reviews, which allows a merger to proceed even if it is found that the transaction will (or is likely to) harm competition, so long as the economic efficiencies outweigh and offset the anti-competitive effects of the transaction.

While Bill C-56 did not initially propose to amend Canada’s abuse of dominance provisions, changes were made to the bill during the House Finance Committee’s review (following an agreement reached between the Liberal government and the New Democratic Party of Canada) that introduced amendments to Canada’s abuse of dominance provisions. Bill C-56 received Royal Assent on December 15, 2023. All of the amendments to the abuse of dominance provisions under Bill C-56 are now in force.

Bill C-56 made three significant changes to the abuse of dominance provisions under the Act. First, the legal test for a prohibition order has been amended, allowing the Tribunal to issue an order if the Tribunal finds that a dominant firm engaged in either a practice of anti-competitive acts, or conduct that had, is having or is likely to have the effect of preventing or lessening competition substantially in a market (and “the effect is not a result of superior competitive performance.”). Prior to this amendment, the Tribunal had to find that a dominant firm satisfied both the anti-competitive intent and anti-competitive effect elements in order to grant a prohibition order. It remains to be seen, however, how jurisprudence will interpret this new test (e.g., what types of conduct can and cannot be attributed to “superior competitive performance”). Second, Bill C-56 increases the maximum fixed penalty amounts to the greater of $25 million for the first violation, and up to $35 million for each subsequent violation, for situations where this amount is higher than the variable maximum. This represents a significant increase in potential AMPs for firms found in violation of the abuse provisions (currently, the maximum penalty is the greater of $10 million for the first violation and $15 million for each subsequent violation, or three times the value of the benefit derived from the anti-competitive practice, or, if that amount cannot be reasonably determined, 3% of the person’s annual worldwide gross revenues). Unlike the test for a prohibition order, an order involving AMPs is only available if the Tribunal finds both anti-competitive intent and anti-competitive effect. Third, the practice of “directly or indirectly imposing excessive and unfair selling prices” has been added to the non-exhaustive list of anti-competitive acts set out in section 78. What constitutes “excessive and unfair selling prices” remains undefined in the Act, and will be subject to future judicial interpretation.

On November 21, 2023, the federal government unveiled its Fall Economic Statement (“FES”), which foreshadowed further significant amendments to the Act. The forthcoming proposed amendments referenced in the FES include, inter alia, strengthening the Bureau’s tools for addressing abuse of dominance (specifically referencing “predatory pricing”), and allowing private litigants to recover damages in proceedings before the Competition Tribunal. On November 30, the federal government introduced a bill (“Bill C-59”) that includes the proposed legislative amendments foreshadowed by the FES. This new bill proposes significant changes across the Act, including to the provisions addressing abuse of dominance and other unilateral conduct.

In particular, Bill C-59 proposes to allow private parties to seek a form of damages under the provisions of the Act addressing unilateral conduct (refusal to deal, exclusive dealing, tied selling, price maintenance and abuse of dominance). Currently, damages are not available to private parties under the unilateral conduct provisions of the Act. Second, Bill C-59 also proposes to relax the test for private parties seeking leave to make an application to the Tribunal under the unilateral conduct provisions of the Act such that the Competition Tribunal may grant a private party leave to make an application if the Tribunal has reason to believe that the applicant is directly and substantially affected in the whole or part of the applicant’s business by such unilateral conduct or if the Tribunal is satisfied that is in the public interest to do so. Currently, an applicant must show that they are substantially affected in the entirety of their business – a high bar – in order to be granted leave to make an application to the Tribunal. The Tribunal also does not currently have discretion to grant leave to private parties where it “is satisfied that is in the public interest to do so”. Lastly, Bill C-59 also proposes amendments to the Act’s refusal to deal provision to capture situations where a business refuses to supply “a means of diagnosis or repair” to a customer within a specified period of time on usual trade terms. This change is intended to provide consumers with what has become colloquially known as a “right to repair” through the Act.

While these recent amendments and further proposed amendments represent a substantial change to Canadian competition law, some topics raised in the Report have yet to be addressed. For instance, neither Bill C-56 nor Bill C-59 introduced bright line rules or presumptions to address self-preferencing and other types of conduct by dominant firms or platforms. The issue of joint dominance in highly concentrated markets was also not directly addressed. It remains to be seen whether Bill C-59 is the Canadian government’s final round of amendments to the unilateral conduct provisions, or whether further amendments that respond to these other concerns raised in the Report could still be forthcoming.