Minister Proposes Amendments to the Competition Act - International Law Office

Summary of Amendments
Changes from 2003 Discussion Paper
Comment

Introduction

On November 2 2004 Canadian Minister for Industry David L Emerson tabled Bill C-19 in the House of Commons, proposing amendments to the Competition Act.(1) According to the minister, these amendments are intended to strengthen Canada's competition framework in a global economy to the benefit of both consumers and businesses. Bill C-19 has passed its first reading in the House of Commons and is now being considered by the House Industry Committee.

Summary of Amendments

Highlights of the proposed amendments include:

• repealing the criminal prohibitions against price discrimination, predatory pricing and promotional allowances (but not price maintenance) - these will now be dealt with under the provision on civil abuse of dominance;
  
  
• introducing administrative monetary penalties (AMPs) as a potential remedy in cases of abuse of dominance, with a maximum penalty of C$10 million and C$15 million for each subsequent order;
  
  
• increasing the maximum level of AMPs for contraventions of the act's deceptive marketing practices provisions to C$750,000 for individuals (C$1 million for each subsequent order) and C$10 million for corporations (C$15 million for each subsequent order);
  
  
• authorizing the competition commissioner to seek orders against parties found to have made false or misleading representations requiring them to make restitution to victimized consumers (the commissioner would also be able to apply for interim orders to freeze assets); and
  
  
• repealing the airline-specific aspects of the act's abuse of dominance provision, which were enacted following Air Canada's acquisition of Canadian Airlines in 1999.

Changes from 2003 Discussion Paper

The proposed amendments represent a scaled-back version of the package of amendments that was initially suggested by the Competition Bureau in a June 2003 discussion paper. For example:

• the proposed amendments limit AMPs to cases of abuse of dominance and deceptive marketing practices, as opposed to extending this remedy to all the act's non-merger civil reviewable practices (eg, refusal to deal, exclusive dealing and tied selling);
  
  
• the proposal to introduce a right to sue for damages in respect of contraventions of the act's reviewable practices has been dropped; and
  
  
• the proposal to empower the commissioner to initiate broad market inquiries has been abandoned.

Also left out of the proposed amendments are the earlier proposals to dramatically restructure the act's conspiracy provision. Competition Commissioner Sheridan Scott has announced that possible changes to this provision will be the subject of additional study and consultation. Similarly, proposed changes to the act's efficiencies provision, which provides a defence to challenges to anti-competitive mergers, will be the focus of their own consultation process.(2)

Comment

The proposal to repeal the criminal pricing provisions is a welcome one. This move has long been advocated in recognition of the fact that these practices can be beneficial to competition. They will now only be a matter of concern if engaged in by a dominant party, and if they result in a substantial prevention or lessening of competition. In that event, however, a party could still be exposed to financial sanction in the form of AMPs.

The proposal to eliminate the act's airline-specific provisions was also expected in light of the changed competitive landscape in the Canadian airline industry, particularly the decline in Air Canada's market share since 1999. The provisions that will be repealed include provisions that (i) define certain airline-related conduct as anti-competitive acts, and (ii) give the commissioner the authority to issue ex parte cease and desist orders against an airline alleged to have abused its dominant position. In the same vein, the Competition Bureau announced recently that it would not be proceeding with its abuse of dominance case against Air Canada because the public interest did not justify continuing with this case in the current competitive environment (for further details see "New Developments in Domestic Law").

Not surprisingly, there has been a rather negative reception in many quarters to the proposals to introduce AMPs as a remedy for abuse of dominance, significantly increase the level of AMPs for deceptive marketing practices and introduce restitution orders as a possible remedy for such practices.

The bureau believes that the threat of these potential remedies will help deter anti-competitive conduct. On the other hand, critics have questioned whether it is appropriate to impose penalties of this nature for what is still non-criminal behaviour. For example, the potential maximum AMPs for abuse of dominance and deceptive marketing practices are the same as those for violation of the act's criminal conspiracy provision. Any opposition to the proposed amendments is likely to centre on these latter proposals.

For further information on this topic please contact Mark Katz or Elisa Kearney at Davies Ward Phillips & Vineberg LLP by telephone (+1 416 863 0900) or by fax (+1 416 863 0871) or by email (mkatz@dwpv.com or ekearney@dwpv.com). The Davies Ward Phillips & Vineberg LLP website can be accessed at www.dwpv.com.

Endnotes

(1) Available at http://www.parl.gc.ca/36/1/parlbus/chambus/house/bills/government/C-19/C-19_1/C-19_cover-E.html.

(2) Competition commissioner, Speaking Notes to the House of Commons Standing Committee on Industry, Natural Resources, Science and Technology (November 18 2004) - available at http://strategis.ic.gc.ca/epic/internet/incb-bc.nsf/en/ct02993e.html.