Targeted measures to foster competition

  • March 28, 2022

Because Canada’s Competition Act is crucial to Canada’s economic recovery and future prosperity, the Competition Law and Foreign Investment Review Section of the Canadian Bar Association believes that any review the legislation should be rigorous, fact-based and include an examination of the public and private enforcement of the Act.

Writing to the Minister of Innovation, Science and Industry, François-Philippe Champagne, the Section emphasizes how important it is “that any amendments be proposed in a stand-alone Competition Act amendment bill, rather than included in omnibus legislation, to allow for appropriate parliamentary scrutiny.”

As the Section explains in a separate letter to Senator Howard Wetston, “how the legislation is enforced is just as critical to a well-functioning competition regime as the legislative framework itself.”

In that letter, the CBA Section presented its preliminary views on a paper by Professor Edward M. Iacobucci titled “Examining the Canadian Competition Act in the Digital Era,” commissioned by Senator Wetston to examine whether digital markets have distinctive features that require significant changes to the Competition Act.

Periodically reviewing the Act to assess whether reform is necessary is a good thing, and so is applying a competition lens to broader public policy issues to encourage efficiency and innovation. “However,” the Section cautions, “wholesale change to the policy objectives of competition law requires significant debate and broad public consultations as these changes could significantly impact the Canadian economy.”

Below is a summary of the Section’s feedback on the Iacobucci paper.

Buy-side and wage-fixing, and no-poach agreements

Buy-side agreements are arrangements on the price of inputs, including labour. As the Section notes, after wide consultation in 2009, Parliament deliberately excluded buy-side agreements from section 45 of the Competition Act, which criminalizes price-fixing and other agreements amongst competitors. They are instead treated “as a reviewable practice where competitive effects can be assessed.”

The Iacobucci paper, the Section adds, argues section 45 should be amended to apply to all buy-side agreements regardless of whether their impact on competition and economic efficiency is negative, neutral or positive.

“The CBA Section believes that the reviewable practice provision in section 90.1 is an appropriate framework to examine buy-side agreements,” the letter says, because it “allows a nuanced and fact-specific evaluation of the effects of specific agreements, which is preferable to the blunt instrument of a per se criminal offence.”

The efficiencies defence

The efficiencies defence in section 96 of the Act allows an anti-competitive merger to proceed if the efficiencies generated are greater than its anti-competitive effects on the economy. The Iacobucci paper argues the requirement that the Competition Bureau quantify anti-competitive effects if section 96 is invoked be abolished.

This, the Section says, would risk making the application of the efficiencies defence less objective, and might create uncertainty for merging parties when determining the case they must meet. The current law “as expressed by the Supreme Court in Tervita provides that anti-competitive effects and efficiencies should be quantified where it is possible to do so, and that qualitative effects and efficiencies should also be taken into account,” the Section writes, before adding that any amendments limiting the efficiencies defence should be preceded by careful study.

Abuse of dominance

Abuse of dominance happens when a dominant business or group of businesses engages in anti-competitive activity with the result that competition is (or is likely to be) substantially prevented or lessened in a market.

The CBA Section believes section 79 of the Act, which deals with abuse of dominant position, should be re-evaluated “because of its importance to competition issues in the digital economy in addition to its role and core element of competition law applicable to all sectors.” But it adds that any specific proposal for substantive change be carefully studied “because of their potential broad consequences on the Canadian economy.”

In summary, especially as it relates to big tech, the CBA Section believes “targeted and specific regulation outside of the Act for markets whose structure may, in exceptional circumstances, warrant modification to protect customers from specific behaviours should be preferred instead of amending the Act, which is framework legislation applying to all industries.” Doing otherwise would create significant risk of unintended consequences “for the vast array of industries not presenting such issues.”