While every business will react to and be impacted by these changes differently, virtually every business will be affected. New risks and considerations will apply to existing business practices, and new opportunities may arise in certain sectors.
Canada has introduced significant changes to its antitrust/competition laws. While some have not been finalized yet, the changes proposed have the potential to significantly impact businesses across the economy, and to impose standards that meaningfully differ from those that apply in other countries.
Following the release of the government’s Fall Economic Statement promising major changes to the Competition Act (“Act”), the changes were introduced in Parliament on November 30, 2023 (via Bill C-59). These supplemented other changes (via Bill C-56) to the Act that became law on December 15, 2023.
While every business will react to and be impacted by these changes differently, virtually every business will be affected. New risks and considerations will apply to existing business practices, and new opportunities may arise in certain sectors. Below, we highlight some of the key changes that members of the North American Equipment Dealers Association (“NAEDA”) should be aware of.
Amendments Passed by Parliament
Civil Agreements
For the first time, agreements that do not include any competitors or potential competitors can be challenged under the Act’s provision allowing respecting civil agreements that are likely to substantially lessen or prevent competition, if a significant purpose of any part of the agreement is to prevent or lessen competition. Currently, the only remedy if such a challenge is successful is an order to cease enforcement of the offending agreement/portion of an agreement. However, as discussed below, monetary penalties and/or civil monetary recovery by private parties will be available if further proposed amendments to the Act become law.
This change already made to the Act is a response to public concern about restrictive covenants included in some retailers’ lease agreements that restrict property owners’ ability to lease to the retailer lessors’ competitors. The impact of this change remains unclear, but at a minimum, businesses will need to consider these provisions when structuring their arrangements with other businesses, including at different levels of the supply chain. Notably, these changes will come into force on December 15, 2024.
For NAEDA members, this change could have implications for agreements between equipment dealers and manufacturers or suppliers. For example, if a dealer enters into an agreement with a manufacturer that includes provisions limiting the dealer’s ability to sell or service competing brands, such an agreement – and the parties to that agreement – could potentially be subject to enforcement if it is found to have a significant purpose of preventing or lessening competition.
NAEDA members should carefully review their existing agreements with manufacturers, suppliers, and other businesses to identify any provisions that might be interpreted as having an anticompetitive purpose. When negotiating new agreements, dealers should be cautious about including clauses that restrict their ability to do business with competitors or that could be seen as limiting competition in the market.
In many cases equipment dealers are presented with the manufacturer’s dealer contract in an “as is” basis. Therefore, several provinces have put in place legislation that prevents a dealer contract from being terminated if they carry a competitive product in the same facility. Bill C-56 may provide equipment dealers with another level of protection for their right to carry any brand that they feel will serve their market.
Abuse of Dominance
The test for abuse of dominance will be amended to make it significantly easier for a claim to succeed. The amendment will remove the requirement for the Commissioner of Competition (“Commissioner”) or private parties to prove that a dominant player’s conduct caused a substantial lessening or prevention of competition in a market, which has always been an essential element of the test. Instead, it will be possible for a dominant party to be found liable solely because it engaged in anticompetitive acts, irrespective of effects. The non-exhaustive list of examples of anticompetitive acts will also now include “directly or indirectly imposing excessive and unfair selling prices.” However, what constitutes “excessive” or “unfair” selling prices is not defined and will have to be established through case law.
In tandem with this change, minimum monetary penalties (“AMPs”) will also increase to C$25 million for a first violation and C$35 million for subsequent violations. However, penalties can be higher – specifically, three times the value of the benefit derived from the conduct or 3% of annual worldwide revenues (if benefit cannot be reasonably determined).
The primary relevance of this change to NAEDA members is that if any of them have a market share in any market of greater than 35% (generally considered to be the minimum required to establish “dominance”), they need to be aware that conduct that could be considered to be predatory, exclusionary or disciplinary toward any market participants may be more likely to be scrutinized and potentially challenged under the Act.
Amendments under consideration by Parliament
Right to Repair
Specific provisions designed to support the “right to repair” of devices and products by consumers would be added to the Act for the first time if Bill C-59 passes. The refusal to deal provision of the Act will be updated to prohibit parties from refusing to provide a means of diagnosis or repair of a product, which includes diagnostic and repair information, technical updates, diagnostic software, or tools and any related documentation and service part.
Combined with the amendments described above to allow more private claims, monetary penalties and civil recovery, manufacturers of a variety of products, from tech to farm equipment, will need to carefully consider any limitations imposed on the right of consumers to repair their products. This change is particularly relevant for equipment dealers, as it may impact their relationships with manufacturers and their ability to provide repair services to customers.
This change is important for NAEDA members as it will directly impact the relationship between equipment dealers and manufacturers, as well as the ability of dealers to provide repair services to their customers. Under the new provision, manufacturers will be required to provide dealers and consumers with the necessary means to diagnose and repair their products, including access to diagnostic and repair information, technical updates, software, tools, and service parts. This is consistent with the industry commitment that has been in place since January 1, 2021. However, these changes may also create challenges in the relationship between dealers and manufacturers who have not signed on to the industry commitment yet. Some manufacturers may be reluctant to share proprietary information or tools, which could lead to disputes or strained partnerships. NAEDA members will need to work closely with their manufacturers to ensure a smooth transition and compliance with the new regulations.
AMPs for Competitor Collaborations
If Bill C-59 is enacted by Parliament, AMPs will available for conduct found to violate the Act’s civil agreements provision, in an amount not exceeding the greater of: (i) C$10 million for the first order and C$15 million for each subsequent order; and, (ii) three times the value of the benefit derived from the conduct or 3% of annual worldwide revenues (if benefit cannot be reasonably determined). As noted above, currently the only remedy for violations of this provision is an order to cease the conduct.
Merger Control
The period during which mergers that are not subject to mandatory notification to the Competition Bureau (“Bureau”) can be challenged would be tripled under Bill C-59, from one year to three years after closing. This is likely a response to concerns about “killer acquisitions,” deals in which companies purchase likely future strong competitors before they can grow enough to be a competitive threat. Parties will have to consider whether it makes sense to voluntarily seek clearance of non-notifiable deals in certain cases to avoid this extended period.
Expanded Private Litigation
If Bill C-59 is enacted, private parties will be able to bring proceedings before the Competition Tribunal (“Tribunal”) seeking civil monetary recovery for non-criminal conduct such as abuse of dominance (similar to monopolization), violations of the civil agreements provision, refusal to deal, tied selling and non-criminal deceptive marketing. Additionally, it would be easier for private parties to obtain “leave” to bring such proceedings. The new right of action would also broaden remedies available for reviewable conduct to include: (i) civil monetary recovery for an amount up to “the value of the benefit derived from the conduct”; and (ii) an order prohibiting the challenged conduct. This addresses criticism that recent amendments enabling private parties to bring cases before the Tribunal did not lead to any significant number of such cases being brought, arguably because of the lack of ability to recover damages. This change may lead to a significant increase in private competition litigation in Canada.
A Refresher on Wage-Fixing and No-Poach Agreements
The criminalization of wage-fixing and certain no-poach agreements in Canada took effect in mid-2023. The Bureau has finalized its enforcement guidelines on wage-fixing and no-poaching agreements (“Guidelines”) that describe how it plans to enforce these new provisions (subsection 45(1.1)) of the Act) that make wage-fixing and no-poaching agreements amongst any two or more unaffiliated employers criminal offences. This change has moved the Canadian approach to such matters closer to that taken in the U.S.
As of June 23, 2023, it is a criminal offence for two or more employers to agree to fix salaries/wages or terms and conditions of employment, or to agree not to poach each other’s employees. These agreements may remain legal under certain circumstances, specifically if they are ancillary restraints that are directly related to and reasonably necessary for achieving the objective of a broader, otherwise legal agreement, including legitimate collaborations, strategic alliances, or joint ventures.
The Bureau states it is unlikely to find wage-fixing or no-poaching agreements problematic when parties take no steps to reaffirm or implement the restraint on or after June 23, 2023. At least two parties must reaffirm or implement the restraint for the Bureau to find the requisite intent or “meeting of the minds.”
Employers should review and update pre-existing company records and agreements to accurately reflect their policies and intentions regarding wage-fixing and no-poaching, avoiding any conduct that reaffirms or implements problematic terms.
The provisions do not mean that third parties, such as industry associations like the NAEDA, cannot collect information on wages, salaries, and terms of employment from various parties in a sector for purposes of disseminating reports on trends. While the Guidelines do not specifically reference this, the same principles outlined in the Bureau’s bulletin on trade associations that apply to sharing pricing information amongst such associations will apply.
This means that parties can share salary, wage, or terms of employment information with third parties for purposes of benchmarking reports provided that the following safeguards are observed:
- Information on any party’s salaries, wages and terms of employment may only be shared with the third party conducting the survey, not with any other employer.
- Absent special circumstances, only past or present information should be shared – not information on future intentions.
- The third party must aggregate the information and anonymize it before disseminating a report on trends/benchmarks to the contributing parties.
- Enough parties’ information should be aggregated to prevent ensure that no party can link any data to a particular source.
Conclusion
The changes to Canada’s competition laws are significant and will impact businesses across various sectors, including equipment dealers. The NAEDA and its members should carefully review these changes, particularly those related to competitor collaborations, abuse of dominance, right to repair, and wage-fixing and no-poach agreements, to ensure compliance and adapt their business practices accordingly.
DENES ROTHSCHILD practices competition, marketing, international trade and foreign investment law. He also litigates class action claims against clients relating to alleged violations of the cartel and misleading advertising provisions of the Competition Act. Denes is also Co-Leader of the firms Public Policy and Government Relations Group. Making use of his dual Canadian and American law degrees, Denes regularly collaborates with attorneys in other jurisdictions to ensure consistent and outstanding representation for his large multinational clients. Denes recently spent a year seconded as corporate counsel to one of the world’s largest information technology corporations. Contact Denes at drothschild@blg.com
MOHIT SETHI adopts a client-centered approach, delivering pragmatic and innovative solutions for optimal results. As an associate in the Competition/Antitrust and Foreign Investment Review group, Mohit advises clients across various industries on a range of legal issues. His expertise includes providing strategic guidance on compliance matters, pre-merger notifications, and inquiries under the Competition Act, as well as foreign investment issues under the Investment Canada Act. Mohit also has experience in civil and regulatory litigation, including competition and securities class actions. Contact Mohit at msethi@blg.com@blg.com
