The Canadian economy is built on the belief that competition motivates businesses to continuously innovate, providing consumers with more choices and lower prices. This not only fuels growth but also compels businesses to consistently enhance their products and services to remain relevant in the market.
However, with recent economic pressures, particularly in the housing and grocery sectors, consumers do not always seem to experience these advantages. Such circumstances have, historically, prompted government intervention. In this article, we provide an overview of Canada’s competition regulatory framework and explore the significance of Bill C-56, a novel legislative initiative designed to boost competition in the Canadian economy for both businesses and consumers.
The Competition Act establishes the legislative framework empowering the Competition Bureau, a federal agency, to investigate and address activities hindering competition, such as price-fixing, market power abuse, and deceptive marketing practices. The Competition Bureau and the Competition Act are pivotal in ensuring fair and competitive markets in Canada.
The Competition Bureau has broad powers under the Competition Act to investigate and prevent anti-competitive behaviour, as well as to bring enforcement matters before the Competition Tribunal. Recently, the federal government introduced proposed legislation known as Bill C-56, the Affordable Housing and Groceries Act, aiming to amend both the Excise Tax Act and the Competition Act to enhance competition and lower grocery prices in Canada. This bill proposes three significant developments:
- Introduction of Formal Market Investigation Powers: Bill C-56 proposes the introduction of formal market investigation powers, allowing the Minister of Innovation, Science and Industry (a federal cabinet minister) to direct the Commissioner of Competition (of the Competition Bureau) to inquire into the state of competition in any market or industry if it is deemed in the public interest, based on that inquire being completed within an 18 month period. This market inquiry power provides the Competition Bureau with enhanced authority to compel the production of otherwise unobtainable information.
- Removal of the Efficiencies Defence in Mergers: The efficiencies defence, which comes from Section 96 of the Competition Act, allows an otherwise anti-competitive merger to proceed if the economic efficiency gains outweigh the merger’s anti-competitive effects. This defense has long been a contentious issue within Canada’s competition regime. Bill C-56 definitively addresses this by repealing Section 96 and removing the defence, though it’s important to note that this removal applies only to mergers.
- Empower the Competition Tribunal to Block Non-Competitor Collaborations: Prior to Bill C-56, the Competition Tribunal (“the Tribunal“) could issue prohibition orders to prevent anti-competitive agreements between competitors that would substantially weaken competition. Bill C-56 broadens this power, allowing the Tribunal to issue prohibition orders not only for agreements between competitors but also for agreements between non-competitors that would have anti-competitive effects in Canadian markets.
Bill C-56 has the potential to be a game-changer for businesses of all sizes in Canada. With its formal market investigation powers, the removal of the efficiencies defence in mergers, and an empowered Competition Tribunal, this bill is a potent tool capable of leveling the competitive playing field.
While it may appear targeted to a select few industries, Bill C-56 extends beyond affordable groceries and housing; it aims to foster an environment where innovation, efficiency, and choice thrive, benefiting not only businesses but all Canadians. However, as with any legislative step, the implementation phase is key. This includes the interaction between the Minister of Innovation, Science and Industry and the Competition Bureau, as well as how the Competition Tribunal will interpret its new powers. At this stage, no particular industry can be certain about where these powers will be focused or what impact they will have on Canadian and international supply chain, retailer and regulatory dynamics.
Written by: Kevin Fernandes and Jonfranco Monaco
This article is provided for general information purposes and should not be considered a legal opinion. Clients are advised to obtain legal advice on their specific situations.