Canada’s federal Competition Act has not been amended in a significant way in 35 years, since 1986. While some are fine with the status quo, others, including academics, policy researchers, and even the federal Commissioner of Competition, have a different perspective. They say that the law in its current form is not sufficient to address the competition concerns of a largely digital economy, nor do the current laws take modern concerns about worker rights, climate change, and other social justice considerations into account. Further, some say that the competition laws need to change to help Canada’s small and medium-sized businesses recover from the losses they’ve sustained over the past two years due to the pandemic.
However, others disagree. Some business leaders and business law experts say that the current system is working just fine and there is no need to fix it or argue for conservative changes to enhance the current system, rather than throw it out and start over.
Below, we will outline the various positions on the current law and the potential impact proposed changes might have on Canada’s corporate commercial sector.
Commissioner of Competition Outlines Needed Changes at the Canadian Bar Association Competition Law Conference
Matthew Boswell, Canada’s Commissioner of Competition, addressed concerns about the lack of modernization to the federal laws in a speech he gave to Canadas’ legal community in October 2021. He started out by reviewing the importance of healthy competition for society in general, and for specific groups or causes as follows:
- Consumers: competition results in competitive costs for necessary goods and services, which benefit consumers always, and in difficult financial times, such as the pandemic, in particular.
- Workers: Competition is necessary to ensure fair wages and working conditions.
- Businesses: Competition laws which prevent large-scale monopolies help Canada’s smaller establishments remain competitive in a challenging economy.
- Government and taxpayers: Competition leads to value on the dollar which will contribute to a growing economy over time.
In his speech, Boswell identified a number of concerns with the current federal competition legislation. In particular, he cited issues such as:
- A lack of effective fines and penalties for wrongdoers;
- Overly complex criteria and legal tests in place to prevent anti-competitive mergers;
- A lack of tools to deter anti-competitive behaviour such as abuse of dominance; and
- A lack of protection for workers who are impacted by unfair wages or job mobility post-merger.
With respect to fines and penalties, many agree that the current system is ineffective in deterring anti-competitive behaviour. Under the current Competition Act, the maximum financial penalty for a first offence is $10 million, and $15 million for subsequent offences. Of course, this seems like a significant amount of money, however as the Toronto Star points out, a large technology company such as Meta (formerly Facebook) earns roughly this amount per hour. Paying this fee would amount to little more than a very minor slap on the wrist. In contrast to the Canadian penalties, the incoming New Digital Markets Act, which will take effect in the European Union as soon as this year, fines companies a percentage of its global revenue if the business is found to have intentionally broken the law.
In further contrast between Canada and the EU, Canada requires specific evidence of harm resulting from anti-competitive behaviour, whereas the laws in the EU merely require a demonstration that anti-competitive behaviour took place at all.
Expanding on Boswell’s point regarding the lack of tools in place to deter abuse of dominance, an independent researcher named Keldon Bester is quick to point out that Canada does have tools in place, but they are often underused. For example, Bester points out Canada’s Competition Tribunal, an independent adjudicator responsible for hearing issues related to large-scale disputes regarding “competitiveness of private enterprise and industry”. He notes that the last time an abuse of dominance matter was brought before the Tribunal was five years ago, indicating an unwillingness to use some of the tools already in place.
This could be due to factors related to the Tribunal itself, which some see as potentially biased in favour of big business. In his speech, Boswell cited internal problems with the Competition Tribunal, mentioning one case in particular in which the Competition Bureau sought an injunction in the proposed merger between Secure Energy Services Inc. and Tervita Corporation, which was denied:
I will be blunt. The tribunal allowed a transaction to proceed that it concluded would likely cause irreparable harm to the public interest and competition. Yet, this transaction was allowed to proceed prior to the hearing of all of the evidence on the Application. This raises valid concerns about the state of competition laws in Canada.
The Toronto Star points out the makeup of the Tribunal, which it says raises questions about a lack of diversity. Four of the five judges are men, and all five are between the ages of 50-70, with considerable backgrounds at private law firms.
In his speech, Boswell looks to other countries that he says are actively working to strengthen competition laws, and better enforce existing laws, including the EU, America, the United Kingdom, and Australia. Boswell argues that Canada needs to do the same to better protect consumers and ensure a healthy and competitive marketplace.
Some Sectors Reluctant to Change, Saying Current System is Largely Sufficient
Detractors of the calls for revising Canada’s competition laws say that those who wish to make the changes noted above are mistaken. Some have taken the tact of calling proponents of the changes ‘hipster anti-trust’ virtue signalers who will limit prosperity. Others have said that Canada cannot follow the lead of a country like the United States when our economy is much smaller and requires different protections.
Edward Iacobucci, the former Dean of the University of Toronto law school, authored a paper that considered some of the proposed changes, and ultimately rejected them in favour of economic efficiency. Many business leaders and business lawyers agree that sweeping changes could be a problem while acknowledging that smaller, targeted changes might make the existing laws more effective.
It remains to be seen whether significant changes will be coming. We will keep watch for new developments and advise our business clients of any potential changes as soon as they are announced.
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