The Prime Minister yesterday announced a suite of new competition law changes targeting the cost of living.
Part of an ongoing review of competition policy, the new measures include an initial set of legislative amendments to the Competition Act designed to “enhance competition across the Canadian economy, with a focus on the grocery sector, which would help drive down costs for middle-class Canadians.” Parliament resumes on September 18, 2023, but no specific timeline was released for the introduction of the legislation.
Blakes has been actively participating in these developments, as they are among the most significant changes to the Competition Act in over a decade. Our engagement has included providing a submission to the Canadian government on proposed amendments and hosting a summit of practitioners and academics.
The three announced measures relating to the Competition Act affect all Canadian industries:
The government intends to provide the Competition Bureau (Bureau) with powers to compel the production of information to conduct effective and complete market studies. Such studies can include burdensome production orders that can be costly and time-consuming.
The government will remove the so-called “efficiencies defence,” which currently allows mergers with economic efficiency gains to proceed if those efficiency gains outweigh the anti-competitive effects from the merger. The defence had become the target of recent criticisms of Canada’s Competition Act, notwithstanding that it has only been applied in a handful of cases. Out of some 10,000 mergers since 1985, the efficiencies defence has been successfully used only twice before the Competition Tribunal to allow a transaction to close. The government’s rationale is that it “currently allows anti-competitive mergers to survive challenges if corporate efficiencies offset the harm to competition, even when Canadian consumers would pay higher prices and have fewer choices.”
Changes will be made to “empower the Bureau to take action against collaborations that stifle competition and consumer choice, in particular situations where large grocers prevent smaller competitors from establishing operations nearby.” The details of these measures remain to be seen, but at first glance, they appear to be aimed at restrictive covenants in leasing contracts, which received some recent critical media attention.
Depending on how the amendments are drafted and how the Bureau takes on its new responsibilities, there is a significant risk of regulatory costs increasing. The changes, once passed, also mean that mergers designed to improve the productivity of the Canadian economy will not be able to rely on a stand-alone efficiencies defence to close the deal or integrate assets.
The government has indicated that it will introduce the legislative changes in the “coming months.” Further clarity is expected to emerge in upcoming discussions with, and announcements from, the government. Blakes has been closely engaged in the government’s review of the Competition Act and is working with our clients to prepare for the coming changes.
For further information, please contact any member of our Competition, Antitrust & Foreign Investment group.
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