Trade and Investment Regulation in Canada

Competition Law

The Competition Act (Act) is Canada’s antitrust legislation. It is the legislation of general application and reflects classical economic theory regarding efficient markets and maximization of consumer welfare. It is administered and enforced by the Competition Bureau (Bureau), a federal investigative body headed by the Commissioner of Competition (Commissioner). The Act may be conveniently divided into two principal areas: criminal offenses and civilly reviewable conduct, which includes merger regulation.

Criminal offenses

What business practices are subject to criminal liability?

The main criminal offenses in the Competition Act relate to conspiracy and bid-rigging.

The conspiracy provisions prohibit competitors (or persons who would be likely to compete) from: conspiring or entering into an agreement or arrangement to fix prices; allocate sales, territories, customers and markets; or fix or control production or supply. Contravention of these provisions constitutes a per se offense (i.e., there is no need to show an effect on competition to secure a conviction). Prior to 2010, proof of an undue limiting, lessening or prevention of competition was required to establish the offense. The penalty upon conviction is imprisonment for up to 14 years and/or a fine not exceeding C$25-million per offence.

The bid-rigging provisions prohibit two or more bidders (in response to a call or request for bids or tender) to agree that one party will refrain from bidding, withdraw a submitted bid, or agree among themselves on bids submitted. The provisions do not apply when the parties clearly inform the party who issued the tender about the joint bidding agreement at or before the time they submit the bid. The penalty upon conviction is imprisonment for up to 14 years and/or a fine at the discretion of the court.

How are criminal offences prosecuted under the Competition Act?

The Commissioner, either on his own initiative or following a complaint from six resident Canadians, can initiate an investigation into a possible violation of the criminal provisions of the Act. At any time during his investigation, the Commissioner can refer the matter to the Director of Public Prosecutions (DPP). The DPP is the only person who may initiate criminal proceedings for contraventions of the Act. To obtain a conviction, the DPP must satisfy a court beyond a reasonable doubt that an offence has been committed.

It is important to note that, under the Act, a foreign competition authority that is a party to a mutual legal assistance treaty with Canada may request, subject to ministerial authorization, the assistance of the Commissioner to further its investigation — even where the conduct alleged as anti-competitive did not occur in Canada. Evidence obtained by the Commissioner in a Canadian investigation may be provided to a foreign competition authority without the authorization of the party being investigated.

Recent enforcement action

Consistent with a global trend among competition authorities, the Commissioner has devoted substantial resources to enforcing the criminal conspiracy provisions of the Act, particularly so-called “hard core” cartels involving agreements between competitors to fix prices or allocate markets or customers between themselves. The single largest fine imposed thus far on a corporation is C$48-million for conspiracy and C$30-million for bid-rigging. Executives have also been fined and subjected to jail terms.

What business practices may constitute civilly reviewable conduct and be subject to possible review before the Competition Tribunal?

Certain non-criminal conduct may be subject to investigation by the Bureau and review by the Competition Tribunal (Tribunal). The Tribunal is a specialized body that is comprised of both judicial and lay members. Reviewable practices are not criminal and are not prohibited until made subject to an order of the Tribunal specific to the particular conduct and party. Matters reviewable by the Tribunal include, among other things, non-criminal competitor collaborations, refusals to deal, exclusive dealing, tied selling, market restriction, price maintenance and abuse of dominant position.

If the Tribunal finds, on the civil standard of the balance of probabilities that a person has engaged in the reviewable activity, it may, depending on the activity, order a person to do or cease doing a particular act in the future, and to otherwise take any other action necessary to fix the anti-competitive harm. The Tribunal is also empowered to impose administrative monetary penalties of up to C$10-million (and, in the case of repeat offenders, C$15-million) under the abuse of dominance provisions. There are criminal penalties for failure to comply with an order once it has been made.

Private parties have the right to bring complaints directly to the Tribunal in relation to five matters: refusals to deal, exclusive dealing, tied selling, market restriction and price maintenance. At one time, the Commissioner was the only person who could bring reviewable trade practices before the Tribunal.

What business practices will attract civil liability? What is the exposure to civil damages?

Section 36 of the Act establishes a private right of action for losses suffered as a result of another party’s breach of any of the criminal provisions (set out in Part VI) of the Act (see Section IV, 1.1, “Criminal offences” for a discussion of the main criminal offences under the Act), or failure to comply with an order made pursuant to the Act (such as, by the Tribunal in connection with civilly reviewable conduct). The constitutional validity of this provision has been upheld and increasing numbers of parties are seeking to enforce this right.

Unlike in the U.S., section 36 limits the recoverable damages to losses that can be proven to have resulted from a violation of the Act or the failure to comply with the order in question, plus costs.

Section 36 provides that the “record of proceedings” in proceedings that resulted in either (i) a conviction of a criminal offence under the Act or (ii) a finding of a failure to comply with an order made under the Act, is prima facie proof of the alleged conduct in a civil action. Furthermore, any evidence given in the prior proceedings as to the effects of the conduct on the person bringing the civil action “is evidence thereof” in the civil action.

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