On September 14, the Prime Minister’s Office announced forthcoming amendments to the Competition Act that will create new information-gathering powers, eliminate the “efficiencies defence” for mergers, and impose new restrictions on certain types of “collaborations” (including restrictive covenants in grocery store leases and, potentially, joint purchasing agreements).
The forthcoming amendments were announced by way of a highly politicized government press release titled “Fighting for the middle class”. The release announced a potpourri of unrelated measures notionally intended to address a housing shortage, support small businesses and combat food price increases. At the bottom of the press release, in a section meant to “address the escalating price of groceries for people”, the government announced that it would amend the Competition Act to:
- Compel production of information for market studies. The Competition Bureau will receive new powers to compel companies to provide information in the context of market studies. While the Bureau is principally a law enforcement agency, it also carries out occasional “market studies” to report on industries or markets of interest. There have been six such market studies since 2008, covering generic drugs, financial services, broadband internet, grocery stores and other markets. The Bureau does not currently have the power to compel companies to provide information or data in connection with such market studies, and has complained that this limitation hinders its ability to carry out market studies effectively. It is fair to question whether the social value of market studies outweighs the significant costs, privacy risks and inconvenience inherent in broadening the Bureau’s information-gathering powers. It is notable also that in respect of most (but not all) of the Bureau’s existing information gathering powers, the Bureau has been subject to a measure of court oversight in the exercise of those powers, but it appears that court oversight may not be a feature of these new information gathering powers.
- Eliminate the efficiencies defence. The Competition Act includes a “defence” for mergers that generate efficiencies that outweigh their anticompetitive effects. While this defence has been a lodestone for controversy in editorials and certain academic commentary, as we have pointed out in several places, the defence has had a minimal impact on merger review in Canada, when one considers the transactions it has saved. To wit, it has been used to save about five mergers since 2009; in the same period, about 60 transactions resulted in competition law remedies and therefore, presumably, were not saved by the efficiencies defence. There has never been a high-profile transaction saved by the efficiencies defence. While the elimination of the efficiencies defence will likely be heralded as a significant step to align Canadian merger law with other countries, in fact, its practical impact will be minimal. In our view, it is unfortunate that the scrapping of this distinctly Canadian economic tool was announced in a jingoistic government press release, with no (apparent) careful dispassionate consideration and debate. The suggestion that the efficiencies defence may somehow be tied to the current elevated levels of inflation is particularly bewildering; over the past 40 years, Canada has experienced periods of low inflation, high inflation and everything in between, with the efficiencies defence having been present the whole time.
- Prohibit certain types of collaborations. The Competition Act will be amended 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 Competition Act already prohibits collaborations that stifle competition – in some cases criminally – and it is not clear what is intended by this sentence, beyond potential measures to prohibit restrictive covenants in leases that impose territorial exclusivity. The government may intend to criminalize so-called “buying cartels” (e, agreements among purchasers of a product about the price and other terms of the purchases, including in the context of joint buying groups). As we have described, the non-criminal status of buy-side agreements was a carefully-considered economic policy that was then enshrined through prior amendments to the Competition Act, and it is not clear why this policy should change now.
These amendments are described as a “first set”, and they follow a previous “first stage” of amendments that were implemented in 2022. After the 2022 amendments, the government launched a wide-ranging consultation on the “future of competition policy in Canada”, and further amendments had been anticipated. Nonetheless, yesterday’s announcement was surprising, as the three discrete amendments were announced not as the outcome of a thoughtful policymaking process, but rather as part of a political “shotgun blast” aimed at addressing everything from housing to small business to groceries. These amendments could therefore be said to undermine the expectation – or perhaps hope – that the government will approach its own consultation in a substantive, policy-driven and rigorous manner.
The announcement is also noteworthy in its internal self-contradictions. For example, in the same part of the press release where the Competition Act amendments are announced, the government also announces that it “is calling for major grocery store chains to stabilize grocery prices” and threatens tax consequences if prices are not stabilized. The key criminal provision of the Competition Act is explicitly designed to prohibit the type of collusive price stabilization that the government now demands. Put differently, the forthcoming coordination that the government will demand would in other circumstances properly become the subject of a Competition Bureau criminal investigation.
Overall, while the announcement does not appear to reflect careful and considered policymaking, the three announced amendments are unlikely to significantly change the impact of competition law and policy in Canada.