Earlier this year, the federal government passed significant amendments to Canada’s Competition Act as part of its Budget Implementation Act (BIA), which received Royal Assent on 23 June 2022.
These changes take preliminary steps to modernize Canada’s competition regime, which has not been significantly updated since 2008.
Much has changed over the last 15 years when it comes to Canada’s economy. The way Canadians purchase goods and services and the way business operate has evolved dramatically, but our competition legislation has fallen behind.
You can see a full guide to the 2022 amendments to the Competition Act on the Government of Canada website. While many of these changes are in effect now, certain others, such as the criminal conspiracy provisions, are set to come into force on June 23, 2023.
We sat down with David Dunbar, Caravel lawyer and former Senior General Counsel and Executive Director of Legal Services at Canada’s Competition Bureau, to cover some of the most important changes to the Competition Act and how owners can prepare their businesses before this new legislation comes into effect.
Wage Fixing and Non-Poaching
This new provision aims to protect workers from agreements between employers that fix wages and restrict job mobility. This amendment, once in force, will make it an offence for employers to agree to fix, maintain, decrease or control wages or other terms of employment. It will also target so-called “no-poach” agreements where employers agree to refrain from hiring or trying to hire one another’s employees.
Breaking these new rules come with significant penalties, including imprisonment for up to fourteen years and/or a fine to be set at the discretion of the court.
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The wage fixing amendment is important for all businesses, but especially business owners who have openly discussed employee wages with competitors in the past. While it may have seemed harmless before, it can now come with severe financial and legal consequences.
For any company that is in a merger or may be in a merger in the future, the non-poaching amendments will be of particular importance. With no-poach agreements being an integral and essential part of many, if not most, merger arrangements, this particular amendment seems destined to create much uncertainty.
We anticipate that businesses will be looking to their lawyers to tell them if their no-poach agreement is covered by the “ancillary restraints defence”: in other words, whether it can be defended as being directly related to and reasonably necessary for giving effect to a broader and lawful agreement.
Drip Pricing
Drip pricing is the practice of offering a product or service at a price that is unattainable because consumers must pay additional non-government imposed fees or charges to buy the product or service.
For example, if you sell concert tickets and the displayed price before checkout is $50 per ticket, but the price on the checkout page is $100 due to additional service fees or other charges (excluding taxes), this is considered drip pricing. This is now explicitly recognized as a harmful business practice.
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This change is especially important for eCommerce businesses that sell their products or services online. These new rules mean that the advertised price must be as close as possible to the final price (excluding any government-imposed taxes). Many eCommerce businesses will likely want to review their purchase flow and website checkout process to ensure they’re in line with these new rules.
Abuse of Dominance
The Competition Act will now define an “anti-competitive act” for the purposes of an abuse of dominance analysis as one that is intended to have a predatory, exclusionary, or disciplinary negative impact on a competitor or to have an adverse effect on competition.
The Act already contains a list of examples of business practices that are considered anti-competitive acts. The amendments add a new one: a selective or discriminatory response by a dominant player to make it more difficult for a competitor to enter a market, or grow or to remove a competitor from a market.
For bigger businesses, especially large technology companies, this means really having to think about whether there’s a procompetitive justification in play when buying out a start-up. Simply removing them as a potential competitor is something that will now run the risk of attracting the Bureau’s attention.
Reviewing Your Compliance Programs
It’s important to remember these legislative changes are very real and can have severe consequences for businesses that are non-compliant. The Competition Bureau is an enforcer of the law, and they work closely with other criminal investigators to combat white-collar crimes. They are paying attention, and they can and will launch investigations in cases where they think a business is offside of the Competition Act.
One of the best ways business owners can prepare for these new Competition Act amendments – and mitigate the risk of penalties – is to review their compliance programs. For smaller businesses that don’t yet have a formal compliance policy for their business, now is a great time to create one.
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Conducting a formal review will help ensure you aren’t engaged in any activities that will become prohibited as the amendments come into effect, as well as provide internal training for your team to avoid the risk of non-compliance in the future.
If you need help reviewing your current compliance program or drafting a new compliance policy for your business, we can help. Caravel is an alternative legal firm with over 85 qualified and experienced lawyers, including those specializing in compliance and regulatory law. Get in touch with our team today to find out more.