Introduction
This bulletin is the fourth in our subject-matter specific series explained in the article: “A New Playing Field: Summarizing Sweeping Reforms to the Canadian Competition Act”, which summarizes key changes to Canada’s Competition Act (the “Act”). Over the last two years, the Act has been substantially reformed through three separate rounds of amendments, most recently on June 20, 2024, by Bill C-59, known as The Fall Economic Statement Implementation Act.[1]
The abuse of dominance provisions have been modified over each of the three rounds of amendments, with greater clarity being provided on what constitutes a violation through each round. Also, there has been a significant increase in the monetary penalties for those found to be in violation of these provisions.
In addition, there has also been an expansion of both the scope of what constitutes an “anti-competitive” act as well as the mechanisms available to bring an abuse of dominance proceeding in front of the Competition Tribunal (“Tribunal”). Accordingly, businesses with a large market share or a dominant market position in an industry should take careful note of these amendments and the impacts they may have.
Overview of abuse of dominance provisions (s.79 of the Act)
In general, an abuse of dominance occurs when a dominant firm (or firms, in the case of joint dominance) engages in a practice of anti-competitive acts or engages in conduct that is likely to prevent or lessen competition substantially in a relevant market. The Competition Bureau (“Bureau”) enforces s.79 of the Act through analysis of the following:
- one or more persons must substantially or completely control a class or type of business throughout Canada or any area thereof (ie. is a “dominant” firm(s)); and either
- that person has engaged in:
- a practice of anti-competitive acts (within the last three years); or
- a practice that must have had, be having or be likely to have the effect of preventing or lessening competition substantially in a market.
Prior to the amendments, the test required that all three of the above elements be met. However, the new test only requires one of the latter two elements i.e., dominance and either a practice of anti-competitive acts or a substantial prevention or lessening of competition).[2]
Key changes to the legal framework on abuse of dominance
1. Clarification on what constitutes an anti-competitive act
While previously an anti-competitive act could only be determined by reference to the list of non-exhaustive examples set out in the Act, the amendments now define an anti-competitive act 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.”[3]
In addition to the definition, the existing list of established anti-competitive acts was amended to also include:
- 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; and
- directly or indirectly imposing excessive and unfair selling prices.
It should be noted, however, that the details of what constitutes a selective/discriminatory response or excessive and unfair prices are not defined, which may be a cause for concern for companies attempting to structure their business dealings to comply with these provisions.
2. Prohibition orders for a broader range of conduct
While previously all three elements of (1) dominance, (2) anti-competitive acts, and (3) substantial lessening of competition had to be met in order for action to be taken, the new provisions permit the Tribunal to issue prohibition orders if a dominant firm meets either the anti-competitive acts or substantial lessening of competition requirement.
These prohibition orders allow the Tribunal to order a stop to the impugned conduct on a far less stringent basis than the previous test. However, in addition to the prohibition order, the other broader range of remedies including the monetary penalties are still available, but are subject to the old requirement that all three factors be met. This change should allow the Bureau to investigate and take enforcement action against a broader range of conduct.
3. Expanded list of factors in assessing effect on competition
In order to determine whether conduct has or is likely to have the effect of substantially lessening competition in the market, the Act provides for a list of factors that should be used by the Tribunal for consideration. Previously, the only guidance in the Act was that the Tribunal consider whether the practice was a result of superior competitive performance. The new updates provide a more comprehensive understanding and allow for greater predictability for firms by providing an expanded list of factors which now include:
- effects on barriers to entry, such as network effects;
- effects on both price competition and non-price competition, such as quality, choice or consumer privacy;
- the nature and extent of change and innovation in the relevant market; and
- any other factor that is relevant to competition in the market that is or would be affected by the practice.[4]
4. Increased range of available monetary penalties
The monetary penalties for a violation of the abuse of dominance provisions were updated twice in the three rounds of amendments beginning in 2022. As of now, the current administrative monetary penalty is an amount not exceeding the greater of $25 million ($35 million for each subsequent order) and three times the value of the benefit derived from the anti-competitive practice or, if that amount cannot be reasonably determined, 3% of the person’s annual worldwide gross revenues.[5]
These amounts are up from the pre-amendment penalties of $10 million ($15 million for each subsequent order), which marks a drastic increase in the potential cost of liability. Businesses should be aware that these heightened penalties may shift risk analysis to favour an emphasis on ensuring compliance, as the Bureau has stated its intent to prevent administrative monetary policies from being merely the “cost of doing business”.[6]
5. Private access to the Tribunal
The first round of amendments saw the introduction of private access to the Tribunal for abuse of dominance cases, allowing parties other than the Bureau to challenge a firm for alleged violation of abuse of dominance provisions. Private parties are now allowed to apply directly to the Tribunal for leave when their business is directly and substantially affected by a practice that the Tribunal has reason to believe constitutes an abuse of dominance.
Additionally, the most recent amendments taking effect on June 20, 2025 will further influence the way these cases are brought, as parties will only need to have part of their business substantially affected, rather than the entirety as was previously the case. In addition, the Tribunal will have the power to order those in contravention of the Act to make disgorgement payments (ie. to have a person found to have violated the abuse of dominance provisions to pay an amount up to the total value of the benefit derived from their conduct to the applicant or any others affected by the practice).
6. Competitor property control under abuse of dominance
The Bureau recently expressed its intent to scrutinize property controls under the framework of abuse of dominance,[7] in addition to the civil collaboration provisions.[8] Competitor property controls primarily deal with exclusivity clauses and restrictive covenants that allow tenants and former landowners to restrict their competitors from a particular space. Exclusivity clauses are used in commercial leases to prohibit the lessor from leasing land or a unit to a competitor of an existing tenant, or to limit how their products can be sold. Restrictive covenants prevent a purchaser or owner from leasing to competing businesses or operating a business that competes with the previous owner.
The Bureau has stated that these controls inherently restrict competitors, but may be justified insofar as they protect incentives for a retailer to make investments to enter into a market. However, this justification must be established in light of the circumstances and the particular terms of the agreements in question. Restrictive covenants, as opposed to exclusivity clauses, are typically long-lasting and are exclusionary, such that the Bureau has stated that their use is not justified except in exceptional circumstances.[9] In addition, administrative monetary penalties will likely be sought where possible as a result of these greater concerns.
Practises falling within the scope of abuse of dominance will undergo the same standard analysis. Dominance will be evaluated within the context of the terms of the property control provisions, in light of the effect they have on competitors and competition generally. The provisions themselves can create dominance where there is already a lack of effective competitors and where new barriers to entering the market are created. The anti-competitive act factor is typically inherent in property control, as the entire point of these provisions is to prevent competitors from operating in a certain area, but there will be consideration of whether it can be justified through its pro-competitive effects. This requires proof on behalf of the dominant firms to establish. Finally, the analysis on the effects on competition focuses primarily on the barriers to entry created by the arrangement and the relative inability of other firms to enter the market.
What these changes mean for your business: 5 compliance must-knows.
Abuse of dominance has gone through a significant revamp throughout the various rounds of amendments and businesses should be aware of these changes in order to properly plan their compliance strategies:
- Dominance remains a key criterion and is assessed on a case-by-case basis considering various factors. While no market share threshold guarantees dominance, the Bureau typically proceeds with further examination if a firm controls over 50% of a defined market (or less than 50% but holds significant market power) or if a group of firms alleged to be jointly dominant, together have a combined market share of over 65%.
- Business practices that will have adverse effects on competitors should be carefully scrutinized to ensure they comply with the expanded powers of the Tribunal.
- The new provisions providing further definition and guidance on what constitutes an anti-competitive act should be considered
- There will likely be new increased risks of litigation as private parties now have a greater financial incentive through the disgorgement payments to bring actions directly to the Tribunal, particularly in instances of class-actions.
- Firms who have competitor property control clauses in their lease agreements should carefully review whether their clauses constitute anti-competitive practices or create anti-competitive effects, and if so, whether or not these effects can be proven to be justified in the circumstances. Firms with restrictive covenants should be extremely careful, as the Bureau has signalled an intention to prohibit these clauses except in extraordinary circumstances.
Should you have any questions regarding compliance with the Competition Act including the recent changes made to it, please reach out to any member of Miller Thomson’s Competition / Antitrust team
[1] Bill C-59, An Act to Implement Certain Provisions of the Fall Economic Statement, 1st Sess, 44th Parl, 2024, cl 236(1) (Assented to 20 June 2024).
[2] Competition Bureau, “Guide to the December 2023 Amendments to the Competition Act”, December 18, 2023, online: https://competition-bureau.canada.ca/how-we-foster-competition/education-and-outreach/guide-december-2023-amendments-competition-act
[3] Competition Bureau, “Guide to the 2022 Amendments to the Competition Act”, June 24, 2022, online: https://competition-bureau.canada.ca/how-we-foster-competition/education-and-outreach/publications/guide-2022-amendments-competition-act
[4] Supra, note 2.
[5] Supra, note 3.
[6] Competition Bureau, “Abuse of Dominance Enforcement Guidelines”, March 7, 2019, online: https://competition-bureau.canada.ca/how-we-foster-competition/education-and-outreach/abuse-dominance-enforcement-guidelines#
[7] Competition Bureau, “Competitor property controls and the Competition Act”, August 7, 2024, online: https://competition-bureau.canada.ca/how-we-foster-competition/education-and-outreach/competitor-property-controls-and-competition-act
[8] See also Miler Thomson “Changes to Canada’s civil competitor collaboration provisions & property controls enforcement guidance”, online: https://www.millerthomson.com/en/insights/competition-antitrust-foreign-investment/changes-to-canadas-civil-competitor-collaboration-provisions-property-controls-enforcement-guidance/
[9] Supra, note 7.
