Strategy

Competition Act: A new playground

Companies can expect more expenses because of the updated Competition Act.

Quietly tucked into the back of Ottawa’s stimulus bill are a few potent changes to Canada’s Competition Act that will likely have some businesses on speed dial with their lawyers. Two of the most controversial changes that became law on March 12 are an updated criminal conspiracy provision and a new merger notification process.

The criminal conspiracy provision, which dates back to 1889, states that it’s a criminal offence for unaffiliated companies to enter an agreement, such as price fixing or allocating customers, that unduly lessens or prevents competition. The old law required the resulting anticompetitive effect be proven to the courts. Under the new law, companies are guilty if they even enter such an agreement. “The cost to the business community and to the economy at this time is going to be phenomenal,” says George Addy, a lawyer with Davies Ward Phillips & Vineberg LLP in Toronto. “And it is highly likely that current business arrangements would be found unlawful and will have to be undone.”

Businesses have a year to get their houses in order, and many may have to go through a legal audit of all their current arrangements. Although lawyers counsel their clients against conspiracy, Addy says that practices such as airline code sharing — where an airline sells seats under its own name on another carrier’s flight—might now also be illegal.

Another change to the act could make corporate mergers a bit more messy for some companies. The short- and long-form filings have been scrapped in favour of an American-style single 30-day notification period. That sounds simpler, but the waiting period can be extended if the Commissioner of Competition issues a request for more information. And the commissioner no longer needs to ask a judge for that second request as was the case under the old law; it can now be issued directly to the parties.

“The reform is going to leave more discretion in the hands of the bureau,” says Kevin Wright, a lawyer with Davis LLP in Vancouver. “While it normally exercises that discretion fairly, the concern is how it’s going to be handled in the more controversial cases.” Nobody seems to know the potential scope of these new powers. The bureau is said to be sending signals to the business community that it will try to be reasonable and not unnecessarily delay mergers. And there is a bright side: mergers worth less than $70 million no longer go through the notification system as opposed to the old $50-million threshold.

The government hopes changes to the Competition Act will increase competitiveness and foreign investment, but some question the timing of adding more bureaucracy at a time when businesses are scraping to save every last dollar. The conspiracy provision, for one, may cost businesses a lot of money, because they must reassess many current transactions. As for the merger provision, some of Addy’s top multinational clients may be already reconsidering joint ventures in Canada.