The Dramatic Expansion Of Private Enforcement Of Canada's Competition Laws

For over a century, Canada has generally relied on a public enforcement model for the enforcement of its federal competition laws. Indeed, for most of the history of the Competition Act  (the Act), the Commissioner of Competition (Commissioner) has had a near-monopoly on enforcing the Act. In the 1970s, Parliament adopted a private right of action for damages, but only in respect of the most egregious forms of criminal conduct under the Act. In 2002, after much consultation and debate, Parliament adopted a limited right of private access to the Competition Tribunal (Tribunal). However, this right of private access was subject to a leave requirement, was limited to certain reviewable practices and included no ability to seek monetary relief from the Tribunal. 

In short, for decades, Parliament has deliberately pursued a limited and measured approach to permitting private enforcement of Canada's competition laws, particularly in light of the perceived excesses of private antitrust litigation in the United States. In addition, legislators and policy makers had expressed concern about the risks of tactical and opportunistic private litigation chilling pro-competitive conduct. In the absence of any compelling evidence of the “underenforcement” of Canada's competition laws, Parliament took the policy approach of leaving enforcement of Canada's competition laws to the Commissioner and limiting private access to the Competition Tribunal. 

In its recent amendments to the Act, Parliament has abandoned this measured approach and has opened the doors of the Tribunal to private litigants that seek to enforce the civil provisions of the Act. For the first time in Canada's history, Parliament has created a right for private litigants to pursue proceedings before the Tribunal for monetary relief on behalf of themselves as well as on behalf of others. In particular, these amendments include

• the creation of new rights of private access to the Tribunal in respect of civil deceptive marketing practices and anti-competitive commercial agreements
• a liberalizing of the test for “leave” that a private party has to meet to commence an application before the Tribunal, potentially enabling public-interest organizations to pursue proceedings before the Tribunal
• the creation of a new right for a private party to seek monetary relief from the Tribunal in respect of civil reviewable practices
• the recognition of a right for a private party to seek monetary remedies on behalf of other “affected parties” and the apparent creation of a nascent class action regime that will be overseen by the Tribunal

In order to give businesses an opportunity to assess their practices and the Bureau to publish guidance, as well as to provide time to consider the framework and procedural rules for private enforcement, most of these new private access provisions will be subject to a one-year delay before they come into force. In other words, they will only come into force on June 20, 2025.

These amendments represent a fundamental change in the enforcement of Canada's competition laws. For many observers, these significant amendments are troubling. While the concept of providing for some additional private enforcement has been discussed over the years (e.g., abuse of dominance, for which private enforcement came into effect in June 2022) the broad-sweeping amendments have been passed with limited consultation, they depart from Parliament's historically measured approach to private enforcement and they adopt open-ended remedies with no developed procedural rules for the award of collective relief. On their face, these new amendments potentially expose domestic and foreign companies that conduct business in Canada to tactical litigation and financial risks before the Tribunal in respect of market conduct that the Commissioner has declined to investigate or enforce.

We have set out our summary of these amendments under the headings that follow.

The existing regime

The existing regime in Canada (until the amendments take effect) provides for limited avenues to pursue private enforcement of Canada's competition laws. 

In 1976, Parliament enacted a limited private action remedy for damages under section 36 of the Act. However, a private party could only invoke this provision before the courts for actual damages arising from criminal conduct under the Act, particularly for price-fixing offences under section 45 and criminal deceptive marketing practices under section 52. Following the adoption of class proceedings legislation in the various provinces in the 1990s, the plaintiffs bar in Canada has successfully invoked these provisions to pursue collective monetary relief for class members who have suffered harm arising from criminal anti-competitive conduct. However, given the restrictions under section 36, plaintiffs have generally been unable to invoke these provisions in respect of non-criminal conduct under the Act, and they have had no ability to seek relief from the Tribunal. In a number of prior cases, private plaintiffs have sought to claim restitutionary relief and disgorgement under the Act, but the courts have consistently held that the remedies under section 36 are limited to actual damages.

In 2002, after a long policy debate, Parliament enacted amendments that opened up limited private access to the Tribunal for certain types of reviewable and non-criminal conduct. In particular, under section 103.1 of the Act, private parties have the ability to seek leave to bring applications to seek injunctive relief in respect of conduct constituting refusal to deal (section 75), price maintenance (section 76), exclusive dealing, tied selling and market restriction (section 77). In June 2022, this list was expanded to include abuse of dominance (section 79). Under these provisions, private litigants could seek “leave” or permission from the Tribunal to bring an application to pursue the enforcement of these civil reviewable practices. The test for leave has presented a high bar, requiring that an applicant show it has been directly and substantially affected in its business. But even if leave was granted, private litigants had no ability to seek any form of damages or monetary relief from the Tribunal. Given the limits of this remedy and the stringent leave test, over the past 20 years, the Tribunal has only granted leave in a limited number of cases, and most of these have been either dismissed or resolved through settlement. 

In June 2022, Parliament adopted new substantive amendments that criminalized certain types of wage-fixing and no-poach agreements under the Act. These amendments came into force in June 2023, and private parties are now able to pursue claims for actual damages under section 36 in respect of such criminal conduct. However, to date, there have been few signs of litigation in this area. 

Over the past two years, there has been renewed policy debate over a potential expansion of private enforcement of the Act, particularly in light of larger debates over inflation and consumer pricing in certain sectors in Canada. In its recent policy submissions, the Bureau has noted its resource constraints, and opined that there may be a role for private enforcement to supplement the Commissioner's enforcement of the Act in respect of certain reviewable practices. Through these new amendments, Parliament has dramatically expanded private access to the Tribunal and has transformed the enforcement of Canada's competition laws.

Changes to private enforcement of the Act

As a result of the new amendments to the Act which will come into force after a one-year delay, private parties will have significantly expanded access to the Tribunal to seek behavioural as well as monetary relief in respect of reviewable conduct under the Act. These new rights of access will be available to individuals and businesses (including competitive rivals) as well as potentially public-interest organizations. A private party must still obtain leave from the Tribunal to bring a proceeding, but Parliament has liberalized the existing test for leave to encourage more private enforcement of the Act.

While Parliament has adopted a broad range of changes to the regime of private enforcement under the Act, we have highlighted some of the most significant changes under the headings below.

Expanded rights of access to the Competition Tribunal

First, Parliament has amended the Act to permit private parties to seek leave from the Tribunal to pursue proceedings in respect of two additional types of anti-competitive conduct under the Act — namely, civil deceptive marketing practices and civil anti-competitive agreements. These expanded rights of access will come into effect on June 20, 2025, the first anniversary of the passage of the amendments.

New private right of access in respect of deceptive marketing practices 

Under these amendments, a private party will be able seek leave from the Tribunal to challenge a deceptive marketing practice under section 74.1 of the Act. In particular, a private party can seek leave to pursue relief against an individual or company that has made false or misleading representations to the public in respect of the promotion of the supply or use of a product or the promotion of any business interest. And as a result of the parallel amendments in respect of the new greenwashing provisions of the Act (see above), it will now be expressly open for a private litigant to seek leave to pursue a proceeding in respect of alleged misrepresentations relating to a product's benefits in protecting the environment or in mitigating the effects of climate change.

It remains to be seen how impactful this new right of access will be. Under the existing Act, private parties already have the ability to pursue claims for damages under section 36 for false and misleading representations that contravene the criminal deceptive marketing provisions of the Act. Private parties also have the ability to pursue claims for damages and other relief in respect of false and misleading representations at common law and under provincial consumer protection legislation, and the courts have certified numerous deceptive marketing class actions over the years. As a result, given the existence of a well established avenue to pursue monetary relief from the courts in respect of deceptive marketing practices, as well as the absence of a remedy of monetary relief under the new amendments (beyond the traditional restitutionary remedy), it is unclear whether these amendments will open the door to a wave of new litigation before the Tribunal, particularly given the continuing requirement to obtain leave. But as noted above, these amendments do appear to open the door for public-interest litigants to challenge deceptive marketing practices, including in respect of greenwashing claims.

New private right of access in respect of anti-competitive agreements

Under these amendments, a private party will be able to seek leave from the Tribunal to challenge a civil anti-competitive agreement under section 90.1 of the Act. In particular, a private party will be able to seek leave to challenge an agreement between two or more parties who are competitors on the alleged basis that the agreement has substantially prevented or lessened (or is likely to substantially prevent or lessen) competition in Canada. And as noted above, as a result of separate amendments of the Act that will come into effect in December 2024, section 90.1 will be extended to include agreements between two or more parties that are not competitors, if the Tribunal finds that a significant purpose of the agreement, or any part of it, is to prevent or lessen competition in any market.

In short, once both sets of amendments are in force on June 20, 2025, private parties will have the right to seek relief from the Tribunal in respect of a wide range of horizontal and vertical agreements that may have an impact on competition in a particular market. As discussed above, there is no precedent for the new “significant purpose” test under Canadian competition law, and these amendments could potentially be invoked by private parties in an attempt to challenge “any part” of a horizontal or vertical commercial agreement that has a “significant purpose” of restricting competition. In concept, a private litigant could seek access to the Tribunal to challenge leases, licensing agreements, distribution agreements, patent settlements and other types of agreements that contain exclusivity or non-compete provisions.

New incentives for pursuing existing private rights of access

As noted above, there are existing rights for private parties to seek leave from the Tribunal in respect of a broad range of civil reviewable practices, including abuse of dominance. However, given the existing leave test and the absence of monetary remedies prior to these amendments, there have only been a handful of private access cases that been pursued before the Tribunal to date. With the changes to the leave test and the new ability to seek monetary remedies, as well as the amendments to the test for abuse of dominance that came into effect in December 2023, an increase in applications by private parties can be anticipated that seek to invoke these existing rights of access in respect of refusal to deal (section 75), price maintenance (section 76), exclusive dealing, tied selling and market restriction (section 77) and perhaps most significantly, abuse of dominance (section 79).

Lower threshold for private parties to seek leave for access to the Tribunal

Second, Parliament has amended and loosened the test for obtaining leave to pursue proceedings before the Tribunal. Again, this lowered test will come into effect on the first anniversary of the amendments (June 20, 2025).

Historically, a private party seeking access to the Tribunal had to demonstrate that they were “directly and substantially affected” in their business by the alleged anti-competitive conduct. However, with the amendments, the test for leave has been lowered for most reviewable practices with the result that a private party will only be required to show that it has been “directly and substantially affected” in “whole or part” of their business. For the reviewable practices of refusal to deal (section 75), price maintenance (section 76), exclusive dealing, tied selling and market restriction (section 77) and abuse of dominance (section 79), a private party may obtain leave by advancing credible evidence that gives rise to a bona fide belief that the party may have been directly and substantially affected in “whole or part” of their business. In addition to these grounds, in an expansive change to existing law, a private party may also seek leave to bring a proceeding before the Tribunal in respect of these practices if the Tribunal is “satisfied that it is in the public interest to do so”.

However, it is important to note that a private party that is seeking private access in respect of a deceptive marketing practice (section 74.1) may only seek leave on the basis of the public-interest test. This restriction is interesting : Parliament appears to have been alive to the risk of tactical litigation by a competitive rival that claims that it was harmed in its business as a result of marketing claims, but it nonetheless extended a right of access to rivals and organizations that were not harmed to seek private access on public-interest grounds.

The liberalized test for leave that only requires a showing of a limited impact in respect of part of the applicant's business has no precedent in the long history of Canadian competition law. In addition, in the body of the amendments, Parliament has not defined or elaborated on the meaning of the phrase “public interest”. While some commentators have speculated that the Tribunal may resort to the limited case law that recognizes “public interest standing” to advance arguments in constitutional litigation, this case law is not analogous to the regime of private access given that the Commissioner has existing powers to bring proceedings and that there may be competitive rivals and/or customers who have a direct interest in the underlying applications. As a result of this amendment, the Tribunal will be placed in a significantly new role as gatekeeper of its processes in assessing what proposed proceedings are “in the public interest”.

It is important to note that there are other important aspects of the leave regime that remain unchanged under the amendments. For example, private enforcement remains unavailable where the Commissioner has already brought an application to the Tribunal challenging the conduct at issue, is currently investigating the conduct at issue or has already reached a settlement concerning the conduct at issue. Private parties must bring their applications no more than one year after the practice or conduct that is the subject of the application has ceased. Finally, in considering an application for leave, the Tribunal may not draw any inference from the fact that the Commissioner has or has not taken any action in respect of the matter.

New remedies for monetary relief

Third, Parliament has dramatically expanded the remedies for private parties by creating a right to pursue monetary relief from the Tribunal. Again, these new remedies will come into effect on the first anniversary of the amendments (June 20, 2025).

Prior to these amendments, private parties had no ability to pursue monetary relief from the Tribunal for any anti-competitive practice. As a result of these amendments, if a private party obtains leave to pursue a proceeding before the Tribunal and is successful on the merits of its application, the private party may seek an order from the Tribunal for the payment of “an amount, not exceeding the value of the benefit derived from the conduct […] to be distributed among the applicant and any other person affected by the conduct, in any manner that the Tribunal considers appropriate”.

There are several major implications of this change.

To begin, once all of these amendments come into force, for the first time a private party can pursue a claim for monetary relief before the Tribunal in respect of a broad range of non-criminal conduct under the Act, including in respect of refusal to deal (section 75), price maintenance (section 76), exclusive dealing, tied selling and market restriction (section 77), abuse of dominance (section 79) and anti-competitive agreements (section 90.1). For deceptive marketing practices (section 74.1), the only financial remedy available that is payable to private litigants is the traditional restitution remedy, and it is only available in certain cases.

Second, the existence of a new remedy for monetary relief will create new incentives for consumers, customers, competitive rivals, public-interest organizations and entrepreneurial plaintiff lawyers to seek access to the Tribunal in a broad range of cases where the Commissioner has not initiated any investigation or taken any enforcement action.

Third, the nature and scope of the monetary remedy is uncertain, particularly since there is no express language that appears to tie the remedy to actual loss or compensatory damages. There is a live debate as to whether this remedy could be limited to actual damages, restitutionary damages, actual disgorgement, an amount to ensure compliance or some other monetary measure. Some observers have opined that Parliament adopted a disgorgement remedy, since it adopted an express limit on the remedy that precludes recovery of amounts that exceed “the value of the benefit derived”. However, that language is only framed as a statutory limit, and there has been a long line of cases holding that there is no remedy of restitution or disgorgement under the Act. There is a compelling argument that Parliament's amendments do not change that settled law. However, given the open-ended language of the amendments, the scope of the amendments will likely be the subject of significant litigation and private parties are going to be incentivized to propose the broadest interpretation and the highest monetary awards.

Fourth, the amendments appear intended to permit some form of rights of collective recovery in favour of the applicant and any other person “affected by the conduct” or to “whom the products were sold”. This language has raised the question of whether Parliament has contemplated a form of class proceedings before the Tribunal. However, in contrast to the rigorous provisions of provincial class proceedings legislation, the amendments offer little guidance in respect of process or substance for this regime of collective relief. On their face, the amendments only address potential distribution and claims administration issues at the highest level of generality, and do not provide any meaningful guidance as to how a proceeding for collective relief would actually be litigated before the Tribunal. Perhaps most importantly, the amendments include no statutory authority for the Tribunal to issue orders that bind the interests of “absent class members” (i.e., interested parties, competitors or purchasers who are not before the Tribunal) or any mechanism for “absent class members” to opt out or object to the Tribunal's proceedings.

Many obvious procedural questions remain. For example:

• What test will an applicant need to satisfy to obtain a form of collective relief? There are currently no detailed class action procedural rules under the Competition Tribunal Rules. There has been speculation that the Tribunal could have reference to the “gap rule” under section 34 of those Rules, and thereby apply the test applicable in the Federal Court under the Federal Courts Rules. However, even the Federal Court test does not address all potential issues. We understand the Tribunal is working on more detailed rules, possibly to take the form of a practice direction or regulations.
• Will applicants be required to satisfy the traditional criteria for certification in common law jurisdictions (e.g., will they need to show the existence of an identifiable class? that there are common issues? preferable procedure?)? Will applicants need to show a causal relationship between the anti-competitive conduct and some type of common impact or gain? In other words, how does aggregate monetary relief work in cases where there is no right to damages per se?
• Which evidentiary standard will apply –the well known “some basis in fact” test? The same standard applied at leave applications?
• When will certification be addressed? Simultaneously with leave, or at some subsequent pre-merit stage?Will there be an ability for class members to opt out of the collective proceeding? Will settlements be binding on the class? Again, under the amendments, there is no statutory authority for the Tribunal to issue orders with preclusive effect, and it is unlikely that the Tribunal could find such authority in simple rule amendments. 
• How will individual issues be dealt with?

Conclusion

In summary, these amendments represent the broadest expansion of private enforcement of Canada's competition laws in a generation. The adoption of new rights of access to the Tribunal, a lowered test for leave, a new monetary remedy and a mechanism of collective relief, coupled with surrounding substantive amendments that have changed the test for abuse of dominance and civil anti-competitive agreements and that have adopted new reviewable practices (such as greenwashing) will create incentives for consumers, businesses, public-interest organizations and class action plaintiffs to pursue proceedings before the Tribunal. While Parliament has wisely delayed the impact of these amendments until June 20, 2025, domestic and foreign companies in Canada will be exposed to significant new litigation risks in Canada, and will need to assess their competitive practices and exposure risks before these amendments come into force. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.