Beware Of Overreach In Canada Competition Law Reforms

May, 2024 – Many of the federal government’s recent reforms in competition law sensibly strengthen the enforcement powers of the Competition Bureau and private actors seeking redress for allegedly anti-competitive behavior. However, amendments to the Competition Act that simply make it easier to meet legal tests for orders against allegedly anti-competitive conduct are over-reach, says a new report by our friends at the C.D. Howe Institute.

In “Uncertainty and the Burden of Proof in Canadian Competition Law,” author Edward M. Iacobucci, a professor in corporate and competition law at the University of Toronto and Competition Policy Scholar at the C.D. Howe Institute, says that while strengthening the enforcement powers of the Competition Bureau is welcome, other amendments to the Competition Act imply more profound changes to the fundamental posture of competition law.

Specifically, there is a family of amendments and proposals to move away from the bedrock principle that the burden rests with the Bureau to prove, on a balance of responsibilities, that a merger or practice by a dominant firm is likely to be or is anti-competitive. 

For example, the author argues that lowering the burden of proof in mergers cases to “appreciable risk” of anti-competitive effects or something analogous would be a mistake.

“The overwhelming problem with this standard is that it is too easy to meet and fails to distinguish anti-competitive from benign conduct,” he states.  He also disagrees with proposals to rely on market shares rather than competitive assessments in mergers cases.  He objects in addition to abolishing the requirement to analyze anti-competitive effects in abuse of dominant position cases – recent amendments imply that pro-competitive conduct could be treated as an abuse of dominance.

Aside from competition law reform, the author notes that there are other policy reforms that could promote competition. 

 “Assuming competition has worsened in Canada, there are several remedial policies that I suspect would be far more important than competition law reform,” he says. “The OECD ranks Canada near the worst internationally in establishing regulatory barriers to competition.” 

 Regulation, internal trade barriers, restrictions on international competition and ownership, and other policies are all important contributors to reducing competition in Canada and, certainly in their collective impact, are more important than competition law, he argues.

Nevertheless, there are good reasons to take stock of Canadian competition law.

“The vulnerability of digital markets to market power stemming from network externalities and scale economies encourages reflection on whether the Competition Act continues to be suitable for present times.”

“I am skeptical of the narrative that the law requires sweeping reform to address the digital economy or to reverse a strong, secular decline in competition caused by competition law,” Iacobucci added. “But I am not skeptical that there is room for improvement. I encourage the government to focus on strengthening enforcement and to resist and even reverse recent reforms to the burden of proof.”

For The Silo, Edward M. Iacobucci, TSE Chair in Capital Markets, Faculty of Law, University of Toronto and C.D. Howe Competition Policy Scholar.

Read the full report here.

Study in Brief:

• There are good reasons to take stock of Canadian competition law. The vulnerability of digital markets to market power stemming from network externalities and scale economies encourages reflection on whether the Competition Act continues to be suitable for present times.

• Recently, a number of statutory amendments have been proposed to amend the Act, some have been tabled in Parliament and still others already adopted. The federal government recently passed consequential amendments that grant the Minister of Innovation, Science and Economic Development (ISED) the power to initiate market studies, to include scrutiny of vertical agreements as possibly anti-competitive collaborations, to repeal the efficiencies defence to mergers, and to lower the burden of proof in abuse of dominance cases.

• Many of the government’s actions to date sensibly strengthen the enforcement powers of the Competition Bureau and make it easier for private actors seeking redress for allegedly anti-competitive behaviour.

• There are, however, other actual and proposed amendments that imply profound changes to the fundamental posture of Canadian competition law. In particular there are actual and proposed amendments that move away from the bedrock principle that the burden rests with the Bureau to prove, on a balance of probabilities, that a merger or practice by a dominant firm is likely to be or is anti-competitive.

• While enhancing enforcement is welcome, legislative amendments that lower the burden of proof are a mistake.