Changes to the Provisions on Mergers and Restrictive Trade Practices in the Competition Act

• 2.1.1.1 What is changing?

  Concentration is a measure that tells us about the relative size of firms in a market. A market is more concentrated when fewer firms make up a larger share of the market.

  Market share is the portion or percentage of the market that a particular firm represents. It can be measured in terms of sales, capacity, reserves or in other ways.

  The June 2024 amendments made important changes to the Act to better address mergers that would significantly increase concentration or market share. The law now reflects that mergers involving large players in highly concentrated markets are likely to harm competition substantially, unless there is evidence that proves otherwise.

  Previously, even where a merger would lead to high concentration in a market, the Tribunal could not intervene on this basis alone. After the changes, a merger is presumed to harm competition substantially if it results in a significant increase in concentration or market share (this is sometimes called a “structural presumption”). Another way to say this is that a merger could be “presumptively anti-competitive.”

  The structural presumption will apply if a merger meets specific thresholds stated in the Act. Where this is the case, the firms who are merging can provide a rebuttal to prove that the merger will not likely harm competition substantially. Otherwise, the merger will be found to breach the merger provisions.

  The amendments also add “the change in concentration or market share” brought about by a merger to section 93 of the Act. This section lists factors the Tribunal may consider in determining whether competition will be harmed substantially.

  This new law will allow better enforcement in concentrated markets. It is also consistent with the approach in the United States. There, enforcement guidelines and caselaw also include a structural presumption that can be rebutted.

• 2.1.1.2 How do we determine if a merger is presumptively anti-competitive?

  The presumption only applies to mergers that would lead to a significant increase in concentration or market share under the Act. We determine whether this is the case by looking at market shares and the concentration index in one or more relevant markets.

  The concentration index is defined as the sum of the squares of the market shares in the relevant market. For example, in a market where five competitors each hold a 20 percent share, the concentration index would be 2,000 (20² + 20² + 20² + 20² + 20²). The concentration index is sometimes called the Herfindahl-Hirschman Index (HHI).

  The concentration index takes into account how many competitors are in a market and how large they are. The index is larger when there are fewer firms, or when firms have larger market shares. It ranges from near 0 to 10 000. It is near 0 where there is a very large number of small firms. It is 10 000 where there is a monopoly.

  When two competitors merge, the change in the concentration index equals twice the product of the shares of the merging parties. For example, if a firm with 30 percent market share acquires a competitor with a 2 percent share, the change in the index is 120 (30 x 2 x 2).

  Under the amendments a merger is presumptively anti-competitive when the concentration index increases, or is likely to increase, by more than 100 points and one of the following is true:

  • The concentration index after the merger is, or is likely to be, above 1 800 points.

  OR

  • The combined market share of the firms who are merging or proposing to merge is, or is likely to be, more than 30%.

  This provides a clear rebuttable presumption that a merger harms competition substantially if it meets the thresholds. Mergers that do not meet the thresholds may still harm competition substantially and we will continue to assess them as we did before the amendments.

• 2.1.1.3 How will we assess mergers that increase market concentration?

  The structural presumption is a signal from Parliament that we should closely examine mergers in concentrated markets to prevent harm to competition. The amendments identify concentration levels that are likely to lead to competition concerns. These changes in the law will be reflected in our future reviews. Where our existing guidance discusses different approaches or criteria, like “safe harbour” thresholds in our guidelines, we will revise or replace it.

  Before the changes, firms planning to merge sometimes argued that even though the combined firms’ share would be large, there would only be a small increase in market share. The criteria in the Act for the structural presumption confirm that even mergers involving small firms may raise concerns. They also confirm that the change in market share required for the presumption decreases where one of the merging firms has a large share (in other words, there is a “sliding scale” approach to the required increase).

  The amendments also specify that mergers between competing buyers, as well as competing sellers, can be presumptively anti-competitive according to the same thresholds.

  We may assess market concentration early in our reviews. This will help us determine whether a transaction meets the specified thresholds. As a result, it will be helpful for merging firms to provide detailed data on market shares to the extent they possess such data.

  We may also focus on defining the relevant markets. This allows us to identify the set of products that are close substitutes for those of the merging firms. Market concentration is a better indicator of whether a merger poses competitive harm when markets are properly defined.

  There can be more than one way to measure concentration or market shares. The measures we use will depend on the nature of the market or industry we are looking at. We may consider multiple measures, or possible market definitions, to confirm whether a merger meets the thresholds.

  Under the Act, merging firms will have the opportunity to rebut a presumption that their merger will harm competition substantially. During our reviews, we will examine information the firms present and other information related to the factors in section 93 from other sources. Normally, mergers that result in a greater increase in concentration or market share are more likely to have larger competitive impacts. This will inform our assessment of whether a merger is likely to harm competition substantially based on all available information.

  Importantly, mergers can harm competition substantially even if they do not meet the concentration thresholds. In those cases, we will continue to pursue enforcement action or seek appropriate remedies. In certain cases, we may not assess market concentration in detail as other evidence may support that the merger will, or will not, harm competition substantially.

2.1.2 Efficiencies

• 2.1.2.1 What is changing?

  On December 15, 2023, the “efficiency exception” in section 96 was removed. The efficiency exception required the Tribunal to weigh efficiencies a merger would create against its anti-competitive effects.

  The efficiency exception continues to apply for anti-competitive mergers that closed or were notified to the Bureau before December 15, 2023. For all other mergers, it does not apply.

• 2.1.2.2 Will we still consider efficiencies when we analyze a merger?

  Parliament made two things clear when it chose to repeal section 96. First, efficiencies cannot save an anti-competitive merger. Second, they play a much smaller role in our analysis. The merger provisions focus on whether a merger will harm competition substantially, and claimed efficiencies will typically not impact this analysis.

  However, in certain cases, mergers may have benefits that are pro-competitive and increase rivalry, and examining these could help us assess whether competition is likely to be harmed substantially. We will continue to focus on how a merger affects competitive rivalry and market power. We do not determine whether a merger will harm competition substantially based on a particular outcome in terms of price, or any other individual aspect of competition. Instead, we assess how a merger affects competition, by analyzing all factors listed in section 93.

2.1.3 Labour markets

• 2.1.3.1 What is changing?

  References to labour have been added to section 92, the provision that allows the Tribunal to remedy mergers that harm competition substantially. The changes confirm that the merger provisions apply to labour markets.

  We routinely assess the effects of mergers in a variety of markets for the purchase of goods or services during our reviews. Subparagraph 92(1)(d) already allowed the Tribunal to consider any substantial lessening or prevention of competition in such markets. That said, the amendment is a signal from Parliament that mergers’ effects on competition in labour markets should be considered going forward.

  A focus on labour markets aligns with other recent amendments to the Act, such as adding section 45(1.1) prohibiting wage-fixing and no-poaching agreements.

• 2.1.3.2 When do mergers lessen or prevent competition in labour markets? How will we make decisions about those mergers?

  We assess whether mergers between competing buyers may lead to an ability to exercise market power either unilaterally or by coordinating with other firms. We apply the same general analysis in labour markets as we do in other buyer markets where the merging firms purchase inputs for their business.

  In labour markets, we focus on whether a merger will harm competition substantially for workers. This may occur, for example, where the merging firms compete to attract workers in the same areas, and this rivalry would be lost through the merger. Compared to the situation without the merger, this can lead to:

  • lower wages
  • worse terms for workers
  • reductions in non-wage benefits, or
  • other changes in workplace quality.

  The merger may also mean fewer workers are employed overall in that labour market. However, a merger can still cause substantial harm to competition without this effect.

  Before the December 2023 amendments, merging firms sometimes argued that job cuts were an efficiency that should be weighed against a merger’s anti-competitive effects under section 96. The amendments repealed section 96. After the changes, we will focus only on assessing whether there is substantial harm to competition under section 92 when we assess labour markets.

  We plan to review our merger guidance to ensure it describes how we analyze labour markets and identifies the features of those markets that are important.

2.2 Abuse of dominance

2.2.1 Changes to the test to stop an abuse of dominance

• 2.2.1.1 What is changing?

  The Competition Tribunal can now stop anti-competitive behaviours under the abuse of dominance provisions when:

  1. a dominant firm (subsection 79(1)) engages in either:
  2. A practice of anti-competitive acts (paragraph 79(1(a)). An anti-competitive act is any act intended to have a predatory, exclusionary or disciplinary negative effect on a competitor, or to have an adverse effect on competition.

  OR

  3. Conduct that has the effect of harming competition substantially (paragraph 79(1)(b)).

  Where all three elements are present remedies beyond stopping the behaviour are available, including administrative monetary penalties and breaking up a business.

  Before the changes a dominant firm had to engage in a practice of anti-competitive acts that had the effect of harming competition substantially for the Competition Tribunal to stop the practice under the abuse of dominance provisions.

• 2.2.1.2 How does this change affect our approach?

  Where an order to stop the behaviour of a dominant firm is an appropriate and effective remedy, we may take action to do so.

  This change gives us more options for how we deal with abuses of dominance. Having only two criteria that need to be proven may allow us to stop the behaviour at an earlier stage. However, in many cases we will continue to gather evidence on all three criteria.

  The impact on each case will depend on:

  • what kind of abuse it is
  • what evidence we uncover
  • what remedy is appropriate and effective

  Our main goal continues to be to protect and encourage the competitive process. Our priorities and how we enforce them relate back to this goal. We prioritize matters where action will have clear benefits for competition in a market, and make a difference for Canadians, especially vulnerable or marginalized Canadians.

  The way we go about assessing dominance is the same as it was before these changes.

2.2.2 Excessive and unfair pricing

• 2.2.2.1 What is changing?

  Section 78 defines what an anti-competitive act is for the abuse of dominance provisions. It also lists examples of anti-competitive acts. This list now includes “directly or indirectly imposing excessive and unfair selling prices.”

• 2.2.2.2 Is charging high prices, or “price gouging,” an abuse of dominance?

  No, not on its own. Simply charging high prices to consumers is not usually an abuse of dominance regardless of how high those prices are. For example, it is usually not an abuse of dominance if a firm charges high prices for a limited product or service that is in high demand, or if it charges some customers higher prices than others.

  An abuse of dominance may allow a dominant firm to increase their prices, but this does not mean high prices are an abuse of dominance themselves.

• 2.2.2.3 When can charging excessive and unfair prices be an abuse of dominance?

  Charging high prices would only be an abuse of dominance where it is done by a dominant firm and either :

  • meets the definition of an anti-competitive act because it is intended to have certain types of negative effects on a competitor or an adverse effect on competition, or
  • has the effect of harming competition substantially.

  If a firm charges too high a price this normally encourages customers to seek out other options which helps its competitors. So, high prices are not normally intended to have a negative effect on a competitor.

  Similarly, a firm usually does not charge high prices so that it can adversely affect competition. Firms make investments and take risks in the hope of making profits. High prices may therefore be how a firm is rewarded for those investments or risks. High prices can also attract new firms to enter the market.

  Charging excessive and unfair prices could also have the effect of harming competition substantially under paragraph 79(1)(b). This will only be the case where the pricing itself harms competition and is not simply high because the firm’s dominant position allows it to charge high prices. Further, the firm must have a plausible competitive interest in the market where competition is harmed substantially to satisfy the criteria in paragraph 79(1)(b).

  In some cases high prices are the result of other anti-competitive behaviours that can be pursued under the Act. In those cases we would usually take action on the anti-competitive behaviour that allows the firm to charge the high price, not the high price itself.

  We expect it will be rare that we investigate claims of excessive and unfair pricing. For us to investigate, we would typically need a credible reason to suspect it is an anti-competitive act or that it has the effect of harming competition substantially. This would include a clear theory of how the pricing harms competition.

• 2.2.2.4 What is an example of how charging excessive and unfair prices may be an anti-competitive act?

  As an example, charging excessive and unfair prices may be an anti-competitive act when they amount to a “constructive refusal” to supply. A constructive refusal occurs when a firm says it is willing to supply a product, but only in a way that means purchasing it is not a real option, such as because it is too expensive. The outcome is the same as if it simply refused to supply.

  A constructive refusal to supply through excessive and unfair pricing can also be a means to achieve other types of anti-competitive behaviour. For example, a dominant firm may tie two products together by charging an excessive and unfair price if they are purchased separately instead of together.

  We can also take action on constructive refusals to supply as a refusal to deal under section 75.

2.3 Section 90.1

2.3.1 Agreements that do not involve competitors

• 2.3.1.1 What is changing?

  On December 15, 2024, section 90.1 will apply to agreements that do not involve competitors or potential competitors. This will be the case if the Tribunal finds that a significant purpose of any part of the agreement is to prevent or lessen competition in any market. This includes both:

  • agreements between customers and suppliers
  • agreements between companies that are not competitors and are not customer and supplier

  For the Tribunal to make an order we will still have to show the agreement harms competition substantially.

  Until the changes come into effect, section 90.1 only applies to agreements between competitors or potential competitors.

  The Act also has criminal provisions relating to things like agreements between competitors to fix prices. This document does not cover those provisions.

  This change comes into effect on December 15, 2024.

• 2.3.1.2 How do we think about agreements that do not involve competitors?

  We focus on whether an agreement harms competition substantially. This normally involves considering if the agreement means at least one of those taking part in it can exercise more market power in one or more markets than if the agreement did not exist.

  It is important to note that other provisions may also apply to agreements that do not involve competitors. Agreements that do not involve competitors may raise issues under these provisions even if section 90.1 does not also apply:

  • the abuse of dominance provisions (sections 78 and 79)
  • price maintenance (section 76)
  • exclusive dealing, tied selling and market restriction (section 77)

• 2.3.1.3 What are some examples of agreements that do not involve competitors that might harm competition?

  An agreement could cause one party to disadvantage competitors of another party, or otherwise reduce the competition a party faces. For example, a retailer and supplier might agree that the supplier must pay the retailer to allow them to match if a competitor to the retailer undercuts them on price. This agreement could disadvantage competing retailers and make competition less intense among them. To avoid compensating the retailer, the supplier could:

  • raise prices to competing retailers, disadvantaging them, or
  • impose minimum pricing policies on retailers

  As well, if competing retailers know about the agreement, they may be discouraged from reducing their prices because they know the retailer will be able to match them on price at no cost.

  Competitor property controls are a specific type of agreement that does not involve competitors. Competitor property controls are restrictions on the use of commercial real estate and can raise serious competition concerns.

  For more information on competitor property controls, please consult the guidance on competitor property controls.

• 2.3.1.4 What should you do if you suspect you are involved in an anti-competitive agreement?

  If you suspect you are involved in an anti-competitive agreement, you may want to seek legal advice. You may also want to change or renegotiate the parts of your agreement you think may be anti-competitive.

  It is a crime if competitors agree to:

  • fix prices
  • allocate markets
  • restrict output
  • engage in bid-rigging

  If you know of or are involved in this kind of an agreement, please see:

  • Immunity and Leniency Programs under the Competition Act
  • Protection for whistleblowers
  • Forms for reporting suspicious activities

2.3.2 Efficiencies

• 2.3.2.1 What is changing?

  On December 15, 2024, the “efficiency exception” in subsections 90.1(4) to (6) will be removed. The efficiencies exception can require the Tribunal to weigh efficiencies an agreement would create against the anti-competitive effects.

  This change comes into effect December 15, 2024.

• 2.3.2.2 Will you still consider efficiencies arising from agreements?

  Parliament made two things clear when it chose to remove the efficiencies exception from section 90.1. First, efficiencies cannot save an anti-competitive agreement. Second, they play a much smaller role in our analysis. Section 90.1 focusses on whether an agreement will harm competition substantially, and claimed efficiencies will typically not impact this analysis.

  However, in certain cases, agreements may have benefits that are pro-competitive and increase rivalry, and examining these could help us assess whether the agreement harms competition substantially. We will continue to focus on how an agreement affects competitive rivalry and market power. We do not determine whether an agreement harms competition substantially based on a certain outcome in terms of price or any other individual aspect of competition. Instead, we assess how an agreement affects competition by analyzing all relevant factors.

2.3.3 Advance certificates for environmental collaborations

• 2.3.3.1 What is changing?

  Businesses that are considering collaborating with one another to protect the environment can apply for an advance certificate to seek confirmation that certain provisions of the Competition Act will not apply to the proposed collaboration.

  We can issue a certificate and register it with the Tribunal if we are satisfied that the proposed agreement meets both of these conditions:

  • is for the purpose of protecting the environment; and,
  • does not harm competition.

  We can impose any terms in the certificate we consider appropriate. For example, we may put terms in the certificate to ensure that competition is not harmed.

  A valid registered certificate means section 90.1 does not apply to the agreement as long as the firms follow the terms described on the certificate. It also means that the conspiracy and bid-rigging provisions (sections 45, 46, 47, and 49) do not apply.

  An application for an advance certificate can only be made before the businesses enter into the agreement. We can not grant certificates for agreements that are already in force.

• 2.3.3.2 How do we consider a request for an advance certificate?

  For more information about advance certificates, including how we consider requests, please see our guide.

2.4 Refusal to deal

2.4.1 Refusals to supply a means of diagnosis or repair

• 2.4.1.1 What is changing?

  Section 75, the refusal to deal provision, now includes references to a “means of diagnosis or repair” (MDR). An MDR can include:

  • diagnostic, maintenance, repair and calibration information
  • technical updates
  • diagnostic software or tools and any related documentation
  • service parts

  In many cases, section 75 could have applied before the changes when a firm refused to supply an MDR. With the amendments, section 75 is more likely to apply where the refused MDR is a license to intellectual property. However, it does not include trade secrets. If a firm refuses to supply an MDR, this can also be an abuse of dominance.

• 2.4.1.2 Do you now have a right to repair your own belongings?

  No, these amendments do not create a general “right to repair.” The provision deals with refusals to supply an MDR to businesses, not individual consumers. Even where the refusal to supply is to a business, it still has to satisfy a five part test on a case-by-case basis for the provision to apply.

2.5 Private access

• 2.5.1.1 What is changing?

  There will be several changes to when private parties can seek orders from the Tribunal under the restrictive trade practices provisions:

  • Private parties will be able to seek an order from the Tribunal requiring the firm that engaged in the anti-competitive behaviour to make payments to the private parties and other persons affected by the behaviour. In total, these payments can be up to the benefit the firm received from their behaviour. The Tribunal can set rules for how these payments should be made. These types of orders are only available to private parties, and not if we at the Competition Bureau make an application to the Tribunal.
  • Private parties will be able to seek orders under section 90.1, which allows for civil review of agreements.
  • The Tribunal will be able to allow private parties to make an application under sections 75, 77, 79 or 90.1 if it has reason to believe that the behaviour directly and substantially affects them in part of their business. At present, the Tribunal can only allow an application under those provisions (aside from section 90.1) if the applicants are directly and substantially affected in the whole of their business, not just in part of it. The Tribunal will also be able to allow private parties to make applications under those provisions if it is in the public interest.
  • If private parties end an application because of any settlement, they must give us a copy. We can ask the Tribunal to change or cancel that settlement if it harms competition.

  Changes to the Act will also allow private parties to make applications under certain provisions on deceptive marketing. Those changes are outside of the scope of this guidance.

  These changes come into effect on June 20, 2025.

• 2.5.1.2 How does private access interact with our enforcement of the Act?

  We view private access to the Tribunal as a complement that works together with our enforcement of the Act.

  We investigate all credible allegations about restrictive trade practices to the extent we consider appropriate. However, we also must make choices about how to use our limited resources to protect competition in ways that matter most for Canadians. This means we may not be able to take action in all cases. A private party may choose to pursue private access if they believe they are in a better position than we are to bring an application or if they disagree with our decision not to proceed with a matter.

  Our investigations and private access applications can affect each other. The Tribunal will not hear an application by a private party on a set of facts if:

  • we have started an inquiry or we have made an application to the Tribunal
  • we discontinued a previous inquiry because of a settlement

  Similarly, if a private party has been granted leave and made an application to the Tribunal we can not make an application to the Tribunal based on the same facts.

2.6 General

• 2.6.1.1 How will we choose between provisions? Will we investigate under multiple provisions at the same time? Will we make an application under multiple provisions?

  We may now make an application under any combination of provisions that relate to mergers and restrictive trade practices. Before the changes to the Act, we could not make applications to the Tribunal under certain combinations of these provisions.

  We often investigate behaviour that could be anti-competitive under multiple provisions. Our general approach is to focus on the nature of the behaviour and whether it gives rise to competition concerns, and we will consider whether multiple provisions apply. This is consistent with how we begin formal inquiries under a part of the Act, not under particular provisions.

  If we determine that more than one provision applies to a behaviour, we may make an application under multiple provisions.

• 2.6.1.2 Will we re-open previous investigations into restrictive trade practices?

  We end investigations where we do not think there is enough evidence that the practice meets the legal tests that apply to it. In some cases, restrictive trade practices we have investigated in the past may have continued after the changes to the Act . Where the legal tests have changed, we may have reason to investigate those practices again and take action under the Act. We will decide whether to re-open past investigations on a case-by-case basis. Our decision will often depend on which cases take priority and what our resources are.

  Parties may also consider private access to the Tribunal to deal with potential restrictive trade practices we have investigated before.

• 2.6.1.3 What cases will we prioritize?

  When we prioritize cases we consider how we can use our limited resources to protect competition in ways that matter most for Canadians. We ask ourselves questions like:

  • How clear is it that our legal tests are met? The stronger the arguments are that a behaviour goes against the Act, the more we will prioritize the case.
  • What products or services are affected? We prioritize cases dealing with products or services that play a big role in the lives of Canadians, or that are important for the Canadian economy.
  • Who is impacted? We prioritize cases that impact vulnerable or marginalized Canadians.
  • What is the scale of the impact? We consider both how many Canadians are impacted, and the size of the impact to those who are.
  • Will this case set a precedent? We prioritize cases that will help provide guidance for similar circumstances, or that will help develop competition law.

  We decide what to prioritize on a case-by-case basis. How important any one of these factors is will depend on the context and circumstances.

  Questions about priorities may have less of an impact on merger cases. In these cases, our review is often triggered when we have received a merger notification or a request for an advance ruling certificate (ARC). Our priority in these cases is to move quickly to identify the mergers that may substantially harm competition.

• 2.6.1.4 What are our plans to update our guidance documents?

  We plan on thoroughly reviewing our guidance documents and updating them as needed to reflect the changes to the Act.

  At present, we plan on creating a comprehensive guideline that covers all of the restrictive trade practices provisions. We have also launched a consultation on our updates to the Merger Enforcement Guidelines.