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Recent Amendments To The Competition Act Introduce New Criminal Offences, Increased Administrative Penalties, And More – Employee Benefits & Compensation



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Bottom Line

On June 23, 2022, the Budget Implementation Act, 2022, No.
1
, S.C. 2022, c. 10 (“Bill C-19”), received Royal
Assent. Among other changes to various federal statutes, Bill C-19
makes significant amendments to the Competition Act,
R.S.C., 1985, c. C-34 (the “Act”), including new
provisions to criminalize business collusion amongst employers,
clarify certain terms under the Act, and increase administrative
monetary penalties. This article highlights the most important
amendments to the Act for employers.

While some of the changes are already in effect, others will
come into force on June 23, 2023, in order to provide employers
with ample opportunity to ensure their business practices are
legally compliant.

Wage-Fixing and No-Poaching Agreements Criminally
Prohibited

Effective June 23, 2023, provisions will be added to Part VI of
the Act to criminalize agreements between employers that: (i) fix,
maintain, decrease, or control wages or other terms of employment
(“wage-fixing agreements”); and (ii) restrict hiring or
attempts to hire each other’s employees (“no-poaching
agreements”).

The new provisions significantly expand the criminal conspiracy
provisions under section 45(1) of the Act, as they apply to any
unaffiliated employers rather than to only “competitors”.
In addition, the existence of a written agreement between employers
is not necessary to trigger a violation of these new provisions.
Instead, a court may infer the existence of an improper wage-fixing
or no-poaching agreement based on the surrounding
circumstances.

Employers who are convicted under section 45 of the Act may face
imprisonment for up to 14 years or a fine set at the court’s
discretion. (Currently, the maximum fine for criminal conspiracy
under the Act is $25 million but this maximum will now be
repealed.) An offending party may also be liable for civil damages
under section 36 of the Act.

“Drip Pricing” and “Anti-Competitive Acts”
Defined

The amendments also clarify a couple of terms under the Act:

  • The new section 52(1.3) under the Act describes “drip
    pricing” as “the making of a representation of a price
    that is not attainable due to fixed obligatory charges or
    fees” other than mandatory charges or fees imposed by
    government (e.g., sales taxes).

  • Section 78(1) now defines an “anti-competitive act”
    as “any act intended to have a predatory, exclusionary or
    disciplinary negative effect on a competitor, or to have an adverse
    effect on competition.” This definition is provided in
    conjunction with the non-exhaustive list of anti-competitive acts
    under the previous section 78(1). Further, a new anti-competitive
    act has been added to the non-exhaustive list: a selective or
    discriminatory response to an actual or potential competitor for
    the purpose of impeding, preventing, or eliminating a
    competitor’s participation in the market.

Increased Administrative Monetary Penalties

As mentioned above, the maximum fine for offences under section
45 of the Act will be removed.

Deceptive market practices under Part VII.1 of the Act will also
attract greater penalties. Fines for individuals are now the
greater of: (i) $750,000 (or $1 million for each subsequent
violation); and (ii) three times the amount of the derived benefit
from the prohibited conduct. For corporations, applicable fines are
the greater of: (i) $10 million (or $15 million for each subsequent
violation); and (ii) three times the amount of the benefit derived
from the prohibited conduct or, if that amount cannot be
reasonably determined
, 3% of the corporation’s annual
worldwide gross revenue.

Similarly, abuse of dominance under part VIII of the Act will
also attract greater administrative fines. The new maximum
penalties are now the greater of: (i) $10 million (or $15 million
for each subsequent violation); and (ii) three times the amount of
value derived from the prohibited conduct or, if this amount cannot
be reasonably determined, 3% of the offending party’s worldwide
annual gross revenue.

The above changes regarding deceptive market practices and abuse
of dominance are currently in force.

Check the Box

While a number of the amendments do not come into force until
June 23, 2023, employers are advised to review their business
practices as soon as possible to ensure compliance with the
Act.

During this timeframe, employers may wish to audit their human
resources policies to ensure that their practices remain lawful. In
particular, non-solicitation clauses appearing to restrict employee
mobility during and following the acquisition or sale of a business
should be reviewed by experienced counsel for legal risk and, if
necessary, modified or eliminated entirely.

Businesses may also wish to conduct regular compliance
assessments and take appropriate actions to mitigate any risks as
they arise.

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.

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