Canada: Radical Expansion of Private Competition Law Litigation

The Government of Canada has proposed legislation that will amend the Competition Act (the “Act”) to permit (i) far more private competition law litigation, and (ii) the awarding of significant new financial remedies for breaches of different provisions of the Act. These changes give plaintiffs new strategic options and litigation incentives, and create new strategic risks for defendants.

Here are four things to know about this new legislation and private competition law litigation in Canada:

New Financial Remedies and Incentives for Private Litigation (Including Class-Action Like Litigation)

At present, other than in criminal cases (like cartels), private plaintiffs cannot win any type of monetary award for proving the existence of or injury from anti-competitive conduct. Under the new legislation, the Competition Tribunal can order that a defendant “pay an amount, not exceeding the value of the benefit derived from the [anti-competitive conduct], to be distributed among the [plaintiff] and any other person affected by the conduct, in the manner that the Tribunal considers appropriate.”

Key Takeaways

• The opportunity for a plaintiff to be awarded a potentially significant amount of money from the defendant for its anti-competitive conduct creates strong incentives to launch private competition law litigation, and new risks for defendants.
• The ability to obtain a financial award that is to be distributed to third parties, including persons other than the plaintiff, may create incentives for the class-action plaintiff’s bar to attempt to launch non-cartel competition law litigation.

New Lowered Test for Leave

At present, and other than in criminal cases (like cartels), private parties can only litigate competition law claims with leave of the Tribunal. The test for leave is high and it effectively bars large and multi-product firms from launching private competition law litigation. Under the new legislation, a private party will still need to obtain leave of the Tribunal, but will be able to obtain such permission if it is “directly and substantially affected in the whole or part” of its business by the alleged anti-competitive conduct, or if the Tribunal “is satisfied that it is in the public interest” to grant leave.

Key Takeaway

• The test for leave has been lowered significantly, and a far greater number of plaintiffs (including large and multi-product firms) will be granted leave to launch non-cartel private competition law litigation. Public interest litigants may also gain the ability to bring proceedings.

Competition Law Expanded to a New Category of Conduct, and New Options and Flexibility for Plaintiffs in Litigation

The new legislation identifies a new category of conduct that contravenes the Act. Notably, a refusal to supply a person with a “means of diagnosis or repair” (including “diagnostic and repair information, technical updates, [or] diagnostic software or tools”) can be contrary to Canadian competition law and subject to challenge by the Commissioner of Competition or a private party. In addition, the new legislation permits private parties to commence competition law litigation alleging a civil conspiracy contrary to the Act (which was not previously permissible). Finally, the new legislation permits the Commissioner and private plaintiffs to allege that a defendant’s conduct breached multiple sections of the Act – e.g., that the conduct constitutes a civil conspiracy and an abuse of dominance.

Key Takeaways

• The “right to repair” is now a part of Canadian competition law.
• A private plaintiff or the Commissioner can allege that a defendant’s conduct breaches multiple provisions of the Canadian competition law in the same proceeding, which largely removes the risk of launching litigation under an incorrect section of the Act.

New Notification Requirement for Settling Private Competition Law Litigation

When private parties settle competition law litigation that has been brought before the Tribunal, the new legislation requires that they serve a copy of that settlement to the Commissioner. The new legislation creates a process for the Commissioner to challenge the settlement, and for the Tribunal to rescind or vary the settlement, if the settlement “has or is likely to have anti-competitive effects.” Failure to provide such notification can result in sanction, including an administrative monetary penalty of up to $10,000 per day.

Key Takeaways

• The new mandatory processes that apply to the settlement of private competition law litigation may make achieving acceptable terms of settlement more complex.
• This new notification requirement resembles the notification requirement that exists under United States law for settlements of Hatch-Waxman litigation, except this notification requirement does not apply to settlements of pharmaceutical patent litigation, but applies to all types of private competition law litigation under the Act (other than criminal cartel cases).

Looking Forward

The proposed legislation is contained in the Government’s budget, and as such is expected to become law late this year or early next year. However, most of the changes described above are not expected to come into effect until one year after the legislation becomes law.

For further information concerning this draft legislation, please contact any member of our Competition and Foreign Investment Group.