PHOTO: Ottawa is receiving pushback over amendments it has tabled to the Competition Act that would, among other things, dramatically raise penalties on companies that break the rules. THE CANADIAN PRESS
This spring, the government tabled a series of amendments to the Competition Act that would, among other things, dramatically raise penalties on companies that break the rules. The amendments would also make wage-fixing a criminal offence, a change that MPs have been calling for in the wake of the Hero Pay scandal in 2020, when the top three grocery chains all cancelled $2-an-hour bonuses for their staff on the same day.
Policy experts, including the federal competition watchdog himself, have heaped criticism on Canada’s competition rules in recent years, calling it too outdated and limp to scare modern, deep-pocketed corporations into doing the right thing. Some of those critics say the government’s proposed amendments, tucked into the annual budget bill in April, are a no-brainer that will offer better protections for consumers and workers at a time of runaway inflation not seen in more than a generation. So the government can’t afford to wait.
But lawyers and think tanks have cautioned against cramming complex legal reform into an omnibus bill. As the Canadian Bar Association put it, the changes have nothing to do with the nation’s budget, so they shouldn’t be in a budget bill. The C.D. Howe Institute accused Ottawa of moving on the matter with “undo haste.”
Four Conservative MPs who sit on the industry committee wrote a letter on May 20 asking the government to pull the amendments from the budget bill because of “a lack of consultation which may result in unintended and unforeseen consequences.”
One of those unintended consequences, at least for business lobbyists, could be a chill on corporate investment in Canada. Currently, the so-called administrative monetary penalty for companies that break competition law is $10 million for the first offence, and $15 million for subsequent offences. Ottawa has recognized those fines are far too low to make much of a difference for any major market player. So the government wants to turn the penalty into a sliding scale.
The government wants to be able to charge penalties that are three times the value of whatever benefit the company was deriving from its anti-competitive practices. And if that can’t be calculated, the government will ask for three per cent of the company’s gross global revenues. For multinational corporations with billions in sales, that’s a big number.
“That could potentially be a number that is hugely in excess of $10 million,” said Michael Kilby, a lawyer who heads up the competition and foreign investment group at Stikeman Elliott LLP.
The Canadian Chamber of Commerce called the proposed penalties a “quantum leap from the status quo.”
“The prospect of an opaque 3x value of quantifiable harm and, if that is not possible, tying penalties to global revenues — with no cap — could lead to unintended harmful consequences for the Canadian economy, including deterring investment,” Mark Agnew, the chamber’s senior vice president of policy and government relations, wrote in a brief to government.
Vass Bednar, one of the most outspoken advocates for competition reform, has dismissed some of the criticisms by saying “people are squirming.”
“I don’t mean ‘the people.’ I mean corporate interests that have long benefited from the policy inertia on competition,” Bednar, executive director of McMaster University’s master of public policy program, told the House of Commons industry committee during a May 20 hearing to study the law changes. “We don’t need any more backroom baseball or tapping the brakes on reform.”
Industry Minister François-Philippe Champagne’s office, which oversees competition policy, is framing the budget bill amendments as a first step, a few quick fixes that can be done now, to be followed by a much broader review of the entire Competition Act that will look to update it for the digital age and bring it more in-line with allies.
“We have been clear that these amendments are a preliminary step to modernizing the act,” Champagne’s spokesperson Laurie Bouchard said in an email on June 8.
For Bednar, that preliminary step is a crucial one. The amendments are a “down payment” on reform, she told the industry committee last month. And they can’t be delayed by corporate interests.
“They are a test of whether Canada takes competition reform seriously. For way too long, we quite simply have not,” she said. “These proposed changes are the absolute lowest hanging fruit. We shouldn’t be examining them further at this point, because they clearly serve the public interest at a time when Canadians are under intense economic pressure.”
Despite the pushback, Liberal MP and industry committee member Nathaniel Erskine-Smith said he suspects the Competition Act amendments will remain on the budget bill without substantial changes.
“I don’t think they will succeed,” he said of the bill’s opponents push to cut the amendments. “I think Vass is right that it’s important for the government to set down this marker and express its seriousness.”