March 5, 2024 – Canada’s competition legislation should remain effects-based and should not enshrine into law presumptions of harm from mergers based on market share thresholds, according to the C.D. Howe Institute’s Competition Policy Council. In “A Step Too Far: Enshrining Structural Presumptions Governing Mergers in the Competition Act is Not Good for Canada’s Competitiveness,” the Council reviews ongoing competition law reform in Canada and cautions against changes that could harm Canada’s competitiveness.
Made up of leading legal practitioners and scholars, the Council recommends a principled, effects-based approach to competition law, anchored in the belief that large firms are not intrinsically harmful absent negative effects and that excessive government intervention in the economy is likely to cause more harm than good.
“Structural tests, especially bright-line rules, presume too strongly that the structure of the market determines outcomes, rather than recognizing a much more complicated relationship between structure and outcome, including the fact that intensely competitive, successful firms may grow in market share,” states Communiqué. “The majority of Council members believe that Canada’s competition legislation should remain effects-based and does not support the introduction of structural presumptions in Canada’s competition law statute.”
The Council notes that reform of competition law in Canada is proceeding in a piecemeal fashion involving three different bills. Bill C-56, An Act to amend the Excise Tax Act and the Competition Act, received Royal Assent on December 15, 2023. Bill C-59, The Fall Economic Statement Implementation Act, is currently at Second Reading in the House of Commons. Bill C-56 implements, and Bill C-59 would implement, a significant overhaul of Canada’s Competition Act. With respect to mergers, Bill C-56 repealed the efficiencies defence, and Bill C-59 will modify the merger notification thresholds and would give the Competition Bureau a longer period to address anti-competitive mergers that are not pre-notified to the Competition Bureau. Bill C-59 also proposes to modify how market concentration is taken into account.
Private member’s bill, Bill C-352 or Lowering Prices for Canadians Act, tabled last September brought into scope the discussion of bright-line rules and presumptions in the context of merger review. Amongst other things, Bill C-352 includes proposals to introduce (1) irrebuttable presumptions of illegality and (2) rebuttable presumptions of illegality based on market-share thresholds into the merger review process of Canada’s Competition Act. Unlike the proposals in Bill C-352, neither Bill C-56 nor Bill C-59 contain bright-line rules or structural presumptions.
In its Communiqué, the Council commends the government for adopting amendments that are consistent with Canada’s historical effects-based merger review regime, and as reflected in other jurisdictions globally, but stresses that “being out in front and prohibiting mergers based on bright-line tests or enshrining structural presumptions into our legislation would not be advisable for Canada’s competitiveness.”
For more information contact: Lauren Malyk, Senior Communications Officer, C.D. Howe Institute, 416-865-1904 Ext. 0247, lmalyk@cdhowe.org
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