Bill C-59, which became law last month, amounts to a complete overhaul of Canadian competition laws.Sean Kilpatrick/The Canadian Press
Bill C-59 does far more than just target corporate greenwashing.
The legislation that became law last month amounts to a complete overhaul of Canadian competition laws. New rules aimed at ending greenwashing by requiring companies to back up their environmental claims have been a much-ballyhooed part of the update, but fundamental changes to the way mergers and acquisitions are reviewed, and the potential for dramatically higher fines and penalties, could have a much bigger economic impact.
Corporate deal-making was already in extended doldrums, and could decline further in the face of rising regulatory uncertainty. Experts complain there is a lack of clarity about virtually every aspect of the overhaul, leaving companies struggling to stay compliant with the new regime.
“We have all these new provisions in the Competition Act, and greenwashing is just one of them, that includes language where nobody knows what it means,” Shuli Rodal, chair of the competition, trade and foreign investment practice at Osler, Hoskin & Harcourt LLP, said in an interview. “You end up telling people that this is all very serious, but then they look at the provisions and they don’t know what they are supposed to do to comply.”
Many aspects of the final legislation took the legal community by surprise, said Chris Hersh, Canadian head of antitrust and competition law at Norton Rose Fulbright Canada LLP, because major changes appeared to have been made between when a draft was made public in December, 2023, and when the bill received royal assent six months later.
“Some things were slipped in at committee and then the bill was passed,” Mr. Hersh said. “There was a real rush to get this through before Parliament rose for the summer.”
Among the most significant last-minute changes was to flip the burden of proof on determining whether a proposed merger is anti-competitive. Previously, the Competition Commissioner, the head of Canada’s Competition Bureau, had to make the case that a certain deal would decrease competition in a certain industry “and then we got to poke holes in that case,” Mr. Hersh said.
Now, deal proponents must prove their arrangement is not anti-competitive, and the Competition Commissioner gets to poke holes in their case.
“That means the review process is going to become, for many deals, more complicated, longer, more expensive and potentially more uncertain,” Mr. Hersh said. “Deals that would have been very straightforward transactions historically are no longer straightforward, and there might be some deals where people will need to think a lot harder about whether they want to take the fight on.”
The bureau is keenly aware of the need for clarity. It released a statement earlier this month promising to issue guidance as quickly as possible. In an e-mailed response to questions on timing, spokesperson John Power said the bureau “will launch a public consultation in the coming weeks.”
But Mr. Hersh said new guidelines are unlikely to come quickly, and for deals that occur in the meantime, the uncertainty could mean unpredictably long delays.
“The bureau is going to have its hands full, because the changes are so broad and cover so many areas of the act, they are going to have to be issuing and reissuing guidance all over the place,” he said.
And all that is just for expansions of existing areas of the bureau’s authority. But the changes brought by Bill C-59 do not stop there.
The Competition Commissioner will now have the ability to challenge agreements between non-competitors, and as of June, 2025, that ability will also be extended to private parties. That means third parties with an interest in a deal that doesn’t involve them directly will soon be able to take their challenge directly to the Competition Tribunal, instead of having to ask the bureau to challenge a deal on their behalf.
Osler’s Ms. Rodal said this change was introduced to address lease covenants that grocery-store chains were including in deals with their landlords that prevented other grocery stores from opening.
“But that language is also very broad, there was a fair bit of excitement when it was first announced, even though people didn’t really understand what it meant,” she said.
Compounding the uncertainty, Ms. Rodal said, is the introduction of new and increased penalties under the new legislation. The maximum administrative monetary penalties regulators can levy have more than doubled from $10-million to $25-million, and companies found to be engaging in anti-competitive behaviour could now face far more substantial costs.
Under the newly amended abuse provision of the act, fines can now be up to three times the expected benefits of anti-competitive conduct. In situations in which those benefits cannot be accurately measured, companies may have to pay up to 3 per cent of their total worldwide revenues.
“It is very unclear where we are going to end up in terms of how this is going to change companies’ behaviour,” Mr. Hersh said. “The big thing now is there is a lot more uncertainty, and uncertainty combined with higher potential risk creates real challenges for companies. I think there is going to be a lot of conservatism as a result of that.”