Easing the burden for refusals to deal and the new right to repair

Jun 28, 2024 4 MIN READ
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The amended Canadian Competition Act

This Update is part of Osler’s guide to the amended Competition Act, which canvasses the significant modernization of Canada’s antitrust law that has transpired following a series of high-profile amendments, culminating in Bill C-59’s royal assent. We invite you to explore our in-depth, multi-part guide examining the key takeaways for businesses operating in Canada.

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Historically, private parties have brought applications to the Competition Tribunal (the Tribunal) under the refusal to deal provision under section 75 of the Competition Act (the Act) more frequently than the Commissioner of Competition (the Commissioner), but with limited success. The available remedy under these provisions was limited to an order to supply on usual trade terms. Moreover, in order to obtain leave to bring an application, an applicant had to demonstrate that — among other things — a person was “substantially affected in his business” due to the inability to obtain adequate supplies of an input on usual trade terms. This requirement was, more often than not, a stumbling block in the context of section 75 and the related applications for leave, as the Tribunal consistently interpreted the requirement to refer to the entirety of the person’s business, rather than only a business unit or product line. Over the past two decades, six applications for leave were specifically denied with respect to alleged refusals to deal because only part of a business (whether by percentage of revenue or by lines of business) was affected.[1]

The amendments expand the refusal to deal provision by now providing that a party seeking leave is only required to show that they are “substantially affected in the whole or part of their business”. The new leave standard is discussed in more detail in the section of this guide discussing private actions. The available remedy has also been expanded somewhat: previously, the Tribunal could order a supplier to accept a person as a customer “on usual trade terms”, whereas now the Tribunal can order a supplier to accept a person as a customer “on the terms that the Tribunal considers appropriate”. We expect that the terms established by the Tribunal will be informed to some extent by the usual trade terms, though the Tribunal may require additional conditions to address concerns on a case-by-case basis. In addition (and as discussed in more detail in the private actions section of this guide), similar to the new remedies for other non-merger civil provisions of the Act, private parties may now seek monetary relief under the refusal to deal provision.

The amendments also introduce into section 75 a “right to repair,” which refers to the concept that end users of products and devices should have the freedom to repair those items, including by ensuring that manufacturers provide for timely access to the spare parts, software and technical support required to perform necessary repairs. A manufacturer’s rationale for imposing repair restrictions may include intellectual property, safety, liability/reputation and service quality. As with recent developments in other countries (e.g., the U.S. FTC’s Nixing the Fix: An FTC Report to Congress on Repair Restrictions [PDF]), Canada has for several years seen calls on multiple fronts for legislation providing for consumers’ right to repair, citing sustainability, economic benefits and consumer rights.

Section 75 now includes a right to repair, capturing circumstances where a supplier refuses to offer repair of or diagnostic services for a product, or to make the means of diagnosis or repair available within a specified period. Where the following statutory factors of the refusal to deal provision are demonstrated, the Tribunal may order a supplier to repair or provide diagnostic services for a product:

(a) The person is substantially affected in the whole or the part of their business or is precluded from carrying on business due to their inability to obtain adequate supplies of the product anywhere in the market on usual trade terms.

(b) The person is unable to obtain adequate supplies of the product because of insufficient competition among suppliers of the product in the market.

(c) The person is willing and able to meet the usual trade terms of the supplier or suppliers of the product.

(d) The product is in ample supply or, in the case of a means of diagnosis or repair, can be readily supplied.

(e) The refusal to deal is having or is likely to have an adverse effect on competition in a market.

The revised provision includes an important exemption confirming that nothing in the refusal to deal provision requires a supplier to disclose a trade secret. It may be that Tribunal case law will need to address the scope of this exemption.

[1] Broadview Pharmacy v. Pfizer Canada, 2004 Comp Trib 23, in the supply of pharmaceutical products to a pharmacy; 1177057 Ontario Inc [Broadview Pharmacy] v. Wyeth Canada Inc, 2004 Comp Trib 22, also in the supply of pharmaceutical products to a pharmacy; Sears Canada Inc v. Parfums Christian Dior Canada Inc, 2007 Comp Trib 6, in the supply of fragrances and cosmetics product; Construx Engineering Corporation v. General Motors of Canada, 2005 Comp Trib 21, in the supply of motor vehicles (also sought leave under section 77); Audatex Canada, ULC v. CarProof Corporation, 2015 Comp Trib 28, in the supply of total loss valuation services; and CarGurus, Inc v. Trader Corporation, 2016 Comp Trib 15, in the supply of vehicle listings services in online marketing. 

Authors: Shuli Rodal, Michelle Lally, Kaeleigh Kuzma, Christopher Naudie, Adam Hirsh, Alysha Pannu, Danielle Chu, Chelsea Rubin, Reba Nauth, Zach Rudge, Graeme Rotrand

The amended Canadian Competition Act: what businesses need to know

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