Navigating Canadian Competition Law: A Manufacturer’s Guide to Avoiding Price-Fixing, Cartels, and Illegal Marketing

For any manufacturer operating in Canada, the landscape of competition law has shifted from a distant regulatory concern to an immediate and severe operational threat. It is no longer sufficient to simply “be aware” of the rules. The Canadian Competition Bureau’s heightened enforcement posture, coupled with recent, aggressive amendments to the Competition Act, means that what was once considered competitive strategy can now be interpreted as a criminal offence. The line between aggressive business tactics and illegal anti-competitive behaviour has become dangerously thin.

Many executives mistakenly believe compliance is about avoiding explicit price-fixing agreements. This is a critical strategic blind spot. The reality is that liability extends to a vast range of activities: how you set promotional prices, how you discuss salaries with industry peers, the information exchanged at trade association meetings, how you display fees on your website, and even the internal justifications for your pricing decisions. The era of casual industry coordination is over. The risks now include multi-million dollar penalties, contract rescissions, and imprisonment for executives.

This guide abandons generic legal advice. Instead, it provides a strict, warning-focused breakdown of the most significant areas of operational exposure for manufacturers under current Canadian law. We will dissect the legal tests, enforcement priorities, and strategic errors that lead to devastating legal consequences. The purpose is not to merely inform, but to equip you with the necessary framework to proactively identify and dismantle these legal threats before they jeopardise your entire enterprise. Your goal must be to move beyond passive compliance and into a state of active, informed risk management.

This article provides a rigorous examination of the most critical compliance areas under Canada’s Competition Act. The following sections break down each risk, from pricing and employment to marketing and acquisitions, providing the necessary intelligence to protect your business.

Predatory Pricing: When Is Lowering Your Prices Considered Anti-Competitive?

Predatory pricing is a deceptive practice where a dominant firm deliberately prices its products or services below its own costs to eliminate or discipline smaller competitors. Once the competition is neutralised, the predator can raise prices to supra-competitive levels to recoup its losses. This is not simply aggressive competition; it is a calculated strategy to harm the market itself, and the Competition Bureau scrutinises it intensely. The core of a predatory pricing case is not just low prices, but a demonstrable plan to subsequently profit from the reduced competition. This intent to recoup losses is a fundamental element of the offence.

The primary test used in Canada to assess predatory pricing is the “avoidable cost” standard. Essentially, if a company is selling a product at a price that does not cover its own average avoidable costs of producing and selling it, this is considered strong evidence of predatory intent. These are costs that could have been avoided had the company not produced the incremental units, such as raw materials and direct labour. In the landmark case Canada (Director of Investigation and Research) v. Air Canada, the Competition Tribunal endorsed this avoidable cost standard, setting a crucial precedent for all Canadian businesses.

For a manufacturer, this means any deep discounting strategy must be supported by a robust business justification that is not predicated on eliminating a competitor. Pricing below your average variable cost, even for a short period, creates significant legal exposure. Documentation is your only defence. You must be able to prove that your pricing decisions were made for legitimate commercial reasons, such as clearing excess inventory or responding to market-wide price drops, rather than with anti-competitive intent. Without this evidence, your pricing strategy could be misconstrued as a predatory act, leading to severe penalties. It is imperative that your finance and sales teams understand and document the cost basis for every significant pricing decision.

Trade Associations: How to Attend Industry Meetings Without Risking Cartel Allegations?

Trade associations serve a legitimate purpose in advancing industry standards and sharing knowledge. However, they are also the single greatest source of risk for cartel conduct. For the purposes of the Competition Act, trade associations are viewed as forums where competitors convene. The law is unequivocal: all trade association rules approved by competing members are considered “agreements between competitors” under Section 45. This means any discussion or formal rule that touches on competitively sensitive topics can be construed as a criminal conspiracy to fix prices, allocate markets, or restrict supply.

The danger lies in both formal agreements and informal “wink-and-a-nod” understandings. Discussions about future pricing intentions, company-specific costs, production levels, marketing plans, or customer allocation are strictly forbidden. Even seemingly innocuous conversations about “industry-wide fee pressures” or “unprofitable territories” can be used by the Competition Bureau as evidence of an illegal agreement. The risk is not limited to physical meetings; virtual conferences, email chains, and even informal social gatherings with competitors carry the same level of legal exposure. Your employees, especially senior sales and marketing staff, must be rigorously trained to recognise and exit any conversation that strays into these prohibited areas.

Your company’s participation must be governed by a strict compliance policy. This policy must prohibit any exchange of competitively sensitive information. Meeting agendas should be reviewed by legal counsel in advance, minutes must be kept meticulously, and employees must understand their obligation to object to and, if necessary, leave any meeting where improper discussions occur. Sanctioning or discriminating against members who do not adhere to association “guidelines” on pricing or services is also illegal. The perception that lower prices indicate lower quality must not be promoted. Your involvement in any trade association must be defensive and procedural, focused solely on legitimate, pro-competitive activities. Anything less is an invitation for a criminal investigation.

The New Wage-Fixing Offence: Why You Can’t Agree on Salaries with Other Employers?

As of June 23, 2023, the landscape of Canadian employment law has been fundamentally altered. It is now a criminal offence for unaffiliated employers to agree to fix wages or to refrain from poaching each other’s employees. These “wage-fixing” and “no-poaching” agreements are now treated with the same severity as price-fixing cartels. This is a “per se” offence, meaning the prosecution does not need to prove any negative effect on the market; the mere existence of the agreement is illegal. The penalties are severe, with potential consequences including up to 14 years imprisonment or unlimited fines.

This prohibition is exceptionally broad. An “employer” is not just the company itself but also includes directors, officers, and agents, such as HR professionals. Therefore, an individual employee who enters into an illegal agreement on behalf of the company can be prosecuted. The law covers any agreement to fix, maintain, decrease, or control salaries, wages, or any other “terms and conditions” of employment. This is not limited to monetary compensation; it includes benefits, allowances, job descriptions, working hours, and anything that could influence a person’s decision to accept or remain in a job. Even informal discussions between HR managers at different companies about salary bands or bonus structures are now fraught with criminal risk.

Furthermore, the law applies to “no-poaching” or “non-solicitation” agreements between employers. For an agreement to be illegal, it must be mutual; a one-way agreement where Company A agrees not to poach from Company B is not problematic unless it is part of a wider web of interconnected agreements. Importantly, the new law is not retroactive, but it will apply to any pre-existing agreements that are reaffirmed or enforced after June 23, 2023. As enforcement guidance from the Competition Bureau clarifies, the continued adherence to old “gentlemen’s agreements” now constitutes a criminal act. All HR practices, including salary benchmarking and recruitment policies, must be reviewed to eliminate any trace of coordination with other employers.

Drip Pricing: Why Hiding Mandatory Fees Until Checkout Is Now Illegal?

Drip pricing is a marketing practice where a company advertises a product or service at one price, but incrementally adds mandatory fees or charges throughout the purchasing process. The final price paid by the consumer is significantly higher than the initially advertised price. This practice is now considered a form of false or misleading advertising under the Competition Act. The law requires that any unavoidable charges be included in the headline price from the very beginning of the shopping experience. Hiding mandatory fees until the final checkout screen is illegal.

The Competition Bureau has taken an extremely aggressive stance on this issue. Enforcement actions have targeted numerous industries, including online retail, ticketing, and telecommunications. These cases have resulted in significant penalties. For example, the Bureau has secured Administrative Monetary Penalties (AMPs) of more than $12 million in various drip pricing cases since 2016. In a high-profile decision, the Competition Tribunal ordered Cineplex to pay a penalty for its practice of adding a mandatory $1.50 online booking fee to its advertised ticket prices only at the end of the transaction. This demonstrates a zero-tolerance approach to any pricing that is not transparent and all-inclusive from the outset.

For manufacturers, this risk is most acute in direct-to-consumer (DTC) e-commerce channels. Any mandatory fees—such as “service fees,” “processing fees,” or non-optional “environmental handling charges”—must be incorporated into the displayed price shown to customers on product pages and in search results. They cannot be introduced later in the cart or during checkout. The only charges that can be excluded from the headline price are provincial sales taxes, delivery fees calculated based on the customer’s location, and truly optional add-ons. You must audit your entire online checkout process to ensure that the first price a customer sees is the real price they will pay, barring taxes and shipping. Any other approach constitutes a direct violation of the Act and exposes your company to significant financial and reputational damage.

Pre-Merger Notification: When Must You Tell the Competition Bureau About Your Acquisition?

Acquiring another business is a standard growth strategy, but in Canada, it is subject to strict oversight by the Competition Bureau to prevent mergers that would substantially lessen or prevent competition. For larger transactions that exceed specific financial thresholds, pre-merger notification to the Bureau is mandatory. However, a series of recent amendments to the Competition Act have dramatically increased the Bureau’s power to review and challenge transactions, including those that do not meet the notification thresholds.

The most significant change is the extension of the limitation period. The Bureau now has up to three years after a merger’s completion to challenge it, a sharp increase from the previous one-year period. This applies even to non-notifiable transactions. This means that any acquisition, regardless of its size, carries a long-tail risk of being unwound by the Bureau if it is later found to be anti-competitive. Furthermore, the amendments introduced a structural presumption: a merger is now presumed to be anti-competitive if it leads to a significant increase in market concentration, shifting the burden of proof onto the merging parties to demonstrate that the deal will not harm competition. The “efficiencies defence,” which previously allowed parties to justify an anti-competitive merger on the grounds of economic efficiency gains, has also been completely removed.

The following table summarises the critical changes to the merger review process that you must understand before contemplating any acquisition. These changes demand a more conservative and proactive approach to competition law analysis in all M&A activities.

The Marketing Restrictions That Can Strip Your Federal Cannabis Licence?

Operating in the Canadian cannabis sector subjects a manufacturer to a dual-layer of intense regulatory scrutiny: the Cannabis Act and the Competition Act. The marketing and promotional rules are particularly severe. The Cannabis Act heavily restricts any promotion that could be seen as appealing to young people, that sets out a price or a price comparison, or that associates cannabis with a particular “way of life.” Violating these rules not only triggers penalties under the Cannabis Act but can also lead to the suspension or revocation of your federal licence to operate.

The intersection with the Competition Act creates further peril. Any promotional activity must be carefully structured to avoid being classified as an illegal inducement or a form of price maintenance. For example, offering discounts or rebates must be done in a way that clearly demonstrates it is a genuine price reduction and not a mechanism to control the final retail price. Bundling products can be problematic if it is perceived as forcing a retailer to carry a less popular product to get access to a more popular one, a practice known as “tied selling.”

Compliance in this area requires meticulous record-keeping and a deep understanding of both regulatory regimes. Your marketing team cannot operate independently; their strategies must be vetted for compliance with both Acts. Educational materials provided to retailers must focus strictly on product features, cultivation methods, and cannabinoid profiles, steering clear of any discussion that could be interpreted as directing their pricing or promotional strategies. The fundamental principle is that all pricing and marketing decisions by retailers must be made independently. Your role is to supply the product, not to influence its final presentation or price to the consumer.

How to Appeal a Government Tender Process That Was Biased Against Your Bid?

Participating in government procurement processes is a significant commercial opportunity, but it also carries the risk of encountering bid-rigging and other forms of collusion among competitors. Bid-rigging is a criminal offence under Section 47 of the Competition Act, where two or more parties secretly agree to manipulate a tender process. This can involve agreeing on which party will submit the winning bid, fixing the prices in bids, or agreeing not to bid at all. Such conduct undermines the fairness and integrity of the competitive process and carries a maximum penalty of up to 14 years imprisonment for individuals involved.

If you suspect a tender process has been compromised, you have several avenues for recourse. The first step is to meticulously document the evidence. Red flags for bid-rigging are often subtle but can form a compelling pattern. These include identical pricing or terms across multiple bids from supposedly competing firms, a consistent rotation of winning bidders across different tenders, the sudden withdrawal of a low bidder without a credible explanation, or unusual subcontracting arrangements where the winning bidder hires losing bidders to perform parts of the work.

Once you have gathered evidence, you can file a formal complaint with the procuring government department, the Canadian International Trade Tribunal (CITT), or directly with the Competition Bureau. The Bureau has a robust immunity and leniency program to encourage whistleblowers to come forward. If your complaint is substantiated, it can lead to a criminal investigation, the disqualification of the colluding bidders, and potentially the re-tendering of the contract. It is critical to act decisively and follow formal channels. Attempting to address the issue informally could compromise your legal position. Your internal procedures should include training for your bid team to recognise and report these red flags immediately.

How to Rescind a Business Purchase Contract Due to Financial Misrepresentation?

When acquiring a business, thorough due diligence is paramount. This process typically focuses on financial statements, assets, and liabilities. However, an often-overlooked area of critical risk is the target company’s compliance with competition law. Discovering post-acquisition that the business you purchased was engaged in illegal activities like price-fixing or market allocation can fundamentally undermine its value and expose you to inherited liabilities. This discovery may provide grounds to rescind the purchase contract entirely.

A contract can be rescinded on the basis of misrepresentation if the seller made a false statement about a material fact that induced the buyer to enter the agreement. The failure to disclose ongoing or past violations of the Competition Act can be considered a material omission. For example, if a significant portion of the target’s revenue was derived from an illegal price-fixing cartel, the business’s true, sustainable earnings are far lower than what was represented. A court may find that this undisclosed illegality constitutes a misrepresentation that goes to the very heart of the business’s value, justifying the extreme remedy of rescission, which effectively unwinds the transaction.

To protect yourself, your due diligence process must explicitly include a competition law audit. This is not a standard financial review. It involves scrutinising pricing history for unusual patterns, reviewing all trade association communications, examining customer and supplier agreements for restrictive clauses, and investigating employment practices for any signs of wage-fixing or no-poaching agreements. The presence of any of these red flags requires immediate and deeper investigation. Incorporating specific representations and warranties related to Competition Act compliance into the purchase agreement is a mandatory protective measure.

The regulatory environment in Canada is unforgiving. Proactive, rigorous, and documented compliance is no longer a best practice; it is a fundamental requirement for survival. Your next step must be to initiate a comprehensive internal audit of the risk areas identified in this guide, led by legal counsel with expertise in Canadian competition law.