Anonymised, illustrative composite. A buyer acquiring a packaging-equipment distributor found an indefinite, all-Canada exclusivity clause buried in a supply agreement with its principal manufacturer — safe when it was signed, and no longer safe by the time the buyer found it.
At a glance
A buyer was acquiring a distributor of industrial packaging equipment, with a bolt-on acquisition of a second, smaller distributor in an adjacent territory planned to follow shortly after. Diligence on the first deal turned up a restrictive covenant embedded in the target's original supply agreement with its principal manufacturer: the distributor was barred from carrying any competing manufacturer's product line, anywhere in Canada, with no sunset date. The clause had been signed a decade earlier and simply carried forward, unchanged, through every renewal since.
The manufacturer held roughly 34% national market share in the relevant equipment category, and the exclusive line represented 71% of the target's own revenue. Before 2024, none of that would have mattered to the Competition Act's civil reviewable-agreements regime: s.90.1 applied only to agreements between competitors, and a manufacturer and its distributor have never competed for anything. A purely vertical arrangement like this one sat entirely outside the section, by design.
That is no longer true. The 2024 amendments removed the competitor requirement for a specific category of agreement, and buyer's counsel had to work out whether this decade-old, never-revisited clause now fell inside it.
National, indefinite exclusivity, no expiry clause, covering 71% of the target's revenue, with a manufacturer holding roughly a third of the relevant national market. None of those figures had changed since the clause was signed. What changed was the law measuring them.
s.90.1(1) is the Tribunal's base order-making power: on application by the Commissioner or a person granted leave under s.103.1, where an agreement “between persons of whom two or more are competitors prevents or lessens, has prevented or lessened or is likely to prevent or lessen competition substantially in a market,” the Tribunal may order any person — party to the agreement or not — to stop doing anything under it. Before 2024, that opening phrase — “between persons of whom two or more are competitors” — was the whole ballgame for a vertical arrangement: no competitors, no application, full stop.
s.90.1(1.01), added in 2024 under the marginal note “Exception — non competitors,” removes that limit for a specific category: “If the Tribunal finds that a significant purpose of the agreement or arrangement, or any part of it, is to prevent or lessen competition in any market, it may make an order under subsection (1) even if none of the persons referred to in that subsection are competitors.” Two things about the wording matter here. First, “any part of it” — the agreement as a whole can have entirely legitimate purposes (quality control, warranty support, brand consistency) and still be caught if one clause within it has a significant anti-competitive purpose. Second, the test is purpose, not effect alone — an indefinite, national, no-competing-lines restriction is exactly the kind of clause a significant-purpose inquiry is built to catch, because there is no obvious legitimate reason for it to run forever across the whole country rather than for a defined period in the distributor's own territory.
This file stops at liability. Only the Commissioner may bring an application relying on s.90.1(1.01) in the ordinary course — the private-leave route under s.103.1(7) exists for a downstream party directly and substantially affected by conduct under s.90.1, which is a different fact pattern from a manufacturer's own distributor auditing its own supply terms in diligence.
Buyer's counsel flagged the clause as a closing-risk item rather than closing with it live. Before signing, the parties renegotiated the exclusivity down to a defined three-year term, limited to the distributor's existing territory rather than all of Canada — narrow enough to support an objectively legitimate, time-and-geography-bound quality-assurance rationale, and specific enough that a “significant purpose to prevent or lessen competition” finding became far harder to sustain. The bolt-on acquisition proceeded on schedule.
Had the buyer closed without renegotiating and the arrangement later drawn a Commissioner inquiry, the Tribunal's remedies since 2024 have real teeth attached: beyond a prohibition or divestiture-style conduct order under s.90.1(1)/(1.1), s.90.1(1.3) allows an administrative monetary penalty “not exceeding the greater of (a) $10,000,000 and, for each subsequent order under either of those subsections, an amount not exceeding $15,000,000, and (b) three times the value of the benefit derived from the agreement or arrangement, or, if that amount cannot be reasonably determined, 3% of the person's annual worldwide gross revenues.” No such penalty existed for a civil s.90.1 order before the same 2024 amendments — the exposure here is not just new in scope, it is new in size.
The tell was not drafting carelessness. The clause was not a compliance failure when it was written — under the law that existed then, an exclusivity term between a non-competing manufacturer and distributor was entirely safe, and nobody had any reason to revisit it. It became a live issue only when Parliament changed the section sitting underneath it. A decade-old vertical restraint that has never been reviewed since the 2024 amendments is worth a second look for exactly that reason.
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