The Competitor : Canada Competition / Antitrust Blog by Stikeman Elliott Lawyers & Attorneys

Susan M. Hutton and Robert Mysicka -

On December 12, 2011, Canada’s Minister of Industry, Christian Paradis, announced that the federal government has reached an out-of-court settlement in its case against U.S. Steel Corp. for its alleged failure to abide by various undertakings that were conditional to the government’s approval of its acquisition of Stelco, a Hamilton-based steel manufacturer, under the Investment Canada Act.

In September, 2007, U.S. Steel sought to acquire Stelco, and submitted the required application for ministerial review and approval under the Act. The statute requires the Minister of Industry to review a foreign acquisition of control of a significant Canadian business and to approve the change in control only if persuaded that the transaction is likely to be of “net benefit” to Canada, based on prescribed - largely economic - criteria. On October 29, 2007 the Minister approved the transaction, subject to 31 binding undertakings which U.S. Steel agreed to abide by as part of its obligations under the Act. 

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Sultana L. Bennett -

On December 1, 2011, the Supreme Court of Canada granted leave to appeal in the British Columbia Court of Appeal decisions Pro-Sys Consultants Ltd. v. Microsoft Corporation (Microsoft) (2011 BCCA 186) and Sun-Rype Products Ltd. v. Archer Daniels Midland Company (Sun-Rype) (2011 BCCA 187). Microsoft and Sun-Rype were two to one majority decisions concluding for the first time in Canada that indirect purchasers of allegedly price-fixed products have no cause of action recognized in law. (see our ealrier post titled: Court of Appeal for British Columbia bars indirect purchaser suits.)

Earlier this month the Québec Court of Appeal in Option Consommateurs v. Infineon Technologies AG (2011 QCCA 2116), unanimously overturning a Superior Court decision that had denied a motion to authorize class action proceedings, allowed indirect plaintiffs to proceed with their price-fixing suit, expressly disagreeing with the British Columbia Court of Appeal’s rulings in Microsoft and Sun-Rype that such plaintiffs have no claim in law. (see our ealrier post titled: Québec Court of Appeal authorizes price-fixing class action involving indirect purchasers.)

These appeals will mark the first time the highest court in Canada will consider this issue in the context of competition class actions.

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Sultana L. Bennett -

On November 16, 2011, the Québec Court of Appeal issued a judgment unanimously reversing the 2008 Québec Superior Court decision in Option Consommateurs v. Infineon Technologies AG dismissing the motion for authorization to institute class action proceedings. Significantly, the class includes both direct and indirect purchasers, and the Quebec decision thus follows the dissent in the 2011 British Columbia Court of Appeal decision in Sun-Rype Products Ltd. v. Archer Daniels Midland Company, holding that the defendants would not face an unfair risk of double recovery because the plaintiffs alleged a single, aggregate loss notwithstanding the mix of direct and indirect purchasers in the class.

Background and Decision in the Superior Court

The defendants were manufacturers of dynamic random access memory or “DRAM,” a semiconductor memory product used in electronic devices, each of whom had admitted participation in a price-fixing conspiracy between 1999 and 2002 and all but one of whom had pleaded guilty to Sherman Antitrust Act violations arising from that conduct in the United States.

In its motion to institute the proceedings in Québec Superior Court, Option Consommateurs, a consumer advocacy organization, alleged that the defendants failed to respect statutory obligations under the Competition Act, and breached the general extracontractual duties imposed upon them by the Civil Code of Québec. Claudette Cloutier, a Montreal resident, sought status as the designated representative in the proceedings on behalf of direct and indirect purchasers of DRAM in Québec. In October 2001, Cloutier had purchased a computer containing DRAM online from Dell Computer Corporation’s website, and claimed to have paid an artificially inflated price for the computer as the result of the defendants’ price-fixing activity.

Justice Mongeau of the Superior Court denied the motion to authorize proceedings on two grounds: first, that Québec did not have proper territorial jurisdiction to hear the class action, but that even if it had, the allegations did not meet the test for authorization under Québec class proceedings law. Option Consommateurs and Cloutier appealed the ruling to the Court of Appeal.

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Michael Laskey -

On November 22, 2011, the Competition Bureau announced that criminal charges had been laid against six companies and five individuals accused of rigging bids for municipal and provincial sewer services contracts in the greater Montreal area. Bid-rigging, in which two or more bidders agree among themselves on whether or how to submit bids, without informing the person calling for the bids, is a criminal offence under section 47 of the Competition Act.

The Crown alleges that the accused companies and individuals conspired to pre-determine the winners of 37 municipal and provincial calls for tender in 2008 and 2009 related to the cleaning and maintenance of sewers, with a total value of C$3.3 million. The bidders who were not pre-determined to win allegedly submitted inflated, token bids in order to mislead tendering authorities into believing that the processes were competitive. Because the alleged conduct took place prior to the 2009 amendments to the Competition Act which increased the maximum penalties available under section 47, the accused face maximum penalties of up to five years in prison and/or a fine in the discretion of the court.

The Bureau also noted that its investigation benefitted from cooperation under its immunity and leniency programs, which provide incentives for parties involved in criminal conduct to self-report the conduct to the Bureau.

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Susan Hutton & Lindsay Gwyer -

On November 3, 2011, the Competition Tribunal issued a decision refusing to grant summary disposition to the vendor respondents in Commissioner of Competition v. CCS Corporation, thus confirming dissolution as a possible remedy in the case. The proceedings centre on the Commissioner’s application challenging CCS Corporation’s completed acquisition of Complete Environmental Inc., which owns the Babkirk Secure Landfill located in northeastern British Columbia, on the basis that the transaction is likely to substantially prevent competition for the disposal of hazardous waste in northeastern British Columbia (for more on the case, see our earlier post).

Because the proceedings deal with a completed transaction, the vendor respondents maintain that they are only implicated to the extent that the Tribunal would order dissolution as a remedy.  Consequently, the vendor respondents moved to have the Commissioner’s application dismissed against them on the ground that there was no genuine basis for the Tribunal to order dissolution. They argued that dissolution was an overly broad and punitive measure, and that divesture would be an effective and more appropriate remedy (assuming that the Commissioner is able to prove that the acquisition would substantially prevent competition). On the other hand, the Commissioner maintained that dissolution might be a necessary remedy, and argued that the application should be allowed to proceed to a hearing in order to determine several factual issues that would impact on the viability of either divesture or dissolution as an appropriate remedy.

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Michael Laskey -

On February 1, 2011, the Competition Bureau issued a statement in respect of the proposed acquisition of CTVglobemedia Inc. by BCE Inc. The statement noted that the Bureau was “cognizant of the growing trend toward vertical integration in the broadcasting industry” and that it was reviewing issues of vertical foreclosure. The statement also noted that the Commissioner of Competition would “closely monitor” the CRTC’s vertical integration hearings and subsequent regulatory developments in that same regard.

On September 21, 2011, the CRTC released its decision, Broadcasting Regulatory Policy CRTC 2011-601, setting out a regulatory framework for vertical integration among broadcasting and programming companies. In its decision, the CRTC imposes a number of restrictions on the activities of “vertically integrated” companies, which for the purposes of the decision it defines as companies that control both programming services (such as conventional television stations) and distribution services (such as cable or satellite systems). More specifically, some of the restrictions imposed by the decision include:

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David Elder and Lindsay Gwyer  -

Life is about to get more difficult for foreign telemarketers that flout domestic Do Not Call rules, as twelve global regulators have joined forces to create an international enforcement network.

On October 28, 2011 the CRTC announced the creation of an International Do Not Call Network to facilitate international cooperation on telemarketing enforcement and hopefully reduce the amount of unauthorized telemarketing calls Canadians receive from abroad. 

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Michael Laskey -

The Competition Tribunal today released an interim supply order requiring the Insurance Bureau of Canada to continue to supply access to its Web Claims Search Application to the Used Car Dealers Association of Ontario. The IBC, which consented to the interim supply order, must continue to supply the UCDA until the disposition of the UCDA’s application under the refusal to supply provision (section 75) of the Competition Act.

As described in our earlier article, the UCDA alleges that the IBC is refusing to supply it with automobile accident history data, which the UCDA says it requires in order to supply its Auto Check service to its members. The UCDA was granted leave to bring its application on September 9, 2011, and the matter is currently pending before the Tribunal.

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D. Jeffrey Brown and Lindsay Gwyer -  

In a recent decision, the Competition Tribunal granted the Commissioner of Competition’s motion requesting that the Toronto Dominion Bank (TD) produce complete versions of a number of documents, including several that had previously been produced in a redacted form. The motion was part of the Commissioner’s proceedings against Visa Canada and Mastercard International under the Competition Act’s civil resale price maintenance (RPM) provision, enacted as part of the substantial amendments to the Competition Act in 2009. TD was granted leave to intervene in that proceeding in respect of a number of issues earlier this year.

The motion stemmed from the redaction by TD of certain documents produced by it in response to the Tribunal’s order granting it leave to intervene, which also ordered it to produce documents relative to the issues within the scope of its intervention. TD submitted that redactions are permitted if information is irrelevant and confidential, or if it is contained in an irrelevant portion of a segmented document. The Tribunal rejected this view, and held that, as a general rule, irrelevant portions of otherwise relevant documents must be disclosed. After reviewing relevant jurisprudence, the Tribunal held that redaction is permissible only in exceptional circumstances, such as where the redacted information is embarrassing or harmful or where there is an “enormous” volume of redacted material.

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D. Jeffrey Brown and Robert Mysicka - 

In a recent ruling, Ontario’s Superior Court of Justice explored the principles underlying the law respecting sealing orders and its application to reviewable matters under Part VII.1 of the Competition Act.  On a motion by the Commissioner of Competition, the Court issued a partial confidentiality (or sealing) order with respect to certain information used by the Commissioner in her application against Rogers Communications Inc. and its wholly owned subsidiary, Chatr Wireless Inc., for alleged misleading advertising. Information about “dropped call” rates, which the Court characterized as being at the “very heart” of the Commissioner’s application, was excluded from the sealing order after the Court determined that it was essential for that aspect of the proceedings to remain transparent. 

Investigation into Misleading Advertising

The application to which the confidentiality order relates originated in November, 2010, when the Competition Bureau commenced legal proceedings against Rogers and Chatr. The Bureau’s application came after complaints were made by competing discount wireless carriers, Wind Mobile and Mobilicity, alleging that Rogers’ Chatr discount brand was misleading consumers into believing that its network was more reliable and had fewer “dropped calls” than those of other discount carriers.

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Megan MacDonald -

On October 6, 2011, the Competition Bureau announced the publication of the final version of its revised Merger Enforcement Guidelines (MEGs), only thirteen months after announcing its intention to review the guidelines in September 2010. The revised MEGs replace both the 2004 version of the guidelines and the Bureau’s 2009 Efficiencies in Merger Review bulletin.

The revisions aim to better describe the Bureau’s analytical approach to merger review by addressing discrete areas where the 2004 MEGs no longer fully reflected Bureau practice or current economic and legal thinking. It is generally understood that the 2010 revisions to the U.S. Horizontal Merger Guidelines (U.S. Guidelines) also constituted an important factor driving the need for review. Whereas the U.S. Guidelines are limited to horizontal mergers, however, the revised MEGs also address vertical merger analysis and go further than the U.S. Guidelines with respect to horizontal merger analysis by incorporating more recent thinking on Canada’s own unique efficiencies defence.

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Jeffrey Brown -

On October 5, 2011, the Competition Bureau released a “Position Statement” summarizing its approach in reviewing Canadian Tire’s recent acquisition of the Forzani Group.  The transaction, which took the form of a takeover bid, was announced on May 9, 2011, and the Bureau cleared the transaction on August 3, 2011.  The transaction provided the Bureau with the relatively rare opportunity to review a retail merger between retailers carrying on business using different business models: Forzani is a national sporting goods retailer (including sports apparel and equipment), and Canadian Tire is a mass merchandiser selling products, through a network of independent dealers, across a range of categories, including sporting goods as well as automotive parts, tools, house wares and electronics.

In reviewing the transaction, the Position Statement notes that the Bureau analysed its potential competitive effects in a number of possible product markets (retail sale of sporting equipment; retail sale of certain sporting equipment categories, such as hockey equipment; and the retail sale of specific sporting equipment products, such as hockey skates), but ultimately concluded that it was not necessary to conclusively define the relevant product market(s) in light of econometric evidence showing that neither party responded competitively to the presence of the other in local markets, and to evidence that this was unlikely to change post-merger. To our knowledge, this is the first time the Bureau has expressly relied on such a competitive effects analysis in its assessment of a merger, although the potential for such an approach was signalled in its draft revisions to the Merger Enforcement Guidelines, published earlier in 2011.

Stikeman Elliott LLP acted as competition counsel to Canadian Tire, with a team consisting of Lawson Hunter, Jeffrey Brown, Paul Beaudry, Megan MacDonald and Alexandra Stockwell.

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Michael Laskey -

On September 22, 2011, the Competition Bureau (the Bureau) announced that charges had been laid against five individuals and four Montreal-based companies involved in an allegedly fraudulent telemarketing operation. According to the Bureau’s Backgrounder, the companies hired telemarketers to contact businesses and falsely suggest (i) that the telemarketers were regular suppliers of the businesses looking to obtain renewals for services; (ii) that purchases of medical kits were required to comply with new legislation; (iii) that an order had already been pre-authorized by someone else in the business; or (iv) that the purpose of the telemarketer’s call was to verify an address when in fact it was to obtain an order confirmation. The companies allegedly sold products which were inflated up to ten times the market value, and threatened collection actions against businesses when they refused to pay.

Based in Montreal, the telemarketing operation had allegedly targeted businesses in Canada, the United States, Europe and Central America since at least 2001. The accused individuals and companies are charged with deceptive telemarketing and misleading representations (both criminal offences) under the Competition Act, and fraud under the Criminal Code. Last year, in remarks made to the International Consumer Protection and Enforcement Network, the Commissioner of Competition remarked that “[i]t is now clear that victims do not need to be Canadian in order for [the Bureau] to take action. This is an important step forward in the international fight against fraud.”

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Shawn Neylan -

Bloomberg News reported yesterday that in an interview given on September 21, Canada's Prime Minister Harper confirmed that capital from China and other countries is welcome provided that acquisitions of Canadian businesses are “economic in nature and don’t have other strategic or political objectives”.  Bloomberg quoted the Prime Minister as saying "[a]s much of an advocate as I am of free markets, I don’t think that governments realistically can just make the assumption that everybody else is operating on a market basis."

With respect to the BHP-Potash transaction that was rejected under the Investment Canada Act the Prime Minister stated: "If it had been in Australia, to put the shoe on the other foot, I don’t believe that takeover would have been approved. ... I think the objectives of BHP, in fairness, probably were beyond merely what we would consider good business in a market sense, but probably more an issue of strategic positioning, and that strategic positioning was obviously not in the interest of the Canadian economy.”

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