Competition Bureau contemplating pre-notification regime for competitor collaborations

Michael Laskey -

The Competition Bureau is contemplating a new pre-notification regime, similar to the regime that currently exists for mergers, whereby businesses will be permitted (or, potentially, obliged) to seek advance clearance from the Bureau before entering into agreements with their competitors. Speaking on a panel at an American Bar Association conference on March 27, Commissioner of Competition John Pecman noted that the plan is in its “early days”, and that the Bureau has not decided whether a regime should be implemented (and if so, whether it should be voluntary or mandatory), but that it is something the Bureau is considering. Such a regime could apply to a variety of types of “normal-course” agreements, such as joint purchasing and selling agreements, buying groups, information sharing agreements, R&D agreements, joint production agreements, non-competition clauses and even joint venture agreements.

The motivation for such a regime may stem from the Competition Act’s dual-track approach to competitor collaborations. In Canada, two provisions of the Act govern agreements among competitors. A criminal provision, intended to capture “naked” price fixing (as well as output restrictions and market allocation), carries significant fines and jail terms. A second, civil provision captures only agreements which adversely affect competition, and carries no such penalties. Although these provisions are intended to serve different purposes, it is up to the Bureau to decide which route it wishes to take when investigating (or prosecuting) any particular agreement. The Bureau has released a guidance document which outlines the types of situations in which it will choose to use the criminal and civil provisions, but this guidance is not binding. So, a pre-clearance regime may give businesses additional certainty in knowing that their joint purchasing agreement or non-compete clause will not be challenged (at least, under the criminal provision).

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Bureau approves Agrium asset sale to CHS

Marisa Muchnik -

On March 17, 2014, Canada’s Competition Bureau announced that it has approved the sale of certain assets of Agrium Inc. to U.S. farm cooperative CHS Inc.  Agrium was required to sell seven retail outlets and nine anhydrous ammonia businesses in Alberta and Saskatchewan, as well as its anhydrous ammonia bullet tank in Medicine Hat, AB and the Viterra Inc. retail outlet in Craddock, AB, pursuant to a Consent Agreement entered into by Agrium on September 5, 2013. The sale to CHS is expected to close on April 1, 2014.

The divestiture was required in relation to Agrium’s acquisition of the majority of Viterra’s retail agri-products businesses from Glencore International plc. Viterra – successor to the former Saskatchewan, Alberta and Manitoba Wheat Pool co-operatives, as well as the largest grain handler in South Australia and a significant food processor in Canada, Australia, New Zealand and the United States - was initially sold to Glencore, but Glencore simultaneously announced side agreements to divest some Viterra assets variously to Agrium and Richardson International Ltd., and (later) to CF Industries. The Bureau cleared the acquisition of Viterra by Glencore in May 2012, and Richardon’s acquisition of some of Viterra’s Canadian grain handling assets in December 2012 (Stikeman Elliott LLP acted as counsel to Richardson).  

In September 2013, the Bureau issued a position statement outlining its review of Agrium’s retail agri-products businesses from Glencore International plc. The details of the Consent Agreement, and the review undertaken by the Bureau, were the subject of a previous post. 

Government agencies to coordinate in Alberta energy markets

Susan M. Hutton and Shannon Kack -

In an effort to coordinate their overlapping mandates, the two agencies charged with ensuring that Alberta power markets remain competitive have signed a Memorandum of Understanding (MOU) calling for continued and more defined cooperation between the agencies.

On March 3, 2014, the Competition Bureau announced that the Commissioner of Competition (head of Canada’s Competition Bureau) and the Market Surveillance Administrator of Alberta (MSA) have signed an MOU, implementing a framework for information sharing and enforcement cooperation and collaboration in matters of mutual interest among the agencies.

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Canada's Anti-Spam Law: Will Your Business Be Ready?

On February 13th, the Communications Group hosted a breakfast seminar in the Toronto office entitled “Canada’s Anti-Spam Law: Will Your Business Be Ready?”.  David Elder briefed those in attendance on key requirements of Canada’s Anti-Spam Law (CASL), the electronic messaging requirements of which will come into effect on July 1, 2014. Among those requirements, David spoke of the obligation to obtain prior consent in the delivery of commercial electronic messages (CEMs) and the prescribed form requirements for those messages, outlined a number of the key exemptions that may be available to some senders, and reviewed the timeline for implementation of various aspects of the new law.  David also reviewed some of the particular challenges that organizations are facing in implementing the new law and discussed the work that organizations must do to be able to continue to send marketing messages to established contact lists.   

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Canadian Tire Becomes Even More "Canadian" with the Acquisition of Pro Hockey Life

Marisa Muchnik -

On February 7, 2014, the Competition Bureau released a Position Statement summarizing the approach taken in its review of the acquisition by Canadian Tire, through its wholly-owned affiliate FGL Sports, of Pro Hockey Life. The transaction was entered into on November 28, 2012, and closed on August 12, 2013. The Bureau determined that the transaction was not likely to substantially lessen or prevent competition in the retail market for hockey equipment and hockey-related merchandise.

The transaction provided the Bureau with the opportunity to review a retail merger between retailers carrying on business using three different business models: Canadian Tire is a national mass merchandiser selling products, through a network of independent dealers, across a range of categories; FGL Sports is a national sporting goods retailer; and Pro Hockey Life is a specialized hockey retailer with a geographic presence limited to 11 areas in Canada.

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Government agencies clarify roles under Canada's Anti-Spam Legislation

David Elder and Shannon Kack -

In an effort to coordinate their potentially overlapping mandates, the three agencies charged with enforcement of Canada’s new anti-spam law have signed a Memorandum of Understanding (MOU) dealing with cooperation and sharing of information among the agencies.

On January 23, 2014, the Competition Bureau announced that the Commissioner of Competition, the Privacy Commissioner of Canada and the Canadian Radio-television and Telecommunications Commission (CRTC), have signed an MOU regarding the implementation of their respective mandates under Canada’s Anti-Spam Legislation (CASL).

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Federal Court of Appeal sends Toronto Real Estate Board case back to Competition Tribunal

Susan M. Hutton and Shannon Kack -

On February 3, 2014, Canada's Federal Court of Appeal (FCA) overturned the Competition Tribunal’s decision to dismiss the Competition Bureau’s abuse of dominance application against the Toronto Real Estate Board (TREB), sending the application back to the Tribunal for reconsideration on its merits.

As mentioned in our earlier blog post, the Competition Bureau’s application involves a challenge by the Bureau against TREB for allegedly abusing its dominance under section 79 of the Competition Act in relation to membership rules governing the use by members of the board’s multiple listing service (MLS®) listing data.

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More charges laid in Quebec construction bid-rigging investigation

Ashley Piotrowski and Shannon Kack -

On January 27, 2014, the Competition Bureau announced that another company, Construction Beaudin & Courville Inc., and its president, Alain Courville, were each charged with one count of bid-rigging under subsection 47(2) of the Competition Act. The contracts in question involved road construction, water treatment and other infrastructure projects in the Saint-Jean-sur-Richelieu region of Quebec between January 2008 and December 2009.

The charges come as part of a larger investigation into an alleged widespread collusive scheme that gave preferential treatment to a group of contractors to obtain municipal contracts mainly for infrastructure projects in St-Jean-sur-Richelieu and surrounding areas. In June 2012, 77 criminal charges were laid against 11 people and nine companies for their participation in the scheme.

The charges were laid following a joint investigation by the Bureau and the Sûreté du Québec’s Service des enquêtes sur la corruption, a division of the Unité permanente anticorruption (UPAC). The UPAC was established by the Government of Quebec in February 2011 with a mandate to coordinate and lead units for investigation, audit and prevention to fight corruption in the Quebec public system.

Commissioner of Competition makes submissions to CRTC regarding wholesale wireless roaming arrangements

Michael Laskey -

On January 29, the Commissioner of Competition made submissions to the CRTC in connection with the its ongoing public proceeding examining whether incumbent wireless carriers are unjustly discriminating, or demonstrating undue preference, with respect to wholesale mobile wireless roaming arrangements.

Wholesale roaming arrangements allow the subscribers of one wireless carrier to utilize the wireless network of another carrier in areas in which the former carrier does not operate a network. In this way, roaming agreements allow carriers without fully-developed Canadian networks (for example, U.S. carriers and new wireless entrants) to offer their customers nation-wide coverage by “piggybacking” where necessary on the network of a more developed carrier.

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Canada announces rules for 2500 MHz spectrum auction in 2015

David Elder -

Days before the hammer is raised for the 700 MHz auction, the Canadian government has already announced its next spectrum auction.

On January 10, Industry Minister James Moore announced that the government will commence an auction of 2500 MHz spectrum on April 15, 2015. The spectrum will be licensed in paired blocks of 10 + 10 MHz and unpaired blocks of 25 MHz. Licence availability varies across different blocks and regions of the country, but a total of 318 licences will be offered, each with a 20 year term. Applications will be due by November 27, 2014.

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Federal Court confirms Minister of Industry's authority to impose spectrum caps

David Elder and Shannon Kack -

In the latest chapter in the ongoing battle between incumbent wireless service providers and the federal government over government policies intended to stimulate more competition in the wireless market, the Federal Court has dismissed an application by Telus Communications Company (Telus) for judicial review of the Minister of Industry’s authority to impose conditions on spectrum licences issued pursuant to the Radiocommunication Act.

The Court’s decision in the case of Telus Communications Company v Canada, came less than two weeks before the scheduled start of Industry Canada’s auction of the highly desirable 700 MHz spectrum.

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2014 Energy M&A Trends in Canada

Glenn Cameron, Susan Hutton, Keith Miller, Cameron Anderson and Brandon Mewhort -

Whether measured by volume or aggregate value, 2013 was a weaker year for energy-related M&A than 2012, continuing a four-year decline in activity in the sector. There was a noteworthy lack of public company M&A in 2013 and nothing to match the marquee deals of 2012: PETRONAS’ $6B acquisition of Progress Energy or CNOOC Limited’s $20B acquisition of Nexen. In spite of that, 2013 still saw a significant number of large and complex transactions, including Suncor’s sale of its conventional natural gas properties for $1B to Centrica and Qatar Petroleum, Progress/PETRONAS’ $1.5B acquisition of Talisman Energy’s Farrell Creek and Cyprus properties and Exxon Mobil/Imperial Oil’s $750M acquisition of part of ConocoPhillips’ non-producing Clyden oil sands acreage.

Reasons for the decline in M&A activity in 2013 included the following:

  • Asian investors paused to digest what they bought after five years of significant investment in the Canadian energy sector, particularly in the oil sands.
  • Changes to Industry Canada’s State Owned Entity (SOE) guidelines announced in December 2012 under the Investment Canada Act, coupled with the failure of two transactions to pass “national security” reviews, have chilled foreign investment by SOEs.
  • Increased uncertainty about whether regulatory approvals would be obtained for pipelines and other projects needed to expand the capacity to transport Canadian crude oil and natural gas to the U.S. and to provide access to offshore markets contributed to investors’ concerns about the future prospects for Canadian production.

In addition to the absence of major acquisitions, 2013 also saw a decline in financing activity by oil and gas issuers. While a select few were able to raise the equity they required, many others could not – at least until Q4 when a spike in oil and gas-related capital markets activity occurred. The numbers of oil and gas issuers on the TSX and TSXV, the number of financings by those issuers and the aggregate equity capital raised to the end of Q3 of this past year were all significantly lower than over the same period in 2012.

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2014 thresholds for Competition Act merger notification and Investment Canada Act review

Susan M. Hutton -

Both the Competition Act and the Investment Canada Act thresholds for review of acquisitions of Canadian businesses are expected to increase in 2014, to C$82 million and C$354 million respectively, although these increases have yet to be officially confirmed by the Minister, and in the case of the Competition Act merger notification “size of target” threshold, is subject to his discretion.

Competition Act:

The Competition Bureau must generally be given advance notice of proposed transactions under the merger notification provisions of the Competition Act, when the “size of the target” exceeds the specified threshold, and when the combined Canadian assets or revenues “in, from or into” Canada of the parties together with their respective affiliates (the “size of parties” test) exceeds C$400 million. Transactions involving Canadian subsidiaries, as well as the direct acquisition of Canadian businesses or assets, and acquisitions of interests as little as 20% (for public companies) or 35% (for private companies and interests in non-corporate business combinations) can trigger merger notifications in Canada.

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Competition Bureau's Fair Business Practices Branch provides insight into key policies and enforcement issues

As advertising and marketing, both traditional and online, continue to be a large part of our economy, it is important to keep up to date with what the Competition Bureau considers to be fair advertising and marketing business practices. Senior Deputy Commissioner of Competition Lisa Campbell and Major Case Director and Strategic Policy Advisor Brendon Ross attended a breakfast seminar at Stikeman Elliott to speak to clients and answer questions regarding priorities of the Fair Business Practices Branch and recent enforcement issues in misleading advertising and marketing.

Bureau relies on EC remedy in clearance of Thermo Fisher/Life Technologies transaction

Megan MacDonald and Anne MacIsaac -

On December 5, 2013, the Competition Bureau issued a No-Action Letter (NAL) clearing Thermo Fisher Scientific Inc.’s proposed acquisition of Life Technologies Corporation. The Bureau issued this clearance based, at least in part, on a remedy obtained by the European Commission (EC) in connection with the proposed acquisition in Europe.

Both Thermo Fisher and Life Technologies produce and supply life sciences products, including laboratory instruments and consumables, globally, including within Canada, the United States and Europe. Thermo Fisher’s proposed acquisition was subject to competition review in each of these jurisdictions.

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