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

Section 103.1 allows private parties to apply directly to the Tribunal to address matters regarding alleged breaches of sections 75 (refusal to deal) and 77 (exclusive dealing, tied selling and market restriction). The necessity of applying for leave is designed to prevent parties from bringing frivolous and vexatious litigation. The only previous application for leave was also brought under section 75 in National Capital News v. Milliken,1 but in that instance leave was denied.

Submissions of Barcode & Symbol
The test for granting leave was outlined by the Tribunal in National Capital News.
The Tribunal must be satisfied that it had "reason to believe" that:

(1) the applicant is directly and substantially affected in the applicant's business by a practice referred to in section 75 or 77 of the Act; and

(2) the alleged practice could be subject to an order under those sections.

The practice that was complained of in this case was Symbol's refusal to supply its barcode scanners to Barcode after Symbol terminated its ten-year supplier relationship with Barcode in March 2003. In its written submission, Barcode alleged that Symbol's refusal to deal caused a substantial loss of revenues, to the point where, if the losses continued, Barcode would be forced out of business. In fact, an interim receiver was appointed on December 19, 2003. Barcode claimed that 50% of its employees had already been laid off as a result of Symbol's actions, and that Symbol's behaviour inhibited its ability to fulfil its maintenance contracts.

In its responding submission, Symbol claimed that it had terminated its relationship with Barcode because, among other things, Barcode had breached the usual trade terms of the contract. Furthermore, Symbol alleged that Barcode had used the Symbol trademark without authorization. Symbol also denied that it had substantially affected Barcode's business, and argued that Barcode's losses could be explained by other factors, including declining market conditions, increased competition from suppliers, exchange rate variations and Barcode's refusal to meet usual trade terms with its current suppliers.

The Tribunal's Analysis
The Tribunal found that Barcode had satisfied the requirements for leave. In its analysis, the Tribunal expanded upon the evidentiary threshold that was established in the National Capital News case. While the Tribunal must find an "adverse effect on competition in a market" before issuing a remedial order for a breach of section 75, this element is not part of the test used when deciding whether to grant leave. Rather, the Tribunal must simply have "reason to believe" that the applicant's business has been directly and substantially affected. This is a lower threshold than that set for evidence in the final application for an order.

The Tribunal went on to explain what is meant by the expression "reason to believe." In the context of the application, Barcode was required to "advance sufficient credible evidence supported by an affidavit to satisfy the Tribunal that there is a reasonable possibility that its business has been directly and substantially affected because of Symbol's refusal to deal" [emphasis added].

A "reasonable possibility" is a lower threshold than a balance of probabilities. However, the Tribunal noted that Barcode was required to show more than a "mere possibility that [its] business had been directly and substantially affected by Symbol" [emphasis added].

The Tribunal also explained the purpose of the leave process. In deciding whether to grant leave, the Tribunal performs a "screening function" by "simply deciding upon the sufficiency of the evidence advanced." However, it is not the function of the Tribunal to "make credibility findings based on affidavits which have not been cross-examined."

The Tribunal noted that in exceptional circumstances parties will be granted a right of reply in leave applications. Barcode had earlier been granted a limited right of reply. As a result, both parties sought to file additional material. However, the Tribunal stated that, in this case, such additional evidence was not required.

Significance
The Tribunal has apparently established a relatively low evidentiary threshold for the leave process under section 103.1. In its role as a gatekeeper, the Tribunal will take the evidence of the would-be applicant at face value, and its analysis will focus on whether the evidence reveals a "reasonable possibility" of an adverse effect on competition, not on the credibility of the evidence.

To date, the Tribunal has rendered two decisions regarding leave to private parties.2Both cases, National Capital News and Barcode's application for leave, involved section 75 of the Act. While the Tribunal's decisions in this regard are informative, it will also be useful to see how the test for leave is applied in matters involving section 77.

Finally, it should be noted that the remedy available to a private litigant under section 103.1 is the same as that available to the Commissioner: an order requiring resumption of supply. An action under section 36 is still the sole means of obtaining private damages under the Act, and such damages are not available for non-criminal behaviour under sections 75 and 77.

FOOTNOTES

¹ 2002 Comp. Trib. 41 (National Capital News).

² Another application for leave involving section 75 was recently filed, though a decision has yet to be rendered. See Allan Morgan and Sons v. La-Z-Boy Canada Ltd. (CT-2003/009), filed November 26, 2003 (to be decided).