On July 13 and August 4, 2004, the Competition Tribunal granted leave to Robinson Motorcycle Limited (Robinson) and Quinlan's of Huntsville Inc. (Quinlans) to bring applications against Fred Deeley Imports Ltd. (FDI) under the refusal-to-deal provisions of the Competition Act1. The two decisions bring to four the number of leave applications granted to private parties since amendments to the Act in June of 2002. Unfortunately, these recent decisions appear to cloud the legal and evidentiary thresholds that will be applied by the Tribunal before granting leave.
As noted in the March 2004 edition of The Competitor, section 103.1 of the Act allows private parties to apply directly to the Tribunal to address alleged breaches of sections 75 (refusal to deal) and 77 (exclusive dealing, tied selling and market restriction). Obtaining leave of the Tribunal is a prerequisite to bringing such applications. To date, a total of nine applications for leave have been filed. Of these, the first was denied, four have been granted and the remaining four await decisions by the Tribunal.
Both recent cases involve the alleged refusal by FDI, the exclusive Canadian distributor of Harley-Davidson (H-D) motorcycles, parts and accessories, to supply Quinlans and Robinson, two Ontario-based motorcycle dealers, with H-D products. The dealers had obtained H-D products for several years pursuant to successive dealer agreements entered into with FDI. However, in December of 2003 and January of 2004, FDI informed Quinlans and Robinson that it would not offer an extension to their agreements. The dealers alleged that FDI's refusal to deal would force them out of business, adversely affecting competition in their markets.
The Legal Test
The Tribunal found that the Dealers had satisfied the requirements for leave, as set out in subsection 103.1(7) of the Act. National Capital News v. Milliken2 was the first case to consider the leave threshold. Dawson J. held that subsection 103.1(7) creates a two-part test, both parts of which must be satisfied for leave to be granted. Based on the wording of the statute, the Tribunal must have "reason to believe" that (1) the applicant is "directly and substantially affected" in its business by the alleged practice and (2) the practice "could be subject to an order" under section 75. Under part two, Dawson J. held that all five paragraphs of subsection 75(1) must be satisfied, the most notable of which is that the alleged refusal to deal "is having or is likely to have an adverse effect on competition in a market".
Two decisions by Lemieux J. subsequent to National Capital News adopted a lower threshold for granting leave. In Barcode Systems v. Symbol Technologies3, the Tribunal held that the five paragraphs of subsection 75(1) need not be satisfied in order for leave to be granted under section 103.1:
As I read the Act, adverse effect on competition in a market is a necessary element to the Tribunal finding a breach of section 75 and a necessary condition in order that the Tribunal make a remedial order under that section. It is not, however, part of the test for the Tribunal's granting leave or not.
What the Tribunal must have reason to believe is that Barcode is directly and substantially affected in its business by Symbol's refusal to sell. The Tribunal is not required to have reason to believe that Symbol's refusal to deal has or is likely to have an adverse effect on competition in a market at this stage4.
Lemieux J. cited this conclusion with approval in Allan Morgan and Sons v. La-Z-Boy5.
Unfortunately, the Tribunal's single-page decisions in Quinlans and Robinson do not discuss the legal test to be applied on leave applications. However, the decisions are structured to address each of the five paragraphs in subsection 75(1) of the Act, and state that the Tribunal could conclude that the elimination of the Dealers "is likely to have an adverse effect on competition. " The decisions thus appear to diverge from the less onerous leave test adopted in Barcode and La-Z-Boy, instead favouring the two-part test of National Capital News.
The Evidentiary Threshold
In National Capital News, the Tribunal held that for it to have "reason to believe" under section 103.1, the applicant must provide "sufficient credible evidence to give rise to a bona fide belief" that it is directly and substantially affected in its business by a practice that could be subject to an order under section 75 or 77. The Tribunal in Barcode explained that evidence advanced will be sufficient if there is a "reasonable possibility" of a direct and substantial effect. A "reasonable possibility" is a lower threshold than a balance of probabilities, but Lemieux J. held that the evidence must show more than a "mere possibility" of the required effect.
The Tribunal in Barcode further explained that on a leave application, its function is limited to screening the evidence to decide on its sufficiency. More particularly, Lemieux J. held that it is not the Tribunal's function "to make credibility findings based on affidavits which have not been cross-examined." However, the Tribunal did note that situations may arise "where it can be demonstrated that an applicant's evidence is simply not credible without engaging the Tribunal in weighing contested statements."
In granting the leave applications in Quinlans and Robinson, the Tribunal was clearly of the view that sufficient credible evidence had been advanced. It would have been useful, however, for the Tribunal to address arguments by FDI that Quinlans' evidence of substantial effect was not credible on its face, because it failed to include financial statements to substantiate its allegation that H-D sales constituted exactly 64.9999% of its total sales for each of five successive years.
After five Tribunal decisions on section 103.1 leave applications, the legal and evidentiary thresholds that will be applied by the Tribunal before granting leave remain uncertain. This uncertainty should be resolved by the Federal Court of Appeal, as the Tribunal's decisions granting leave in Quinlans, Robinson, La-Z-Boy and Barcode have all been appealed.
 Robinson Motorcycle Limited v. Fred Deeley Imports Ltd., 2004 Comp. Trib. 13, and Quinlan's of Huntsville Inc. v. Fred Deeley Imports Ltd., 2004 Comp. Trib. 15
 The National Capital News Canada v. The Honourable Peter Milliken, M.P., 2002 Comp. Trib. 41.
 Barcode Systems Inc. v. Symbol Technologies Canada ULC, 2004 Comp. Trib. 1.
 Barcode, Reasons and Order Regarding Application for Leave to Make an Application Under Section 75 of the Competition Act, dated January 15, 2004, at paras. 10 and 8.
 Allan Morgan and Sons Ltd. v. La-Z-Boy Canada Ltd., 2004 Comp. Trib. 4, Reasons and Order Regarding Application for Leave to Make an Application Under Section 75 of the Competition Act, dated February 5, 2004, at para. 14.