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

Danielle K. Royal

The Competition Bureau (the Bureau) recently released for consultation a revised draft Technical Bulletin on "Regulated" Conduct (the Draft Bulletin) setting out the Commissioner of Competition's approach to enforcement of the Competition Act where the impugned conduct may be regulated by another federal, provincial or municipal law or legislative regime.1A review of the Draft Bulletin indicates that the Bureau has considerably narrowed the scope of the defence - subject to further clarification by the courts. Comments are requested by February 3, 2006.

The Draft Bulletin draws an important distinction between conduct regulated by federal laws as opposed to conduct regulated by provincial laws. With respect to federal laws, it states that in circumstances where a party is unable to reasonably comply with both the Competition Act and another federal law, the Bureau will not pursue a matter under the Competition Act if Parliament has articulated an intention to displace competition law enforcement either explicitly through legislation or implicitly by establishing a comprehensive regulatory regime that authorizes a regulator to act inconsistently with the Competition Act.2 Moreover, the Bureau appears to recognize that in the context of conflicting federal laws, the regulated conduct defence is applicable both to the criminal provisions and the reviewable practice provisions of the Competition Act. However, the Bureau's approach to impugned conduct authorized by provincial regulatory laws is more restrictive and uncertain.

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Susan M. Hutton and Michael Kilby

In a flurry of announcements this fall, the Canadian Competition Bureau released a draft Information Bulletin on Merger Remedies in Canada. Comments are requested by January 20, 2006. Highlights of the draft Bulletin of note to practitioners include:

• a preference for structural remedies (such as divestiture) to behavioural remedies (which, in the Bureau's view, may require monitoring and/or risk being ineffective).

• acceptance of partial divestitures (e.g., selected manufacturing facilities, retail locations, products or product lines, intellectual property or other discrete assets), subject to satisfaction that willing buyers are available. In this regard, the Bureau may seek information from the marketplace to verify the likely viability and effectiveness of the proposed remedy.

• a strong recommendation to merging parties to use a "fix it first" approach, which means either completion of a divestiture of a party's own assets before the main transaction closes or a signed agreement in this regard, to be executed on closing of the main transaction. Registration of a consent agreement in such circumstances will not normally be required.

• if up-front divestiture is not possible, the Bureau indicates it expects sales processes to be concluded within between 3 and 6 months after closing (considerably shorter time limits than many prior consent agreements would indicate).

• the increased use of "crown jewels" during the trustee sale period, to provide the vendor with an incentive to complete the initial divestiture in a timely fashion, and/or to enhance its marketability in the hands of the trustee.

• the draft Bulletin indicates that certain terms of agreed remedies can initially be kept confidential. Such information as the initial time period for sale before the assets are transferred to a trustee, the fact that there is no minimum price, and the assets forming part of a "crown jewel" package, may be kept confidential. Full disclosure will be the norm, however, if other jurisdictions disclose such information, or in the case of cases that are contested before the Competition Tribunal (in which case the full text of a proposed order will be made public at the time the application is filed).

• the draft Bulletin also contains an indication that, in cooperating with other competition enforcement agencies internationally, Canada may rely on remedies arrived at in foreign jurisdictions if they raise no Canada-specific issues.

The shortened time limits for initial divestiture, the increased desire for crown jewels, and the emphasis on up-front buyers and other "fix it first" remedies are likely to engender significant comment amongst merger specialists and their clients.

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Susan M. Hutton

The Competition Bureau announced on November 23, 2005 that Labatt Brewing Company pleaded guilty to price maintenance in Quebec court, and was fined $250,000 - a fine that equals the largest fine previously issued in a price maintenance case. The charges were laid in relation to attempts "by agreement, threat, promise or like means" by Labatt company representatives to increase the price of discount beer sold by nine independent convenience/grocery retailers in Sherbrooke and elsewhere in Quebec. The Bureau said that "Labatt's attempts, when successful, affected the price of discount beer sold by these nine retailers, including brands from its competitors".

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With the fall of Canada's Liberal minority government on November 28, 2005, Bill C-19, An Act to Amend the Competition Act and to Make Other Consequential Amendments, died on the order paper. While the outcome of the January 23, 2006 federal election is unclear, re-introduction of the Bill in 2006 seems likely. Meanwhile, on October 6, 2005, the Government had announced amendments that would have increased the criminal fines for anti-competitive conspiracies from a current maximum of CDN$10 million to a maximum of CDN$25 million per indictment. The new proposals would also have provided the Commissioner of Competition with the authority to conduct broad-ranging studies of competition in a market - even when she does not believe there are grounds for an order pursuant to the Competition Act.

Bill C-19 was originally introduced to Parliament in the Fall of 2004, and was under review by the House Standing Committee on Industry, Science and Technology since that time.

The newly introduced amendments were in addition to those initially proposed in Bill C-19, which included, among other things, proposals to:

• repeal the existing criminal provisions in the Competition Act dealing with price discrimination, predatory pricing and discriminatory promotional allowances; and

• enable the Competition Tribunal to order the payment of an administrative monetary penalty up to a maximum of CDN$10 million (first order) or CDN $15 million (subsequent orders) under the abuse of dominance provisions of the Competition Act.

 

 

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