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

D. Jeffrey Brown and T. Gregory Kane, Q.C.

On January 15, 2008, Canada's broadcasting and telecommunications regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), issued new policies respecting cross-media, television and broadcast distribution undertaking (BDU, e.g., a cable or satellite TV provider) ownership ¹. Under these policies, as a general rule:

• a person will be permitted to control undertakings in only two of three types of media (radio, conventional "over-the-air" television and newspapers) serving the same (local) market (cross-media ownership policy);
• the CRTC will not approve applications for transfers of effective control that would result in common ownership of television undertakings (conventional, specialty and pay) with a total national audience share (across all types) greater than 45%, will carefully examine applications that would result in a share between 35% and 45%, and will expeditiously review applications resulting in a share less than 35% (television ownership policy); and
• the CRTC will not approve applications for transfers of effective control of BDUs that would allow one person to control all BDUs in any given market (BDU ownership policy).

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On October 24, 2008, the Competition Bureau (the Bureau) released its draft Information Bulletin on Trade Associations (the Bulletin) for public comment.  

According to the Bureau, participation in trade associations - particularly those whose members compete - carries with it an inherent risk that the association may be used as a forum for anti-competitive conduct, particularly anti-competitive agreements or collective action that violates the criminal conspiracy (cartel) provision of the Competition Act.  "Association activities that deal with subjects such as pricing, customers, territories, market shares, terms of sales and advertising restrictions" are of particular concern to the Bureau. The draft Bulletin aims to provide guidance to trade associations on how best to ensure compliance with the Competition Act; it calls upon trade associations to "ensure that appropriate safeguards are implemented" to guard against anti-competitive conduct.

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On January 28, 2008, at the request of Labatt Brewing Company Limited (Labatt), the Federal Court set aside its own order (of November 8, 2007) requiring Labatt to produce documents related to the Commissioner's ongoing investigation of the Labatt/Lakeport merger (the merger), which closed on March 29, 2007. The original order was obtained on an ex parte (without notice to Labatt) application by the Commissioner of Competition (the Commissioner) under Section 11 of the Competition Act¹ (the Act). The Court did so on the grounds that the disclosure made to secure the order was misleading, inaccurate and incomplete and, had complete disclosure been provided, the November 8, 2007 order would not have been granted (at least not on the terms on which it was granted). This most recent decision is just the latest in a series of decisions against the Commissioner respecting her investigation into the merger² and raises a number of interesting questions about how this may affect the Competition Bureau's approach to formal investigations going forward.

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Shawn Neylan and Michael Kilby

On January 22, 2008, the Federal Court of Appeal dismissed the appeal by the Commissioner of Competition in the Labatt/Lakeport merger, delivering its judgment from the bench, after having heard arguments only from the Commissioner's counsel.
 

The Tribunal decision

The appeal was from an order of the Competition Tribunal made on March 28, 2007, dismissing the Commissioner's application under s.100 of the Competition Act to delay closing of the acquisition of Lakeport Brewing Income Fund (Lakeport) by Labatt Brewing Company Limited (Labatt). This transaction closed on March 29, 2007. Shawn Neylan of Stikeman Elliott LLP led the competition team for Lakeport, supported by Michael Kilby. Litigation partner Katherine Kayargued the case for Lakeport at the Tribunal.

The determinative issue in the Tribunal's decision was whether the potential post-closing remedies of dissolution and divestiture could effectively remedy a substantial lessening of competition (SLC) assuming an SLC were later established, since at the time of the hearing the Commissioner had not concluded that there would be a SLC as a result of the transaction, but was requesting more time to complete her review. The Tribunal found that the Commissioner had not met the burden of establishing that closing would substantially impair the Tribunal's ability to remedy an SLC, and accordingly dismissed the Commissioner's application. The Tribunal pointed out that Canadian merger remedies need not restore the pre-merger situation (as in the U.S.), but need only restore competition to the point that there is no substantial lessening of competition, a point which the Tribunal's decision indicated that the Commissioner's evidence had not addressed.

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On December 20, 2007, American Iron & Metal Incorporated (“AIM”) made a Competition Act merger filing with respect to its proposed acquisition of SNF Incorporated (“SNF”).  AIM and SNF were two leading scrap metals collectors and processors in Eastern Canada. On January 28, 2008, the Commissioner of Competition applied to the Tribunal for an order to prevent the closing and/or implementation of the proposed transaction pursuant to section 100 of the Act.  The Competition Bureau subsequently negotiated a consent agreement requiring AIM to preserve the assets of concern for a period of 60 days to allow for completion of the merger review.  In light of the consent agreement, the section 100 application did not go to hearing.  The proposed transaction closed on February 5, 2008.

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