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

On June 29, 2010, the Competition Bureau announced that Zellers Inc. agreed to take steps to address the Bureau's position that a Zellers' savings card promotion violated the Competition Act.  The Bureau stated that Zellers promoted the savings cards, valued at $10, with the purchase of the movie Avatar on DVD or Blu-Ray and that one of the conditions associated with the savings card was a $50 minimum purchase in order to redeem the savings card. The Bureau claimed that this condition was omitted from the advertising for the promotion and only disclosed after consumers made their initial purchase.

The steps to be taken by Zellers to resolve the Bureau's concerns are as follows:

• Customers who present a $10 savings card, or a sales receipt for the movie Avatar purchased between April 22 and 24, 2010, will receive a $10 credit with no minimum purchase required;
   
• The redemption period will be extended to August 6, 2010;
   
•  Zellers will bring these changes to the attention of consumers through in-store signage and a notice posted on their Web site; and
   
• Two corrective notices will be published in major Canadian newspapers, and Zellers will advertise the details of the redemption in flyers.

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On June 29, 2010, the Competition Bureau announced that it had negotiated a merger remedy in connection with the IESI-BFC Ltd. (BFI) and Waste Services Inc. (WSI) transaction.  The remedy is set out in a Consent Agreement filed with the Competition Tribunal. The divestiture will include commercial front end (as opposed to roll off bin) waste collection assets, including customer contracts, vehicles, bins and other equipment in Calgary, Edmonton, Hamilton, Ottawa and Simcoe County, Ontario as well as a waste transfer station located in Hamilton, Ontario.

The Consent Agreement includes specific provisions regarding national accounts, unassignable contracts and the prospect of different buyers in the various markets.

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On June 25, 2010, the Minister of Industry, Tony Clement, announced that he had approved Sinopec’s acquisition of a 9% interest in Syncrude under the Investment Canada Act.  The Minister stated that he had considered Sinopec’s plans, undertakings and other information and emphasized that the transaction would not change the level of Canadian ownership of Syncrude which will remain at 56%.

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Shawn Neylan and Sharon Seung

On May 25, 2010, the Quebec Superior Court acquitted Electromega Limited (Electromega), a traffic lights manufacturer, of a bid-rigging charge relating to the supply of LED traffic lights in Quebec.

Prior to the trial, Electromega had brought an application for a stay of proceedings on the basis that the death of its president in September 2009 deprived it of an essential witness and therefore a right to a fair and public hearing pursuant to paragraph 11(d) of the Canadian Charter of Rights and Freedoms. The court concluded that Electromega had not proven that the missing evidence created a prejudice of such magnitude that it amounted to a deprivation of the opportunity to make full answer and defence. Consequently, Electromega’s application was dismissed. However, at trial, the case was dismissed on the basis that the Crown had failed to prove an agreement.

The facts in issue arose in July 2004, when the city of Quebec solicited bids for the supply of LED traffic signals sourced by Gelcore (distributed in Quebec by Electromega), or Dialight (distributed by Tassimco Technologies Inc. (Tassimco)).

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The House of Commons Standing Committee on Canadian Heritage has released transcripts of its June 1, 2010 hearing during which representatives of Icahn Enterprises and Heritage Canada testified regarding Icahn’s proposed acquisition of control of Lions Gate Entertainment Corp. (“Lionsgate”). While declining to give evidence with respect to the Investment Canada Act review process, the Icahn representative explained the business rationale of the transaction.  Among other things, Committee members asked whether the Icahn representative was a Canadian and whether he could name a Quebec film.

The June 3, 2010 Heritage Committee hearing transcripts have also been released.  Representatives of Lionsgate testified at this hearing regarding their view that the transaction would not be of net benefit to Canada and should therefore not be approved by the Heritage Minister under the ICA. A Lionsgate representative stated that “I think we have been a very loyal partner to Canada, and Canada has been a very loyal partner to us, and together Canada and Lionsgate have built a major media giant.” Among other things, Committee members asked for the address on his business card.

As noted in an earlier post, the Minister of Heritage approved  the transaction on June 9, 2010 based on commitments given by Icahn in relation to Canadian cultural activities.

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On June 14, 2010, the Federal Court of Canada released its decision dismissing US Steel’s constitutional challenge of the Investment Canada Act provision providing for enforcement of undertakings that may be given by investors to obtain Ministerial approval of transactions that are subject to the ICA.  The challenge was brought as an application in proceeding commenced by the Attorney General of Canada (“AGC”) for an order enforcing certain employment and capital expenditure undertakings given by US Steel in respect of its 2007 acquisition of Stelco, and for the imposition of a penalty of $10,000 for each day of alleged non-compliance.

The court found that the potential monetary penalty was not penal in nature, but was rather intended by Parliament to promote and ensure the legislative objectives of the Investment Canada Act.  Therefore, section 11 of the Charter, which provides rights to persons who are charged with an offence, did not apply.

The court also found that the procedural rights that were available in the proceeding brought by the AGC were sufficient to conclude that US Steel’s right to a fair hearing in accordance with the principles of fundamental justice under s. 2(3) of the Bill of Rights was not violated.

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Shawn C.D. Neylan

Building on extensive institutional leadership and expertise, three important positions have recently been filled in the Mergers Branch of the Competition Bureau.  Leading the Mergers Branch, Paul Collins has recently been appointed Senior Deputy Commissioner of Competition, Mergers.  Mr. Collins has extensive experience from his many years as a highly regarded competition law advisor in the competition bar in Toronto.  Mr. Collins is second-in-command at the Bureau, reporting directly to the Commissioner of Competition, Melanie Aitken.

The Mergers Branch includes three divisions and the Merger Notification Unit, the heads of which report to Mr. Collins.  Ann Wallwork has been Assistant Deputy Commissioner of Competition for Division A for a number of years, and also assumed the role of Acting Senior Deputy Commissioner of Mergers between December 2009 and May 2010. 

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On May 27, 2010, the Ontario Superior Court dismissed a motion brought by Bell Canada  (“Bell”) for an interlocutory injunction restraining Rogers Communications Inc. and Rogers Cable Communications Inc. (“Rogers”) from advertising that Rogers’ internet service is the "fastest" and/or the "most reliable."  Among other things, Bell alleged that the advertising in question breached the misleading advertising provisions of the Competition Act.

The court held that irreparable harm was not established because similar advertising claims had been made by Rogers since 2008, and because Bell and Rogers had litigated other advertising disputes in the past. The court also found that Bell had not factually established that it had suffered actual losses in the market or damage to its reputation as a result of the ads.

On the question of the "balance of convenience," the court concluded that the parties were "aggressive advertisers" and that it would not be justified to interfere in the "advertising war" between two large corporations.

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The Minister of Industry, Tony Clement, today announced the launch of a public consultation on foreign investment restrictions in the telecommunications sector. The Minister issued a consultation paper that calls for consideration of three options:

• Increasing the limit for direct foreign investment in broadcasting and telecommunications common carriers to 49 percent;
• Lifting restrictions on telecommunications common carriers with a 10-percent market share or less, by revenue; or
• Removing telecommunications restrictions completely.

The consultation period will end on July 30, 2010.
 

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On June 9, 2010,  the Honourable James Moore, Minister of Canadian Heritage and Official Languages, announced the approval of the Icahn Group’s acquisition of Lions Gate Entertainment Corp.  The Minister stated that his decision “will result in Lions Gate maintaining or increasing Canadian film and television production and protect and preserve Canadian jobs.”  The Minister referred to undertakings being given with respect to employment and film production in Canada, film production in Quebec, distribution rights for Lions Gate films, “providing financial support to organizations that help less fortunate Canadians experience Canadian culture”, and support for cultural events.

The Minister’s decision was announced after the House of Commons Standing Committee on Canadian Heritage had commenced a study on the transaction.

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In the text of a May 4, 2010 speech that was released by the Competition Bureau on June 7, 2010, the Commissioner of Competition, Melanie Aitken, has affirmed the guidance in the Competitor Collaboration Guidelines regarding the care with which she will proceed under the cartel provision (section 45 of the Competition Act).  The Commissioner said:     “[l]et me be crystal clear: if an agreement among competitors does not constitute a naked agreement to fix prices, allocate markets, or restrict output, that agreement will be subject to – at most, and only – a separate, civil review requiring proof of economic harm.” 

The Commissioner also confirmed the written guidance that certain types of agreements will not be the subject of cartel prosecutions: “we have explicitly removed whole categories of agreements from the scope of criminal enforcement action, such as dual distribution agreements, franchise agreements and non–competes, unless, of course, the agreement is just a sham. We are doing our best to put a fence around the conduct we would consider investigating as criminal, and to paint that fence in bright, bold colours.”

These unequivocal statements of the Commissioner will be welcomed by businesses who are considering legitimate collaborative conduct which may raise issues under the new and potentially very broad cartel law.   Still, it must be noted that the Commissioner’s guidance is not binding and will not remove the risk of private actions in which cartel conduct is alleged.

The Commissioner also discussed merger review issues and her case against the Canadian Real Estate Association in the May 4, 2010 speech.

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On June 3, 2010, the Supreme Court of Canada declined to hear an appeal by DRAM manufacturers of a decision of the British Columbia Court of Appeal that certified a class in a civil action alleging price-fixing with respect to dynamic random access memory. As is customary when leave to appeal is declined, the Supreme Court did not give reasons for its decision.

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On June 2, 2010, the Competition Bureau released a policy statement regarding its approach to the disclosure of information to companies involved in hostile transactions. Bidders and targets in hostile or unsolicited transactions can have competing interests, posing challenges for the Bureau when it comes to complying with its confidentiality obligations under the Competition Act. Although the Bureau has an explicit obligation to immediately notify a target of the date upon which the Bureau receives a pre-merger notification filing from the bidder, the Act does not otherwise address the issue of information sharing in the context of hostile or unsolicited transactions.

The Bureau's new policy statement sets out that when the Bureau provides to one party information regarding such matters as the anticipated duration of the Bureau review and its views on whether the transaction would substantially lessen or prevent competition, it will also “strive to disclose” that information “equitably” with the other party, subject to the restrictions in the Competition Act.  There is therefore a stance favouring the sharing of information but which also recognizes that there will be limitations required by law in some cases.

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A Ministry of Finance news release issued on June 3, 2010, reported that Jim Flaherty, Minister of Finance, addressed a symposium in Beijing. Minister Flaherty was quoted as saying “[a]s we work to ensure a fledgling [global] recovery takes root, [China’s] contribution will become even more important. And, in playing an increasingly important role in the global economy, I’m here today to tell you that you will continue to have a friend and partner in Canada.”

While the news release does not mention recent Chinese investments in Canada, it noted that Minister Flaherty welcomed growing investment and trade between Canada and China.

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On May 31, 2010, the Competition Bureau announced that Clean Harbours, Inc., a US-based company that provides environmental waste services in Canada, had implemented a merger remedy as required by the terms of its July 2009 agreement with the Commissioner of Competition.  The agreement required the divestiture of the Pembina Area Landfill in Alberta which Clean Harbours had acquired as a result of its 2009 acquisition of Eveready Inc., an Alberta-based company that also provided environmental waste disposal services.  In July 2009, the Bureau stated that it had concluded that Clean Harbours' acquisition of Eveready would likely prevent or lessen competition substantially in respect of Class I solid hazardous waste disposal in Alberta. In particular, the Bureau was concerned that the transaction “could result in higher prices for solid hazardous waste disposal” since Clean Harbours would have owned the only two Class I hazardous waste landfills in the province.

The landfill was sold to Secure Energy Services Inc.  Although the Initial Sale Period (during which Clean Harbours would have conduct of sale) set out in the agreement is still confidential, it is possible that it was considerably shorter than the 10-month period it took to complete the divestiture.  If so, the Commissioner may have agreed to one or more extensions of the Initial Sale Period so as to allow for the orderly sale of the business by Clean Harbours, rather than resorting to a forced sale by a divestiture trustee as provided for in the agreement if a sale was not completed by Clean Harbours within the Initial Sale Period.
 

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On May 31, 2010, the Competition Bureau released for consultation a draft revised Fee and Service Standards Handbook for Merger-Related Matters. The Bureau proposes changes to timelines as well as some adjustments to the assessment of transaction complexity. Service standards are wholly distinct from statutory waiting period under the merger filing provisions of the  Competition Act.  They set out, depending on substantive complexity, non-binding maximum time periods within which the Bureau will endeavour to complete a merger review.

Merger reviews are designated as being either “non-complex”, “complex”, or “very complex”. The draft Handbook proposes:

• the “non-complex” service standard period will remain at 14 days (practically speaking, there is probably not much room for a shorter period)
• the “complex” service standard period will be reduced from 70 days to 60 days (this reflects the Bureau’s record of generally completing complex reviews in substantially less than 70 days)
• the “very-complex” service standard period will also be reduced from 5 months to 120 days (reflecting the bureau’s overall success in completing reviews in less than 5 months but still a courageous move given the challenges that may be associated with such reviews)
• the introduction of a new service standard period to apply where the Bureau issues a formal Supplementary Information Request (“SIR”) – the new period will be 30 days following the completion of the parties’ response to the SIR (a reasonably tight time line for the Bureau to impose on itself).

The Bureau will accept comments on the draft until July 31, 2010.

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On May 31, 2010, the Competition Bureau released its Merger Review Performance Report which provides an update on the performance of the Bureau's Mergers Branch.

For the Bureau’s year of April 1, 2009 - March 31, 2010, the Bureau commenced a total of 216 merger reviews. Reviews were commenced after receiving merger notifications under Part IX of the Competition Act or requests for advance ruling certificates under s. 102 of the Competition Act or for other reasons.  Merger review numbers were slightly less than previous years.  The Bureau commenced 239 merger reviews in the 2008 – 2009 year and 337 merger reviews in the 2007 – 2008 year (the highest number since at least the 2003 – 2004 year).

The Bureau also reported on the breakdown of complexity designations. In the 2009 – 2010 year the Bureau classified 173 transactions (84%) as non-complex (subject to a non-binding maximum 2 week review period), 27 transactions (13%) as complex (subject to a non-binding maximum 10 week review period), and 6 transactions (3%) as very complex (subject to a non-binding maximum 5 month review period).  These results were generally in line with previous years.  From 2003 to 2010, approximately 88% of merger reviews were classified as non-complex, 10% as complex and 2% as very complex. 

The Bureau reported that in the 2008 – 2009 year it completed its merger reviews within the designated review period 93% of the time for non-complex transactions, 89% of the time for complex transactions and 83% of the time for very complex transactions.  Thus, while exceptions do exist, overall the Bureau completes its merger reviews within the applicable review period in a high percentage of cases.

It is important to keep in mind that review periods are based on non-binding review periods set out in the Bureau’s Fee and Service Standards Handbook. These are wholly distinct from the statutory waiting periods set out in Part IX of the Competition Act.

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