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

Shawn Neylan and Michael Kilby

On July 28, 2010, the Competition Bureau (Bureau) announced that it had reached an agreement with Nufarm Limited (Nufarm) in relation to its earlier acquisition of AH Marks Holding Limited (AH Marks) in March 2008, stating that commitments made to the Bureau by Nufarm and the entering into of a consent decree in the United States between Nufarm and the Federal Trade Commission (FTC) were adequate to resolve Canadian competition concerns.
 
The US consent decree pertains to three herbicides used on farms and lawns.  Nufarm is required to sell AH Marks’ rights and assets associated with the “MCPA” herbicide to a new competitor, Albaugh Inc., and to sell AH Marks’ rights and assets associated with “MCPP-P” herbicide to a new competitor, PBI Gordon Co.  Further, Nufarm is required to modify current agreements with two other companies (Dow Chemical Company and Aceto Corporation) to allow them to fully compete in respect of the MCPA herbicide, and a third herbicide, “2,4-DB.”  In the United States, the FTC concluded that Nufarm’s acquisition of AH Marks resulted in Nufarm having a monopoly in the US markets for the MCPA and MCPP-P herbicides, and left only two competitors in the market for the third herbicide, 2,4-DB.  In Canada, Nufarm will divest its MCPA Task Force seat and certain Canadian MCPA Technical Registrations and Canadian Formulated Product Registrations to Albaugh.

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Shawn Neylan

On July 23, 2010, the Federal Court of Appeal dismissed US Steel’s application for a stay of the Attorney General of Canada’s proceeding against it to enforce Investment Canada Act (ICA) undertakings with respect to Ontario steel mills it acquired in 2007.  The Minister is seeking enforcement of undertakings regarding employment and production levels, and a fine for non-compliance.

The court decided that while US Steel could show that its appeal from a trial level dismissal of its constitutional challenge of the enforcement provision in the Investment Canada Act was not frivolous or vexatious, it had not shown irreparable harm or that the balance of convenience favoured a stay of the enforcement proceeding.

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Shawn Neylan and Sharon Seung

On March 19, 2010, the Quebec Court of Appeal upheld a decision rendered by the Quebec Superior Court, unconditionally absolving Mr. Daniel Drouin, the accused, of a price-fixing charge. The Court of Appeal dismissed the Crown’s application for leave to appeal on the basis that the lower court judge had not made a reviewable error which would merit judicial review.

In the original Superior Court decision, the court had ordered an absolute discharge. The accused had pleaded guilty to a charge brought against him for fixing the price of gas in the city of Victoriaville in 2005, when he was the supervisor of Les Pétroles Cadrin Inc. In his capacity as supervisor, the accused was responsible for setting the price of gas sold by the service station. The price-fixing charge was brought against the accused following an investigation by the Competition Bureau.
 

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Shawn Neylan and Michael Kilby

In the first quarter of 2010, the Investment Review Division of Industry Canada (IRD) received approximately 115 notifications in respect of the acquisition or establishment of Canadian businesses pursuant to the Investment Canada Act (ICA).  In addition, 4 Ministerial decisions based on applications for review were made.  By way of contrast, in the full 2007 year, likely a high water mark for foreign investment in Canada, approximately 676 notifications and 62 Ministerial decisions based on applications for review were made.

 The key distinction between an application for review and a notification is that an application for review requires that a foreign investor establish for the Minister of Industry  (or the Minister of Heritage in the case of cultural businesses) that a proposed investment is of "net benefit to Canada".  This is usually achieved by providing binding undertakings to the Minister in respect of the future conduct and management of the Canadian business.  A notification does not trigger any approval requirement but is largely an administrative formality.  Applications for review are usually triggered by large, direct acquisitions of Canadian businesses.

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Shawn Neylan and Michael Kilby

On March 12, 2009, the Government of Canada enacted extensive changes to the Investment Canada Act as part of Bill C-10, the budget implementation bill passed in response to the global economic crisis.  The bill was introduced in Parliament on February 6, 2009 and received royal assent only five weeks later.

In light of the speed with which the amendments were passed, it was expected that it would take some time to prepare implementing regulations that would allow the new law to come into force. Draft regulations were published one year ago, on July 11, 2009. Extensive comments were made on the draft regulations. However, final regulations have not come into force.

The amendments in question, once implemented by regulations, will change the Investment Canada Act review threshold for direct acquisitions by WTO investors from $299 million in gross assets, measured on the basis of current book value (2010 threshold), to $600 million in “enterprise value”, rising progressively to $1 billion in enterprise value over a four-year period.  The clear intent of Parliament was to lessen the number of foreign investments in Canada that would be subject to review and Ministerial approval (usually granted on the basis of binding undertakings).

While it is clear that the calculation of enterprise value raises some difficult technical questions that must be addressed in the final regulations, the amount of time this is taking is delaying the implementation of Parliament’s intent to liberalize Canada’s foreign investment regime and, to the extent this was the case, Parliament’s intent that Bill C-10 be a key part of Canada’s response to the global economic crisis.

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The Competition Bureau today announced new criminal charges against 25 individuals and three companies with respect to alleged price fixing in Québec and stated that other investigations with respect to alleged price fixing in retail gasoline outside of Québec were ongoing.  Among other things, the bureau used wiretaps in its investigation.

The bureau stated in a backgrounder that: “[w]hile some of the accused operated under the name or "banner" of a major oil company, it was the local operators of the gas stations who were responsible for setting the final price at the pump. There is no evidence that the three major national oil companies' corporate offices were involved in these offences.”

The bureau acknowledged that: “[s]imilar gasoline prices, or similar changes in the price of gasoline, do not necessarily indicate price-fixing. High prices are a concern under the Competition Act only when they are the result of anti-competitive conduct, such as price-fixing.”

The accused are presumed to be innocent and are entitled to all of the rights and defences provided by law including a fair and public hearing before an independent and impartial tribunal.
 

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On July 6, 2010, United States Steel Corporation (USS) filed a notice of motion with the Federal Court of Appeal seeking a stay of the Attorney General of Canada’s (AGC) enforcement proceeding under s. 40 of the Investment Canada Act (ICA), pending determination of the appeal brought to the court by USS in respect of a decision upholding the constitutional validity of s. 40.   The Federal Court issued its decision upholding the constitutionality of section 40 of the ICA on June 14, 2010, and USS filed its notice of appeal on June 24, 2010.

The AGC’s enforcement proceeding seeks the enforcement of undertakings given in 2007 by USS under the ICA in relation to its acquisition of Stelco as well as the imposition of a fine of $10,000 for each day of alleged non-compliance.  The undertakings in question relate to Canadian employment and production levels.  The United Steelworkers and Lakeside Steel have intervened in the AGC’s proceeding to seek damages for lost wages and the divestiture of the former Stelco operations.

USS argues that the possibility of a forced divestiture puts in jeopardy USS’s entire investment in Canada (despite the fact that the Minister has not sought this remedy).  It also argues that if a stay is not granted the hearing of the AGC’s enforcement proceeding will be nearly or fully completed such that USS will be deprived of its right to appeal the order upholding the constitutionality of s. 40.  USS argues that the AGC’s proceeding is fundamentally a retrospective effort in light of the fact that the undertakings are due to expire in October, 2010 and that there would therefore be no prejudice to the AGC if a stay is granted.

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