Competition Bureau Clears Retail Gas Mergers

Neil Morgan and Mike Laskey - 

On June 27, the Competition Bureau  announced that it had cleared Alimentation Couche-Tard Inc.’s acquisition of CST Brands, Inc. (the owner of the Ultramar brand), and the subsequent sale of the majority of CST’s Canadian assets to Parkland Industries Ltd. (see the Bureau press release).  This concludes the Bureau’s lengthy review of the transactions, which were announced in the third quarter of 2016.

Each transaction is subject to a consent agreement, which the Bureau concluded will address the competition concerns it alleged were associated with the transactions.  Pursuant to the consent agreements: (i) Couche-Tard agreed to sell 366 gas stations and gasoline supply contracts to Parkland, and one gas station to Philippe Gosselin & Associés Limitée; and (ii) Parkland agreed to sell nine gasoline supply contracts to MacEwen Petroleum Inc.  or McDougall Energy Inc. and certain of its own assets to MacEwen in two other markets where the Bureau alleged competition issues.

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CASL confusion: what July 1 really signifies for marketers

David Elder - 

July 1, 2017 is not only Canada’s 150th birthday -- it is also marks three years since Canada’s Anti-Spam Legislation (CASL) has been in force.  While Canadian businesses are unlikely to celebrate the latter anniversary with barbecues and fireworks, July 1 will signify an important change in the way that CASL will apply. 

Unfortunately, there seems to be some confusion about what the approaching deadline really means for marketers.  From a CASL perspective, July 1 is important for 3 reasons:

Private right of action

Let’s start with what it doesn’t mean: July 1 will no longer mark the coming into force of the private right of action contained in the law.  This provision would have allowed civil suits to be filed against individuals and organizations for alleged violations of the law.  In addition to suing for actual damages, the provision also would have allowed plaintiffs to claim statutory damages (which need not be proved) of up to $200 – including for receipt of a non-compliant email message.

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Canadian Merger Control Thresholds for 2017: Competition Act and Investment Canada Act increases

Susan M. Hutton

Both the Competition Act and the Investment Canada Act thresholds for review of acquisitions involving Canadian businesses are expected to increase in 2017. The “size of target” threshold for Competition Act notification, if adjusted pursuant to the formula prescribed in the Act, will increase very slightly to C$88 million (from C$87 million in 2016), although this increase has yet to be confirmed by the Minister and is subject to his discretion.

The Canadian government has also announced that the threshold for review under the Investment Canada Act applicable to direct acquisitions by state owned or influenced WTO investors will increase to C$379 million for transactions closing in the remainder of 2017 (from C$375 million in 2016), based on the book value of assets. Other ICA thresholds remain unchanged at this time, although the government announced in the fall that the review threshold for private WTO investors ‒ based on enterprise value of the Canadian business ‒ will increase in April to C$1 billion rather than C$800 million as previously scheduled.

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Volkswagen and Audi settled environmental marketing claim with $15 million penalty

Vanessa Leung

On December 19, 2016, Volkswagen Group Canada Inc. (VW) and Audi Canada Inc. (Audi) entered into a consent agreement with the Commissioner of Competition to resolve the Commissioner’s concerns that VW and Audi had made false or misleading environmental marketing claims about certain of its 2.0 litre diesel vehicles. The consent agreement is one component of a broader Canadian settlement relating to VW’s and Audi’s allegedly misleading environmental claims.

The Bureau alleged that software installed in the affected VW and Audi vehicles could detect a test being conducted and alter the operation of the vehicle during the test to reduce nitrogen oxide emissions. The Bureau also alleged, however, that during normal use, the nitrogen oxide emissions would exceed the amounts at which the vehicle had been certified. The Bureau concluded that the statements, warranties and/or guaranties made about the performance or efficacy of these vehicles were false and misleading in a material respect, and were not based on adequate and proper testing, contrary to the Competition Act

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Competition Bureau clears McKesson's acquisition of Rexall Health, subject to conditions

Gideon Kwinter and Mike Laskey

On December 14, the Competition Bureau entered into a consent agreement with McKesson Corporation in relation to its acquisition of Rexall Health from Katz Group. The agreement brings an end to the Bureau’s extensive review of the transaction, which was announced over nine months ago, on March 2, 2016.

Upon closing of the transaction, McKesson, the largest pharmaceutical product wholesaler in Canada, will acquire Rexall Health’s approximately 470 retail pharmacies. The Bureau determined that the acquisition would likely result in a substantial lessening or prevention of competition in the wholesale and retail of certain pharmacy products and services.

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Moose Knuckles resolves misleading "Made in Canada" representations

Vanessa Leung - 

On December 7, 2016, Moose International Inc. (Moose Knuckles) reached a consent agreement with the Commissioner of Competition. The consent agreement resolves the Commissioner’s concerns about deceptive marketing practices in respect of the “Made in Canada” claims on certain Moose Knuckles parkas.

According to the Bureau, Moose Knuckles claimed that its parkas are “Made in Canada” (both on its website, and on the interior of the parkas themselves). The Bureau alleged that, in fact, the parkas were imported from Vietnam and Asia in a nearly finished form. The Bureau concluded that Moose Knuckles’ advertising was therefore inconsistent with its (non-binding) “Made in Canada” guidelines, which have three key requirements:

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Bill C-25 broadens the Competition Act affiliation rules

William Wu - 

On September 28, 2016, the federal Minister of Innovation, Science and Economic Development introduced Bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act, and the Competition Act. Bill C-25 proposes to introduce a number of important changes to the Canadian corporate governance regime for federally-incorporated businesses and organizations. In relation to the Competition Act, Bill C-25 proposes to broaden the affiliation rules, which could potentially impact a wide range of competition law issues.

The proposed amendments to the affiliation rules in Bill C-25 are substantially the same as those previously included in the proposed Price Transparency Act (Bill C-49) in December 2014. The primary objective of Bill C-49 at the time was to address the perceived problem of unjustified cross-border price gap between identical or similar products in Canada and the United States, which was the focus of significant commentary and criticism from competition law practitioners, economists and academics. The proposed amendments to the affiliation rules were just an incidental part of the bill. Bill C-49 died on the order paper, along with it its proposed amendments to the affiliation rules (which themselves were not controversial). The current Bill C-25 revives substantially the same amendments to the affiliation rules as those included in Bill C-49. 

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Competition Bureau questions: Why don't we see more health care advertising?

William Wu and Vanessa Leung - 

Due to regulations by provincial governments and self-regulating professional bodies, Canadian health care professionals face significant restrictions on how they are permitted to advertise their services in the marketplace. For example, price advertising, where professionals advertise the prices they will charge for particular services, is often limited; comparison advertising, where a professional compares his or her services and skills to those of another professional, is generally prohibited.

On October 4, 2016, the Competition Bureau published a report assessing the effect of advertising restrictions on the health care marketplace. The report suggests that advertising restrictions, while well-intentioned, may result in unnecessarily high prices for consumers, and calls on regulatory bodies to begin collecting data to conduct further empirical studies on the effect of advertising restrictions.

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Template consent agreement for better transparency and predictability in merger remedy

Vanessa Leung and William Wu - 

On September 29, 2016, the Competition Bureau released a template for merger consent agreements.

As part of its enforcement mandate, the Bureau reviews certain proposed transactions to determine whether they will likely result in a substantial lessening or prevention of competition in a market. If the Bureau determines that the proposed transaction is likely to result in substantial anti-competitive effects, the Commissioner of Competition has the option to challenge the proposed transaction before the Competition Tribunal or negotiate appropriate remedial measures with the merging parties to address the proposed transaction’s likely anti-competitive effects. Such negotiated remedial measures are typically implemented by way of a consent agreement. Once registered with the Tribunal, the consent agreement has the force and effect of a court order. The Bureau, as well as merging parties, generally prefers to pursue negotiated consent agreements rather than formal litigation before the Tribunal, as Tribunal litigation is more costly, time-consuming and uncertain for both the Bureau and the merging parties.

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Avis and Budget reach settlement in alleged misrepresentation of fees and discounts

Vanessa Leung and Ashley Piotrowski

On June 2, 2016, the Competition Bureau reached a consent agreement with Aviscar Inc. and Budgetcar Inc. / Budgetauto Inc., over allegations of false or misleading advertising for prices and discounts on car rentals and associated products.  A Bureau investigation concluded that certain prices and discounts initially advertised were not attainable because consumers were charged additional mandatory fees that were only disclosed later when making a reservation. Pursuant to the consent agreement, the parties will pay a $3 million administrative monetary penalty, as well as $250,000 towards the Bureau’s investigative costs.  The parties have also agreed to implement a compliance program.

Background

In March 2015, the Bureau filed an application against the Aviscar Inc. and Budgetcar Inc. / Budgetauto Inc., alleging that the parties had made false or misleading representations to the public to promote the use of their rental cars and associated products, and that the parties had supplied their rental cars and associated products at a higher price than was advertised to consumer. The representations were made across a broad range of media including print, website, mobile applications, television commercials and electronic messages.

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CRTC partners with global agencies to enforce spam and telemarketing rules

David Elder - 

The Canadian Radio-television and Telecommunications Commission (CRTC) has announced that it has signed a memorandum of understanding with 10 domestic and global enforcement agencies to aid in the enforcement of spam and telemarketing laws.  However, while the announcement is certainly a step in the right direction, many of the countries that produce the most spam were not at the table.

The agreement is intended to promote cooperation between the various enforcement agencies, and includes commitments by each signatory to share information and intelligence regarding unsolicited communications, where permitted by the laws of its jurisdiction.  

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Competition Tribunal renders a decision in the Toronto Real Estate Board case

Ashley Piotrowski

After five years of back and forth at various levels of court, the Competition Tribunal has rendered a decision in the Toronto Real Estate Board case, partially granting the application brought by the Commissioner of Competition pursuant the abuse of dominance provision (section 79) of the Competition Act.    

As mentioned in our earlier blog posts, the Commissioner’s application involves a challenge by the Commissioner against TREB for allegedly abusing its dominance under section 79 of the Competition Act in relation to membership rules governing the use by members of certain of the board’s multiple listing service® (MLS®) listing data. In particular, the Commissioner alleged that TREB’s rules restricted the manner in which real estate brokers and salespersons may display and use certain MLS® data.

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Competition Bureau completes update of Intellectual Property Enforcement Guidelines

Jeff Brown and Margaret Kim - 

On March 31, 2016, the Competition Bureau (the Bureau) released the anticipated final version of its updated Intellectual Property Enforcement  Guidelines (2016 IPEGs), seven months after the public consultation of the Phase II draft revision (Draft Phase II IPEGs) concluded in August 2015. The 2016 IPEGs further clarify, and provide practical guidance on, the Bureau’s enforcement approach to several important issues at the interface between competition and intellectual property (IP) laws, namely (1) patent litigation settlements between brand and generic pharmaceutical companies, (2) product switching (also known as product hopping), (3) patent assertion entities (PAEs) and (4) collaborative standard setting and standard essential patents (SEPs). 

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CRTC executes another raid in malware investigation

David Elder - 

The Canadian Radio-television and Telecommunications Commission (CRTC) has announced the execution of another warrant under Canada’s Anti-Spam Legislation (CASL), this time at two locations in the Niagara region of Ontario.

This is only the second such warrant executed by the CRTC under the anti-spam law.  As in a recent previous announcement respecting the execution of a similar warrant, the warrant was issued as part of an ongoing investigation, and the party that was the subject of the warrant was not identified.

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Telus agrees to pay $7.34 million in customer rebates to resolve false and misleading advertising allegations

Jeff Brown and Margaret Kim - 

On December 30, 2015, the Competition Bureau announced that it had reached a consent agreement with Telus Communications Inc., one of Canada’s “Big Three” wireless carriers, over allegations of false or misleading advertisements for premium text messaging and rich content services, such as trivia, daily horoscopes, and ring tones. 

As part of the consent agreement, Telus will issue rebates in an aggregate amount up to $7.34 million to certain current and former wireless customers, who the Bureau alleged were unknowingly charged extra for the text message services. The Bureau noted that the amount for consumer rebates made available under the consent agreement is the most obtained by it under any consent agreement to date.  In March 2015,  Rogers Communications Inc. settled with the Bureau, agreeing to pay $5.42 million in refunds to customers for the same fees as part of the same investigation. Similar proceedings against Bell Canada and the Canadian Wireless Telecommunications Association are ongoing.

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Would Steris/Synergy have been blocked in Canada? Prevention of Competition à la Canadienne

William Wu - 

On September 24, 2015, a U.S. District Court in Ohio denied a motion for a preliminary injunction sought by the Federal Trade Commission (FTC) to prevent Steris Corporation from acquiring its alleged potential competitor Synergy Health plc. The FTC sought the injunctive relief under the Clayton Act based on the so-called “actual potential entrant” doctrine, alleging that the acquisition would have prevented Synergy’s entry into the contract sterilization market in competition against Steris.

This case provides an interesting comparison to the Canadian “substantial prevention of competition” test clarified by the Supreme Court of Canada earlier this year in the Tervita decision. Although the tests are now substantially similar, in practice Canadian courts have exhibited a greater willingness to find entry to be “likely” despite business plans to the contrary.

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Competition Bureau bulks up Electronic Production Guidelines

Mike Laskey and Susan M. Hutton - 

On September 8, the Canadian Competition Bureau released updated instructions for the production of electronic records by merging parties responding to supplementary information requests, or “SIRs” as they are known. SIRs are thorough requests for data, e-mails and other documentation and information that are issued in connection with complex competition merger reviews, and are commonly viewed as the Canadian equivalent of US Second Requests. The updated instructions set out detailed parameters that the Bureau expects merging parties to follow when responding to SIRs, and put an increased focus on large document productions exported from specialized litigation support software. The updated instructions are similar to the US Federal Trade Commission’s Bureau of Competition Production Guide.

The updated instructions contemplate two options for document productions: (a) productions from computer systems without sophisticated litigation export capabilities; and (b) productions from specialized litigation software. The instructions associated with the former type are straightforward, and similar to the previous instructions: parties may simply produce documents in their “native” format (e.g., Word, Excel, etc.). The instructions associated with the latter type are largely new, and much more complex: parties are expected to produce documents in a specific and detailed manner, with a large amount of “metadata” (e.g., author, date created, date modified, etc.) set out in a separate index.

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Parkland announces closing of Pioneer transaction as Competition Act merger proceedings continue

Michael Laskey and Katarina Zoricic -

On June 25, Parkland Fuel Corporation announced the closing of its acquisition of the assets of Pioneer Energy LP. The closing follows an order of the Competition Tribunal, issued on May 29, 2015, which partially granted the Commissioner of Competition’s request for an injunction against Parkland’s acquisition of 14 of the 393 gas stations and exclusive long-term supply contracts. The Commissioner of Competition filed an application under section 92 of the Competition Act on April 30, 2015, seeking to block the acquisition of the 14 stations, alleging that the transaction (announced on September 17, 2014) would likely lead to a substantial lessening of competition in 14 already concentrated markets across Ontario and Manitoba.

Issued under section 104 of the Competition Act (see below), the interim injunction requires Parkland to preserve and independently operate the assets to be acquired from Pioneer in six of the 14 communities until the Tribunal issues its final decision.

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Competition Bureau releases "Phase II" Draft Revision of the Intellectual Property Enforcement Guidelines

 D. Jeffrey Brown and Jessica Rutledge - 

On June 16, 2015, the Competition Bureau released an updated draft version of the Intellectual Enforcement Property Guidelines (IPEGs), which set out its approach to enforcing the Competition Act  against potentially anti-competitive practices involving intellectual property. The draft updates concentrate on the Bureau’s enforcement approach in three areas, namely (a) patent litigation settlements, (b) standard-essential patents and (c) patent assertion entities. The most significant changes include the creation of a “safe harbour” for settlements of patent infringement litigation between branded and generic drug manufacturers that do not involve a reverse payment (i.e., a payment from the branded manufacturer to the alleged infringer). The draft IPEGs also signal a narrow scope of litigation settlements that may be subject to enforcement under the criminal cartel provisions of the Act.

Background

The IPEGs set out the Bureau’s enforcement approach with respect to the Competition Act and potentially anti-competitive practices involving intellectual property. 

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Canada's Competition Bureau loses major bid-rigging case: 60 not guilty verdicts

Susan M. Hutton and Gina Demczuk - 

In a further blow to the track record of the Competition Bureau and the Public Prosecution Service of Canada in contested criminal trials, on April 27, 2015, a jury in the Ontario Superior Court of Justice found nine defendants not guilty on 60 charges of bid-rigging and conspiracy to rig bids. Another individual - David Watts, who waived his right to a preliminary inquiry, and sought an order directing a verdict of acquittal for himself only - was acquitted in February, 2015 of similar charges in a directed verdict.

The Competition Bureau had commenced a criminal inquiry in 2006 into bid-rigging allegations against 14 individuals and seven companies, regarding allegations that the accused had coordinated their bids for certain information technology (IT) services contracts with the Canadian federal government. The Attorney General filed the charges in February, 2009. One corporation had sought immunity from the Competition Bureau under its immunity program, in which the corporation and its employees are not prosecuted in exchange for assisting the Bureau with its inquiry and subsequent prosecution.  Two of the individuals pleaded guilty. Prior to the preliminary inquiry, the Crown had dropped charges against one individual.

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CRTC shows great interest in US-based robocaller offering low credit card rates - $145,000 fine imposed

David Elder -

For the second time in a month, the CRTC has imposed a penalty against a foreign telemarketer.

In the most recent case, an administrative monetary penalty of $145,000 was issued against Arizona-based Rainmaker Marketing/Maple Accounting for making unsolicited telemarketing calls pitching lower credit card rates.

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Red Light: Competition Bureau alleges misleading advertising by car rental firms

Jennifer Rad -

The Competition Bureau has filed an application with the Competition Tribunal against Aviscar and Budgetcar, and their parent company, Avis Budget Group Inc., alleging deceptive marketing practices contrary to several provisions of the Competition Act. The Bureau’s investigation into the pricing practices of Avis and Budget, two of the largest rental car companies in Canada, uncovered price representations which the Bureau considers to be false or misleading in a material respect, dating back to 1997.

In its Notice of Application, the Bureau submits that the prices advertised to the public by Avis and Budget are “not in fact attainable,” thereby creating a false general impression about prices and discounts. The Bureau submits that actual rental costs could be up to 35% higher than advertised once “non-optional” fees imposed by both companies are included. Although these “non-optional” fees are known to Avis and Budget, the Bureau alleges that the companies choose to exclude them from advertised prices and/or discounts. The Bureau also alleges that the “non-optional” fees, once revealed to the customer, are characterized as charges being imposed on customers by governments or other third-parties, when in fact they are Avis’ and Budget’s own charges related to the cost of doing business.

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Media mergers and the Competition Bureau: Is the medium the market?

Michael Kilby -

The rapid growth of digital media in recent years and the simultaneous pressures on traditional media have led to a number of fascinating media transactions in which the Competition Bureau has had to confront the difficult question of product market definition in industries characterized by disruptive technological change.

In March 2015, the Bureau cleared a magazine publishing transaction (TVA Group’s acquisition of Transcontinental’s magazine business) due, in its words, to the “presence of effective remaining competitors in all overlapping genres of magazines and the ability of advertisers to reach the same demographics through other magazines and media” (emphasis added). The Bureau also stated that it considered the “general decline in readership of magazines, in part attributable to the increasing importance of the Internet as an alternative for readers” (emphasis added).

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Grocery mergers in the United States and Canada: Something to chew on

Michael Kilby -

On January 27, the U.S. Federal Trade Commission announced a competition law remedy in respect of the Albertsons / Safeway grocery merger, requiring the divestiture of 168 supermarkets in 130 local markets in numerous states. This remedy is of particular interest from a Canadian competition law perspective in light of the recent completion of two Canadian grocery sector transactions, namely, Sobeys’ acquisition of Canada Safeway and Loblaw’s acquisition of Shoppers Drug Mart, both of which resulted in divestitures.

Several comparisons may be drawn between the approach taken by the U.S. FTC and the Canadian Competition Bureau in reviewing these mergers.

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New 2015 thresholds for Competition Act merger notification and Investment Canada Act review

Susan M. Hutton and Mike Laskey -

Both the Competition Act and the Investment Canada Act thresholds for review of acquisitions involving Canadian businesses are expected to increase in 2015. The “size of target” threshold for Competition Act notification, if adjusted pursuant to the formula prescribed in the Act, will increase to C$86 million, although this increase has yet to be confirmed by the Minister and is subject to his discretion. Industry Canada has announced that the threshold for review applying to most direct acquisitions under the Investment Canada Act will increase to C$369 million for transactions closing in the remainder of 2015.

Competition Act:

The Competition Bureau must generally be given advance notice of proposed transactions under the merger notification provisions of the Competition Act, when the “size of the target” exceeds the specified threshold, and when the combined Canadian assets or revenues “in, from or into” Canada of the parties together with their respective affiliates (the “size of parties” test) exceeds C$400 million. Transactions involving Canadian subsidiaries, as well as the direct acquisition of Canadian businesses or assets, and acquisitions of interests of as little as 20% (for public companies) or 35% (for private companies and interests in non-corporate business combinations) can trigger merger notifications in Canada.

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Supreme Court clarifies "prevention" and revitalizes efficiencies defence in Tervita merger case

Susan M. Hutton and Michael Laskey -

Canada’s Supreme Court of Canada issued its much-anticipated decision in the case of Tervita Corp. v. Canada Commissioner of Competition yesterday, upholding the Federal Court of Appeal’s (and the Competition Tribunal’s) treatment of likely future entry in cases involving the “prevention” of competition, but overturning their rulings as to the application of the efficiencies defence, and in the process increasing the evidentiary burden on the Commissioner to mount a successful challenge to an anti-competitive merger.

The Tervita case has important implications for risk assessment by merging parties, who must now consider what may seem to be somewhat remote alternatives to their proposed merger when considering whether the merger will “prevent” competition. It also could have significant spillover effects as the Commissioner may well now, as a result of losing this case on the grounds of efficiencies, seek to gather even more data and do even more analysis regarding quantification of anti-competitive effects than had previously been the case.

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The Price Transparency Act: Frequently asked questions

Michael Laskey -

As we blogged about in December, the Government of Canada has introduced legislation that will grant the Commissioner of Competition broad powers to investigate and report on so-called “price gaps” between Canada and the US (i.e., products or classes of products whose selling price in Canada is higher than their selling price in the US).

The “frequently asked questions” below are intended to assist businesses in understanding (i) who will be affected by the law; (ii) what investigatory powers the Commissioner will have; and (iii) the ultimate outcome of “price gap” reviews.

You can also download a PDF copy of the FAQ.

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Parliament proposes bill to tackle geographic price discrimination

Megan MacDonald and Erica Lindberg

On December 9, 2014, the Government of Canada introduced legislation aimed at addressing geographic price discrimination, specifically in the form of the much-discussed “U.S.-Canada price gap”. If passed, Bill C-49, titled the Price Transparency Act, will amend Canada’s Competition Act (the Act) to give the Commissioner of Competition the power to make inquiries into complaints that the selling price of a product or class of products (or of a similar product or class of similar products) is, or was, higher in Canada than in the United States.

What You Should Know about Bill C-49

  • Scope of the Proposed Investigative Power: When making an inquiry into potentially discriminatory pricing practices, the Commissioner will be empowered to make ex parte applications to obtain court orders compelling a person to (a) attend and be examined under oath or affirmation; (b) produce specified records, copies of records, or any other thing; or (c) deliver a written return showing in detail the information specified in the order. The amendments to the Act will permit such orders to be made even where the person who is the subject of an order is located outside Canada. 
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Supreme Court of Canada declines Toronto Real Estate Board appeal

Marisa Muchnik -

The Supreme Court of Canada recently dismissed the application by the Toronto Real Estate Board (TREB) for leave to appeal the Federal Court of Appeal’s judgment overruling a decision of the Competition Tribunal that had dismissed the challenge of the Commissioner of Competition (the Commissioner) to certain restrictions by TREB on the manner in which its member real estate agents can disseminate information from TREB’s multiple listing service. The Commissioner’s application will therefore proceed to a hearing on the merits before the Competition Tribunal.

Background

The proceedings date back to May 2011, when the Commissioner brought an abuse of dominance application under subsection 79(1) of the Competition Act (Canada) (the Act) against TREB, an incorporated trade association. TREB is the largest real estate board in Canada with approximately 39,000 members. TREB is said to control a multiple listing service, which contains data about sale prices, historical house prices, and the amount of time a property has been on the market. The Commissioner alleged that TREB had abused its dominance by denying its members the ability to introduce new web-based real estate brokerage services by limiting the use members are allowed to make of the listings and related data.

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CRTC clarifies that anti-spam law won't apply to self-installation of computer programs - most of the time

David Elder -

CRTC staff has issued important guidance on its interpretation of section 8 of Canada’s Anti-Spam Legislation (CASL), noting that the law would not apply to most installations initiated by users, including the downloading of mobile apps from popular digital distribution platforms like The App Store, Google Play and BlackBerry World.

While much attention has been paid to the core anti-spam provisions of CASL, which came into force on July 1, less attention has been paid to date with respect to section 8, which governs the installation of computer programs in the course of commercial activity.  However, as the January 1, 2015 coming into force date nears for that provision, many businesses have been struggling to understand their legal obligations and take the necessary steps to comply.

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Competition Bureau sets out preliminary views on patent agreement settlement enforcement

D. Jeffrey Brown and Justine Johnston -

On September 23, 2014, John Pecman, the Commissioner of Competition, delivered the keynote address at the George Mason University Pharma Conference. The Commissioner spoke about how the Competition Bureau (the Bureau) approaches the interface between competition law and intellectual property (IP), and the Bureau’s enforcement work in Canada’s pharmaceutical industry, including its treatment of reverse-payment patent settlements or pay-for-delay agreements under the Competition Act (the Act).

The Commissioner’s speech coincided with the Bureau’s release of a white paper entitled Patent Litigation Settlement Agreements: A Canadian Perspective. The white paper provides information on Canada’s pharmaceutical industry and regulatory regime, identifies the provisions of the Act that may apply to reverse-payment settlements, and explains the Bureau’s preliminary views on how the Act could apply to reverse-payment settlements. Both the Commissioner’s speech and the white paper make it clear that the Bureau will consult with stakeholders during a forthcoming second stage of public consultations for revising the Intellectual Property Enforcement Guidelines (the IPEGs) to develop appropriate enforcement guidelines.

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Foreign investment in the Canadian book industry

Shawn Neylan, John Leopold, Michel Gélinas and Michael Kilby recently co-authored the paper "Has the Canadian Government Turned the Page on its Book Policy? An Opportunity for Foreign Investors to Consider Investments in the Canadian Book Industry". The authors discuss the challenges Canadian book businesses have experienced attracting capital because they could not sell a controlling interest in their business to non-Canadians.  In recent years, there have been a number of developments which suggest that there is more openness by the Heritage Minister and the Department of Canadian Heritage to consider and allow controlling investments in the book industry by non-Canadian investors. Click here to read the full article.

Eastlink and Bruce Telecom abandon $26.5M merger amid Competition Bureau concerns

Megan MacDonald and Erica Lindberg -

On August 15, 2014, the Competition Bureau (the Bureau) announced that Bragg Communications Inc. (Eastlink) and Bruce Telecom had terminated an announced merger, which would have resulted in the acquisition of Bruce Telecom (the incumbent telecommunications provider for a large portion of Bruce County, Ontario) by Eastlink (a privately-held company that owns and operates cable systems across Canada), for a purchase price of C$26.5 million.

Eastlink’s decision to terminate followed a review by the Bureau’s Mergers Branch, pursuant to which the Bureau concluded that the acquisition would likely have resulted in a substantial lessening or prevention of competition in the towns of Port Elgin and Paisley, Ontario, where Eastlink and Bruce Telecom are the only current providers of wireline telecommunications services. Although the merger did not meet the thresholds for notification to the Bureau, it was brought to the Bureau’s attention as a result of several consumer complaints.

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Commissioner Pecman introduces realignment at the Bureau

Marisa Muchnik -

On May 21, 2014, Commissioner John Pecman announced a significant “realignment” process to the internal structure of the Bureau. The Bureau was historically divided into four enforcement branches: Criminal Matters, Civil Matters, Mergers and Fair Business Practices. The development will combine the Fair Business Practices Branch and the Criminal Matters Branch into a single branch, and also combine the Mergers Branch and the Civil Matters Branch.  All non-criminal cases, including mergers, non-criminal conduct and non-criminal competitor agreements will be handled by the civil branch, whereas criminal cases, including conspiracies, cartels, and bid-rigging, will be under the criminal branch.

Commissioner Pecman noted that the alignment will not decrease the size of the Bureau. However, the realignment will undoubtedly result in many other synergies, and promote greater collaboration within the branches. Pecman noted that the realignment is “about building a stronger, more flexible and more adaptive agency.”

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What's old is new - dusting off the OSP rules

Jennifer Rad -

It has been almost a decade since the Competition Bureau sunk its teeth into the enforcement of ordinary price claims, pursuant to the Competition Act’s deceptive marketing practices provisions. But what is old may be new again as recent signals from the Competition Bureau point towards increased enforcement focus on these types of claims in the future. As such, Canadian businesses should ensure that their corporate compliance programs and pricing practices are in-line with the OSP rules of the Act and the Bureau’s Ordinary Price Claims Guidelines which the Tribunal relied on heavily when analyzing past cases.In particular, Subsections 74.01(2) and (3) of the Act set out specific requirements for the calculation of the ordinary selling or reference price on which savings claims are based, known as the “volume test” and the “time test”:

Volume Test In order to meet the volume test, the reference price must be one at which a substantial volume of product has been sold at that price (or a higher price), within the relevant geographic market, within a reasonable period before or after the savings claim is made.

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Canadian Sentenced to 3 years in Prison for Foreign Bribery attempt

Susan M. Hutton -

On May 23, 2014, the Ontario Superior Court sentenced Mr. Nazir Karigar, an Ottawa-based business executive, to a three-year prison term for attempting to bribe foreign public officials. This judgment marks the first time an individual has been found guilty and convicted under Canada’s Corruption of Foreign Public Officials Act (CFPOA). Enacted in 1998, the CFPOA criminalizes the offering of bribes or other advantages to foreign public officials, and is Canada’s equivalent to the United States’ Foreign Corrupt Practices Act.

The court held that Karigar, 67, conspired with employees and associates of Cryptometrics Canada in Ottawa in an effort to win a $100 million security contract with Air India. He arranged illicit payments for officials of Air India and an Indian Cabinet Minister. Karigar’s defense counsel submitted that Karigar’s age and his lack of prior criminal involvement, as well as Cryptometric’s ultimate failure to receive the contract, should be considered as mitigating factors in sentencing, and requested a conditional sentence. In his judgment, Judge Charles Hackland rejected the notion that Karigar should avoid jail, noting a list of aggravating factors, namely that:

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Competition Bureau contemplating pre-notification regime for competitor collaborations

Michael Laskey -

The Competition Bureau is contemplating a new pre-notification regime, similar to the regime that currently exists for mergers, whereby businesses will be permitted (or, potentially, obliged) to seek advance clearance from the Bureau before entering into agreements with their competitors. Speaking on a panel at an American Bar Association conference on March 27, Commissioner of Competition John Pecman noted that the plan is in its “early days”, and that the Bureau has not decided whether a regime should be implemented (and if so, whether it should be voluntary or mandatory), but that it is something the Bureau is considering. Such a regime could apply to a variety of types of “normal-course” agreements, such as joint purchasing and selling agreements, buying groups, information sharing agreements, R&D agreements, joint production agreements, non-competition clauses and even joint venture agreements.

The motivation for such a regime may stem from the Competition Act’s dual-track approach to competitor collaborations. In Canada, two provisions of the Act govern agreements among competitors. A criminal provision, intended to capture “naked” price fixing (as well as output restrictions and market allocation), carries significant fines and jail terms. A second, civil provision captures only agreements which adversely affect competition, and carries no such penalties. Although these provisions are intended to serve different purposes, it is up to the Bureau to decide which route it wishes to take when investigating (or prosecuting) any particular agreement. The Bureau has released a guidance document which outlines the types of situations in which it will choose to use the criminal and civil provisions, but this guidance is not binding. So, a pre-clearance regime may give businesses additional certainty in knowing that their joint purchasing agreement or non-compete clause will not be challenged (at least, under the criminal provision).

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Bureau approves Agrium asset sale to CHS

Marisa Muchnik -

On March 17, 2014, Canada’s Competition Bureau announced that it has approved the sale of certain assets of Agrium Inc. to U.S. farm cooperative CHS Inc.  Agrium was required to sell seven retail outlets and nine anhydrous ammonia businesses in Alberta and Saskatchewan, as well as its anhydrous ammonia bullet tank in Medicine Hat, AB and the Viterra Inc. retail outlet in Craddock, AB, pursuant to a Consent Agreement entered into by Agrium on September 5, 2013. The sale to CHS is expected to close on April 1, 2014.

The divestiture was required in relation to Agrium’s acquisition of the majority of Viterra’s retail agri-products businesses from Glencore International plc. Viterra – successor to the former Saskatchewan, Alberta and Manitoba Wheat Pool co-operatives, as well as the largest grain handler in South Australia and a significant food processor in Canada, Australia, New Zealand and the United States - was initially sold to Glencore, but Glencore simultaneously announced side agreements to divest some Viterra assets variously to Agrium and Richardson International Ltd., and (later) to CF Industries. The Bureau cleared the acquisition of Viterra by Glencore in May 2012, and Richardon’s acquisition of some of Viterra’s Canadian grain handling assets in December 2012 (Stikeman Elliott LLP acted as counsel to Richardson).  

In September 2013, the Bureau issued a position statement outlining its review of Agrium’s retail agri-products businesses from Glencore International plc. The details of the Consent Agreement, and the review undertaken by the Bureau, were the subject of a previous post. 

Government agencies to coordinate in Alberta energy markets

Susan M. Hutton and Shannon Kack -

In an effort to coordinate their overlapping mandates, the two agencies charged with ensuring that Alberta power markets remain competitive have signed a Memorandum of Understanding (MOU) calling for continued and more defined cooperation between the agencies.

On March 3, 2014, the Competition Bureau announced that the Commissioner of Competition (head of Canada’s Competition Bureau) and the Market Surveillance Administrator of Alberta (MSA) have signed an MOU, implementing a framework for information sharing and enforcement cooperation and collaboration in matters of mutual interest among the agencies.

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Canada's Anti-Spam Law: Will Your Business Be Ready?

On February 13th, the Communications Group hosted a breakfast seminar in the Toronto office entitled “Canada’s Anti-Spam Law: Will Your Business Be Ready?”.  David Elder briefed those in attendance on key requirements of Canada’s Anti-Spam Law (CASL), the electronic messaging requirements of which will come into effect on July 1, 2014. Among those requirements, David spoke of the obligation to obtain prior consent in the delivery of commercial electronic messages (CEMs) and the prescribed form requirements for those messages, outlined a number of the key exemptions that may be available to some senders, and reviewed the timeline for implementation of various aspects of the new law.  David also reviewed some of the particular challenges that organizations are facing in implementing the new law and discussed the work that organizations must do to be able to continue to send marketing messages to established contact lists.   

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Canadian Tire Becomes Even More "Canadian" with the Acquisition of Pro Hockey Life

Marisa Muchnik -

On February 7, 2014, the Competition Bureau released a Position Statement summarizing the approach taken in its review of the acquisition by Canadian Tire, through its wholly-owned affiliate FGL Sports, of Pro Hockey Life. The transaction was entered into on November 28, 2012, and closed on August 12, 2013. The Bureau determined that the transaction was not likely to substantially lessen or prevent competition in the retail market for hockey equipment and hockey-related merchandise.

The transaction provided the Bureau with the opportunity to review a retail merger between retailers carrying on business using three different business models: Canadian Tire is a national mass merchandiser selling products, through a network of independent dealers, across a range of categories; FGL Sports is a national sporting goods retailer; and Pro Hockey Life is a specialized hockey retailer with a geographic presence limited to 11 areas in Canada.

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Government agencies clarify roles under Canada's Anti-Spam Legislation

David Elder and Shannon Kack -

In an effort to coordinate their potentially overlapping mandates, the three agencies charged with enforcement of Canada’s new anti-spam law have signed a Memorandum of Understanding (MOU) dealing with cooperation and sharing of information among the agencies.

On January 23, 2014, the Competition Bureau announced that the Commissioner of Competition, the Privacy Commissioner of Canada and the Canadian Radio-television and Telecommunications Commission (CRTC), have signed an MOU regarding the implementation of their respective mandates under Canada’s Anti-Spam Legislation (CASL).

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Federal Court of Appeal sends Toronto Real Estate Board case back to Competition Tribunal

Susan M. Hutton and Shannon Kack -

On February 3, 2014, Canada's Federal Court of Appeal (FCA) overturned the Competition Tribunal’s decision to dismiss the Competition Bureau’s abuse of dominance application against the Toronto Real Estate Board (TREB), sending the application back to the Tribunal for reconsideration on its merits.

As mentioned in our earlier blog post, the Competition Bureau’s application involves a challenge by the Bureau against TREB for allegedly abusing its dominance under section 79 of the Competition Act in relation to membership rules governing the use by members of the board’s multiple listing service (MLS®) listing data.

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More charges laid in Quebec construction bid-rigging investigation

Ashley Piotrowski and Shannon Kack -

On January 27, 2014, the Competition Bureau announced that another company, Construction Beaudin & Courville Inc., and its president, Alain Courville, were each charged with one count of bid-rigging under subsection 47(2) of the Competition Act. The contracts in question involved road construction, water treatment and other infrastructure projects in the Saint-Jean-sur-Richelieu region of Quebec between January 2008 and December 2009.

The charges come as part of a larger investigation into an alleged widespread collusive scheme that gave preferential treatment to a group of contractors to obtain municipal contracts mainly for infrastructure projects in St-Jean-sur-Richelieu and surrounding areas. In June 2012, 77 criminal charges were laid against 11 people and nine companies for their participation in the scheme.

The charges were laid following a joint investigation by the Bureau and the Sûreté du Québec’s Service des enquêtes sur la corruption, a division of the Unité permanente anticorruption (UPAC). The UPAC was established by the Government of Quebec in February 2011 with a mandate to coordinate and lead units for investigation, audit and prevention to fight corruption in the Quebec public system.

Commissioner of Competition makes submissions to CRTC regarding wholesale wireless roaming arrangements

Michael Laskey -

On January 29, the Commissioner of Competition made submissions to the CRTC in connection with the its ongoing public proceeding examining whether incumbent wireless carriers are unjustly discriminating, or demonstrating undue preference, with respect to wholesale mobile wireless roaming arrangements.

Wholesale roaming arrangements allow the subscribers of one wireless carrier to utilize the wireless network of another carrier in areas in which the former carrier does not operate a network. In this way, roaming agreements allow carriers without fully-developed Canadian networks (for example, U.S. carriers and new wireless entrants) to offer their customers nation-wide coverage by “piggybacking” where necessary on the network of a more developed carrier.

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Canada announces rules for 2500 MHz spectrum auction in 2015

David Elder -

Days before the hammer is raised for the 700 MHz auction, the Canadian government has already announced its next spectrum auction.

On January 10, Industry Minister James Moore announced that the government will commence an auction of 2500 MHz spectrum on April 15, 2015. The spectrum will be licensed in paired blocks of 10 + 10 MHz and unpaired blocks of 25 MHz. Licence availability varies across different blocks and regions of the country, but a total of 318 licences will be offered, each with a 20 year term. Applications will be due by November 27, 2014.

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Federal Court confirms Minister of Industry's authority to impose spectrum caps

David Elder and Shannon Kack -

In the latest chapter in the ongoing battle between incumbent wireless service providers and the federal government over government policies intended to stimulate more competition in the wireless market, the Federal Court has dismissed an application by Telus Communications Company (Telus) for judicial review of the Minister of Industry’s authority to impose conditions on spectrum licences issued pursuant to the Radiocommunication Act.

The Court’s decision in the case of Telus Communications Company v Canada, came less than two weeks before the scheduled start of Industry Canada’s auction of the highly desirable 700 MHz spectrum.

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2014 thresholds for Competition Act merger notification and Investment Canada Act review

Susan M. Hutton -

Both the Competition Act and the Investment Canada Act thresholds for review of acquisitions of Canadian businesses are expected to increase in 2014, to C$82 million and C$354 million respectively, although these increases have yet to be officially confirmed by the Minister, and in the case of the Competition Act merger notification “size of target” threshold, is subject to his discretion.

Competition Act:

The Competition Bureau must generally be given advance notice of proposed transactions under the merger notification provisions of the Competition Act, when the “size of the target” exceeds the specified threshold, and when the combined Canadian assets or revenues “in, from or into” Canada of the parties together with their respective affiliates (the “size of parties” test) exceeds C$400 million. Transactions involving Canadian subsidiaries, as well as the direct acquisition of Canadian businesses or assets, and acquisitions of interests as little as 20% (for public companies) or 35% (for private companies and interests in non-corporate business combinations) can trigger merger notifications in Canada.

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Competition Bureau's Fair Business Practices Branch provides insight into key policies and enforcement issues

As advertising and marketing, both traditional and online, continue to be a large part of our economy, it is important to keep up to date with what the Competition Bureau considers to be fair advertising and marketing business practices. Senior Deputy Commissioner of Competition Lisa Campbell and Major Case Director and Strategic Policy Advisor Brendon Ross attended a breakfast seminar at Stikeman Elliott to speak to clients and answer questions regarding priorities of the Fair Business Practices Branch and recent enforcement issues in misleading advertising and marketing.

Bureau relies on EC remedy in clearance of Thermo Fisher/Life Technologies transaction

Megan MacDonald and Anne MacIsaac -

On December 5, 2013, the Competition Bureau issued a No-Action Letter (NAL) clearing Thermo Fisher Scientific Inc.’s proposed acquisition of Life Technologies Corporation. The Bureau issued this clearance based, at least in part, on a remedy obtained by the European Commission (EC) in connection with the proposed acquisition in Europe.

Both Thermo Fisher and Life Technologies produce and supply life sciences products, including laboratory instruments and consumables, globally, including within Canada, the United States and Europe. Thermo Fisher’s proposed acquisition was subject to competition review in each of these jurisdictions.

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Online crime bill would expand investigative powers in the Competition Act

Michael Laskey -

For the second time, the federal government is attempting to significantly expand the investigative powers of the Commissioner of Competition. Although described as part of an effort to prosecute online bullying and the exchange of illicit photographs, Bill C-13 (titled the Protecting Canadians from Online Crime Act), which received first reading in Canadian Parliament on November 20, would also introduce broad new powers for the Commissioner when investigating companies and individuals suspected of having contravened or engaged in reviewable conduct under the Competition Act.

The modifications to the Competition Act in Bill C-13 are very similar to those included in last year’s Bill C-30 (titled the Protecting Children from Internet Predators Act), which we described in our post last year, though provisions relating to warrantless access to internet subscriber information have been removed. Bill C-13 was roundly criticized by privacy advocates for its onerous surveillance provisions, and the federal government abandoned the bill in February, 2013.

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Quebec telemarketing scheme leads to imprisonment

Marisa Muchnik -

On December 4, 2013, the Competition Bureau announced that Gilles Tremblay, a Quebec telemarketer, pleaded guilty to deceptive telemarketing under the Competition Act and fraud under the Criminal Code. As a result, Tremblay was sentenced to nine months imprisonment.
 

The guilty pleas arose out of Tremblay’s investment in a telemarketing scheme involving two operations in Montreal. Tremblay invested somewhere between $50,000 and $75,000 in the scheme and was involved in the financial management of some of the telemarketing activities. The scheme promoted “government grants” to American citizens and the sale of office supplies and medical kits to Canadian and American businesses utilizing allegedly misleading or fraudulent practices. The 2006 investigation was conducted by the Bureau in partnership with the Centre of Operations Linked to Telemarketing Fraud.
 

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Bureau clears Telus to take over Public Mobile

Ashley Piotrowski and Shannon Kack -

On November 29, 2013, Canada’s Competition Bureau (the Bureau) issued a no-action letter in respect of the proposed acquisition by TELUS Communications Inc. (Telus) of Public Mobile Holdings Inc. and its operating subsidiary, Public Mobile Inc. (Public Mobile), giving Telus the green light to acquire Public Mobile’s four spectrum licenses. The Bureau’s review is noteworthy for several reasons: First, it resulted in a remedy. Second, the remedy is behavioural in nature. Third, there is no “consent agreement”, which is the usual way of formalizing a remedy. And, fourth, the precise form of the commitment made by Telus is not clear. A position statement accompanied the Bureau’s announcement.

In its position statement, the Bureau characterized the wireless telecommunications industry as having high barriers to entry and expansion, readily accessible information about competitor pricing, and the existence of industry organizations that could facilitate the dissemination of market and pricing information amongst competitors, all of which are factors the Bureau states could potentially raise concerns not only of unilateral, but coordinated conduct. The Bureau also characterized the industy as having a high concentration of market share, with the vast majority of wireless subscribers served by three national incumbents (Telus, Rogers and Bell). Following Industry Canada’s 2008 spectrum auction, the Bureau states that national incumbents responded to increased competition from new entrants (WIND Mobile, Public Mobile, Mobilicity and Videotron Mobile) by lowering prices, accelerating the introduction of new products, plans and services, and expanding the overall range and diversity of wireless products, plans and services available to customers.

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Termination of franchise agreements required in minority interest acquisition

Jeffrey Brown and Shannon Kack -

On November 1, 2013, the Competition Bureau (the Bureau) announced a Consent Agreement with La Coop fédérée (LCF) and Groupe BMR (BMR) in relation to LCF’s acquisition of a minority interest in BMR. A position statement was released on November 13, 2013, outlining the Bureau’s analysis of the proposed merger.

Under the terms of the Consent Agreement, LCF and BMR are required to (i) terminate franchise agreements with certain retail store franchisees in four Quebec regions; and (ii) continue to supply these franchisees on competitive terms until a new franchisor is found or until December 31, 2014. In essence, the Consent Agreement will require the affected franchisees to find new competitor banners under which to carry on their retail businesses in these regions or to otherwise carry on business independently of LCF and BMR.

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Supreme Court of Canada allows indirect purchasers of products to sue for damages

Katherine Kay, Danielle Royal, Mark Walli, James S.F. Wilson and Alexandra Urbanski -

The Supreme Court delivered its long-awaited rulings on October 31 in proposed class actions involving claims for damages for alleged competition law violations brought by “indirect purchasers” of products (Pro-Sys v. Microsoft, Sun-Rype v. Archer Daniels Midland and Infineon Technologies AG c. Option Consommateurs). Indirect purchasers are purchasers of a product (or of another product containing the initial product) who seek recovery for overcharges that are alleged to have been “passed on” to them through the chain of distribution for the initial product. The primary issue in each case was whether indirect purchasers have a legal cause of action allowing them to sue for damages (which typically happens by way of a class action). The Supreme Court held that they do.

In Microsoft, the plaintiffs brought a class action on behalf of indirect purchasers who alleged that the corporation had conspired with manufacturers (among others) to raise the price of its operating systems and software, and that these overcharges were passed on to purchasers of computers. The Sun-Rype case was brought on behalf of a proposed class which consisted of direct and indirect purchasers of high fructose corn syrup (“HFCS”) or products containing HFCS, who similarly alleged that manufacturers had conspired to fix the price of HFCS and that the unlawful overcharges were passed on to class members. Both of the actions were certified as class proceedings in the Supreme Court of British Columbia, but those certifications were reversed by the Court of Appeal in 2011, on the basis that indirect purchasers have no cause of action recognized in law.

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Supreme Court of Canada grants leave in wiretap disclosure cases

Paul Beaudry -

On October 3rd, the Canadian Bar Association held a panel on the disclosure of confidential information in competition cases as part of its Annual Competition Law Fall Conference. The panel was moderated by our own Louis P. Bélanger, who represents intervener Ultramar Ltd. in two high-profile cases involving the disclosure of wiretap evidence, Couche-Tard Inc v Jacques and Pétrolière Impériale v Jacques. The Supreme Court of Canada recently granted leave to appeal in both cases, which are contesting an interlocutory order of the Québec Superior Court that required the Competition Bureau and the Director of Public Prosecutions of Canada to disclose wiretap evidence to third parties in civil proceedings under the Competition Act in “follow-on” suits to the criminal prosecutions under the same Act.  Section 36 of the Competition Act allows a person to sue for loss or damage arising from a breach of the statute’s criminal provisions.

Between 2005 and 2006, the Competition Bureau had intercepted and recorded numerous telephone conversations as part of its “octane” criminal investigation, which involved a gasoline price-fixing cartel in the Estrie region of Québec. The Crown subsequently laid criminal charges against fifty-two individuals and companies for illegally conspiring to inflate gas prices. During the criminal proceedings, the Director of Public Prosecutions of Canada disclosed to the accused over 5000 recordings of conversations involving the accused parties intercepted during the investigation.

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Divestitures required in Canadian Movie Theatre Merger

Susan M. Hutton and Shannon Kack -

On October 10, 2013 the Competition Bureau issued a no-action letter in respect of the acquisition by Cineplex Inc. (Cineplex) of 24 movie theatres in Atlantic Canada from its competitor, Empire Theatres Ltd. (Empire), indicating that the Commissioner does not, at this time, intend to challenge the proposed acquisition pursuant to section 92 of the Competition Act.

By way of background, Cineplex originally sought  to acquire two additional theatres in Ontario along with Empire’s 24 movie theatres in Atlantic Canada. Following a three-month review of the proposed transaction, the Bureau raised concerns over the competitive overlap of the parties in Ontario, determining that the proposed transaction would likely result in a substantial lessening of competition in that province. The Bureau had no concerns with respect to a lessening of competition in Atlantic Canada, as Cineplex currently has no theatres there.

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Divestitures Required in Agrium's Agri-Products Acquisition

Marisa Muchnik -

On September 5, 2013, Canada’s Competition Bureau announced that a Consent Agreement had been negotiated requiring a number of divestitures by Agrium Inc. in relation to its acquisition of the majority of Viterra Inc.’s retail agri-products businesses from Glencore International plc. A position statement accompanied the Bureau announcement. 

Under the terms of the Consent Agreement, Agrium will divest seven retail stores and nine anhydrous ammonia businesses.

By way of background, Viterra – successor to the former Saskatchewan, Alberta and Manitoba Wheat Pool co-operatives, as well as the largest grain handler in South Australia and a significant food processor in Canada, Australia, New Zealand and the United States - was initially sold to Glencore, but Glencore simultaneously announced side agreements to divest some Viterra assets to Agrium and Richardson International Ltd., and (later) to CF Industries. The Bureau cleared the acquisition of Viterra by Glencore in May 2012, and Richardon’s acquisition of some of Viterra’s Canadian grain handling assets in December 2012 (Stikeman Elliott LLP acted as counsel to Richardson).

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Competition Bureau introduces criminal cartel whistleblowing initiative

In remarks delivered to the Canadian Bar Association, Commissioner of Competition John Pecman (then interim Commissioner) announced a new whistleblowing program developed by the Competition Bureau’s Criminal Matters Branch. The Criminal Cartel Whistleblowing Initiative will encourage members of the public to provide information to the Competition Bureau regarding possible violations of sections 45 to 49 of the Competition Act, i.e., the criminal cartel provisions which prohibit, among other things, agreements or arrangements among competitors to fix prices, allocate markets, restrict output or rig bids.

The Competition Act and the Criminal Code already provide for a variety of protections to whistleblowers. The Competition Act provides that any person who has reasonable grounds to believe that a person has committed (or intends to commit) an offence under the Act may notify the Commissioner of the particulars of the matter and may request that his or her identity be kept confidential with respect to the notification. The Competition Act also bars retaliation by employers against whistleblowers who act in good faith and on the basis of reasonable belief. The Criminal Code contains broader protections for whistleblowers who provide (or intend to provide) information to anyone responsible for law enforcement with respect to any kind of offence (under any federal or provincial act or regulation) committed by someone in their organization (including directors and officers and other employees).

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Canada's Competition Tribunal dismisses RPM case against Visa and MasterCard - no "resale"

Susan M. Hutton and D. Jeffrey Brown -

On July 23, 2013, the Competition Tribunal dismissed the Commissioner of Competition’s resale price maintenance (RPM) case against Visa Canada Corporation and MasterCard International Incorporated (CT-2010-010).  In a summary of its decision (which will be made available in full once confidential information is identified and redacted), the Tribunal said that section 76 of the Competition Act requires a resale and that, in this case, the Commissioner of Competition had not established that Visa and MasterCard’s customers resell Visa and MasterCard’s products. Furthermore, the Tribunal held that the Commissioner’s proposed interpretation of section 76 of the Act was not supported by the legislative history of the provision or other decisions.

In the event that the Tribunal’s interpretation of section 76 of the Act was incorrect, the Tribunal conducted an alternative analysis that assumed that Visa and MasterCard engaged in RPM, as defined by the Commissioner, by implementing the no-surcharge rule. The no-surcharge rule prohibits merchants from applying a surcharge for customers paying with credit cards. Under these circumstances, the Tribunal found there had been an adverse effect on competition. However, even under this alternative analysis, the Tribunal said that it would not have issued an order and stated that a regulatory, rather than competition, response would be better suited to address the concerns raised by the Commissioner. The Tribunal further noted that the experience in other jurisdictions showed consumer concerns related to surcharging would arise and regulatory intervention would then take place.

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Competition Bureau consents to Re-structuring of Interac Payment Association

Susan Hutton, Michael Laskey, Erica Lindberg -

On July 12, 2013, the Interac Association – responsible for operating Canada’s on-line, point-of-sale and ABM debit system - filed a request with the Competition Tribunal to amend the Consent Agreement under which it has been operating since 1996. The original agreement required, among other things, that Interac be managed on a not-for-profit basis. The Commissioner of Competition has consented to the proposal, after rejecting a similar request in 2010.

Interac seeks to restructure to become a for-profit corporation, with an independent board. It believes this change will provide the flexibility necessary in order to remain a low-cost payment alternative for merchants in what has become an increasingly competitive payments marketplace. The new Interac Corporation would operate its services under a cost-recovery model, which would it says will permit the allocation of funds for the research and development of new and innovative payment services.

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Competition Bureau puts deferred payment plans under the microscope in misleading advertising charges against Canadian Furniture Retailers

Ashley Weber and Erica Lindberg -

On July 9, 2013, the Competition Bureau announced that it would be pursuing civil charges of deceptive marketing under the Competition Act against Canadian furniture retailers Leon’s Furniture Ltd. and The Brick Ltd. (acquired by Leon’s earlier in 2013).

In a civil action filed with the Ontario Superior Court of Justice, the Bureau alleges that the retailers’ “buy now, pay later” programs, in which consumers are encouraged to purchase products under a deferred payment program, gives the false general impression that consumers can take advantage of the programs at no extra charge, and fails to adequately disclose the surcharges that will be applied to the balance of the purchase price (section 74.01(1)(a)).  By way of example, a customer wanting to defer payment on a $1500 sofa could be required to pay up to $350 at the time of purchase, despite advertisements stating customers would pay “absolutely nothing” for up to 21 months.

The Bureau also alleges that the administration and processing fees applicable to the deferred payment programs are “hidden”, and can result in substantial additional costs (including both up-front costs as well as costs added to the balance to be paid), which result in the final price of the product being higher than the advertised price (section 74.05(1)).

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Supreme Court of Canada will hear appeal in the Tervita (CCS) merger

Susan M. Hutton -

On July 11, 2013, the Supreme Court of Canada granted leave to appeal in Tervita Corporation et al v Commissioner of Competition. Five months earlier, the Federal Court of Appeal had upheld an order of the Competition Tribunal requiring Tervita Corporation (formerly known as CCS Corporation) to divest its acquisition of a hazardous waste landfill site on the grounds that it had likely substantially prevented competition in the market for the supply of hazardous waste landfill services in northeastern British Columbia.  The transaction had already closed, and was below the threshold for merger notification. At issue in the Federal Court were, among other things, the required time frame for poised entry in a “prevent” case, and the proper approach to the efficiencies defence. Please refer to our earlier blog posts to read more about the decisions of the Competition Tribunaland the Federal Court of Appeal.

Canada steps up its fight against foreign corruption

As we discussed in an earlier post, the federal government recently introduced amendments to the Corruption of Foreign Public Officials Act (CFPOA) to strengthen the government’s ability to investigate and prosecute Canadians and Canadian businesses that attempt to gain a business advantage through bribery. On June 19, the amendments were granted Royal Assent.

The CFPOA prohibits giving or offering to give any type of benefit to a foreign public official, or any other person, for the benefit of the foreign public official, where the ultimate purpose is to obtain or retain a business advantage. Since the 2008 creation of the RCMP’s International Anti-Corruption Unit, the government has increased enforcement and pursued several high profile corruption cases. Going forward, the government has signalled that it will increase its efforts to combat international corruption.

As we previously discussed, the amendments ultimately make several significant changes to the CFPOA, including entrenching the nationality principle as the basis of jurisdiction for offences, broadening the definition of “business” to which the CFPOA applies, creating a books and records offence and increasing the maximum term of imprisonment.

The changes are in force but for the amendment repealing the CFPOA provisions regarding the facilitation of payments, which will come into force on a date fixed by the government.

Alberta Court of Appeal grants appeal in buyer-side cartel action

Susan M. Hutton and Justine Johnston -

The Alberta Court of Appeal issued a decision on June 14, 2013, in a private action for damages under section 36 of the Competition Act, reversing the trial court’s decision that Husky and ExxonMobil, co-owners of certain oil and gas properties near Rainbow Lake, Alberta, had illegally conspired to lessen competition for purchases of fluid hauling services, contrary to section 45 of the Act.

In 321665 Alberta Ltd. v ExxonMobil Canada Ltd., the trial judge had held that Husky and ExxonMobil’s decision to single-source their acquisition of fluid hauling services at Rainbow Lake unduly lessened competition and violated section 45 of the pre-2009 Act. The Act has since been amended and the Crown no longer has to prove the impugned agreement led to or was likely to lead to an undue lessening of competition. To read more about the Alberta Court of Queen’s Bench decision, please see our earlier blog post here.

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John Pecman is appointed Commissioner of Competition

John Pecman, who has served as Canada’s Interim Commissioner of Competition since September 2012, has been appointed to serve a five-year term as Commissioner of Competition, as announced today by the Honourable Christian Paradis, the Minister responsible for the Competition Bureau.

Paul Collins, leader of the Competition Law and Foreign Investment practice group at Stikeman Elliott and formerly head of the Mergers Branch at the Bureau said of the appointment: “John Pecman is an excellent choice to take the helm of the Competition Bureau for the next five years. I have had the distinct pleasure of working across from and with John during my appointment with the Bureau and look forward to continuing to do so.”

Said Lawson Hunter, former Commissioner of Competition (then, Director of Investigation and Research) and founder of the Stikeman Elliott practice group: “John has demonstrated sound judgment throughout his career at the Bureau. His broad experience in all aspects of the Competition Act makes him almost uniquely qualified for this most important position.”

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Criminal charges laid in Canadian chocolate cartel

On Thursday, June 06, 2013, the Competition Bureau laid criminal charges against three corporations and three individuals for their roles in allegedly fixing the price of chocolate confectionery products in Canada.

The alleged price-fixing occurred before the 2010 amendments to the Competition Act, and the accused have been charged under the criminal cartel provision in the old section 45. Under that provision, the Bureau must prove not only that there was an agreement between competitors to fix prices but also that the agreement had or was likely to unduly lessen competition in a market. If convicted, the accused face fines of up to $10 million and/or a prison term of up to five years.

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Interim Commissioner emphasizes importance of trust and enhanced collaboration'

Michael Laskey -

Interim Commissioner of Competition John Pecman and Senior Deputy Commissioner of Mergers Kelley McKinnon recently attended a breakfast seminar at Stikeman Elliott, to speak to an overflow crowd of clients and to answer questions related to their visions for the future of the Competition Bureau.


 

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Call me maybe? ONCA says standing offers could be contract bids under Bid-Rigging Offence

Susan M. Hutton and Solène Murphy -

April 3, 2013 the Ontario Court of Appeal released its reasons for decision in R v. Dowdall, affirming the Superior Court’s earlier decision to commit 17 defendants to stand trial on charges of bid-rigging under s.47 of the Competition Act. The defendants had argued that tenders submitted to pre-qualify as approved suppliers, or to create a standing order, if and when such services were required, was not a “bid or tender” and thus fell outside the ambit of the prohibition against bid-rigging.

Both the Superior Court and Court of Appeal agreed that the preliminary inquiry judge reasonably concluded that there was some evidence that the process of obtaining a Standing Offer Agreement was contractual and could be considered a “request for bids or tenders” under the bid-rigging offence.

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Competition Tribunal dismisses Competition Bureau's Abuse of Dominance Application against the Toronto Real Estate Board

Sultana L. Bennett -

On April 15, 2013, the Competition Tribunal dismissed the Competition Bureau’s application (the Application) against Canada’s largest real estate board, the Toronto Real Estate Board (TREB). The Tribunal found that the abuse of dominance provision under section 79 of the Competition Act (the Act) did not apply to the facts of the case, which pertained to TREB’s membership rules governing the use of its Multiple Listing Service (MLS) data.

The Bureau’s May 27, 2011 application requested that TREB eliminate rules allegedly denying its real estate agent members the ability to introduce Internet-based real estate brokerage services by limiting the use the members could make of the MLS listings and related data.

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Federal Court of Appeal Upholds Competition Tribunal's Decision in the Tervita (CCS) Merger

Susan M. Hutton, Paul Beaudry and Solene Murphy -

On February 25, 2013, the Federal Court of Appeal (FCA) released its decision upholding the Competition Tribunal’s Order requiring that Tervita Corporation (formerly known as CCS Corporation) divest the Babkirk hazardous waste landfill site in northeastern British Columbia following its acquisition of Complete Environmental Inc. The decision provides guidelines for determining a reasonable period of time for likely market entry in a “prevent” case, as well as clearer guidance on what is “in” and what is “out” for a section 96 efficiencies defense.  It also marks a rare challenge to a closed, and non-notifiable transaction.

Background

In February 2010, Complete received regulatory approval to open the Babkirk landfill. Construction had not yet commenced when Tervita acquired the site from Complete. At the time of the transaction, Tervita operated the only two operational secure landfills for hazardous waste in British Columbia.  The Commissioner of Competition therefore alleged that the transaction substantially prevented competition in hazardous waste landfill in northeastern B.C.

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The Competition Bureau clears Leon's/The Brick Furniture merger

Marisa Berswick -

Parties considering retail mergers should take note of the approach that the Canadian Competition Bureau took in analyzing the proposed acquisition of The Brick Ltd. and its subsidiaries (The Brick) by Leon’s Furniture Limited (Leon’s). Stikeman Elliott LLP has experience acting as competition counsel in a number of retail mergers, including the recent acquisition by Canadian Tire of Forzani, in which the Bureau took a similar approach. Both retail merger reviews highlighted the key role of econometrics in the Bureau’s assessment of whether the merged entity will have the ability to increase prices.

On March 19, 2013, the Bureau released a position statement in respect of the merger of the two national retailers of furniture, mattresses, appliances and electronics. The Commissioner of Competition issued a “no action letter” to Leon’s and The Brick on March 11, 2013, meaning the merger will not be challenged. The Bureau’s review focused on the potential competitive effects in the retailing of furniture and mattresses. Leon’s and The Brick were viewed as particularly close competitors in respect of furniture and mattresses, with a high degree of differentiation from other competitors.

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Canada sharpens its teeth to take a bite out of bribery

Susan Hutton -

On February 5, 2013 the federal government tabled amendments to the Corruption of Foreign Public Officials Act (CFPOA) which, if passed, would give Canada a much broader reach and pose a more serious threat to Canadians and Canadian businesses who attempt to gain a business advantage through bribery. These amendments are evidence of the Government’s tougher approach to enforcement of the CFPOA in recent years, as witnessed already by prosecutions of Niko Resources in 2011 and more recently of Griffiths Energy, both of which pled guilty to offences under the Act (see below for more details).  In some ways, the CFPOA will now be tougher than its US counterpart.

Generally speaking, the CFPOA prohibits giving or offering to give a benefit of any kind to a foreign public official, or any other person for the benefit of the foreign public official, where the ultimate purpose is to obtain or retain a business advantage.

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Canada's Commissioner of Competition toughens stance

Susan M. Hutton and Robert Mysicka -

Recent remarks by Canada’s Interim Commissioner, John Pecman, reinforce the view that the Bureau is pursuing all avenues available to it under the Competition Act to fulfill its mandate of investigating and challenging civil and/or criminal anti-competitive practices. In this respect, the interim Commissioner noted three of the Bureau’s priorities going forward:

  • focused enforcement and strategic regulatory interventions designed to benefit Canadians;
  • applying Canada's competition laws in a transparent and predictable manner; and
  • developing trust through enhanced collaboration

In addition to these priorities, Mr. Pecman noted that the Bureau would assist in providing clarification on the Act’s price maintenance provisions, issues that have arisen in the context of electronic document production, the Bureau’s leniency program for those that cooperate in criminal investigations, and investigative procedures.

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Canadian and foreign investment regulation outlook for 2013

Michael Kilby  -

Investment Canada – The Year of the State-Owned Enterprise

2012 proved to be a highly eventful year for foreign investment law in Canada. Although numerous foreign investments by SOEs in the Canadian energy sector had received foreign investment approvals in recent years1, the summer of 2012 saw the announcement of two multi-billion dollar energy transactions involving SOEs that collectively posed an unprecedented test for the Investment Canada Act and for Canadian policymakers. In June, Petronas (the Malaysian state-owned oil company) announced its $6 billion acquisition of Progress Energy. At the time, this was the largest-ever proposed acquisition of a Canadian company by a state-owned enterprise. But that record did not stand for long: just a month later, in July, CNOOC Limited (a majority Chinese state-owned oil company)announced its $15 billion acquisition of Nexen.

These proposed acquisitions became the subject of intense scrutiny in the national media throughout the summer and fall, and indeed attracted attention in the business press globally, particularly in Asia. With few exceptions, large-scale M&A activity in the Canadian oil patch ground to a halt in the fall of 2012 as market participants stood still and held their collective breath pending the outcome of the government reviews of these proposed foreign investments. Tension was only heightened in October when the Minister of Industry rejected the Petronas transaction on a preliminary basis, immediately recalling the rejection of BHP Billiton’s hostile bid for Potash Corporation of Saskatchewan less than two years earlier.

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Increased thresholds for Competition Act merger notification and Investment Canada Act review

Marisa Berswick -

The thresholds for review of acquisitions involving Canadian businesses will soon increase under both the Competition Act and the Investment Canada Act.

The Competition Bureau announced on January 8, 2013 that the “transaction size” threshold for review of acquisitions under the Competition Act will increase from the 2012 threshold of CDN$77 million to CDN$80 million. The 2013 threshold is anticipated to come into effect on or about January 12, 2013.

The transaction-size threshold is based on the book value of assets in Canada of the target (or in the case of assets, of the assets in Canada being acquired), or the gross revenues from sales “in or from” Canada generated by those assets, calculated in accordance with the Notifiable Transactions Regulations under the Competition Act. The Competition Act threshold is indexed annually to account for inflation. The ”size of parties” threshold remains constant at CDN$400 million.

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Lights! Camera! No-action! Canada's Competition Bureau clears merger of Canadian film distributors

Susan M. Hutton and Robert Mysicka -

On January 3, 2013 the Competition Bureau issued a No-Action Letter in respect of the acquisition by Canadian film distributor Entertainment One Ltd. (eOne) of its competitor, Alliance Films Holdings Inc. (Alliance), indicating that the Commissioner does not, at this time, intend to challenge the proposed acquisition pursuant to section 92 of the Competition Act.

In its statement concerning the proposed acquisition of Alliance by eOne, the Bureau indicated that the parties are significant competitors for film distribution in Canada but that the distribution of Canadian films constitutes a distinct product market due to various government cultural initiatives and funding programs.  In particular, in order to qualify for government funding available for Canadian productions (a significant source of total funding), the producer must use a Canadian distributor, and government funding requirements limit the ability of the distributor to lower minimum guarantees or increase distribution fees. Notwithstanding the substantial share of the combined companies in that market, therefore, the Bureau concluded that the government policies in place would render a substantial lessening or prevention of competition unlikely and that in any event, there was effective remaining competition for the distribution of non-Canadian films.

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The Bureau withdraws charges related to waste company's breach of consent agreement

Marisa Berswick -

On December 14, 2012, the Competition Bureau announced that it had withdrawn criminal charges related to the breach of a consent agreement in a waste-collection company merger due to the accidental leak of privileged information during the course of the Bureau’s investigation.

The Bureau said in its statement that on September 19, 2012, it “became aware of an unfortunate procedural error, where certain information subject to solicitor-client privilege had been inadvertently shared with investigators.” As previously covered on this blog, on September 11, 2012, the Bureau laid criminal charges against Progressive Waste Solutions Ltd. and its subsidiary BFI Canada Inc. (known together as Progressive). The Bureau alleged that Progressive had violated the terms of a consent agreement it had entered into with the Bureau in 2010. The Bureau concluded at the time that the merger would result in a substantial lessening or prevention of competition in the waste collection market in several Canadian cities.

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Vertical pork mergers pass mustard with Competition Bureau

Michael Laskey -

On December 17, the Competition Bureau released a position statement summarizing the approach it had taken in analyzing two proposed vertical mergers (i.e., mergers between firms at different levels of a supply chain) in the pork industry. Both proposed mergers involve the acquisition of a large Western Canadian hog producer by a company that sells finished food products (pork cuts) to consumers: Olymel L.P. plans to acquire Big Sky Farms Inc. and Maple Leaf Foods Inc. plans to acquire Puratone Corporation. The Bureau decided not to challenge either merger.

The key concerns considered by the Bureau, and its conclusions about each, were:

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Charges laid in Montréal telemarketing case

Robert Mysicka and Graeme Deuchars -

On December 7, 2012, the Competition Bureau announced that charges have been laid against five individuals for violations of the Criminal Code of Canada and of the Competition Act, in relation to tactics used in two Montréal-based telemarketing operations.

The charges arose out of a 2006 investigation by the Competition Bureau in partnership with the Centre of Operations Linked to Telemarketing Fraud (COLT), a joint forces operation between a number of Canadian and American law enforcement authorities. The investigation revealed two telemarketing operations in Montréal promoting the sale of office supplies and medical kits to Canadian and American businesses that allegedly utilized misleading or fraudulent tactics, including implying that the caller represented a business that had an existing relationship with the victim’s company, indicating that certain products or services were required under government rules, or implying that the call was being made on behalf of a government agency Five individuals were charged with defrauding the public in excess of $5,000 contrary to section 380(1) of the Criminal Code. In addition, four of these individuals were charged under the Competition Act with making false or misleading representations during telemarketing calls.

Section 52.1(3) of the Competition Act is a criminal provision that prohibits making materially false or misleading representations in promoting the supply or use of a product or business interest during interactive telephone communications (telemarketing). Contraventions of the Competition Act’s telemarketing provisions carry a maximum penalty on indictment of a fine in the discretion of the court, and/or up to 14 years imprisonment.

House arrest off the table for cartels and bid-rigging

Mark Walli and Graeme Deuchars-

On November 20, 2012, amendments to the Criminal Code of Canada under the Safe Streets and Communities Act (the SCCA) came into force, restricting the availability of conditional sentences for individuals convicted of certain offences, including conspiracy to fix prices and bid-rigging under the Competition Act. Conditional sentences are non-custodial punishments, such as house arrest, that may only be assessed where the judge determines the offender is not a danger to the community. While these amendments were not specifically directed at Competition Act offences, the result of the legislative changes is to eliminate the discretion to allow for serving custodial sentences for serious Competition Act offences in the community.

The SCCA, introduced in 2011, included a slate of amendments to the Criminal Code and other legislation which the Department of Justice stated were intended to “combat crime and terrorism”. Among other things, the SCCA provides that conditional sentences are unavailable for all offences for which the law prescribes a maximum term of imprisonment of 14 years or more – this includes cartel agreements among competitors, bid-rigging and willful or deceitful misleading advertising under the Competition Act.

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Competition Bureau disputes public statement by RBS Group

Michael Laskey -

On November 14, the Competition Bureau published a news release disputing a statement made by the Royal Bank of Scotland Group (RBS) related to the Bureau’s ongoing investigation of alleged collusive conduct in the setting of the LIBOR benchmark rate. In its third-quarter Interim Management Statement, RBS stated that it was “co-operating fully” with investigations by the Bureau and other regulators. The Bureau’s news release argued that this statement was false, in light of the fact that RBS had not applied to its leniency or immunity programs and that RBS had challenged a court order obliging it to produce documents in connection with the Bureau’s investigation.

In its reply, RBS emphasized that it did want to cooperate with the Bureau, but that the production of documents requested by the Bureau would violate privacy laws in the United Kingdom. RBS stated that it had offered a number of alternative mechanisms, but that the Bureau had refused such offers.

This is not the first time the Bureau has intervened when it believed a public statement by a company was inaccurate. In September 2011, the Bureau required Beiersdorf Canada Inc. to correct an allegedly inaccurate public statement the company made in relation to a settlement it had reached with the Bureau. Businesses should take note that the Bureau is active in monitoring comments they make in the press and in public disclosure filings.

Public Works Canada Bans Convicted Bid-Riggers from Future Bids (even if they were leniency recipients)

Jeffrey Brown and Edwin Mok -

A recent change in the integrity policy of the Department of Public Works and Government Services Canada (Public Works) has resulted in a prominent consulting firm being effectively banned from making future bids for services to the department.

On July 30, 2012, Corporate Research Group Ltd. (CRG) pleaded guilty to a criminal charge of bid-rigging for real estate advisory services contracts with the federal government. It was fined $125,000. According to the Competition Bureau news release at the time, CRG and Louis Facchini, who ran First Porter Consultancy, had submitted coordinated bids under an agreement not disclosed to Public Works.

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Competition Policy Council calls for clarification of Regulated Conduct Doctrine

Robert Mysicka and Edwin Mok -

On November 20, 2012, the C.D. Howe Institute’s Competition Policy Council—a group comprised of top-ranked academics and practitioners active in competition policy—published a report calling for the Competition Bureau to clarify the scope of the Regulated Conduct Doctrine (“RCD”) and characterizing it as a “back door route to cartels”. The RCD is a legal doctrine enshrined in section 45(7) of the Competition Act which immunizes regulated entities from prosecution in circumstances where their conduct would otherwise be illegal under the Act. It was described by Grange J.A. in R. v. Independent Order of Foresters:

“The doctrine simply means that a person obeying a valid provincial statute may, in certain circumstances, be exempted from the provisions of a valid federal statute. But there can be no exemption unless there is a direction or at least an authorization to perform the prohibited act.”

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Canada's new interim Commissioner of Competition emphasizes compliance programs

Robert Mysicka and Marty McKendry -

In his first published remarks as Interim Commissioner of Competition, John Pecman discussed a number of competition-related issues, underscoring the importance of compliance programs, the competition risks associated with participation in trade associations, and the Bureau’s key enforcement priorities going forward.

Mr. Pecman, who was appointed Interim Commissioner on September 26, noted the increasing international prevalence and cooperative enforcement of competition law. He also emphasized the seriousness of cartel activity, referring to Chief Justice Crampton’s remarks in the case against Maxzone Auto Parts, where Mr. Justice Crampton likened cartel agreements to fraud and approved incarceration as an effective deterrent.

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CRTC guidance on check-boxes for e-marketing likely to tick off business community

David Elder -

Although the date on which Canada’s Anti-Spam Legislation (CASL) may come into force is uncertain, the CRTC has issued two bulletins that provide guidance as to how to comply with the new law, once proclaimed in force.

But while some of the new guidance is helpful, other provisions will likely create significant operational concerns for businesses.

The Commission is the body charged with oversight and enforcement of most provisions of the new law, including the core provisions respecting commercial electronic messages (CEMs), alteration of transmission data and the installation of computer programs.  In addition, the CRTC has the power to make regulations under the Act with respect to certain matters.

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CRTC reaffirms competitiveness of mobile wireless industry, even as it plans new wireless consumer code

David Elder -

The Canadian Radio-television and Telecommunications Commission (CRTC) has denied requests by consumers, consumer groups and some new entrants to re-regulate retail and wholesale wireless services generally, finding that competition in the mobile wireless market continues to be sufficient to protect the interests of users with respect to rates and choice of competitive service provider.

The finding, in Telecom Decision CRTC 2012-556, followed a public proceeding to consider whether the conditions of forbearance in the Canadian wireless market had changed sufficiently to warrant CRTC intervention with respect to retail mobile wireless data and voice services. That proceeding was triggered by an application by consumer groups to prohibit certain billing practices by wireless service providers, as well as an application by wireless service providers for the Commission to establish a uniform national consumer code for wireless services.

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Seminar considers recent developments in competition and foreign investment law

Michael Kilby -

On September 12, my colleagues in the Competition & Foreign Investment Group hosted a breakfast seminar at which many of the recent developments in Canadian competition and foreign investment law were discussed and analyzed. As many of you know, there have been a number of important legal changes in the competition field in recent years. For example, a per se criminal offence for cartel conduct and a new civil provision for reviewing certain types of competitor collaborations have been introduced, competition law-related class action lawsuits have proliferated, a US-style two-stage merger review process has been created, penalties and enforcement activities associated with misleading advertising have been enhanced, and amendments to the Investment Canada Act have come into effect.

During the seminar, Paul Collins, having just returned to Stikeman Elliott following a two-year term as Senior Deputy Commissioner – Mergers Branch, spoke of recent developments at the Competition Bureau with a focus on recent enforcement activities and priorities. Litigator Katherine Kay summarized the current state of play of competition law class actions in Canada, while Shawn Neylan emphasized the importance of implementing an effective competition law compliance program in light of the Bureau’s recent enforcement activities. Meanwhile, Susan Hutton provided an update on and explained the significance of recent amendments and proposed amendments to the Investment Canada Act in relation to enforcement, review thresholds and new filing requirements.

A video and booklet of the seminar are available.

Global competitiveness report ranks Canada's competition regime 21st in world

Michael Laskey -

On September 5, the World Economic Forum released the 2012-2013 edition of its Global Competitiveness Report. The Report uses financial and statistical data as well as executive opinion surveys to rank countries on a wide variety of metrics related to social and economic competitiveness. Canada was ranked 14th overall, down two places from its result in 2011-2012.

Of interest to businesses and competition counsel, Canada ranked 21st overall in the “effectiveness of anti-monopoly policy” category. Respondents to the executive opinion survey were asked to what extent they felt that anti-monopoly policy promoted competition in their respective countries, on a scale of one to seven (with a score of seven meaning that anti-monopoly policy “effectively promote[d] competition”). The mean score was 4.0. Canada scored 4.9, beneath countries such as the U.S. (also 4.9; 17th overall) and the U.K. (5.2; 10th overall), and even Qatar (5.3; 8th overall) and South Africa (5.3; 6th overall). The honour of ‘most effective anti-monopoly policy’ went to Norway, with a score of 5.7.

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John Pecman Appointed as Canada's Interim Commissioner of Competition

Shawn C.D. Neylan

On September 26, 2012, John Pecman was appointed as the new Interim Commissioner of Competition, to lead the Competition Bureau until a new Commissioner of Competition is appointed. In announcing Mr. Pecman’s appointment the Minister of Industry, the Honourable Christian Paradis said “"With nearly 30 years of experience at the Bureau, Mr. Pecman has a keen understanding of competition law and marketplace conduct."

Mr. Pecman joined the Competition Bureau in 1984 and has worked extensively in the enforcement branches of the Competition Bureau, the agency that he now heads as Interim Commissioner. He has been involved in numerous leading cases as the senior officer, some of which were resolved on consent or by guilty plea, others of which were contested before the Competition Tribunal.

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Canada releases new Enforcement Guidelines on Abuse of Dominance; minimal change from draft guidelines

Susan M. Hutton and Edwin Mok -

On September 20, 2012, Canada’s Competition Bureau (the Bureau) published the final version of its long-awaited Enforcement Guidelines on the abuse of dominance provisions (sections 78 and 79) of the Competition Act (the Final Guidelines). The Guidelines have been more than three years in the making. An initial draft released in January of 2009 was the subject of considerable public comment, but was never finalized. The Bureau released a draft version of substantially revised guidelines for public consultation on March 22, 2012 (the Draft Guidelines). After receiving and reviewing submissions from interested parties, the Bureau has now released the final version, which replaces all of the Bureau’s previous publications on the abuse of dominance provisions.

In general, the Final Guidelines are substantively similar to the Draft Guidelines. There are no significant changes in the Final Guidelines as compared to the Draft Guidelines.

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Private member's bill would prohibit commercial advertising to children under 13

Michael Laskey -

On June 6, 2012, NDP MP Peter Julian introduced Bill C-430, An Act to Amend the Competition Act and the Food and Drugs Act (Child Protection Against Advertising Exploitation). The private member’s bill would amend the civil misleading advertising section of the Competition Act to prohibit the direction of any advertising or promotion, for commercial purposes, at persons under 13 years of age. The proposed test for such advertising would take into account the manner, time and place of the ad and the nature and intended purpose of the product or business being promoted. The bill also clarifies that advertising may be found to be directed at persons under 13 even though it is presented in printed material intended for people 13 and older, in broadcast during air time intended for persons 13 and older, or in any manner intended for persons both over and under 13. Finally, the criminal misleading advertising section of the Act would be amended to deem all such advertising to be a “recklessly made representation that is false or misleading in a material respect”, and so child-directed advertising would also violate the criminal misleading advertising law.

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Canada's Competition Bureau uses big stick for breach of consent agreement in merger case

Michael Laskey -

On September 11, the Competition Bureau announced that it had laid criminal charges against Progressive Waste Solutions Ltd. and its subsidiary, BFI Canada Inc., alleging that Progressive had violated the terms of a consent agreement it had entered into in 2010. The consent agreement was reached in respect of a merger between IESC-BFC Ltd. and Waste Services Inc. (now known together as Progressive), two commercial waste collection companies. The Bureau concluded at the time that the merger would result in a substantial lessening or prevention of competition in the waste collection market in several Canadian cities, and entered into a consent agreement with the merging parties which required them to divest certain assets in the affected markets. The consent agreement also provided that the parties could not attempt to reacquire the customers of the companies who purchased the divested assets for one year following the divestitures. In October and December of 2010, the Bureau approved divestiture buyers. Now, the Bureau alleges that Progressive violated the terms of the agreement by soliciting and reacquiring a customer whose contract had been divested, and then providing a false declaration of compliance and failing promptly to notify the Bureau of the breach.

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CCS appeals Competition Tribunal's landfill decision; stay granted

 Susan M. Hutton & Edwin Mok -

The Canadian landfill company that lost a merger challenge at the Competition Tribunal in Canada’s first pure prevention of competition case has appealed to the Federal Court of Appeal.

On January 4, 2011, the Commissioner of Competition applied to the Tribunal for an order to dissolve a merger between CCS Corporation and Complete Environmental Inc. In the alternative, the Commissioner sought an order for CCS to divest itself of Complete or Complete’s wholly–owned subsidiary, Babkirk Land Services. Babkirk had obtained approval to operate a secure landfill site in northeastern British Columbia. As such, Babkirk had been poised to compete directly with CCS. The Commissioner alleged that the merger between CCS and Complete would result in a substantial prevention of competition in the market for hazardous waste disposal in northeastern British Columbia.

On May 29, 2012, the Tribunal ruled in favour of the Commissioner, finding that CCS’s acquisition of Complete would likely prevent competition substantially in the market for the supply of landfill services for solid hazardous oil and gas waste. The Tribunal ordered that CCS divest its shares or assets of Babkirk by December 28, 2012. On July 17, 2012, the Tribunal further issued a divestiture procedure order.

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Ontario court clarifies application of Regulated Conduct Defence on a pre-trial motion.

Susan M. Hutton and Robert Mysicka

A recent decision by Justice K.M. van Rensburg of the Ontario Superior Court of Justice has affirmed the applicability of the Regulated Conduct Doctrine (RCD) as a possible defence to conduct prohibited by the Competition Act while also clarifying the extent to which evidence is necessary in order to assert the defence.  

In Fournier Leasing Company Ltd. v. Mercedes-Benz Canada Inc. the plaintiffs, a group of automobile dealers who import BMW, Mercedes Benz, and Mini vehicles into Canada, brought a motion to certify a class proceeding against BMW and Mercedes Canada for conduct that they alleged breaches Part VI of the Competition Act and also constitutes a tort. In regards to the Competition Act claims, the plaintiffs in their pleading alleged the existence of a conspiracy between the two car manufacturers and their dealers.

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Real estate advisory company pleads guilty to bid-rigging

Susan M. Hutton and Robert Mysicka -

On July 30, 2012 Corporate Research Group Ltd. (CRG) pled guilty to a charge of bid-rigging under subsection 47(2) of the Competition Act. The bid-rigging was in relation to federal government contracts for real estate advisory services in Canada.

The guilty plea follows the Competition Bureau’s investigation into CRG’s activities after being contacted by the Department of Public Works and Government Services Canada (PWGSC). The specific complaint related to a Request for Standing Offers (RFSO) issued by PWGSC for real estate advisory services. In its guilty plea, CRG admitted that Louis Facchini, a company representative carrying on business as First Porter Consultancy, submitted bids, in response to the RFSO, that were arrived at through an agreement that was not disclosed to PWGSC.

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Competition Bureau clears Maple acquisition of TMX

Michael Kilby -

Today, the Commissioner of Competition issued a “no-action letter” to Maple Group in respect of its proposed acquisition of TMX Group, Alpha Group and Canadian Depository Services. 

The Competition Bureau’s review of the Maple / TMX transaction was extensive. Maple Group (whose investors are Alberta Investment Management Corporation, Caisse de dépôt et placement du Québec, Canada Pension Plan Investment Board, CIBC World Markets Inc., Desjardins Financial Group, Dundee Capital Markets Inc., Fonds de solidarité des travailleurs du Québec (F.T.Q.), National Bank Financial & Co. Inc., Ontario Teachers' Pension Plan, Scotia Capital Inc., TD Securities Inc. and The Manufacturers Life Insurance Company) announced on May 15, 2011, in the midst of the failed bid by the TSX to merge with the LSE, that the Group had submitted a proposal to acquire the TMX Group. Maple filed an application for an advance ruling certificate on June 7, 2011. The transaction was therefore under active Competition Bureau review for a period of some 13 months.   

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Canadian Commissioner to step down in September; new head of Mergers Branch

Paul Beaudry and Megan MacDonald -

On June 28, 2012, Canada’s Commissioner of Competition, Melanie Aitken, announced  her decision to leave her post, effective September 21, 2012.

Commissioner Aitken was appointed to a five-year term in August 2009, having replaced the previous Commissioner, Sheridan Scott, as Interim Commissioner just prior to the enactment of significant amendments to the Competition Act in March, 2009.

Ms. Aitken held the role of Assistant Deputy Commissioner in the Mergers Branch from 2005 to 2007, and was appointed head of the Mergers Branch at the end of that term. Prior to joining the Bureau, Ms. Aitken had been a commercial litigation partner with two Canadian law firms, with a secondment to the Federal Department of Justice as Senior Counsel from 2001 to 2003.

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Canadian Court broadens scope of corporate liability in competition law case

Susan Hutton and Shannon Kack -

On May 30, 2012, in R v Global Fuels, the Court of Québec interpreted for the first time the new section 22.2 of the Criminal Code (the Code) regarding the criminal liability of organizations. Section 22.2 makes corporations liable for the actions of a “senior officer”. Section 1 of the Code defines “senior officer” as a representative who plays an important role in the establishment of an organization’s policies or is responsible for managing an important aspect of the organization’s activities and in the case of a body corporate, includes a director, its chief executive officer and its chief financial officer. The Court held that the term “senior officer “encompasses more than the individuals who form the directing minds of the corporation under the identification doctrine which had previously governed corporate liability (see Canadian Dredge and Dock Co v. The Queen.

The Supreme Court of Canada had previously characterized a “directing mind” as follows (The Rhone v The Peter AB Widener: at 526):

The key factor which distinguishes directing minds from normal employees is the capacity to exercise decision-making authority on matters of corporate policy, rather than merely to give effect to such policy on an operational basis….

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Guilty pleas in Quebec sewer services cartel

On June 22, 2012, Canada’s Competition Bureau announced that Colmatec Inc. and its operations director, Rénald Drouin, have pleaded guilty in a scheme to rig bids on contracts for specialized sewer services in the province of Québec. Charges are still pending against five other companies and their directors as part of the conspiracy, which involved bids on 37 municipal contracts worth over $3 million. A sixth company had previously pleaded guilty on November 22, 2011. Colmatec has been fined $50,000 and is subject to a court order, while Rénald Drouin will perform 100 hours of community service and is subject to a two year probation period. Bid-rigging is a criminal offence under section 47 of the Competition Act.

Paul Collins returns to Stikeman Elliott from Mergers Branch

Susan Hutton -

Stikeman Elliott recently welcomed back Paul Collins, as he returned to his position as Head of the Competition and Foreign Investment Group at the firm, following a two-year term at Canada's Competition Bureau. Paul's time at the Bureau as the Senior Deputy Commissioner in charge of the Mergers Branch corresponded with significant enhancements to the Bureau's merger enforcement powers, and the successful prosecution of a rare contested merger case.

I recently caught up with Paul to discuss his experiences at the Bureau and to get his views on how he sees the Bureau exercising its merger enforcement authority going forward.

Canada's Commissioner wins prevent case - Tribunal orders divestiture of hazardous waste landfill

Ashley Weber -

On May 29, 2012, the Competition Tribunal ruled in favour of the Commissioner of Competition, and ordered CCS Corporation to divest a hazardous waste landfill site, the acquisition of which the Commissioner had alleged would result in a substantial prevention of competition in the market for hazardous waste disposal in northeastern British Columbia. This was the first contested challenge to a merger by the Commissioner since 2005. 

Complete Environmental had received regulatory approval to open the Babkirk landfill in February 2010, and had not yet started construction when CCS Corporation acquired the site. CCS already operates the only two operational secure landfills for hazardous waste in British Columbia. The Commissioner alleged that, through the acquisition of the Babkirk landfill, CCS had prevented the entry of a potential competitor, thereby substantially preventing competition.

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Competition Bureau conducts performance review of its mergers branch

Susan M. Hutton and Robert Mysicka

The Competition Bureau has released an updated Merger Review Performance Report (Report) tracking the activities of its Mergers Branch since the last report published in May, 2010 and discussed in our previous post.

Since 2010, the Bureau has published a series of revised guidelines as part of its ongoing efforts to realign its merger review procedures following the 2009 amendments to the Competition Act and the Notifiable Transactions Regulations. The updated guidelines include:

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Bureau's investigation into aftermarket auto parts industry results in $1.5 million fine for price-fixing

Susan M. Hutton and Robert Mysicka -

On May 4, 2012 the Competition Bureau announced that Maxzone Auto Parts (Canada) pleaded guilty to price-fixing for its participation in an international cartel involving aftermarket replacement automotive lights.  Maxzone was fined C$1.5 million under subsection 45(2) of the Competition Act which provides for imprisonment and/or a maximum fine of C$25 million for the offence of conspiracy to fix prices between competitors.The products that were the subject matter of the conspiracy consisted primarily of headlights and tail lights purchased by auto parts supply companies in Canada for use as replacement parts in automobiles.

Maxzone admitted to implementing an agreement with its competitors that fixed the price of aftermarket automotive lights in Canada from January 2004 to September 2008. The products that were the subject matter of the conspiracy consisted primarily of headlights and tail lights purchased by auto parts supply companies in Canada for use as replacement parts in automobiles.

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Competition Bureau releases statement on Chartwell and Health Care REIT's acquisition of Maestro Retirement Residences

Marisa Berswick -

On April 11, 2012, the Competition Bureau released a statement summarizing its review of the acquisition of retirement residences by Chartwell Seniors Housing REIT (Chartwell) and Health Care REIT Inc. (HC) of the Maestro Retirement Residences Portfolio (Maestro). The Bureau issued a No Action Letter in respect of the acquisition.

Both Chartwell and Maestro operate retirement residences in Canada, while Ohio-based HC operates retirement residences in the United States. The Bureau’s review focused on the different types of retirement residences and the local nature of competition among retirement residences. The relevant product markets were defined as Independent Supportive Living programs (ISL) and Assisted Living programs (AL), due to differences in the services offered and demand considerations for each.

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Competition Bureau releases statement on Cardinal Health's acquisition of Futuremed

Ashley Weber and D. Jeffrey Brown -

On April 16, 2012, Canada’s Competition Bureau issued a statement outlining the analysis it had undertaken of Cardinal Health’s then-proposed acquisition of Futuremed to conclude that, despite some concerns expressed by certain customers, the transaction was unlikely to result in a substantial prevention or lessening of competition in any relevant Canadian market. Stikeman Elliott acted on behalf of Cardinal Health.

Cardinal Health and Futuremed were both distributors of a broad range of medical supplies and surgical equipment to various healthcare facilities in Canada, supplying products from hundreds of global manufacturers. The Bureau noted that prices in the healthcare products distribution industry are typically set through a tendering process between manufacturers and customers, whereby manufacturers sell direct to the individual healthcare facility or, alternatively, to a buying group acting for several healthcare facilities. As such, authorized distributors of manufacturers, such as Cardinal Health and Futuremed, do not compete on price, but rather compete through the use of distribution fee rebates, quality of service and technical expertise offered to customers.

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Competition Tribunal maintains interim supply order despite third party objections in Used Car Dealers case

Michael Laskey -

On March 16, the Competition Tribunal rejected a motion by the Insurance Bureau of Canada for the rescission of an interim supply agreement in its ongoing dispute with the Used Car Dealers Association of Ontario despite objections from one of IBC’s members, holding that the industry association had also bound its members when it agreed to the interim supply agreement. The decision, which has the effect of maintaining a mandatory supply order despite the objections of an IBC member which had directed IBC not to supply its confidential information, has important implications for industry associations and their members.

UCDA is a not-for-profit trade association representing motor vehicle dealers in Ontario. Among other services, it provides a service called “Auto Check”, which allows dealers to verify accident history information about vehicles they intend to sell. IBC, which collects and provides the data for the Auto Check service, is a not-for-profit corporation made up of 139 member insurance companies. On June 17, 2011, IBC terminated UCDA’s access to its insurance data, and UCDA was forced to suspend its Auto Check service. The reasons for the termination, and UCDA’s allegations that the termination constituted a “refusal to deal” contrary to section 75 of the Competition Act, are described in our earlier article. Meanwhile, the parties agreed to an interim supply agreement pursuant to which IBC would continue to supply UCDA with claims data while the case was before the Tribunal, and the agreement was formalized by an order of the Tribunal.

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Supreme Court of Canada: average consumer is "credulous and inexperienced" for misleading advertisement purposes

Ashley Weber -

In February 2012, the SCC released its decision in Richard v. Time Inc., a case brought forward from the Quebec Court of Appeal, which considered the “general impression” test in relation to the misleading advertising provisions of the Quebec Consumer Protection Act (CPA). Given the recently increased enforcement activity of the Competition Bureau with respect to deceptive marketing practices, companies that advertise to consumers anywhere in Canada should take heed of the SCC decision. The misleading advertising provisions of the Quebec CPA are based, to a large extent, on what is now the federal Competition Act, and similar types of consumer protection laws exist in the other Canadian provinces. Accordingly, the impact of the SCC decision will go beyond the CPA, affecting enforcement of deceptive marketing practices under both federal and provincial consumer protection laws in Canada. 

The SCC decision provides clear guidance on how to assess an advertisement’s target audience for purposes of the “general impression” test, and clarifies that both the layout of the advertisement and the meaning of the words, taken in their entirety, form the general impression of an advertisement. As such, regulators and companies now have a firmer understanding of what test to consider when determining whether an advertisement is misleading in a material respect.

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Competition Bureau releases additional Pre-Merger Interpretation Guideline for consultation

Susan M. Hutton & Kim Lawton -

Competition Bureau (the Bureau) has published a draft new Pre-Merger Interpretation Guideline for public consultation (Guideline #15), providing details as to how the Bureau calculates the value of “assets in Canada” and “gross revenues from sales” for purposes of the merger notification thresholds.  It will be open for comment from interested parties until June 13, 2012.

The purpose of the guideline is to assist parties and their counsel in interpreting and applying the provisions of theCompetition Act (the Act) relating to notifiable transactions. This guideline sets out the general approach taken by the Bureau and may assist businesses in determining whether the parties-size and transaction-size thresholds under sections 109 and 110 of the Act are exceeded.

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New interpretation guidelines on pre-merger notification released by Competition Bureau

Susan M. Hutton & Robert Mysicka -

On March 23, 2012, the Competition Bureau announced its publication of two draft Pre-Merger Notification Interpretation Guidelines for public consultation.

The publications, dubbed Pre-Merger Notification Interpretation Guideline Number 12 and Number 14 relate respectively to the requirement to submit a New Pre-merger Notification and/or ARC Request Where a Proposed Transaction is Subsequently Amended, and Duplication Arising from Transactions Between Affiliates.

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Competition Bureau releases new draft guidelines on abuse of dominance

D. Jeffrey Brown & Robert Mysicka -

The Competition Bureau announced yesterday that it has released its long-awaited revised draft Abuse of Dominance Guidelines outlining the Bureau’s approach to reviewable matters under sections 78 and 79 of the Competition Act. The newly released Guidelines are intended to replace the draft guidelines released in January, 2009, which was the first time the Bureau had updated its enforcement approach to abuse of dominance since 2001.

Abuse of dominance occurs when a dominant firm (or group of firms) in a market engage in a practice of anti-competitive acts that result, or are likely to result, in a substantial prevention or lessening of competition. Sections 78 and 79 of the Competition Act allow the Competition Tribunal, on application by the Commissioner of Competition, to prohibit dominant firms from engaging in anti-competitive practices, or to order such further remedial action as is reasonable and necessary to restore competition in the market.

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Canadian government to loosen foreign ownership restrictions in telecommunications sector

Susan M. Hutton, T. Gregory Kane & David Elder -

As part of its plan to auction rights for the 700 MHz spectrum band, the Canadian government announced yesterday that it plans to amend the Telecommunications Act to lift foreign investment restrictions for telecommunications companies holding less than a 10 per-cent share of the total Canadian telecommunications market.

The Honourable Christian Paradis, Minister of Industry, announced the following commitments designed to provide Canadians with greater choice and lower prices in the market for wireless services

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Canadian court comes down hard on misleading business directory scam

Ashley Weber -

On March 1, 2012, the Ontario Superior Court put an end to a deceptive marketing scam that had resulted in thousands of Canadians falling victim to false and misleading representations, to the tune of an estimated $7 million. In response to an application filed by the Commissioner of Competition, the court held that representations made to the public about a business directory service with a similar name and website to the well-established Yellow Pages business directory were false or misleading in a material respect, contrary to Section 74.01(1)(a) of the Competition Act. The court imposed an administrative monetary penalty (AMP) of $8 million on the related companies, and AMPs of $500,000 on each of the companies’ two principals. The court also ordered that restitution be paid to the individuals that had been victimized by the scam.

Playing on Canadians’ familiarity with the Yellow Pages business directory operated by the real Yellow Pages Group, the respondents had been marketing themselves under a similar name and offering online business directory services to Canadians since January 2010, leading many Canadians to believe that they were receiving communications from the established Yellow Pages Group. Through those communications, recipients were asked to “update” their existing records in order to obtain an additional free Google advertisement. A review of the fine print, however, revealed that it was actually an agreement to sign a new two-year contract for a fee of $2,856. If recipients did not respond and/or pay the requested fee, they were subsequently sent as many as three additional invoices, reminder notices or letters. The communications contained a logo similar to that of the real Yellow Pages Group, and referenced “Yellow Page” (no “s”) in large font.  In reality, the communications were coming from companies and individuals that were in no way related to Yellow Pages Group or its business directory service.

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Federal Court of Appeal addresses limitation period under the Competition Act

Sultana L. Bennett -

The Federal Court of Appeal, in a recent decision under the Competition Act, (the Act), has confirmed that the effects of a conspiracy do not have the effect of extending the limitation period under the Act, but also declined to close the door against the extension of the limitation period by the application of the discoverability principle in future cases.

In August 2008, Garford Pty Ltd. (Garford) sued Dwyidag Systems International, Canada, Ltd. (DSI) and others for patent infringement and alleged breaches of the Act. Garford claimed that DSI, having entered into three purchase agreements to acquire the assets of certain entities in the cablebolt market, breached subsection 45(1) of the Act, which prior to its amendment in 2010 prohibited conspiracies, agreements and arrangements that unduly lessened competition.

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Internet Predators bill would expand investigative powers in the Competition Act

Michael Laskey -

On February 14, 2012, the Minister of Public Safety tabled Bill C-30, the government’s most recent proposal for so-called “lawful access” legislation which would enhance its online surveillance powers. Titled the Protecting Children from Internet Predators Act, the bill has faced considerable criticism from privacy advocates and legal scholars, and the government announced on February 24 that it would delay consideration of the bill while it contemplated changes to address privacy concerns.

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Novel costs award in trial of first buyer-side conspiracy claim for damages in Canada

Michael Kilby and Kim Lawton -

The Court of Queen’s Bench in Alberta has recently ruled in 321665 Alberta Ltd. v. ExxonMobil Canada Ltd,  on several issues relating to costs under section 36 of the Competition Act. The ruling follows an award of damages in a civil case involving a rare buyer-side conspiracy, brought under the pre-2009 section 45 of the Act.

By way of background, section 36 of the Competition Act provides a statutory cause of action to any person who has suffered loss or damage arising from the breach of any of the criminal provisions in Part VI of the Act. These criminal provisions include conspiracy, bid-rigging, misleading advertising, and deceptive telemarketing.

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Rogers Communications claims misleading advertising case, AMPs violate Canadian Constitution

Susan M. Hutton and Marisa Berswick -

Rogers Communications Inc. will appear before the Ontario Superior Court in June, claiming that two aspects of the Competition Act dealing with civilly reviewable misleading advertising are unconstitutional: AMPs (administrative monetary penalties) in the millions of dollars, and the “adequate and proper” testing requirements. If they are ruled unconstitutional, the case stands to gut the Competition Bureau’s ability to seek multi-million dollar penalties under the civil misleading advertising provisions of the Competition Act, and may have implications for its ability to do so in abuse of dominance provisions as well.

The Competition Bureau’s legal proceedings against Rogers began in September, 2010 when Wind Mobile filed a formal complaint with the Competition Bureau regarding Roger’s new discount cell phone service, Chatr Wireless. In November 2010, the Commissioner started legal proceedings against Rogers to stop the allegedly misleading advertising of Chatr, based on claims that it had fewer dropped calls than competitors.

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Quebec construction companies plead guilty to bid-rigging in Chicoutimi hospital expansion project

Susan Hutton and Robert Mysicka -

On February 17, the Competition Bureau announced that three construction companies—Construction G.T.R.L. (1990) Inc., Acoustique JCG Inc., and Entreprises de Construction OPC Inc.—have pled guilty to charges of bid-rigging in a construction project involving the expansion of the Chicoutimi hospital. The case comes less than half a year after a similar bid-rigging scheme involving ventilation companies in Montreal was uncovered and prosecuted, resulting in the imposition of a substantial fine and a prohibition order.

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Bureau's decision to launch merger register raises confidentiality issues under the Competition Act.

Susan Hutton & Robert Mysicka -

On February 6, 2012, the Competition Bureau announced that as part of its efforts to increase transparency in the merger review process it will begin publishing monthly reports of concluded mergers.  The first report, for the month of February, will be published in March and will appear as a table with information on the parties to the transaction, the industry, and the result (i.e. whether the merger was concluded following the issuance of an Advanced Ruling Certificate (ARC) under section 102 of the Competition Act, the issuance of a “No-action Letter”, the registration of a consent agreement, or a judicial decision). 

The Bureau’s decision to publish a list of completed merger reviews comes after its previously announced decision to discontinue issuing detailed backgrounders on the facts of particular cases. Such backgrounders had been sporadic, and subject to permission by the parties to reveal non-public information, but had been helpful in shedding light on the Bureau’s enforcement approach to mergers – no such details of individual cases will be provided in the merger register.

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Increased 2012 thresholds for Competition Act notification and Investment Canada Act review

Susan M. Hutton -

The thresholds for review of acquisitions involving Canadian businesses will soon increase under both the Competition Act and the Investment Canada Act.

The Competition Bureau (Canada) announced on February 7, 2012 that, effective February 11, the pre-merger notification transaction-size threshold for 2012 will increase to Cdn$77 million from the 2011 threshold of Cdn$73 million. The threshold is based on the book value of assets in Canada of the target (or in the case of assets, of the assets in Canada being acquired), or the gross revenues from sales “in or from” Canada generated by those assets, calculated in accordance with the Notifiable Transactions Regulations under the Competition Act. After February 11, 2012, the Competition Bureau must generally be given advance notice of proposed transactions when the acquired assets in Canada or revenues generated in or from Canada exceed $77 million, and when the combined Canadian assets or revenues “in, from or into” Canada of the parties together with their respective affiliates exceed $400 million.

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Canada's Competition Bureau releases revised Merger Review Process Guidelines

Susan M. Hutton and Michael Laskey -

On January 11, 2012, Canada’s Competition Bureau published revised Merger Review Process Guidelines, updating the Bureau’s approach to the administration of the merger review process under the Competition Act in light of experience gained since the implementation of the two-stage U.S.-style notification process in 2009. 

In particular, the Guidelines discuss: (i) the statutory waiting periods which apply to mergers that exceed certain thresholds set out in the Act; (ii) the two-stage notification process including the use of Supplementary Information Requests (SIRs), similar to the “second request” process in the United States; (iii) the use of timing agreements as an alternative means of obtaining information about a transaction and (iv) provide the Bureau’s view of how parties should conduct their searches for documents and information when responding to a SIR, in the form of sample search instructions.

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Supreme Court of Canada grants leave to appeal regarding indirect purchaser issues

Sultana L. Bennett -

On December 1, 2011, the Supreme Court of Canada granted leave to appeal in the British Columbia Court of Appeal decisions Pro-Sys Consultants Ltd. v. Microsoft Corporation (Microsoft) (2011 BCCA 186) and Sun-Rype Products Ltd. v. Archer Daniels Midland Company (Sun-Rype) (2011 BCCA 187). Microsoft and Sun-Rype were two to one majority decisions concluding for the first time in Canada that indirect purchasers of allegedly price-fixed products have no cause of action recognized in law. (see our ealrier post titled: Court of Appeal for British Columbia bars indirect purchaser suits.)

Earlier this month the Québec Court of Appeal in Option Consommateurs v. Infineon Technologies AG (2011 QCCA 2116), unanimously overturning a Superior Court decision that had denied a motion to authorize class action proceedings, allowed indirect plaintiffs to proceed with their price-fixing suit, expressly disagreeing with the British Columbia Court of Appeal’s rulings in Microsoft and Sun-Rype that such plaintiffs have no claim in law. (see our earlier post titled: Québec Court of Appeal authorizes price-fixing class action involving indirect purchasers.)

These appeals will mark the first time the highest court in Canada will consider this issue in the context of competition class actions.

Québec Court of Appeal authorizes price-fixing class action involving indirect purchasers

Sultana L. Bennett -

On November 16, 2011, the Québec Court of Appeal issued a judgment unanimously reversing the 2008 Québec Superior Court decision in Option Consommateurs v. Infineon Technologies AG dismissing the motion for authorization to institute class action proceedings. Significantly, the class includes both direct and indirect purchasers, and the Quebec decision thus follows the dissent in the 2011 British Columbia Court of Appeal decision in Sun-Rype Products Ltd. v. Archer Daniels Midland Company, holding that the defendants would not face an unfair risk of double recovery because the plaintiffs alleged a single, aggregate loss notwithstanding the mix of direct and indirect purchasers in the class.

Background and Decision in the Superior Court

The defendants were manufacturers of dynamic random access memory or “DRAM,” a semiconductor memory product used in electronic devices, each of whom had admitted participation in a price-fixing conspiracy between 1999 and 2002 and all but one of whom had pleaded guilty to Sherman Antitrust Act violations arising from that conduct in the United States.

In its motion to institute the proceedings in Québec Superior Court, Option Consommateurs, a consumer advocacy organization, alleged that the defendants failed to respect statutory obligations under the Competition Act, and breached the general extracontractual duties imposed upon them by the Civil Code of Québec. Claudette Cloutier, a Montreal resident, sought status as the designated representative in the proceedings on behalf of direct and indirect purchasers of DRAM in Québec. In October 2001, Cloutier had purchased a computer containing DRAM online from Dell Computer Corporation’s website, and claimed to have paid an artificially inflated price for the computer as the result of the defendants’ price-fixing activity.

Justice Mongeau of the Superior Court denied the motion to authorize proceedings on two grounds: first, that Québec did not have proper territorial jurisdiction to hear the class action, but that even if it had, the allegations did not meet the test for authorization under Québec class proceedings law. Option Consommateurs and Cloutier appealed the ruling to the Court of Appeal.

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Criminal charges laid in alleged Montreal sewer services cartel

Michael Laskey -

On November 22, 2011, the Competition Bureau announced that criminal charges had been laid against six companies and five individuals accused of rigging bids for municipal and provincial sewer services contracts in the greater Montreal area. Bid-rigging, in which two or more bidders agree among themselves on whether or how to submit bids, without informing the person calling for the bids, is a criminal offence under section 47 of the Competition Act.

The Crown alleges that the accused companies and individuals conspired to pre-determine the winners of 37 municipal and provincial calls for tender in 2008 and 2009 related to the cleaning and maintenance of sewers, with a total value of C$3.3 million. The bidders who were not pre-determined to win allegedly submitted inflated, token bids in order to mislead tendering authorities into believing that the processes were competitive. Because the alleged conduct took place prior to the 2009 amendments to the Competition Act which increased the maximum penalties available under section 47, the accused face maximum penalties of up to five years in prison and/or a fine in the discretion of the court.

The Bureau also noted that its investigation benefitted from cooperation under its immunity and leniency programs, which provide incentives for parties involved in criminal conduct to self-report the conduct to the Bureau.

Competition Tribunal confirms possibility of dissolution as remedy in CCS case

Susan Hutton & Lindsay Gwyer -

On November 3, 2011, the Competition Tribunal issued a decision refusing to grant summary disposition to the vendor respondents in Commissioner of Competition v. CCS Corporation, thus confirming dissolution as a possible remedy in the case. The proceedings centre on the Commissioner’s application challenging CCS Corporation’s completed acquisition of Complete Environmental Inc., which owns the Babkirk Secure Landfill located in northeastern British Columbia, on the basis that the transaction is likely to substantially prevent competition for the disposal of hazardous waste in northeastern British Columbia (for more on the case, see our earlier post).

Because the proceedings deal with a completed transaction, the vendor respondents maintain that they are only implicated to the extent that the Tribunal would order dissolution as a remedy.  Consequently, the vendor respondents moved to have the Commissioner’s application dismissed against them on the ground that there was no genuine basis for the Tribunal to order dissolution. They argued that dissolution was an overly broad and punitive measure, and that divesture would be an effective and more appropriate remedy (assuming that the Commissioner is able to prove that the acquisition would substantially prevent competition). On the other hand, the Commissioner maintained that dissolution might be a necessary remedy, and argued that the application should be allowed to proceed to a hearing in order to determine several factual issues that would impact on the viability of either divesture or dissolution as an appropriate remedy.

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CRTC's vertical integration decision in broadcasting proposes controls on vertically-integrated broadcasters

Michael Laskey -

On February 1, 2011, the Competition Bureau issued a statement in respect of the proposed acquisition of CTVglobemedia Inc. by BCE Inc. The statement noted that the Bureau was “cognizant of the growing trend toward vertical integration in the broadcasting industry” and that it was reviewing issues of vertical foreclosure. The statement also noted that the Commissioner of Competition would “closely monitor” the CRTC’s vertical integration hearings and subsequent regulatory developments in that same regard.

On September 21, 2011, the CRTC released its decision, Broadcasting Regulatory Policy CRTC 2011-601, setting out a regulatory framework for vertical integration among broadcasting and programming companies. In its decision, the CRTC imposes a number of restrictions on the activities of “vertically integrated” companies, which for the purposes of the decision it defines as companies that control both programming services (such as conventional television stations) and distribution services (such as cable or satellite systems). More specifically, some of the restrictions imposed by the decision include:

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CRTC goes global on telemarketing: will co-chair new international Do Not Call enforcement network

David Elder and Lindsay Gwyer  -

Life is about to get more difficult for foreign telemarketers that flout domestic Do Not Call rules, as twelve global regulators have joined forces to create an international enforcement network.

On October 28, 2011 the CRTC announced the creation of an International Do Not Call Network to facilitate international cooperation on telemarketing enforcement and hopefully reduce the amount of unauthorized telemarketing calls Canadians receive from abroad. 

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Parties consent to interim supply order in refusal to deal case

Michael Laskey -

The Competition Tribunal today released an interim supply order requiring the Insurance Bureau of Canada to continue to supply access to its Web Claims Search Application to the Used Car Dealers Association of Ontario. The IBC, which consented to the interim supply order, must continue to supply the UCDA until the disposition of the UCDA’s application under the refusal to supply provision (section 75) of the Competition Act.

As described in our earlier article, the UCDA alleges that the IBC is refusing to supply it with automobile accident history data, which the UCDA says it requires in order to supply its Auto Check service to its members. The UCDA was granted leave to bring its application on September 9, 2011, and the matter is currently pending before the Tribunal.

Competition Tribunal orders production of unredacted documents

D. Jeffrey Brown and Lindsay Gwyer -  

In a recent decision, the Competition Tribunal granted the Commissioner of Competition’s motion requesting that the Toronto Dominion Bank (TD) produce complete versions of a number of documents, including several that had previously been produced in a redacted form. The motion was part of the Commissioner’s proceedings against Visa Canada and Mastercard International under the Competition Act’s civil resale price maintenance (RPM) provision, enacted as part of the substantial amendments to the Competition Act in 2009. TD was granted leave to intervene in that proceeding in respect of a number of issues earlier this year.

The motion stemmed from the redaction by TD of certain documents produced by it in response to the Tribunal’s order granting it leave to intervene, which also ordered it to produce documents relative to the issues within the scope of its intervention. TD submitted that redactions are permitted if information is irrelevant and confidential, or if it is contained in an irrelevant portion of a segmented document. The Tribunal rejected this view, and held that, as a general rule, irrelevant portions of otherwise relevant documents must be disclosed. After reviewing relevant jurisprudence, the Tribunal held that redaction is permissible only in exceptional circumstances, such as where the redacted information is embarrassing or harmful or where there is an “enormous” volume of redacted material.

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Superior Court issues partial sealing order in Commissioner's case against Chatr Wireless

D. Jeffrey Brown and Robert Mysicka - 

In a recent ruling, Ontario’s Superior Court of Justice explored the principles underlying the law respecting sealing orders and its application to reviewable matters under Part VII.1 of the Competition Act.  On a motion by the Commissioner of Competition, the Court issued a partial confidentiality (or sealing) order with respect to certain information used by the Commissioner in her application against Rogers Communications Inc. and its wholly owned subsidiary, Chatr Wireless Inc., for alleged misleading advertising. Information about “dropped call” rates, which the Court characterized as being at the “very heart” of the Commissioner’s application, was excluded from the sealing order after the Court determined that it was essential for that aspect of the proceedings to remain transparent. 

Investigation into Misleading Advertising

The application to which the confidentiality order relates originated in November, 2010, when the Competition Bureau commenced legal proceedings against Rogers and Chatr. The Bureau’s application came after complaints were made by competing discount wireless carriers, Wind Mobile and Mobilicity, alleging that Rogers’ Chatr discount brand was misleading consumers into believing that its network was more reliable and had fewer “dropped calls” than those of other discount carriers.

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Competition Bureau publishes final version of revised Canadian MEGs

Megan MacDonald -

On October 6, 2011, the Competition Bureau announced the publication of the final version of its revised Merger Enforcement Guidelines (MEGs), only thirteen months after announcing its intention to review the guidelines in September 2010. The revised MEGs replace both the 2004 version of the guidelines and the Bureau’s 2009 Efficiencies in Merger Review bulletin.

The revisions aim to better describe the Bureau’s analytical approach to merger review by addressing discrete areas where the 2004 MEGs no longer fully reflected Bureau practice or current economic and legal thinking. It is generally understood that the 2010 revisions to the U.S. Horizontal Merger Guidelines (U.S. Guidelines) also constituted an important factor driving the need for review. Whereas the U.S. Guidelines are limited to horizontal mergers, however, the revised MEGs also address vertical merger analysis and go further than the U.S. Guidelines with respect to horizontal merger analysis by incorporating more recent thinking on Canada’s own unique efficiencies defence.

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Competition Bureau releases Canadian Tire/Forzani "Position Statement"

Jeffrey Brown -

On October 5, 2011, the Competition Bureau released a “Position Statement” summarizing its approach in reviewing Canadian Tire’s recent acquisition of the Forzani Group.  The transaction, which took the form of a takeover bid, was announced on May 9, 2011, and the Bureau cleared the transaction on August 3, 2011.  The transaction provided the Bureau with the relatively rare opportunity to review a retail merger between retailers carrying on business using different business models: Forzani is a national sporting goods retailer (including sports apparel and equipment), and Canadian Tire is a mass merchandiser selling products, through a network of independent dealers, across a range of categories, including sporting goods as well as automotive parts, tools, house wares and electronics.

In reviewing the transaction, the Position Statement notes that the Bureau analysed its potential competitive effects in a number of possible product markets (retail sale of sporting equipment; retail sale of certain sporting equipment categories, such as hockey equipment; and the retail sale of specific sporting equipment products, such as hockey skates), but ultimately concluded that it was not necessary to conclusively define the relevant product market(s) in light of econometric evidence showing that neither party responded competitively to the presence of the other in local markets, and to evidence that this was unlikely to change post-merger. To our knowledge, this is the first time the Bureau has expressly relied on such a competitive effects analysis in its assessment of a merger, although the potential for such an approach was signalled in its draft revisions to the Merger Enforcement Guidelines, published earlier in 2011.

Stikeman Elliott LLP acted as competition counsel to Canadian Tire, with a team consisting of Lawson Hunter, Jeffrey Brown, Paul Beaudry, Megan MacDonald and Alexandra Stockwell.

Criminal charges laid in Canada for international telemarketing fraud

Michael Laskey -

On September 22, 2011, the Competition Bureau (the Bureau) announced that charges had been laid against five individuals and four Montreal-based companies involved in an allegedly fraudulent telemarketing operation. According to the Bureau’s Backgrounder, the companies hired telemarketers to contact businesses and falsely suggest (i) that the telemarketers were regular suppliers of the businesses looking to obtain renewals for services; (ii) that purchases of medical kits were required to comply with new legislation; (iii) that an order had already been pre-authorized by someone else in the business; or (iv) that the purpose of the telemarketer’s call was to verify an address when in fact it was to obtain an order confirmation. The companies allegedly sold products which were inflated up to ten times the market value, and threatened collection actions against businesses when they refused to pay.

Based in Montreal, the telemarketing operation had allegedly targeted businesses in Canada, the United States, Europe and Central America since at least 2001. The accused individuals and companies are charged with deceptive telemarketing and misleading representations (both criminal offences) under the Competition Act, and fraud under the Criminal Code. Last year, in remarks made to the International Consumer Protection and Enforcement Network, the Commissioner of Competition remarked that “[i]t is now clear that victims do not need to be Canadian in order for [the Bureau] to take action. This is an important step forward in the international fight against fraud.”

Competition Bureau releases review of 2007 self-regulated professions study

Susan M. Hutton and Paul Beaudry

On September 2, 2011, the Competition Bureau released the results of an ex-post assessment of its December 2007 study entitled “Self-Regulated Professions: Balancing Competition and Regulation.” The Bureau’s review assessed developments since the publication of its 2007 study, which contained 53 recommendations aimed at eliminating unwarranted regulatory restrictions on competition in five self-regulating professions: accountants, lawyers, optometrists, pharmacists and real estate agents.

In addition to specific recommendations, the 2007 study also included six guiding principles set forth by the Bureau to help regulators develop regulatory frameworks that maximize consumer welfare through competition:

  1. Regulation should have clearly defined and specific objectives.
  2. Restrictions should be directly linked to clear and verifiable outcomes.
  3. Regulation should be the minimum necessary to achieve stated objectives.
  4. The regulatory process must be impartial and not self-serving.
  5. A regulatory scheme should allow for periodic assessment of its effectiveness and be subject to regular reviews.
  6. A primary objective of the regulatory framework should be to promote open and effectively competitive markets.
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Used Car Dealers Association accuses Insurance Bureau of refusal to deal

Michael Laskey -

On September 9, 2011, the Competition Tribunal released a decision granting leave to the Used Car Dealers Association of Ontario (UCDA) to bring an application against the Insurance Bureau of Canada (IBC) seeking redress under the “refusal to deal” provisions contained in section 75 of the Competition Act. UCDA claims that IBC stopped supplying it with data on vehicle accident and claims history, which the IBC compiles from its member insurers. According to UCDA, it relies on being able to purchase this data to supply vehicle accident history reports to its members.  The Tribunal has granted the UCDA's application for leave to file an application under section 75, and such an application has in fact been filed.

UCDA alleges that one of its competitors in the accident history report market, CarProof, has a significant business relationship with IBC. CarProof provides its claims check service to the public at a price of $34.95 per search, while UCDA’s Auto Check service is available only to UCDA members and costs $7 per search (but includes less information than a CarProof report). UCDA alleges that IBC refuses to supply it with insurance data because of UCDA’s low pricing policy.

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Competition Bureau finds slimming creams not as effective as advertised

Ashley Weber -

The Competition Bureau announced last week that it has entered into a Consent Agreement with Beiersdorf Canada Inc., the Canadian distributor of Nivea, regarding misleading claims associated with Nivea's "My Silhouette" product. According to the Competition Bureau, certain claims about the product, including that it can slim and reshape the body and cause a reduction of up to three centimetres on targeted areas, were false or misleading, and not based on adequate and proper testing. As part of the settlement, Beiersdorf has agreed to pay an administrative penalty of $300,000 plus $80,000 in costs, in addition to providing refunds to consumers.

The settlement follows on the heels of another high profile misleading advertising decision by the Commissioner of Competition pertaining to Bell Canada, which we described in a post of July 29. In that decision, the Commissioner concluded that Bell had misled consumers in its advertising regarding the prices consumers are required to pay for its TV, internet, home phone and wireless services. Bell Canada agreed to pay an administrative monetary penalty of $10 million, as well as revise its current and future advertising to ensure that consumers are no longer misled by the prices advertised and the fine-print disclaimers that accompany the advertising.

Given the recent activity by the Commissioner to exercise her powers under the Competition Act to crack down on misleading advertising, and further, given the steep penalties that can be imposed under the Act on companies found to have engaged in deceptive marketing ($10 million initially for a corporation and $15 million for repeat offenders), companies should take the time to carefully review their advertising and disclaimers prior to going to print, in order to ensure representations made to the public do not run afoul of the Act.

If you have any questions about the misleading advertising or other provisions of the Competition Act, I invite you to contact me or any other member of our Competition & Foreign Investment Group.

Canadian Competition Bureau introduces new standard language for "no action" letters

Paul Beaudry -

On August 8, 2011, the Competition Bureau provided guidance regarding the standard language parties can expect to see in standard “no action” letters issued in the context of merger reviews.

The Bureau’s approach better aligns the default language in no action letters with subsection 123(2) of the Competition Act and will no longer refer to the sufficiency of grounds to challenge. After September 1, 2011, “no action” letters will specify that:

“…the Commissioner does not, at this time, intend to make an application under section 92 in respect of the proposed transaction.”

For years, there has been a disconnect between the requirements of section 123 of the Competition Act for early termination of the initial 30-day waiting period under subsection 123(2) of the Act and the language actually used in “no action” letters, which granted such early termination, but mimicked the language used in advance ruling certificates issued under section 102 of the Act. The Bureau’s new standard language, while not changing the intended meaning of “no action” letters, aligns “no action” letters with the statutory requirements.

Competition Bureau releases study of Canadian merger remedies

Susan M. Hutton and Robert Mysicka -

On August 11, 2011 the Competition Bureau (Bureau) released a summary of an internal study on the efficacy of remedies obtained under the merger provisions of the Competition Act The study examined the efficacy of the Bureau’s policies and procedures on merger remedies for the years 1995-2005. In particular, the survey focused on 23 merger cases in which different remedial measures were implemented over the ten-year period. The Bureau interviewed different stakeholders in the merger review process, including merged entities, customers and purchasers of divested assets, as well as third parties affected by the remedy.   The study utilized 135 interviews, approximately 50% of which were responses from customers.

The Competition Act allows for the Commissioner of Competition to make an application to the Competition Tribunal preventing a merging entity, alone or in combination with others, from having the ability to exercise market power as a result of its merger. The Commissioner can challenge the merger under section 92 of the Act, or seek to resolve the competition concerns by negotiating remedies with the merging parties. In practise, very few merger cases in Canada are litigated. Accordingly all of the remedies examined had been agreed with the parties. The Bureau’s 2006 Bulletin on Merger Remedies specifies four types of remedial measures used by the Bureau and the Tribunal to address mergers that have, or are likely to have, detrimental effects on competition. The study, which will be used to validate and refine certain aspects of the Bureau’s practice, describes key observations on the four principal remedies currently used by the Bureau, including: structural remedies, quasi-structural remedies, combination remedies, and stand-alone behavioural remedies. For purposes of the public summary of the report, however (details of the complete study must remain confidential pursuant to the confidentiality provisions of section 29 of the Competition Act), results have been summarized for structural, and for all other categories.

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Competition Bureau releases new guidelines on merger notification in Canada

Susan M. Hutton and Robert Mysicka -

Canada’s Competition Bureau has released three new guidelines relating to its merger review process under Part IX of the Competition Act.  The first two guidelines discuss the Bureau’s approach to the disclosure of confidential information and the running of waiting periods in the context of unsolicited (hostile) bids. The third guideline discusses the completeness of notifications, in particular with respect to the meaning of “officers and directors” for non-corporate entities, and when information can be excluded from a notification on the basis of confidentiality.

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Canada leads international effort to stop business directory scam

Jennifer Rad -

The Competition Bureau announced on July 28, 2011 that it had filed an action against five companies (Yellow Business Marketing Ltd. in Canada; Yellow Publishing Ltd. and Yellow Data Services Ltd. in the UK; Yellow Page Marketing B.V. in the Netherlands, and Backoffice Support SL in Spain) and three individuals (Brandon Marsh, manager of Yellow Business Marketing Ltd. and Jan Marks and Steve Green, Spanish residents) with the Ontario Superior Court of Justice in connection with a deceptive marketing scheme targeting businesses in Canada.

"We are committed to cracking down on fraud that victimizes consumers and businesses. Significantly, the action we are taking today underscores the importance of working with our international partners to frustrate these types of multi-jurisdictional scams." said Melanie Aitken, Commissioner of Competition.

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Quebec ventilation contractor fined for bid-rigging

Susan M. Hutton and Robert Mysicka -

Les Entreprises Promécanic Ltée (Promécanic), a ventilation company based in Laval, Québec, has pleaded guilty to three criminal charges of bid-rigging for tenders issued by its contractors in 2004 and 2005. On July 19, 2011, Promécanic was fined C$425,000 by the Superior Court of Québec for participating in agreements to fix the outcome of bids for the installation of residential ventilation systems in Montreal.

In December, 2010, the Competition Bureau’s investigation of eight ventilation systems companies culminated in the laying of criminal charges for bid-rigging against Promécanic and seven others. Bid-rigging, which is defined in section 47 of the Competition Act, prohibits bidders from entering into an agreement not to submit bids or to submit pre-arranged bids when responding to a bid or tender call. The criminal sanction under section 47 applies if the person calling for the bids is not made aware of the agreement at or before the time when the bid or tender is submitted or withdrawn. In this case, the Bureau’s investigation found evidence of collusion among the eight ventilation companies in five separate competitive bidding processes valued at approximately C$8 million. The maximum penalties for bid-rigging include a fine that is at the discretion of the court and/or a prison term not exceeding 14 years.

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Canada's Corruption of Foreign Public Officials Act shows its teeth

Susan Hutton and Paul Beaudry -

On June 24, 2011, Niko Resources Ltd., a Calgary-based oil and gas exploration and production company, entered a guilty plea under Canada’s Corruption of Foreign Public Officials Act (CFPOA) with respect to charges of bribing a public official in Bangladesh. Niko, which operates in a number of countries around the world, had been notified by Canadian authorities in January 2009 that it was being investigated over allegations that it had provided the Energy Minister of Bangladesh with a $190,000 vehicle for personal use as well as with trips to Calgary and New York. These gifts had been made at the time when the Minister was assessing how much compensation was owed to Bangladeshi villagers for water contamination and other environmental concerns caused by explosions at a Niko operation.

Niko’s sentence included a $9.5 million fine and a three-year probation order that requires the company to implement a detailed compliance program subject to review by an independent auditor. Prior to Niko’s conviction, only one Canadian company had been convicted of foreign bribery under the CFPOA in the past decade. The $25,000 fine issued by the court in that case, known as R. v. Hydro Kleen Services Inc., was less than the bribe involved.

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Bell Canada to pay $10-million penalty for misleading advertising

Ashley Weber and Jennifer Rad -

On June 28, 2011, Bell Canada entered into a Consent Agreement with the Commissioner of Competition that will require Bell to pay a $10-million administrative monetary penalty for making false or misleading representations in its advertising regarding the prices consumers are required to pay for its Home Phone, Internet, Television, and Wireless services. 

Upon completion of its investigation, the Competition Bureau concluded that Bell has, since December 2007, advertised monthly prices which were lower than the actual price it charges consumers for its services. Section 74.01 of the Competition Act prohibits any representation to the public, for the purposes of promoting a product, that is false or misleading in a material respect, and takes into account both the general impression conveyed by a representation as well as its literal meaning.

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Federal Court of Appeal dismisses Refusal to Deal appeal

Susan M. Hutton & Marisa Berswick

On June 2, 2011, the Federal Court of Appeal (FCA) released its decision in Nadeau Poultry Farm Limited v. Groupe Westco Inc et al., in which it upheld the decision of the Competition Tribunal to dismiss the appellant’s complaint under s. 75 of the Competition Act (refusal to deal). While the appellant was ultimately unsuccessful, both decisions shed light on the limited scope of s. 75, particularly in regulated industries where supply is statutorily restricted.

The Decision at the Tribunal

As discussed in our post of November 19, 2009, this case concerns a dispute between the appellant, Nadeau Poultry Farm, the operator of the only chicken slaughtering plant in New Brunswick, and the main respondent, Group Westco Inc., a chicken producer that, along with its subsidiaries, owns or controls just over half of the chicken production in New Brunswick. In 2007, Westco offered to buy or invest in the Nadeau plant, but negotiations between the parties broke down. Westco made it clear that if Nadeau was not willing to sell its plant, Westco would construct its own slaughtering plant in partnership with Nadeau’s main competitor and thereby deprive Nadeau of 50% of its supply. Eventually, Westco gave written notice that it would stop supplying chickens to Nadeau and the other respondents followed soon after, leading to the commencement of a private action before the Competition Tribunal for an order for resumed supply. On June 8, 2009, the Tribunal dismissed the application based on Nadeau’s inability to satisfy the five conditions required by s. 75, which require that:

  • a customer is substantially affected in its business or is precluded from carrying on business because it is unable to obtain adequate supplies of a product anywhere in a market on usual trade terms; 
  • this occurs as a result of insufficient competition among suppliers; 
  • the customer is willing and able to meet usual trade terms;
  • the product is in ample supply; and 
  • the refusal to deal is having or is likely to have an adverse affect on competition in a market.
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Groupon falls afoul of UK advertising regulator

Ashley Weber and Graeme Deuchars  -

On June 8, 2011, the UK Advertising Standards Authority (ASA) found that online coupon provider Groupon, Inc. had misrepresented the ordinary selling price of a third party service that was advertised to Groupon’s online subscribers, and ordered Groupon to remove the advertisement from circulation.  The ASA also ordered Groupon to ensure its compliance with proper advertising policies, so as to prevent similar events in the future.  The decision is one of several regulatory decisions by the ASA in recent months, illustrating that – despite disclaimers to the contrary in the terms of use - “deal-a-day” online websites offering “red flag” or “last minute” for third party products and services may not be immune to scrutiny for representations made in online advertising in the UK, and possibly elsewhere.  Whether such services could rely upon the exception in Canada’s Competition Act for those who “print, publish or otherwise disseminate” an advertisement has not been tested.

The ASA decision came in response to a complaint that Groupon had overstated the savings for a third party salon treatment that was offered to Groupon subscribers at “£24 instead of £90”. The ASA found that Groupon did not have adequate evidence to substantiate the ordinary selling price of £90 in order to make the savings claim (Groupon had relied on an e-mail price list provided by the third party salon which quoted the regular price of the treatment).  The ASA ruled that the advertisement could not appear again in its current form, and informed Groupon that it would need to obtain documentary evidence of its suppliers’ pre-discount prices for future advertising.

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Draft revisions to Canadian MEGs released for comment

Susan M. Hutton and Marisa Berswick

On June 27, 2011, the Competition Bureau issued draft revisions to Canada’s Merger Enforcement Guidelines (MEGs).  The MEGs, last revised in 2004, set forth general direction on the Bureau’s analytical approach to merger review under Part VIII of the Competition Act. On February 24, 2011, the Commissioner announced that the Bureau would undertake “moderate revisions” to the MEGs. An important factor driving the current revisions is generally understood to be the 2010 revisions to the U.S. Horizontal Merger Guidelines (U.S. Guidelines), although the Canadian revisions did not simply adopt those made in the U.S. In addition, the Canadian MEGs address both horizontal and vertical merger analysis and reflect more recent thinking on our own unique efficiencies defence. The Bureau is seeking public feedback on its draft revised MEGs by August 31, 2011, with a view to publishing them in final form in the fall of 2011.

Substantively, the draft revised MEGs do not appear to indicate dramatic shifts in Bureau merger enforcement policy or practice.   They do adopt a more nuanced approach to market definition, however, and provide more detail regarding the Bureau’s approach to monopsony (buyer) power, minority interests and interlocking directorates, the use of various economic tools in the analysis of competition between firms with differentiated products (“upward pricing pressure” as such is not specifically mentioned, but is very much there in spirit), a change in the approach to assessing whether entry is likely to be “timely”, a more nuanced treatment of coordinated effects, and an expanded analysis of anti-competitive effects in non-horizontal mergers. The revisions are intended to address areas where the 2004 MEGs no longer fully reflected Bureau practice and current economic and legal thinking.

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Canadian ownership "restored": Federal Court of Appeal puts the Wind back in Globalive's sails

Greg Kane and David Elder -

In a significant decision released yesterday, the Federal Court of Appeal has restored a Federal Cabinet Order that found that Globalive Wireless Management Corp. (Globalive) meets Canadian ownership requirements to operate as a telecommunications common carrier.

As we noted previously, the Federal Court Trial Division had quashed the decision of the Federal Cabinet that found that Globalive, which provides wireless services in Canada under the Wind Mobile brand, met Canadian ownership requirements under the Telecommunications Act

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Canada's Merger Control and Foreign Investment Regimes - selected recent developments

Shawn C.D. Neylan and Michael Kilby -

In March 2009, significant amendments to Canada’s Competition Act and Investment Canada Act were passed, with important implications for the regulatory review of mergers and acquisitions. 

Merger Control – Competition Act

Following the amendments of March 2009, Canada now has a “two-stage” merger review process. The merits and demerits of this new regime were never thoroughly debated among competition law practitioners or in Parliament, because the amendments were included in a budget implementation bill drafted in response to the global economic crisis of 2008. The bill moved through the legislative process in a matter of weeks, with the clear focus of parliamentary debate being on economic stimulus measures, rather than amendments to the Competition Act and other statutes. In any event, the new merger review process shares many similarities with the US process under the Hart-Scott-Rodino Act1. More particularly, the submission of the required notification filings by the purchaser and the target company triggers a 30 calendar day waiting period during which the transaction may not proceed, unless the Commissioner of Competition (the Commissioner) issues a positive clearance for the transaction and/or terminates the waiting period. If the 30 calendar day waiting period expires without the issuance by the Commissioner of a supplementary information request (a SIR), then there is no legal impediment to the parties closing the transaction. However, if the Commissioner issues a SIR within the 30 calendar day waiting period, the transaction may not close until 30 days after the parties have complied with the SIR, unless the Commissioner issues a positive clearance for the transaction and/or terminates the waiting period.

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Toronto Real Estate Board charged with Abuse of Dominance

Susan Hutton -

Canada's Competition Bureau announced on May 27, 2011 that the Commissioner of Competition had filed an application with the Competition Tribunal alleging an abuse of dominance by the Toronto Real Estate Board in the market for residential real estate brokerage services. According to the Commissioner's application, TREB member brokers have access to detailed information about properties listed on the TREB multiple listing service (which lists almost all properties for sale in the Greater Toronto Area or GTA), such as historical prices, comparables, etc. Members of the TREB, however, are not permitted to provide their customers with direct access to the complete TREB MLS, nor to disseminate the more detailed information to their customers via searchable websites. The Commissioner alleges that such rules effectively prevent on-line brokerages from competing in the GTA as they do in the United States and Nova Scotia, for example. The allegations in the Commissioner's application are unproven, and no response has been filed.

Foreign investment review in Canada: "Be careful what you wish for".

Lawson A.W. Hunter, Q.C. and Susan M. Hutton -

In February, 2011, a Canadian Parliamentary committee began reviewing the Investment Canada Act (ICA) with a view to recommending measures to increase the transparency and effectiveness of the statute. The review was terminated by the federal election called in late-March, but may well recommence in the next Parliament. This article examines recent events leading to the statutory review as well as the various decision-making models under consideration and asks: “Will reforms be of “net benefit” to Canada?”

The ICA applies to the acquisition of control of existing Canadian businesses and to the commencement of new Canadian businesses by non-Canadians. In the case of most such transactions, the foreign purchaser or investor is merely required to file a short notification within 30 days following completion of the transaction, and there is no discretion on the part of the Canadian Government to block the deal from closing or to re-visit it after the fact to impose conditions. Acquisitions of control of large Canadian businesses, however, by persons controlled in WTO-member states (and smaller acquisitions if the business has a “cultural” aspect or neither party is controlled in a WTO-member state) generally require the approval of the Minister of Industry on the grounds that he or she is satisfied that the transaction is likely to be of “net benefit” to Canada, according to a prescribed set of criteria. 

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Canadian Competition Bureau updates handbook for binding written opinions

Susan M. Hutton and Edwin Mok -

On May 18, 2011, the Competition Bureau released a new Fee and Service Standards Handbook for Written Opinions with updated guidance on required information, service times, and fees for binding written opinions. Section 124.1 of Canada’s Competition Act, which was added in 2002, gives the Commissioner the ability to issue a written opinion as to whether particular provisions of the Act would apply to the facts described in the application.  These opinions are binding upon the Commissioner provided that all material facts have been disclosed.

The Bureau’s new Handbook aims to assist applicants in determining what material facts need to be disclosed.  It provides non-exhaustive lists of required information for some of the most frequently reviewed provisions, including: s. 76 (price maintenance), ss. 77 to 79 (other civil reviewable practices including abuse of dominance), s. 90.1 (non-criminal agreements with competitors that substantially lessen or prevent competition), s. 45 (cartels, i.e., criminal competitor agreements), s.52 (misleading advertising), s. 52.1 (deceptive telemarketing), s. 53 (deceptive notice of winning a prize), and ss. 74.01 to 74.06 (civil deceptive marketing practices). The new Handbook reflects some recent changes to the Act, such as the addition of s. 90.1 and the corresponding “per se” nature of the cartel offence.  It also makes some changes to the information required for certain provisions.  For example, requests for written opinion for s. 45 and ss. 77 to 79 now require the submission of “any relevant agreement(s)”, a requirement not stipulated in the previous Handbook.

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New Ministers for Investment Canada

Susan M. Hutton -

Canada's Prime Minister, Stephen Harper, unveiled his new Cabinet on May 18, 2011, after winning a majority in Parliament in the May 2 election. Christian Paradis, an MP from Quebec serving since 2006 and former Minister of Public Works and Government Services, has been appointed Minister of Industry Canada, replacing Tony Clement who moved to Treasury Board (to oversee federal government spending). James Moore, an MP from northern British Columbia serving since 2000, was re-appointed to his post as Minister of Canadian Heritage and Official Languages.

The Minister of Industry is responsible for deciding whether to allow foreign takeovers of certain Canadian businesses, either himself on the basis of whether the investment will be of "net benefit to Canada", or (with the ultimate decision being that of the Governor in Council, ie, the federal Cabinet) on national security grounds. The Minister of Canadian Heritage is responsible for "net benefit" reviews of foreign takeovers of Canadian businesses with activities (no matter how dry and seemingly "uncultural") in certain cultural industries (books, magazines, periodicals, newspapers, film, video or audio recordings, music scores, radio, TV, cable or satellite broadcast distribution).

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Court of Appeal for British Columbia bars indirect purchaser suits

Katherine L. Kay and Mark Walli

On April 15, 2011, the Court of Appeal for British Columbia released judgments in two competition class actions which concluded for the first time in Canada that indirect purchasers of allegedly price-fixed products “have no cause of action recognized in law.”  Pro-Sys Consultants Ltd. v. Microsoft (Microsoft) and Sun-Rype Products Ltd. v. Archer Daniels Midland Company (Sun-Rype) were appeals heard one after the other by the same panel of three judges. Both cases were decided by a two to one majority and overturned chambers judgments certifying class actions (see  Microsoft and Sun-Rype respectively) .

The majority judgments found that the issue of whether indirect purchasers could sue to recover a price-fixing overcharge passed on to them by the defendants’ customers (or other intermediaries in the product distribution chain) was a “pure question of law” capable of being resolved at the pleadings or class certification stage of the case, and that it was “plain and obvious” that indirect purchasers had no such claims.

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Credit cards face class action in Canada

A class action was commenced on March 28, 2011 against VISA™ and MasterCard™ and the major Canadian banks, in British Columbia, Canada. Mary Watson, owner of a furniture store in Vancouver, is the representative plaintiff. 

The suit alleges that, contrary to s. 45 of the Competition Act, the defendants fixed, maintained, and controlled the Merchant Discount Fees charged to merchants who accept credit cards as payment, monitored adherence to the Fees, and also controlled the supply of credit card network services. Section 36 of the Competition Act permits private parties to bring actions for damages suffered as a result of criminal (but not civil) violations of the Act. According to the plaintiffs, merchants in Canada paid $5 billion dollars in Merchant Discount Fees in 2009.

This class action follows on the heels of related cases in Canada and the United States and Europe. In December 2010, the Competition Bureau filed an application with the Canadian Competition Tribunal against VISA and MasterCard under s. 76 of the Competition Act, a civil provision enabling the Tribunal to prohibit anti-competitive resale price maintenance (being civil in nature, the case will not permit private parties to bring actions for damages suffered, even if the Commissioner’s case succeeds). The Bureau alleges that each of VISA and Mastercard require banks to impose rules which, among other things, prevent merchants from encouraging the use of cards with lower discount fees, thereby lessening competition between and among the credit card networks. Each of VISA and Mastercard dispute the Commissioner’s claims. The Department of Justice in the United States had previously brought a similar case in the United States against each of VISA, Mastercard and American Express (VISA and Mastercard agreed to a settlement in late 2010, while the case against American Express is ongoing), as has the European Commission.

Canadian Merger Enforcement Guidelines to be revised

Michael Kilby -

On February 24, 2011, the Commissioner of Competition announced that the Competition Bureau will undertake “moderate revisions” to the Canadian Merger Enforcement Guidelines (MEGs). This announcement follows a series of roundtable consultations with competition law practitioners across Canada, consultations with foreign agencies and an internal Bureau review. A wide variety of opinions were expressed during these roundtable consultations, including opinions as to whether revisions were necessary, particularly given that the MEGs were last revised in 2004 following a thorough review and consultation process. In this regard, an important factor driving the revisions is generally believed to be the 2010 revisions to the U.S. Horizontal Merger Guidelines (although these had last been revised in 1992).

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Bill introduced to assist investigations in light of new technologies

Sharon Seung -

Bill C-51, An Act to amend the Criminal Code, the Competition Act and the Mutual Legal Assistance in Criminal Matters Act (short title: Investigative Powers for the 21st Century Act) was re-introduced in the House of Commons on November 1st, 2010. As the short title of Bill C-51 implies, the bill aims to extend the current investigative powers of national law enforcement and security agencies for computer-related crimes to take into account the use of new communications technologies. While many of the proposed changes relate to the Criminal Code, they have an impact on the Competition Act and the investigative powers of the Commissioner of Competition.

Two other bills, Bill C-50, An Act to amend the Criminal Code (interception of private communications and related warrants and orders) and Bill C-52, An Act regulating telecommunications facilities to support investigations, were also introduced in October and November of last year. These three complimentary bills had previously been introduced under the former Liberal government in 2005, and under the Conservative government in 2009, but were killed by elections or prorogation.

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Competition Bureau raises "size of target" merger threshold

The Competition Bureau announced today that the threshold for the size of the assets or revenues of the "target" of acquisitions involving businesses in Canada will increase to $73 million.  The change will take place following publication in the Canada Gazette, which is expected to take place on February 12, 2011.  Generally speaking, transactions involving parties whose combined assets in Canada or revenues in, from or into Canada (including those of affiliates) exceeds C$400 million must be notified in advance of closing to the Competition Bureau, if the business in Canada has assets in Canada or revenues generated therefrom exceeding the "size of target" threshold.  This threshold may be modified annually under the indexing provisions of the Competition Act.

Competition Bureau challenges waste acquisition

Susan M. Hutton and Sharon Seung

On January 26, 2011, Canada’s Competition Bureau announced that it has applied to the Competition Tribunal for an order to dissolve CCS Corporation’s acquisition of Complete Environmental Inc., which owns the Babkirk Secure Landfill located in northeastern British Columbia. Interestingly, the theory of harm in this case is founded on a likely “prevention” rather than a “lessening” of competition – typically harder to prove.

CCS’ acquisition of the Babkirk Secure Landfill is said to be likely to substantially prevent competition for the disposal of hazardous waste produced largely at oil and gas facilities in northeastern British Columbia. According to the Commissioner of Competition: “[b]y purchasing, rather than face competing with the Babkirk Secure Landfill, CCS will prevent the entry of competition into the market for secure hazardous waste disposal in Northeastern British Columbia.” Complete Environmental had received regulatory approval to open the landfill in February 2010, but had not yet started construction. According to the Bureau, had the Babkirk Secure Landfill opened, it would have become a competitor to CCS, which currently operates the only two operational secure landfills for hazardous waste in British Columbia.

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Competition Bureau's new powers resulting in increased merger scrutiny?

An article in the Globe and Mail considers whether enhancements to the Competition Bureau's enforcement tools  have led to more aggressive scrutiny of corporate mergers in Canada. Some in the legal community see an increase in the Competition Bureau's demands for remedies emerging from the Bureau's ability, since 2009, to request additional documents and information from merging parties without having to obtain court approval, and to extend waiting periods while such requests are complied with. Others, however, disagree that the Bureau's substantive approach to merger review has been affected by the enhanced investigative powers. According to the head of Stikeman Elliott's Competition Law practice group, Lawson Hunter, who was quoted in the article,

I don’t see any evidence that the bureau is getting more aggressive in how they are analyzing mergers because of these changes at all.

Commissioner of Competition Melanie Aitken, has also suggested that the Bureau is taking a cautious approach to its expanded powers. In a September 2010 speech to the CBA Fall Competition Law Conference, Ms. Aitken stated:

The Guidelines [the Bureau's Merger Review Process Guidelines, which explain the Bureau's approach to administering Canada's merger review process] also emphasized our commitment to use our new information gathering powers judiciously, only in respect of those transactions that raise significant competition issues and for which the Bureau requires additional information to conduct a sufficiently thorough review.

Since the introduction of the amendments in 2009, the Bureau has issued only ten SIRs [Supplementary Information Requests, also called "second requests" in the United States]. To put this into perspective, the Bureau has received more than 300 merger filings over this same period, approximately 90% of which were cleared within the initial 30-day review period.

Truth in Tweeting: Competition Bureau advertising rules apply to sponsored tweets

This past weekend, the UK's Guardian published an interesting article on the practice of celebrity endorsements on social networking sites like Twitter. As described by the Guardian, the Office of Fair Trading, the UK's consumer and competition authority, investigated a media company last year that engaged in remunerating individuals that published online content promoting the company's clients. At issue was the fact that the content was published "without sufficient disclosures in place to make it clearly identifiable to consumers that the promotions had been paid for." In the United States, the Federal Trade Commission suggested last year that the disclosure of sponsored tweets be made using a hashtag like #paid or #ad.

At home, meanwhile, the Financial Post recently reported on the Competition Bureau's response to the issue.

In Canada, a spokesman for The Competition Bureau said that promoted tweets in Canada must conform to existing Canadian advertising legislation.

Anyone endorsing a product must actually use the product and their opinion of the product must not have changed, he said. However, Canadian law does not have any specific laws governing the use of promoted tweets on Twitter.

Thus, Canadian companies (and social media users) should be reminded that even in the Twitterverse, the Deceptive Marketing Practices provisions of the Competition Act continue to apply.

Reading the fine print: advertising, anti-spam and class action update

Some of the most rapidly-evolving issues facing Canadian businesses concern the increasingly-complex labyrinth of advertising regulations, anti-spam legislation, privacy issues and the rise of competition law-related class action lawsuits. Companies must remain on top of the latest developments in these areas in order to effectively manage their risk.  The webcast of a recent seminar hosted by Stikeman Elliott LLP, which featured panellists from the Competition Bureau and members of the firm's Competition/Antitrust Group, is now available on-line. Printed materials are also available.

M&A Trends for 2011

As the global financial storm subsides, our colleagues Richard Clark and Curtis Cusinato take a look at the issues facing Canadian M&A in 2011 in an article recently posted on CanadianSecuritiesLaw.com. Specifically, Richard and Curtis have identified 11 trends for the upcoming year, including the gaining strength of poison pills, the growth of a domestic high-yield debt market and recent income tax developments that have a generally positive effect for M&A.

Competition Bureau gets new powers to combat online deception

David Elder -

With the passage this week of anti-spam legislation in Canada, a number of related amendments to the Competition Act aimed at combating misleading and deceptive practices online should be in force by next summer.

Bill C-28, the Fighting Internet and Wireless Spam Act (FISA), received Royal Assent this week, and is expected to come into force within 6 to 8 months. FISA contains a number of important amendments to the Competition Act which give the Commissioner and the Bureau a role in investigating and enforcing the new legislation. Industry Canada officials have indicated that the Bureau will be receiving additional budget resources and personnel to meet these new responsibilities.

The amendments clarify that offences under the Competition Act relating to false or misleading electronic messages or telemarketing are committed by those who permit messages to be sent, in addition to those who actually send them. The definition of “telemarketing’ is also expanded to cover not only “interactive telephone communications”, but to extend to “any means of telecommunication,” so would include not just voice communications, but text messages, instant messages, and social networking messages through applications such as Facebook and Twitter. Similar amendments are made to other key definitions in the Act to better capture online practices and technologies.

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Competition Bureau challenges credit card rules

D. Jeffrey Brown -

The Competition Bureau of Canada announced on December 15, 2010 that it had filed an application with the Competition Tribunal to strike down certain rules that Visa and MasterCard impose on merchants who accept their credit cards. The Bureau is challenging Visa and MasterCard's rules under the price maintenance provisions of the Competition Act. The Bureau launched its investigation in response to complaints by merchants and their associations and initiated a formal inquiry in April 2009. It marks the second civil case launched by the Commissioner in the past year challenging unilateral conduct - a significant increase in the pace of enforcement of the reviewable practice provisions of the Competition Act, if it persists, although the case has taken almost two years to come to fruition.

Sector inquiries by Competition Bureau (Bill C-452) deliberated by Industry Committee

Susan M. Hutton

Bill C-452 proposes to give the Commissioner of Competition and the Competition Bureau broad powers to review the state of competition in entire industry sectors, absent grounds to believe that the Competition Act has been violated. The Bill was referred to the Standing Committee on Industry, Science and Technology (Parliament, House of Commons) in June, 2010. The Committee has now asked for an extension of its review, beyond February 1, 2010, in order to enable it to hear from a wide range of witnesses prior to clause-by-clause review. 

Currently, the Commissioner's extensive investigative powers can only be used in relation to an "inquiry" which requires that grounds exist for believing either than an offence has been committed under the criminal provisions of the Competition Act, or that grounds exist for the Tribunal to make an order under one of the civil provisions of the Act.  There is no explicit power for the Commissioner to inquire into the state of competition in an industry, absent allegations of wrong-doing under the Act. A predecessor to the Competition Bureau, the Restrictive Trade Practices Commission, made extensive use of sector inquiry powers under the Combines Investigation Act, most notably inquiring into competition in the oil and gas sector for over ten years, between 1973 and 1985, while ultimately failing to find any evidence of wrongdoing.  In 2000, Industry Canada and Natural Resources Canada jointly sponsored an independent review of the sector by the Conference Board of Canada, which again found the industry to be reasonably competitive.  In response to the introduction by a Private Member of Bill C-452, the grounds for which again focus on competition in relation to gasoline prices, the Competition Bureau has said that it does not need the extra powers.

Canadian Competition Bureau releases new Mergers Handbook and Procedures Guide

Susan M. Hutton

As of November 1, 2010, new internal processing deadlines apply to Canadian merger review by the Competition Bureau, pursuant to the release of the Fees and Service Standards Handbook for Mergers and Merger-Related Matters. The Handbook’s release followed the release of a draft handbook in May, 2010 and extensive public consultations.  A key purpose of the new Handbook is to better align the Bureau’s own (non-binding) internal timelines for processing merger files (so-called “service standards”) with the statutory waiting periods. 

At the same time, in a related Procedures Guide for Notifiable Transactions and Advance Ruling Certificates, the Bureau has clarified that electronic merger notifications will now only be accepted between 9 am and 5 pm Eastern Time on business days for same-day receipt (the Bureau had previously accepted paper filings until 5:00 pm, but electronic filings until midnight for same-day receipt), and waiting periods that end on a weekend or other statutory holiday in the province of Quebec will be extended to expire on the next business day.

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European Court of Justice holds firm: no EU in-house privilege

Mark Walli

Nearly three decades ago, the European Union’s highest court adopted a two-part test for “legal professional privilege” protecting lawyer-client communications: (1) the communication must involve legal advice given for the purpose of the client’s rights of defence, and (2) the advice must emanate from an “independent lawyer.”1 Under the AM&S Europe test, communications between in-house counsel and company employees were found not to be protected by the privilege.  The Applicants in the recent case of Akzo Nobel Chemicals Ltd, joined by a host of European bar associations, the Netherlands and the United Kingdom as intervenors, asked the Court of Justice (ECJ) to relax or overrule the existing test and to extend the legal professional privilege to in-house counsel. In its decision released September 14, 2010, the ECJ squarely rejected their appeal and confirmed the existing rule.2

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Local waste divestitures approved

Shawn Neylan

On October 5, 2010, the Competition Bureau announced that it has approved the divestiture of waste collection assets of BFI Canada Inc. in Calgary, Ottawa and Edmonton. The divestitures were announced as a remedy in relation to the merger of IESI-BFC Ltd. (BFI) and Waste Services Inc. on June 29, 2010. In each city, there was a different buyer, illustrating that in transactions involving smaller geographic markets, different buyers in each market may be acceptable. Divestitures in other cities are still required under the terms of the consent agreement.

MCC article considers differences in Canadian/American antitrust law

The Metropolitan Corporate Counsel recently published an article discussing the differences between Canadian competition law and American antitrust law as well as some of the legislative developments occurring in the two countries. Stikeman Elliott partner Jeffrey Brown was interviewed for the article.

Competition Bureau clears Shaw's acquisition of Canwest Global's Television Business

The Competition Bureau announced on August 13 that it will not challenge the proposed acquisition of the over-the-air and specialty television businesses of Canwest Global Communications Corp. (Canwest) by Shaw Communications Inc. (Shaw). According to the Bureau, the transaction would not likely give rise to a substantial lessening or prevention of competition, being the statutory test for a merger challenge under the Competition Act. The Bureau based its conclusion on a number of factors, including effective remaining competition, the effect of the regulatory environment and a lack of relevant competitive concerns on the part of market participants. Concerns from market participants are typically a very important factor in the Bureau's assessment of the competitive impact of a transaction. In terms of the transaction's potential impact on advertising, the Bureau found that there were numerous alternative options available to advertisers. The transaction remains subject to CRTC approval.

Competition Bureau requires divestiture in Novartis / Alcon Transaction

On August 9, 2010, the Competition Bureau announced that it had entered into a consent agreement with Novartis AG to resolve competition concerns stemming from Novartis’ proposed acquisition of control of Alcon, Inc.

The Bureau had concluded that, in the absence of a remedy, the acquisition would likely result in a substantial lessening of competition in Canada in the supply of certain ophthalmic products, more particularly: injectable miotics (which are used to contract the pupil in order to perform surgery); ocular conjunctivitis drugs (which are used to treat seasonal allergies); and multi-purpose contact lens cleaners/disinfectants solutions.  The consent agreement requires the divestiture of assets and associated licenses relating to the sale in Canada of the following Novartis products: Miochol-E (an injectable miotic); Zaditor (an anti-allergy agent); and Solocare Aqua (a multi-purpose contact lens cleaner and disinfecting solution, including the MicroBlock anti-bacterial lens case).

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Court upholds certification of class action in price-fixing case

Shawn Neylan and Sharon Seung

In a judgment rendered June 8, 2010, the Ontario Superior Court dismissed a motion by FMC Corporation and FMC of Canada, Ltd. (collectively, FMC) for leave to appeal a September 28, 2009 decision certifying a class action. The motion was supported by Arkema Inc., Arkema Canada Inc. and Arkema S.A. (collectively, Arkema). Both FMC and Arkema were among the defendants in the class action proceeding.

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Competition Bureau reaches agreement in Teva/ratiopharm merger

On July 30, 2010, the Competition Bureau (Bureau) announced that it had reached a consent agreement with Teva Pharmaceuticals Industries Ltd. (Teva) and the Merckle Group, carrying on business as ratiopharm, requiring the divestiture of assets and associated licenses in relation to certain forms of acetaminophen oxycodone tablets and morphine sulfate sustained release tablets. The agreement follows the Bureau’s determination that Teva's acquisition of ratiopharm would result in a substantial lessening of competition in Canada with respect to such products.  The consent agreement provides that Teva must divest either Teva or ratiopharm's versions of these products in Canada within an initial sale period, failing which the products are to be divested pursuant to a trustee sale process.  Teva and ratiopharm are both active within the Canadian generic drug manufacturing industry. The parties had entered into an acquisition agreement on March 18, 2010, valuing the global ratiopharm business at €3.625 billion.

This transaction represents the fourth occasion to date in 2010 for which the Bureau has required a merger remedy (Ticketmaster/Live NationBFI Canada/Waste Services, Nufarm/AH Marks, and Teva/ratiopharm).

Jeffrey Brown and Michael Kilby of Stikeman Elliott LLP were Canadian competition counsel to ratiopharm.

Post-Closing herbicide merger remedy

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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Absolute discharge for price-fixing upheld

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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Higher Investment Canada Act threshold still not in force

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.

More retail gasoline price fixing charges

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.
 

Savings cards enforcement action

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.

Commissioner obtains waste divestitures in BFI - WSI transaction

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.

Red light for bid-rigging charge

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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New era at Mergers Branch of the Competition Bureau

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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Court declines to interfere in telecom advertising war

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.

Commissioner paints bright fence around cartel conduct

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.

Supreme Court of Canada declines to hear DRAM certification appeal

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.

New Bureau policy for information in hostile transactions

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.

Waste firm divests Alberta landfill

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.
 

Bureau issues draft revised Mergers Fee and Service Standards Handbook

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 ActThey 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.

Competition Bureau releases Merger Review Performance Report

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.

Joint venture cartel exemption of the United States to apply in Canada?

Canada’s recent move to a stricter cartel law that does not require proof of market effect is considered to be a shift towards American cartel law, where hard core cartels receive per se treatment. The new Canadian law can raise complicated issues with respect to joint venture activities. It defines criminal cartels as agreements between “competitors” to engage in the activities of fixing price, allocating markets or controlling supply. These activities may also arise in the context of what would otherwise be considered legitimate joint ventures. Although the Commissioner’s Competitor Collaboration Guidelines indicate that the new parallel reviewable matter provision for agreements that substantially lessen or prevent competition is the preferred approach for the assessment of legitimate joint venture agreements, she nonetheless has the discretion to recommend that such agreements be subject to criminal prosecution. Private litigants may also bring private actions in respect of joint venture activities that they allege contravene the cartel provision.

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Amendments to the Competition Act tabled as part of new legislation to fight spam

On May 25, 2010, the Canadian federal government re-introduced legislation with the stated objective of promoting the efficiency and adaptability of the Canadian economy by regulating commercial conduct that discourages the use of electronic means to carry out commercial activities.  The centerpiece of Bill C-28, the Fighting Internet and Wireless Spam Act, is a prohibition on the sending of commercial electronic messages without prior express or implied consent of the recipient, as well as prohibitions relating to the alteration of transmission data and the unauthorized installation of computer programs.  Bill C-28 is nearly identical to previous legislation that was introduced in 2009 but which did not complete the legislative process prior to conclusion of the Parliamentary session this past December.  When implemented, Bill C-28 will make related amendments to the Competition Act, the Personal Information Protection and Electronic Documents Act, the Canadian Radio-television and Telecommunications Commission Act and the Telecommunications Act.

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Commissioner of Competition and Director of Public Prosecutions sign Memorandum of Understanding

On May 14, 2010, the Commissioner of Competition, Melanie Aitken, and the Director of Public Prosecutions, Brian Saunders, announced that they entered into a Memorandum of Understanding (MOU). The MOU establishes the guiding principles of the relationship between the Competition Bureau and the Public Prosecution Service of Canada (PPSC). Stakeholders now have a clearer understanding of the working relationship between the Bureau investigators and PPSC counsel, such as their respective roles and responsibilities at different stages of an investigation. The MOU was not intended to change the relationship between the two organizations, but to crystallize their existing relationship.  This announcement continues the Bureau's policy of providing transparency where possible.

Competition Bureau confirms enforcement approach to new Guidelines on "Made in Canada" and "Product of Canada" claims

The Competition Bureau today clarified its enforcement approach with respect to the Bureau's revised Enforcement Guidelines for "Product of Canada" and "Made in Canada" Claims released in December 2009. The Guidelines will be an important resource for businesses who need to understand the Bureau's approach in assessing "Product of Canada" and "Made in Canada" claims for non-food products under the false or misleading representations provisions of the Competition Act, the Consumer Packaging and Labelling Act and the Textile Labelling Act. The Guidelines will take effect on July 1, 2010 and a six-month transitional period will follow. During this period, the Bureau states that it will only consider enforcement action in circumstances of bad faith.  In other cases, the Bureau will limit its response to apparent non-compliance to education and warning letters.

Reitmans agrees to revise Smart Set promotion

Today,the Competition Bureau announced that Reitmans (Canada) Limited, a major Canadian clothing retailer, will modify a promotion, alleged to be misleading, offered by Smart Set, a division of Reitmans. The promotion in question consisted of a "Savings Pass" offered to customers of Smart Set. There were conditions associated with the redemption of the "Savings Pass" that the Bureau viewed as not being disclosed in Smart Set's in-store signage or Smart Set's Web site. The Bureau considered this to be contrary to the false or misleading representations provisions of the Competition Act.

Solvay Chemicals fined $2.5 Million for price-fixing

The Competition Bureau announced today that Solvay Chemicals Inc. has been fined $2.5 million by the Federal Court after the company pleaded guilty to criminal charges for fixing the price of hydrogen peroxide sold in Canada. Solvay Chemicals Inc. is the second party to plead guilty in this alleged price-fixing conspiracy. The Bureau's investigation of other companies alleged to be participants in the conspiracy is ongoing.

Canadian Competition Tribunal to review real estate rules

Katherine L. Kay and Danielle Royal

In February 2010, the Commissioner of Competition commenced an application against The Canadian Real Estate Association (CREA)1 alleging that CREA violated the abuse of dominance provisions of the Competition Act. CREA is a trade association comprised of over 100 local real estate boards and 98,000 real estate brokers and agents. CREA owns the MLS® trademarks, which it licenses to local real estate boards and associations across Canada who use those trademarks in the operation of local MLS® systems.

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Certification of competition class actions: The tide turns against defendants

Katherine L. Kay and Danielle Royal

Until recently, Canadian courts were generally reluctant to certify class actions alleging violations of competition law, principally on the basis that plaintiffs failed to put forward a workable class-wide method for determining the existence of harm for each class member.

In 2009, however, two significant decisions in Ontario and British Columbia - Irving Paper Ltd. v. Atofina Chemicals Inc.1 in the Ontario Superior Court of Justice and Pro-Sys Consultants Ltd. v. Infineon Technologies AG et al. in the Court of Appeal for British Columbia - signaled a new openness to such claims.

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Eli Lilly-Apotex patent litigation comes to an end

Jeffrey Brown

While the Court in this case addressed numerous issues, the scope of this article is limited to the issue of the intellectual property-competition interface.On October 1, 2009, the Federal Court of Canada, in Eli Lilly and Company v. Apotex Inc.,rejected a counterclaim by Apotex, a generic pharmaceutical manufacturer, in which it had sought damages pursuant to section 36 of the Competition Act (the "Act") against two brand name pharmaceutical manufacturers in connection with a patent assignment. The decision follows the November 2005 judgment in which the Federal Court of Appeal characterized the assignment of a patent as including "evidence of something more than the mere exercise of patent rights" and, as such, not beyond the application of the Act's conspiracy provision(See "Canada's Federal Court of Appeal Rules on Competition Law/Patent Law Interface," Intellectual Property Update (January 18, 2006).)

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Canada's new US-style merger review process may increase burdens for more complicated transactions

Susan M. Hutton and Michael Kilby

New Merger Review Process

On September 18, 2009, following a consultation and comment period, the Competition Bureau issued its final Merger Review Process Guidelines, which explain the Bureau's approach to administering Canada's new, two-stage merger review process. The publication of the final Guidelines sheds important light on the Bureau's approach to the new process - especially given the lack of meaningful debate within the Canadian competition bar or Parliament as to the desirability or scope of the changes, prior to them becoming law in March, 2009, as part of an omnibus budget stimulus package rushed through Parliament in response to the economic crisis.

In summary, the new Canadian merger review process mimics that in the U.S., with an initial thirty-day waiting period, which can be extended for another thirty days after the merging parties comply with a "supplementary information request," or SIR, if one is issued during the initial waiting period. Anyone familiar with U.S. merger review will, of course, also be aware of the complaints regarding the enormous time and expense of complying with such "second requests" - and the questions regarding the efficiency of what some see as disproportional document production requirements.

While the Bureau was quick to deny that it would mimic the U.S. approach in terms of either the scope of documentary production, or the number of such requests that are issued, the Guidelines - and recent experience1 - indicate that many features of U.S. procedure and practice have been adopted - creating a more burdensome process for merging parties in complex cases than they were used to under the old regime.2

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Merger remedy in Danaher acquisition of MDS

The Competition Bureau announced today that it has reached an agreement with Danaher Corporation to resolve its concerns with respect to Danaher's acquisition of MDS Inc.'s Analytical Technologies business. Danaher has also signed a consent decree with the United States Federal Trade Commission, which the Bureau determined was sufficient to adequately resolve competition concerns in Canada.

Pursuant to the U.S. decree, Danaher agreed to a divestiture of MDS's Arcturus brand of laser microdissection (LMD) instruments, reagents and consumables to Life Technologies Corporation. The divestiture package includes all relevant Canadian intellectual property rights relating to Arcturus LMD instruments in Canada.

Canadian merger notification regulations revised

Susan M. Hutton and Ashley M. Weber

Amendments to the Notifiable Transactions Regulations made under the Competition Act (the Regulations) came into force on February 2, 2010. These amendments reflect the legislative amendments to the Competition Act passed in March, 2009. The highlights include the creation of a uniform notification form for all transactions, changes to the prescribed information that must be supplied to the Commissioner, and stipulations as to how certain asset and revenue values are to be calculated for amalgamations.
 

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Canada's tougher cartel law into force March 12, 2010

Susan M. Hutton

The one-year delay before Canada's new, tougher, cartel law comes into force expires this month. Starting March 12, 2010, prohibited agreements between competitors will be criminally illegal in Canada, regardless of their impact on competition. The amendments result in the creation of a new category of "per se" criminal offences (so-called because the outlawed categories of agreement are "per se" illegal without proof of economic effect). Penalties under the new offence will also increase: from the former maximum five years imprisonment and/or C$10 million fine, to a maximum of 14 years and/or C$25 million.

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No Profits for Interac: Commissioner will not agree that payments association can become for-profit corporation

Shawn C.D. Neylan

On February 12, 2010, Canada's Commissioner of Competition announced that she would not agree to changes to a fourteen-year old Competition Tribunal order which, among other things, prohibits the Interac Association from operating on a for-profit basis. Interac is the organization that develops and operates a national payment network allowing Canadians to access their money through automated banking machines and point-of-sale terminals. Surprisingly, the Commissioner appears to favour a dated and cumbersome regulated structure over evolution to a market-based entity. The press release issued by the Commissioner did not explain the analysis that lies behind her decision and raises a number of questions as to why she would not support a move by a regulated entity towards a more market-based structure.
 

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Ticketmaster and Live Nation agree to consent agreement to resolve Competition Bureau concerns

Jeffrey Brown and Kevin Rushton

On January 25, 2010, the Competition Bureau announced that it had entered into a consent agreement with Ticketmaster Entertainment, Inc. and Live Nation, Inc. to resolve competition concerns identified by the Bureau with respect to their proposed merger. The Bureau's announcement coincided with a similar announcement by the U.S. Department of Justice Antitrust Division, with whom the Bureau cooperated closely in its review.

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Bamboo labelling and advertising

The Competition Bureau announced today that more than 450,000 textile articles have been re-labelled and over 250 Web pages corrected as a result of the Bureau's efforts to ensure that textile articles derived from bamboo are accurately labelled and advertised. The Bureau took this initiative because of concerns over potentially misleading labelling and advertising in the marketplace with respect to textile articles labelled "bamboo".

Tassimco Technologies pleads guilty to bid-rigging in Quebec City

Today the Competition Bureau announced that Tassimco Technologies Canada Inc.has pleaded guilty before the Superior Court of Quebec to a bid-rigging charge in respect of the sale and supply of light emitting diode modules for traffic signals. The company was fined $50,000 and is subject to a court order requiring the implementation of a corporate compliance program and the education of employees about bid-rigging and conspiracy offences under the Competition Act.

Competition Bureau Requires Divestitures by Ticketmaster

The Competition Bureau announced today that it has reached a consent agreement with Ticketmaster Entertainment, Inc. and Live Nation, Inc. that resolves the Bureau's concerns about their proposed merger. The agreement requires divestitures by Ticketmaster to facilitate competition in the ticketing services market.  It also requires Ticketmaster to sell its Paciolan ticketing business and to licence its ticketing system for use by a third party event promoter.  The consent agreement also contains some behavioural provisions.
 

Canada's Competitor Collaboration Guidelines issued in final form

Susan M. Hutton and Jeffrey Brown

The Canadian Competition Bureau published the promised Competitor Collaboration Guidelines on December 23, 2009, less than three months before the coming into force of the new, stricter, criminal cartel provisions and their companion civil provisions applicable to non-criminal, but anti-competitive, competitor agreements. The Guidelines, which were preceded by an earlier consultation draft, published in May 2009, answer several questions raised by the new sections 45 and 90.1 of the Competition Act, but (unavoidably) leave many more to be clarified by the courts. Anyone doing business in Canada will wish to take stock of their dealings with competitors prior to the implementation of the new law on March 12, 2010. Seemingly innocuous agreements that did not appear to have a significant adverse effect on competition may now attract criminal (and civil) liability.

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Federal Court of Appeal clarifies misleading advertising provisions

Jeffrey Brown and Susan M. Hutton


On October 15, 2009, the Federal Court of Appeal allowed the Commissioner of Competition's appeal of a Competition Tribunal decision involving misleading representations by a Vancouver career-consulting business.

The principal issue in the case, The Commissioner of Competition v. Premier Career Management Group Corp. and Minto Roy, 2009 FCA 295, was "whether . representations to certain individuals, though made individually and in private, were nevertheless made 'to the public'" within the meaning of the Competition Act. The Court also addressed the issue of whether or not the representations in question were false and misleading and, if yes, whether they were false and misleading in a material respect.

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New legislation to improve protection and efficiency in electronic commerce

Ashley M. Weber

On December 1, 2009, Bill C-27, also known as the Electronic Commerce Protection Act, passed through first reading in the Senate. Its objective is to regulate certain activities that discourage reliance on electronic means of carrying out commercial activities, such as spam, spyware and internet fraud, in order to promote efficiency and adaptability in the Canadian economy. More specifically, it will prohibit the sending of commercial electronic messages without the prior consent of the recipient, as well as provide rules governing the sending of those types of messages and a mechanism for withdrawing consent. It will also prohibit practices relating to the alteration of data transmission and the unauthorized installation of computer programs. When implemented, Bill C-27 will amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act.

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Lower thresholds for both Competition Act and Investment Canada Act in 2010

Susan M. Hutton

Unless changed by regulation, the "size of target" threshold for advance notification under the Competition Act of transactions involving Canadian businesses will likely be reduced to C$67 million, in accordance with the GDP indexing provisions which were introduced in amendments to the Act last March. The amount will be official once published by the Minister in the Canada Gazette, and until then the previous C$70 million threshold continues to apply.

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Competition Bureau Reaches Agreements with Hot Tub Retailers on ENERGY STAR Claims


The Competition Bureau announced today that it has entered into consent agreements with two Canadian hot tub retailers, Polar Spas (Edmonton) Ltd. and Sleepwise Inc., regarding claims that certain hot tub products were associated with the ENERGY STAR Program.

Recent merger settlements in Canada

Susan M. Hutton

The Competition Bureau has settled a number of long-running merger reviews in recent months:

  • On November 4, 2009, the Competition Bureau announced that it had reached an agreement with Agrium Inc. to resolve competition concerns related to Agrium's proposed acquisition of CF Industries Holdings Inc. Under the terms of the Consent Agreement, if Agrium is successful in its bid, it will divest half of its nitrogen-based fertilizer production facility in Carseland, Alberta and will be required to supply additional product to Terra Industries, Inc., a new entrant into Western Canadian wholesale nitrogen fertilizer markets. 
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Tribunal cries "fowl": Rejects "refusal to deal" application in chicken case

Eliot N. Kolers

The Competition Tribunal (the "Tribunal") released a decision in Nadeau Poultry Farm Limited v. Westco Inc., et al (2009 Comp Trib 6), in which it made several valuable clarifications in its interpretation of the "refusal to deal" provision contained in section 75 of the Competition Act (the "Act"). Under this provision, a supplier of a product can be ordered to sell its product to a particular customer if certain criteria are met. This case, which came before the Tribunal through the private access provisions allowing private parties to bring cases before the Tribunal, sheds light on the Tribunal's interpretation of the concepts of "ample supply", "as a result of insufficient competition", "usual trade terms", and "adverse impact on competition", all in the context of a supply-managed industry.
 

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Proof of loss by proof of gain: B.C. Court of Appeal reversal certifies DRAM price-fixing class action

Katherine L. Kay and Kevin Rushton


On November 12, 2009, the British Columbia Court of Appeal unanimously allowed an appeal from the dismissal of a class certification motion in an action alleging price-fixing against certain manufacturers of DRAM (dynamic random access memory) chips, which are found in a wide variety of electronics products. The B.C. Court of Appeal certified a class of direct and indirect purchasers of DRAM and products containing DRAM.1

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Bureau Guidelines focus on consumer rebate promotions

Kim D.G. Alexander-Cook


On September 21, 2009, the Competition Bureau released its Enforcement Guidelines on Consumer Rebate Promotions. These Guidelines set out the Bureau's (non-binding) interpretation of both the criminal and the civil provisions relating to false or misleading representations under the Competition Act, the Consumer Packaging and Labelling Act, and the Textile Labelling Act as applied to consumer rebate promotions, and include examples of recommended best practices.
 

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Patent settlement agreements: Federal Court of Appeal keeps door open for Competition Act challenges in Canada

Jeffrey Brown and Alexandra Stockwell

In June 2009, the Federal Court of Appeal (FCA) upheld the Federal Court of Canada's decision in Laboratoires Servier v. Apotex Inc.1, a patent infringement case. In its decision, the trial Court had dismissed a counterclaim by the defendant, Apotex, alleging that the settlement agreement leading to the patent's issuance constituted a conspiracy to lessen competition and an offence under Canada's Competition Act. While the trial Court held that the defendant had failed to support its allegations with sufficient evidence, it nevertheless allowed that a patent settlement agreement could amount to a conspiracy under the Competition Act in some circumstances. The FCA agreed.

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Bureau reaches Suncor/Petro-Can consent agreement

On July 21, 2009, Canada's Competition Bureau announced that it had reached a consent agreement with Suncor and Petro-Canada in connection with their proposed merger, previously announced on March 23, 2009. The consent agreement addresses the Bureau's concerns that the merger may have led to a substantial lessening of competition and increased retail gasoline prices. Specifically, the consent agreement requires that the parties:

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New Bill to enhance Commissioner's investigative powers

Michael Kilby

On June 18, 2009, the Minister of Justice tabled a new statute, Bill C-46, also known as the Investigative Powers for the 21st Century Act, proposing amendments to the Criminal Code, the Mutual Legal Assistance in Criminal Matters Act, and the Competition Act. The stated purpose of the new Bill, which has received first reading in Parliament, is to enhance the investigative powers of law enforcement agencies in order that they may keep pace with modern communications technologies. Amendments to the Criminal Code are intended to give investigators better tools to perform complex investigations into communications that have occurred over the Internet and/or electronic communication networks. Among other things, Bill C-46 will create a new concept of "transmission data," and extend investigative powers currently restricted to telephone data to all means of telecommunications. The Bill will enhance the power of investigators to seek court orders to compel the production of data with respect to the transmission of communications, and the location of transactions and individuals. Government investigators will also be given powers to seek orders for the preservation of electronic evidence and warrants to help track transactions and individuals.

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Ontario Divisional Court overturns refusal to certify franchise class action in Quizno's case

Katherine L. Kay and Mark Walli

In a 2-1 decision released April 27, 2009, the Ontario Divisional Court allowed an appeal from the dismissal of a class certification motion and conditionally certified a class of present and former Canadian franchisees of the Quizno's quick-service restaurant chain.1


The Plaintiffs, two of more than 400 Canadian Quizno's franchisees, alleged that they had been overcharged for food and other supplies they purchased for use in their Quizno's restaurants. They sought class certification of civil claims for damages against their Quizno's franchisors (the "Quizno's Defendants") for breach of contract and for breach of section 61 of the Competition Act (which, until its repeal and replacement with a civil provision on March 12, 2009, made price maintenance a criminal matter - section 36 of the Competition Act permits civil suits for damages incurred as a result of a violation of a criminal provision of the Act, even without a conviction), as well as a "civil conspiracy" claim against the Quizno's Defendants and Gordon Food Service Inc. and its affiliate (GFS), the primary distributor of many supplies to Canadian Quizno's restaurants.

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Competition Bureau releases final merger efficiencies Bulletin

In March, 2009, the Competition Bureau released in final form a Bulletin to provide "practical guidance" on the Bureau's approach to "efficiencies" claims in mergers, as provided for in section 96 of the Competition Act (the Act). In particular, the Bulletin addresses the information required and the analytical approach to be used to determine when the Bureau will refrain from challenging on a merger on the grounds that the efficiency gains likely to be brought about by the merger will be greater than and will offset the anticompetitive effects likely to arise from it. The Bulletin, released in draft for public comment in August 2008, is said to supplement the discussion of efficiencies in the Bureau's Merger Enforcement Guidelines (revised in 2004), commonly known as the MEGs.

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Canadian Competition Bureau unveils Revised Merger Review Process Guidelines and filing requirements

Susan M. Hutton

The Canadian Competition Bureau recently unveiled draft new Guidelines for The Revised Merger Review Process, as well as a proposed Regulation Amending the Notifiable Transactions Regulations1.Both documents are in draft form, with comments requested by May 29, 2009 in the case of the draft Guidelines, and by June 3, 20092 in the case of the proposed Regulation. The sudden implementation of a U.S.-style two-stage merger review process on March 12, 2009 left the Bureau rushing to update the filing requirements, not least because the current Regulation speaks of a choice between a short-form and a long-form notification that no longer exists. The Bureau's draft process Guidelines seek to answer questions concerning "supplementary information requests," the equivalent of so-called "second requests" for documents and information in the United States. The issuance of such a request triggers the second stage of merger review and suspends the waiting period while the parties supply the additional information requested.

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Insufficient efficiencies: Competition Bureau forces divestiture in Newfoundland propane acquisition

Kim D.G. Alexander-Cook
 

Canada's Competition Bureau recently released a Backgrounder explaining the results of its review of the acquisition by Superior Plus LP of various propane assets of Irving Oil Limited/Irving Oil Marketing Limited. Notwithstanding acceptance by the Commissioner of Competition that the acquisition would result in efficiencies, the Commissioner forced Superior to divest itself of certain Irving propane-storage assets to another Newfoundland competitor.

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Primer on amendments to Canada's Competition Act and Investment Canada Act

Susan M. Hutton and Kevin Rushton

On March 12, 2009, the Canadian government enacted the most significant amendments in over 20 years to Canada's competition and foreign investment regimes, as part of Bill C-10, the Budget Implementation Act, 2009. The amendments to the Competition Act result in fundamental changes to the way that business operates in Canada, and provide the Competition Bureau with unprecedented enforcement tools and/or penalties in all areas. Fewer foreign investments in Canada will meet the increased thresholds for Ministerial review and approval under the changed Investment Canada Act, but all such investments will face potential scrutiny under a new "national security" test. The most significant amendments to both these laws are discussed below.

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Bill C-10 Competition Act and Investment Canada Act amendments enacted

Jeffrey Brown and Kevin Rushton

On March 12, 2009, the most significant amendments to Canada's competition and foreign investment regimes in more than 20 years were enacted when Bill C-10, the Budget Implementation Act, 2009, received Royal Assent. The amendments were described in detail in the February 20, 2009 edition of The Competitor.
 

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Massive amendments to Competition Act and Investment Canada Act tabled today

Susan M. Hutton

The Canadian Competition Bureau will be pleased today, as significant and far-reaching amendments to the Competition Act and the Investment Canada Act were included in the Budget Implementation, 2009 bill (C-10), which was tabled today in the House of Commons by the Canadian government (see Parts XII and XIII).

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Canada's Competition Bureau seeks comments on revised Abuse of Dominance Guidelines

On January 16, 2009, Canada's Competition Bureau (the Bureau) released draft revised Abuse of Dominance Guidelines (the Updated Guidelines), which are intended eventually to replace the original guidelines released in 2001.

Abuse of dominance occurs when a dominant firm (or group of firms) in a market engage in a practice of anti-competitive acts with the result that competition is prevented or lessened substantially in a market. Sections 78 and 79 of the Competition Act set out the powers of the Competition Bureau to prohibit a dominant firm (or group of firms) from engaging in anti-competitive practices, or to require other remedial action if necessary to restore competition. At present, no damages or fines for abuse of dominance are provided for under the Act, although amendments to introduce fines have been proposed by the Government. To prove abuse of dominance, three principal elements must be established:

  1. one or more persons substantially or completely controls, throughout Canada, a class or species of business;
  2. the person or persons have engaged in a practice of anti-competitive acts; and
  3. the practice has had, is having, or is likely to have the effect of preventing or lessening competition substantially.
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Personnel changes at the Competition Bureau

Commissioner of Competition Sheridan Scott announced in December that she was stepping down as Commissioner of Competition, head of Canada's competition enforcement agency, the Competition Bureau - to enter private practice.  The Government has announced that Melanie Aitken, previously Senior Deputy Commissioner, Mergers Branch has taken over as Interim Commissioner.  Adam Fanaki, a former private competition law practitioner who has been Special Counsel to the Commissioner for the past two years, takes over as Acting Senior Deputy Commissioner, Mergers Branch.

Lakeport/Labatt finally concludes: no challenge from Competition Bureau

Susan M. Hutton

The announcement by the Competition Bureau on January 16, 2009 that it has concluded there is insufficient evidence to challenge the acquisition of Lakeport Brewing Income Fund (Lakeport) by Labatt Brewing Company (Labatt) brings to an end one of the most heated skirmishes in the annals of Canadian competition law.  The outcome of what could be among the lengthiest merger reviews in Canadian legal history may well result in support by the Government for less judicial oversight of the merger review process, and for longer waiting periods, with a proposed move to US-style second request procedures.1 As described below, Shawn Neylan of Stikeman Elliott led the competition team for Lakeport prior to closing, supported by Michael Kilby. Litigation partner Katherine Kay successfully argued the case for Lakeport before the Competition Tribunal, in the hearing on the injunction application.
 

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Akzo Nobel fined $3.15 million for price fixing

Canada's Competition Bureau announced on November 21, 2008 that Akzo Nobel Chemicals International BV had pled guilty to criminal charges for fixing the price of hydrogen peroxide sold in Canada between 1998 and 2001, and agreed to pay a C$3.15 million fine.

Sales of the product in Canada during that period were approximately C$470 million, and Akzo Nobel accounted for approximately 5% of Canadian sales. The Bureau's release revealed that the company had cooperated in the investigation, and that the Bureau's investigation of the international conspiracy is ongoing.

Throne speech promises big changes to Canada's competition and foreign investment regimes

Susan M. Hutton

Canada's 40th Parliament opened on Wednesday, November 19, 2008 with the traditional Speech from the Throne, outlining the government's legislative priorities. In keeping with the turbulent economic times and with calls for greater supervision of business, the throne speech promised to "proceed with legislation to modernize our competition and investment laws, implementing many of the recommendations of the Competition Policy Review Panel."

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Bureau revises corporate compliance bulletin

Jennifer MacArthur

Canada's Competition Bureau has published a revised Information Bulletin on Corporate Compliance Programs, in conjunction with the publication of a draft bulletin on trade associations, described in the preceding article.

The original information bulletin was issued by the Bureau in 1997, and the updated version largely elaborates on the principles set out in the original, but with some notable changes.  In particular, the revised bulletin has been expanded to include a template compliance program, a template "certification letter" for execution by employees following training, and a "due diligence checklist" for senior management. Although the revised bulletin has no legal effect and is not binding on the Bureau, it provides businesses with guidance as to the elements of a credible and effective corporate compliance program - which could prove important in the Bureau's consideration of a recommendation for leniency or alternative resolutions, should prosecution under the Competition Act nonetheless become a possibility.

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Appeal underway in travel industry misleading advertising case

Kim D.G. Alexander-Cook

The parties in Maritime Travel Inc. v. Go Travel Direct.com Inc.,1 a misleading advertising private action decided earlier this year, have recently filed their initial appeal and cross-appeal submissions.2

At trial, Maritime Travel, an established Canadian east-coast travel agency, alleged that upstart tour operator Go Travel Direct.com Inc. ran materially misleading newspaper advertisements. Maritime Travel claimed damages based on section 36 of the Competition Act, which provides a civil remedy for damages suffered as a result of a breach of a criminal provision of the Act. In this case, Maritime Travel alleged that Go Travel had knowingly or recklessly made representations to the public that were false or misleading in a material respect, contrary to section 52 of the Act. Developments in the law around sections 36 and 52 of the Act are important, because these sections provide the only basis for private damages for misleading advertising under the Act.

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Google Inc. terminates services agreement with Yahoo! Inc.

On November 5, 2008, Google Inc. (Google) announced that it had terminated a non-exclusive advertising services agreement (the Agreement) with Yahoo! Inc. (Yahoo!) entered into by the parties in June. 

Under the Agreement, Yahoo! would have enjoyed the option of displaying Google's "sponsored search" ads in place of, or in addition to, its own sponsored search ads in the United States and Canada.

While the parties announced the Agreement in June, they voluntarily delayed implementation to permit antitrust/competition authorities in the United States and Canada to review the Agreement. Notwithstanding changes proposed by the parties to alleviate potential concerns raised by antitrust authorities, the U.S. Department of Justice's Antitrust Division (US DOJ) informed the parties on November 5 of its intention to file an antitrust lawsuit to block its implementation. Google thereafter announced that it had terminated the Agreement, prompting the US DOJ and the Canadian Competition Bureau to discontinue their respective investigations.

Stikeman Elliott represented Yahoo!, with a team comprising Paul Collins, Jeffrey Brown, Michael Kilby and Jennifer MacArthur.
 

CBA responds to Gover Report on Competition Bureau's Section 11 practices

Susan M. Hutton

On Thursday, September 4, 2008, the Canadian Bar Association - National Competition Law Section (CBA or the Section) sent a short - and in places critical - response to the report by Mr. Brian Gover to the Commissioner of Competition and the Deputy Minister of Justice regarding the Competition Bureau's practices in obtaining court orders for the production of information and documents under section 11 of the Competition Act.

The Report (dated June 19, 2008 and publicly released on August 12, 2008)1 had been commissioned by the government2 in response to the Federal Court's decision to set aside a section 11 order that had been issued ex parte in the Labatt/Lakeport merger inquiry3. The Court had found the Commissioner's affidavit evidence used to obtain the order to have been "misleading, inaccurate and incomplete." While her officials asserted that this conclusion was unfounded, the Commissioner and the Deputy Minister of Justice nonetheless asked Mr. Gover, a private practitioner with Stockwoods LLP, to review and advise on the standard of disclosure required in ex parte applications under the Competition Act, as well as on the Bureau's section 11 process generally.

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Transport Canada introduces guidelines for new CTA merger review provisions

Kim D.G. Alexander-Cook

On July 28, 2008, Canada's Ministry of Transport, Infrastructure and Communities (Transport Canada) released draft Guidelines for Mergers & Acquisitions Involving Transportation Undertakings (the Transport M&A Guidelines). The Transport M&A Guidelines, which were prepared in consultation with Canada's Competition Bureau, relate to the potential for a public interest review under section 53.1 of the Canada Transportation Act (the CTA) of certain proposed merger transactions involving federal transportation undertakings (those having an inter-provincial or international dimension).1,2

Transport Canada has also requested input on the possibility of new regulations exempting certain classes of transactions from the merger and review provisions of the CTA. Submissions related to the draft Transport M&A Guidelines and/or to exempting classes of transactions will be accepted until September 30, 2008.

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Bureau publishes new Predatory Pricing Enforcement Guidelines

Susan M. Hutton

On July 21, 2008, the Competition Bureau (Bureau) published its new Predatory Pricing Enforcement Guidelines (New Guidelines), following the issuance of draft guidelines in October, 2007 and a period of public consultation.1 The New Guidelines supersede all previous statements of the Bureau and the Commissioner of Competition on the subject.

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New Canadian standards for industry and advertisers: Bureau releases Environmental Claims Guide

Kim D.G. Alexander-Cook

On June 25, 2008 Canada's Competition Bureau (Bureau) released Environmental Claims: A guide for industry and advertisers (Environmental Claims Guide or Guide), its new environmental claims guidance document produced in partnership with the Canadian Standards Association (CSA).

The Environmental Claims Guide is meant to provide industry and advertisers with best-practices guidance for compliance with the prohibitions against false or misleading advertising in Canada's Competition Act, Consumer Packaging and Labelling Act and Textile Labelling Act, in addition to providing industry with a guide to the application of the CAN/CSA-ISO 14021, Environmental labels and declarations - Self-declared environmental claims (Type 11 environmental labelling) regulations.1

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Bureau issues draft information bulletin on sentencing, leniency in cartel cases

Danielle Royal

The Competition Bureau also recently issued a Draft Information Bulletin on Sentencing and Leniency in Cartel Cases for public consultation.1 The Bulletin sets out the factors that the Commissioner of Competition and the Bureau will consider in making recommendations to the Director of Public Prosecutions (DPP) that those accused of criminal cartel and bid-rigging offences under the Competition Act2should be treated leniently in sentencing.

The Bureau's goal is to establish a transparent and predictable Leniency Program to complement the Bureau's existing Immunity Program. Under the Immunity Program, full immunity from prosecution is available, subject to certain conditions, to the first business organization or individual that comes forward to assist the Bureau with an investigation into the activities of a cartel or bid-rigging scheme - in other words, full immunity is available to the "first in."

In the past parties who co-operated with the Bureau's investigations in a timely and valuable way have also qualified for lenient treatment in sentencing. The formal Leniency Program clarifies the terms on which leniency will be made available in the future, on the expectation that parties will then be more likely to come forward and cooperate with investigations.

The Bulletin is divided into three parts. The introduction provides an overview of how the Bureau, the Act and the cartel provisions operate, and the respective roles of the Commissioner of Competition, the DPP and the Courts in enforcing the Act.  The second part of the Bulletin sets out the general principles of sentencing that the Courts will consider, and which the Bureau therefore considers in the course of making sentencing recommendations. The third part of the Bulletin describes the more specific terms on which the Bureau will recommend a reduced sentence for participants in the Leniency Program as a result of cooperation and assistance during the investigation.  This article focuses on the second and third parts of the Bulletin.

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Canadian Bureau bulletin on search and seizure practices

The Competition Bureau recently published its Information Bulletin on Sections 15 and 16 of the Competition Act, which sets out the Bureau's practices and policies under the Competition Act's search warrant provisions and related powers for the search of computer systems. The Bulletin sets out what persons or businesses should expect from the Bureau during a search and with respect to the handling of any "records or other things" seized as a result of the search.

Although unable to provide for all eventualities, in our view the Bulletin provides general insight into the Bureau's approach to section 15 search warrants and the related use of computer systems. The Bulletin does not, however, reveal any material changes in the search procedures utilized by the Bureau in recent years.

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Competition Policy Review Panel urges Competition Act, Investment Canada Act reforms

On June 26, the blue-ribbon Competition Policy Review Panel issued its report to the federal Industry Minister on how to raise Canada's standard of living through greater competition and productivity, calling for urgent action to improve Canada's competitive position.

The report, "Compete to Win," is wide-ranging and thought-provoking, canvassing issues ranging from education, immigration, taxation, and securities regulation to specific proposals to amend Canada's competition and foreign investment review laws.  Implementation of all, or even many, of the Panel's sixty-five recommendations would result in fundamental changes to the way business operates in Canada.

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Something old, something new: Private member's Bill moves forward with potential for big changes to Canada's Competition Act

Susan M. Hutton

Nearly six years after the Standing Committee on Industry, Science and Technology released its report "A Plan to Modernize Canada's Competition Act," and more than two years after the death of Bill C-19 on the parliamentary order paper, Parliament is once again considering a proposal to make significant amendments to the Competition Act.

A private member's bill, introduced by Bloc Québécois MP Roger Gaudet last October, has received second reading in Parliament, and will now move to Committee for debate. If passed in its current form, it would entail such significant - and controversial - changes as:

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New draft guidance on multi-level marketing and pyramid selling

Kim D.G. Alexander-Cook

On March 31, 2008 the Commissioner of Competition (the Commissioner) issued a draft Information Bulletin entitled Multi-level Marketing and Scheme of Pyramid Selling, Sections 55 and 55.1 of the Competition Act.  Once finalized, this bulletin will replace existing 1996 guidance on the same topic.  Written comments on the draft Bulletin will be accepted by the Competition Bureau until June 30, 2008.
 

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No hockey for Hamilton: NHL restrictions on franchise relocation not anti-competitive

Susan M. Hutton
 

On March 31, 2008 Canada's Competition Bureau announced the conclusion of its investigation into the policies of the National Hockey League (the NHL) for the approval of transfers of ownership and relocations of franchises.  The Bureau concluded they were not in violation of the civil "abuse of dominance" provisions (s. 79) of the Competition Act.  The inquiry had been commenced by the Bureau in June 2007, following media reports that James Balsillie, co-CEO of Research In Motion (makers of the BlackberryT personal communications device), had been foiled in his latest attempt to buy an NHL franchise and move it to southern Ontario (either Hamilton or Kitchener-Waterloo) when the NHL refused to consider the relocation of the Nashville franchise.

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Brian Gover appointed to advise the bureau on section 11

Susan M. Hutton

March 3, 2008:  Brian Gover, a partner at Stockwoods LLP Barristers, a former criminal crown counsel and experienced trial lawyer, has been appointed to advise Sheridan Scott, Commissioner of Competition, and John Sims, Deputy Minister of Justice, on the Bureau's section 11 process. 

In particular, he is to report on the standard of disclosure required in ex parte applications under s. 11 for orders for the production of documents and information under the Competition Act, and to make recommendations to assist in ensuring that the Competition Bureau makes adequate disclosure to the courts in ex parte section 11 proceedings.

The Bureau was roundly rebuked by the Federal Court in a January, 2008 decision setting aside section 11 orders issued by it in November, 2007 in the ongoing Labatt/Lakeport merger inquiry, saying that the information filed by the Commissioner had been "misleading, inaccurate and incomplete." For further detail see "Substantial disclosure obligations for production orders: Federal Court rebukes Commissioner" (The Competitor, February 11, 2008). Mr. Gover is to report by June.

Competition Act class action fails certification test

Katherine Kay and Mark Walli

Stikeman Elliott is counsel to a group of defendants in a very recent proposed class action decision in Ontario in which certification was dismissed, adopting earlier court approaches in applying the test for certification where competition law violations are alleged. The Ontario Superior Court of Justice dismissed the motion for certification in a proposed class proceeding brought by two Ontario franchisees of the Quiznos restaurant chain against their Quiznos franchisors and Gordon Food Service, Inc. and GFS Company Inc. (GFS), the primary food distributors to the Quiznos franchise system.1 The plaintiffs, who sought to represent a class of all Canadian Quiznos franchisees, brought claims for civil conspiracy against GFS and the Quiznos franchisors, together with claims for breach of section 61 of the Competition Act, R.S.C. 1985, c.19 (2nd Supp) (the Act) and breach of contract against Quiznos. Katherine Kay and Mark Walli of our firm represent GFS.

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Canadian Bureau releases draft bulletin on trade associations

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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Substantial disclosure obligations for production orders: Federal Court rebukes Commissioner

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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Commissioner swallows defeat in beer battle

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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Competition Bureau negotiates a hold separate arrangement for American Iron & Metal Incorporated and SNF Incorporated

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.

Appeal Court firmly dismisses Commissioner's merger injunction appeal

Shawn C.D. Neylan

On January 22, 2008, the Federal Court of Appeal dismissed an appeal by the Commissioner of Competition (the Commissioner) of the Competition Tribunal's refusal to grant an injunctive order under s. 100 of the Competition Act. The order would have delayed the closing of Labatt Brewing Company Limited's acquisition of Lakeport Brewing Income Fund. The Tribunal's decision not to grant the injunctive order was a landmark in Canadian merger review law. It has now been upheld by the Court in a resounding manner, as the Court concluded it did not need to hear submissions from Labatt's counsel. The Court is expected to issue reasons for its decision in due course. We will send out an update when those reasons are issued.

Shawn Neylan and Katherine Kay of Stikeman Elliott were competition counsel to Lakeport (until its acquisition by Labatt), successfully defending the Commissioner's request to the Tribunal for an injunction in the original proceedings.

Canada Pipe case settled, abuse of dominance provision remains unresolved

Kevin Rushton

On December 20, 2007, the Competition Bureau announced the end to five years of litigation concerning the Stocking Distributor Program (SDP) of Canada Pipe Company Ltd. with the filing of a consent agreement with the Competition Tribunal. The consent agreement pre-empts the Tribunal's re-determination proceedings in the case.  As a result, the proper legal approach to the Competition Act's abuse of dominance provision, in light of the Commissioner of Competition's position in the proceedings, has yet to be resolved.

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Consent agreement reached in paint company merger

Jennifer Macarthur

On December 14, 2006, the Competition Bureau announced that a consent agreement was filed with the Competition Tribunal in relation to the acquisition by Akzo Nobel N.V. (Nobel) of Imperial Chemical Industries (ICI). Nobel's paint brands include Sico, PARA, Béntonel and Crown Diamond, while ICI's brands include CIL, Glidden, Colour Your World and Ralph Lauren.

The consent agreement requires Nobel to divest certain paint brands, including the PARA business and the Crown Diamond brand, and related assets in Canada in order to address the Bureau's competition concerns in the supply of paint resulting from the acquisition of ICI. In addition, the consent agreement requires Nobel, for a period of five years, to cease a program in Quebec that rewards retailers for carrying only Nobel brands or for the number of Nobel brands purchased in Quebec.

Recent marketing and advertising enforcement actions

Kim D.G. Alexander-Cook

Premier Fitness hit by $200,000 AMP and ten-year agreement

On November 27, 2007, the Competition Bureau announced that it filed with the Competition Tribunal a ten-year consent agreement with Premier Fitness Clubs, resolving concerns that membership advertising from 1999 to 2004 did not adequately disclose additional fees that consumers were obligated to pay to enjoy membership. Premier Fitness owns and operates thirty-five clubs in Ontario. Under the terms of the consent agreement, Premier Fitness must pay an administrative monetary penalty of $200,000; publish a corrective notice in certain newspapers; display a corrective notice in its clubs and on its Web site; implement a compliance policy to cover its marketing practices; and not make false or misleading representations in future promotional materials.

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Canadian Report calls for changes in the self-regulated professions

Susan M. Hutton

Canada's Competition Bureau released its report, Self-regulated professions - Balancing competition and regulation (the Report) on December 11, 2007 (see www.competition.gc.ca). According to a recent study by the Conference Board of Canada, labour productivity of the professions in Canada is about half that of the professions in the United States. Citing an OECD report that identified decreasing regulation of the professions as one of five key ways to improve the future prosperity of Canada, the Bureau report has specific proposals for improvement.

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Amended gift card legislation in Ontario

As we approach the holiday season, recent changes to the laws in Ontario around gift cards should be borne in mind.  In particular, since October 1, 2007 gift cards can no longer be issued in Ontario with an expiry date, with very limited exceptions.  In most cases, if gift cards are issued with an expiry date, the law now requires that the expiry date be ignored.

Additionally, as a result of the amendments, gift cards must be issued for the full value of the payment by the consumer - no charge can be levied for the issuance of the card. Furthermore, any permitted fees and all restrictions, limitations and conditions that the supplier imposes must be set out in writing.

Click here to view the amended regulations to the Consumer Protection Act.

Bureau releases Abitibi-Bowater technical backgrounder

Ian Disend

On October 30, 2007, the Competition Bureau (the "Bureau") released its technical backgrounder on the approval of the pulp and paper merger involving Montreal-based Abitibi-Consolidated Inc. and South Carolina-based Bowater Incorporated. The merger was originally announced on January 29, 2007, and the Bureau pronounced its intention not to challenge approximately 6 months later, on July 24 of the same year.

The Bureau concluded there were six overlapping product markets as follows: softwood lumber (North America), market pulp (at least North America), wood chips (local or regional), roundwood/logs (local or regional), uncoated groundwood papers ("UGW")(unspecified), and newsprint (Eastern Canada).

For each of the markets with the exception of newsprint, the Bureau easily concluded there were no grounds to challenge the merger. The newsprint market, however, led to a more in-depth analysis, as combined market share surpassed the Bureau's "safe harbour" guideline of 35% in the Eastern Canadian market. This concern was compounded by significant barriers to entry, due to the high capital investment required declining demand, and relatively weak foreign competition. However, on balance the Bureau concluded that competitors' production could be recommitted to Eastern Canada in the event of price increases, and customers had shown a willingness to switch suppliers in the past.

At the end of the day, the Bureau was not without its reservations, but did not find sufficient evidence to challenge the merger. The backgrounder did make mention, however, of the Bureau's right to do so over the next three years.

Canada levies fines against Bayer Group for role in international cartels

Michael Kilby

On October 30, 2007, the Competition Bureau announced that the Bayer Group pled guilty to three counts under section 45 of the Competition Act in respect of its role in three international price fixing conspiracies in the rubber and chemicals industry. Bayer AG was fined C$2.9 million for its part in a rubber chemicals conspiracy and C$400,000 for its role in a nitrile rubber conspiracy. Bayer Corporation, a wholly owned US subsidiary of Bayer AG, was fined C$345,000 for participation in a conspiracy to fix the price of aliphatic polyester polyols made from adipic acid.  In all, the fines totalled C$3.645 million.  Significant fines have also been levied against several companies in respect of these cartels in the United States and Europe.

Sharpening Canada's competitive edge

Shawn Neylan

On October 30, 2007 the federal government's Competition Policy Review Panel (CPRP) issued its consultation paper "Sharpening Canada's Competitive Edge" (the Consultation Paper). The government established the CPRP in the Spring of 2007 to undertake a review of Canada's competition policies and its framework for foreign investment policy. The government's objective is to ensure that Canada's policies keep pace with changes in the global economy (including the opening of national markets, the increase in global investments and the orientation of production around global supply chains) in order to create a highly competitive national economy and help create more and better jobs for Canadians.

The Consultation Paper is thoughtful, well written and comprehensive. It is designed to facilitate discussion that will enable the CPRP to provide recommendations to the government on how to enhance Canadian productivity and competitiveness. It notes that the CPRP will no longer consider issues related to state-owned enterprises and national security as the government has indicated its intent to provide more immediate attention to these issues.

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Canadian Bureau releases Generic Drug Sector Study

Kim D.G. Alexander-Cook

On October 29, 2007 the Competition Bureau ("Bureau") released its Canadian Generic Drug Sector Study, initiated in September, 2006, to identify areas where changes in the market framework might attain greater benefits through competition. The study was initiated in response to several studies that had found the price of prescription generics to be high in Canada compared to other countries.1

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Canada's new Immunity Program unveiled

Jennifer MacArthur

On October 10, 2007, the Competition Bureau released a revised Information Bulletin on the Immunity Program Under the Competition Act, along with revised Responses to Frequently Asked Questions. The two documents should be read together in order to understand the Bureau's approach to recommending immunity. The new Bulletin and FAQs replace previous versions published in 2000.

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Bureau releases new draft Predatory Pricing Enforcement Guidelines

Ian Disend and Susan M. Hutton

On October 9, 2007, the Competition Bureau (the Bureau) released new draft Predatory Pricing Enforcement Guidelines (the Guidelines)."1Public comment is requested before January 18, 2008.

The Bureau first released guidelines on predatory pricing - the practice of pricing goods or services below their cost, so as to eliminate or discipline a competitor - in 1992. An attempt in 2002 to revise the Guidelines met with controversy, and that draft was ultimately withdrawn. The latest draft Guidelines go further than previous Guidelines in confirming the treatment of predatory pricing by the Bureau, at the first instance, as a civil matter under the "abuse of dominance" provisions, and thus subject to a competitive impact test (the actual legal provision being criminal and being capable of enforcement if a competitor is likely to be eliminated, even if there is no substantial lessening of competition). The new draft Guidelines also fully adopt the "avoidable cost" standard for the determination of unreasonably low prices.

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New Canadian Bulletin on the protection of confidential information

Michael Kilby

On October 10, 2007, following consultations that began in 2005, the Competition Bureau (the Bureau) published a new information bulletin outlining its policies on the communication of confidential information (the New Bulletin). The New Bulletin updates a previous information bulletin on the same subject (published in 1995) in order to provide more practical guidance and to reflect subsequent amendments to the Competition Act (the Act) as well as increasing international cooperation between competition authorities.

Confirming the bulletin issued in 1995, the Bureau states that its general policy is to minimize the extent to which confidential information is communicated outside the Bureau, and that it will be vigilant in avoiding the communication of confidential information unless it is specifically permitted by the Act, and even if it is permitted, will consider whether the disclosure is advisable or necessary.

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SCC divided on key issues of copyright law and policy: Grey marketer prevails

Justine Whitehead, D. Jeffrey Brown

On July 26, 2007, the Supreme Court of Canada (SCC) issued its decision in the case of Kraft Canada Inc. v. Euro Excellence Inc. The SCC allowed the appeal of Euro Excellence, thereby disallowing Kraft Canada's claim of secondary infringement of copyright against Euro Excellence.

While the SCC's decision to allow the appeal was made by a margin of seven to two, a deeply divided SCC produced four sets of reasons in reversing the decisions of both the Federal Court of Appeal (2005 FCA 427) and Federal Court (2004 FC 652). The decision raises interesting questions about the interface of intellectual property and competition law, in particular the extent to which copyright law can and should be used to limit competition from grey-market imports.

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Canada and the EU: Continued Cooperation and Convergence?

An extract from The European Antitrust Review 2008, a Global Competition Review special report.

Susan Hutton

Any discussion of the enforcement cooperation activities of the Canadian Competition Bureau (the Bureau) and the Directorate General for Competition of the European Commission (the Commission) must at this stage focus not only on communications between them but also on results. It would appear that after years of working together in both bilateral and multilateral fora on the development of competition law enforcement policies and practices, and of cooperationin the investigation of individual cases, different results are still sometimes apparent. That said, the ultimate goal of consistency and convergence among the agencies can only be achieved through continued such dialogue and cooperation, and overall the glass should likely still be viewed as half full.

Revised rules for Canada's Competition Tribunal

Canada's Competition Tribunal hears and disposes of all matters under the "deceptive marketing practices" and "reviewable matters" provisions of Canada's Competition Act, most notably applications by the Commissioner of Competition to challenge mergers, abuse of dominance, anti-competitive distribution practices and misleading advertising, and private applications related to refusal to deal and anti-competitive distribution or pricing practices.

On May 26, 2007, revised rules of practice for Canada's Competition Tribunal were published for a sixty-day consultation period. The stated objectives of the (extensive) revisions to the rules were to integrate existing Tribunal practice directions, establish a comprehensive case management procedure, adopt a single procedure for all applications to the Tribunal, reinstate the relevance standard for documentary discovery, establish procedures to make the hearings more efficient, and provide a more logical structure for the rules. The Tribunal's revision to its rules was undertaken in cooperation with a committee comprised of Tribunal members and staff, representatives of the Competition Bureau, Justice Canada and the National Competition Law Section of the Canadian Bar Association. Extensive consultations within and among each of these groups of Committee members were undertaken over several drafts of the revised rules. The final draft of the revised rules were presented to, and revised by, the judicial members of the Tribunal.

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Canada Pipe case remanded back to Tribunal

On May 10, 2007, Canada's Supreme Court denied leave to appeal the Federal Court of Appeal's decision in The Commissioner v. Canada Pipe et al., the first and only appellate decision in respect of the abuse of dominance and exclusive dealing provisions of Canada's Competition Act.

As a result of the Supreme Court's decision, the case will be remanded back to the Competition Tribunal for decision in accordance with the legal tests established by the Federal Court of Appeal. The Commissioner of Competition has, in previous statements, confirmed that the Federal Court of Appeal's decision will not alter the Bureau's approach to enforcement of these provisions, as detailed in its Abuse of Dominance Guidelines.

Stikeman Elliott successfully represented the Commissioner of Competition as lead counsel before the Federal Court of Appeal and the Supreme Court of Canada in this matter, during his tenure as Special Counsel to the Commissioner of Competition during 2005 and 2006.

Bill C-11: Changes to the Canada Transportation Act

Susan M. Hutton and Ian Disend

Bill C-11, An Act to amend the Canada Transportation Act and the Railway Safety Act and to make consequential amendments to other Acts, received Royal Assent on June 22, 2007. Bill C-11 changes the merger review regime for all transactions involving transportation undertakings which transactions otherwise are required to be notified under Part IX of the Competition Act.

According to the new provisions of the Canada Transportation Act, when notification is required under s. 114(1) of the Competition Act, parties to a proposed transaction involving any "transportation undertaking" (as opposed to only air transportation undertakings, as before) must now give notice to the Minister of Transportation (the Minister). The requirement that the Canadian Transportation Agency (the Agency) must also be given notice for air transportation undertakings remains unchanged.

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Grain handlers make divestitures to maintain industry competitiveness

Susan M. Hutton and Ian Disend

On July 5, several major players in Canada's grain-handling industry finalized plans for divestitures as agreed with the Competition Bureau (the Bureau). The most recent divestitures were required following the June, 2007 acquisition by Regina-based Saskatchewan Wheat Pool (SWP) of Winnipeg-based Agricore United (AU). However, the entire process dates back to the beginning of the most recent round of grain-handling consolidation in 2001, when United Grain Growers Ltd. (UGG) acquired Agricore Cooperative Ltd. (ACL). The complicated package of remedies includes the following:

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The new "refusal to deal": Tribunal rejects GPAY claim

Susan M. Hutton and Ian Disend

Section 75 of the Competition Act addresses the reviewable practice of "refusal to deal." In June of 2002, the Act was amended so as to allow private parties to bring actions under this section before the Competition Tribunal (the Tribunal), where leave has been granted by the Tribunal pursuant to s. 103.1 of the Act. Prior to the 2002 amendments, s. 75(1) had required four conditions to be met before relief could be granted. Pursuant to those amendments, however, a fifth condition was added; namely, that the refusal to deal must have caused or be likely to cause an "adverse effect" on competition in a market.

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Landmark merger review decision from the Competition Tribunal

The Competition Tribunal has dismissed an application by the Commissioner of Competition to delay closing of a transaction between Labatt Brewing Company and Lakeport Brewing Income Fund. Both parties sell beer in Ontario. Stikeman Elliott represented Lakeport on the transaction and before the Competition Tribunal.

On February 1, 2007, Labatt and Lakeport jointly announced a supported offer by Labatt for all of Lakeport's trust units. The parties mailed their offer materials on February 22 and the offer period expired on March 29. The parties also filed long form merger notification materials under the Competition Act - the statutory waiting period relating to those expired on March 26. Lakeport units trade on the Toronto Stock Exchange.

The support agreement included an obligation for Labatt to attempt to negotiate a "hold separate" arrangement with the Commissioner of Competition, if needed, and to take any and all possible steps within the requirements of the support agreement to be able to pay for the units at the earliest possible date, including vigorously resisting any application by the Commissioner to delay closing.