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

Justice Simpson stated that in order for the Tribunal to grant the respondents’ motion, the respondents would have to have demonstrated that there was no genuine basis for the Commissioner to seek dissolution as a remedy. This required them to show that divesture was an effective and realistic remedy. While divesture is theoretically an effective remedy, Justice Simpson found that the lack of any identified buyer in this case made it potentially unrealistic. Moreover, she accepted the Commissioner’s argument that evidence might be adduced at the hearing which would speak to the relative effectiveness and intrusiveness of dissolution and divesture.

Justice Simpson was also unconvinced by the Respondent’s contention that the Commissioner had failed to explicitly allege dissolution as the only effective remedy. It was sufficient that the Commissioner had claimed dissolution as an alternative remedy, to be used if it was the only remedy available to adequately address the substantial prevention of competition. Consequently, Justice Simpson kept the door open to the possibility of dissolution, concluding that if the Commissioner was successful on the merits it would be for the Tribunal to weigh the evidence for and against the two remedies.

The registered consent agreement contemplates that Novartis will have an initial sale period within which to complete the divestiture of the products in question, failing which a divestiture trustee will be empowered to complete the divestiture.  It also contemplates that the relevant Miochol-E assets and associated licenses will be divested to Bausch & Lomb Incorporated, pursuant to an asset purchase agreement signed in July 2010.  The consent agreement does not contain an explicit “hold separate” obligation but does contain detailed asset preservation obligations, together with the appointment of a monitor.
The transaction had been announced on January 4, 2010, suggesting a relatively long review period by the Bureau.  The remedy is somewhat notable in that Novartis already owned an approximate 25% interest in Alcon, which it acquired in 2008.  It is not publicly known whether the Bureau reviewed the initial 2008 acquisition of the 25% interest, or how its analysis differed in respect of the 2010 transaction.
This transaction represents the fifth occasion to date in 2010 for which the Bureau has required a merger remedy (along with Ticketmaster/Live Nation,  BFI Canada/Waste Services, Nufarm/AH Marks, and Teva/ratiopharm).

Both the Bureau and the FTC press releases refer to extensive international cooperation between the Bureau, the FTC, UK and Australian competition authorities, including specific reference to close cooperation between the Bureau and FTC that resulted in a coordinated remedy addressing the Canadian and US markets.

The remedy is notable in that it was obtained in respect of a merger that had been consummated over two years ago.  The size of the AH Marks business at the time of the acquisition (a reported purchase price of approximately £75 million, and reported global annual revenues of approximately £62 million) was such that the transaction may not have triggered pre-merger notification requirements.  It is always important to assess the substantive competition issues raised by a transaction, even where the transaction does not trigger mandatory filings.

Background

Many of the circumstances of the case were relevant to whether post-closing remedies would be inadequate to remedy an SLC: (i) Lakeport units were publicly traded and there was therefore a public interest in the orderly functioning of securities markets, in addition to the public interest in competition; (ii) a proposed "hold separate arrangement" would have covered the entire Lakeport business (there was no issue of the potentially messy separation of parts of the business should a remedy be required); (iii) the Commissioner had refused to engage in discussions regarding such a hold separate arrangement; (iv) Labatt voluntarily undertook to abide by a hold separate arrangement in the event that the Tribunal dismissed the Commissioner's application; (v) Lakeport had recently undergone an initial public offering and had performed very well, indicating it could be re-sold to implement a future remedy; (vi) Lakeport and Labatt had complied with document and information production orders before the s. 100 application, and most other recipients of such orders had also complied; and (vii) the Commissioner had substantial recent industry knowledge as a result of considering another proposed beer acquisition in the recent past.

The Court of Appeal decision

The Court noted that three conditions must be satisfied before an interim order delaying closing may be granted. The first two conditions were not disputed on the appeal as the Commissioner: (i) had certified that an inquiry was being made into the transaction; and (ii) was of the opinion that more time was required to complete the inquiry.

The third condition, the subject of the appeal, is that "the Tribunal must be satisfied that if the interim order is not granted, a person is likely to take an action that would substantially impair the ability of the Tribunal to make an order under section 92 to remedy the effect of the proposed transaction on competition because that action would be difficult to reverse."

The Commissioner argued on appeal that the correct interpretation of s.100 is that once the first two conditions are met (i.e., once the Commissioner certifies that an inquiry is being made into a transaction and is of the opinion that more time is required to complete the inquiry), the Tribunal can refuse to grant an order delaying closing only if either the Commissioner has acted in a patently unreasonable manner or not in good faith, or the application is an abuse of process. The Court found that Parliament had not intended so limited a role for the Tribunal.

The Commissioner also argued that the Tribunal's decision essentially restored a now non-existent requirement that the Commissioner satisfy the Tribunal that the transaction is reasonably likely to prevent or lessen competition substantially. This requirement was removed through an amendment to s.100 in 1999. The Court, however, found that the Tribunal had not revived the pre-1999 language because the Tribunal had not required the Commissioner to establish that the transaction was reasonably likely to prevent or lessen competition. Instead, the Court found that the Tribunal was correct in requiring that it be satisfied that its ability to remedy the effect of the merger on competition would be substantially impaired if the order delaying closing was not granted. The Commissioner's application was deficient in this key regard - it failed to establish to the Tribunal's satisfaction that, without an interim order, the Tribunal's remedial powers would be substantially impaired.

The Court added that in the factual context of the Labatt / Lakeport transaction, the Tribunal needed to understand the nature of the potential lessening of competition that prompted the inquiry, the kinds of remedies that might ultimately be sought by the Commissioner, the action the Commissioner wished to forbid, what would be required to reverse the action, and the potential effectiveness of remedies with and without the interim order.

Implications for future transactions

The ability to potentially close very complex transactions soon after the expiry of the statutory waiting period raises important tactical implications for transactions where the purchaser is prepared to close without competition clearance and thereby take the risk of a post-closing merger challenge by the Commissioner. Although in this case the Tribunal refused to order a hold separate over the objection of the Commissioner, in the future it may still be wise to propose a workable hold separate to the Commissioner if the parties wish to close at the end of the statutory waiting period. The Commissioner may decline to participate in such discussions in order to preserve the ability of the Tribunal to fashion a post-closing remedy, but this may be at her peril. It may also be appropriate to propose an alternative form of hold separate arrangement that does not need the Commissioner's involvement. Indeed, the Commissioner agreed to a hold separate arrangement in the scrap metal merger of American Iron & Metal Company Inc. and SNF Inc. on January 29, 2008, immediately after filing an application under section 100 to delay closing.

Commissioner strips Lululemon of clothing claims

The Bureau announced on November 16, 2007 that Vancouver-based Lululemon Athletica Inc. has agreed to remove all claims alleging therapeutic benefits from its "VitaSea" line of clothing products, marketed in its forty retail stores across Canada. The popular yoga- and exercise-wear chain has agreed to remove from clothing tags all therapeutic claims regarding the VitaSea technology (claimed to, for example, moisturize), remove from its Web site and in-store advertising all references to the VitaSea technology, inform its employees that they should not provide information on the impugned claims to customers, and undertake a review of all Lululemon promotional and marketing materials to ensure compliance with relevant legal requirements.  In describing this enforcement action, the Bureau noted that it is closely watching an increasing trend in the marketplace in claims about the use and attributes of sustainable fibres.

Health and environmental claims an ongoing bureau focus

Investigations and enforcement actions over marketing and advertising claims related to health products and services have been a significant part of the Bureau's recent fair-business-practices work. In addition to the steps taken against Lululemon described above, in the past three years the Bureau has announced numerous specific actions relating to misleading health claims, including in connection with UV protective clothing, "light" and "mild" cigarettes, nutrition information software, diabetes "cures," tanning-studio health claims, fitness club services, diet patches, herbal products, weight-loss programs and bogus cancer-therapy clinics.

The Bureau's focus on false or misleading health claims extends also to claims related to the environment.  According to a recent survey of environmental claims undertaken by a Canadian environmental marketing firm (which information has also caught the eye of the Bureau), the use of environmental claims is now pervasive across product categories.  The majority (57%) of the environmental claims examined in the survey reportedly failed to disclose attributes of the product relevant to (potentially negative) environmental effects; 26% of claims could not be substantiated by accessible information or third-party certification; 11% were deemed by the survey authors to be vague (e.g., claims of "all-natural"); and 5% were judged irrelevant (e.g. "CFC-free" oven cleaner, when CFCs are banned) and/or meant to distract from a more significant (negative) product feature (e.g., "organic" cigarettes).

In March, 2007, the Bureau issued for public comment new draft guidance on environmental claims.  Based on the draft document, the Bureau may be preparing to take a rigid stance on certain types of environmental claims. For example, in the draft document: (i) claims that a product is "free" of a substance may not be made when historically the product has never contained that substance; (ii) verification materials related to environmental claims must be available to both purchasers and potential purchasers, with no qualification related to confidential information; and (iii) consumers are misled if an explanatory statement for an environmental claim on a product is not displayed on the same display panel as the claim itself.

• AU has finally sold off its Port of Vancouver grain-handling terminal (the UGG Terminal) to Alliance Grain Terminal Ltd., pursuant to a consent agreement registered at the Tribunal by UGG on October 17, 2002 (the 2002 Consent Agreement). The divestiture had been ordered in response to UGG's 2001 acquisition of ACL.
• SWP has sold off nine inland grain elevators and a Port of Vancouver terminal elevator to Cargill Ltd. (Cargill). The sale was made pursuant to a consent agreement registered on March 28, 2007 (the 2007 Consent Agreement). The Bureau had determined that even with the divestiture of the UGG Terminal, noted above, the SWP/AU merger would have led to the post-transaction entity controlling 89% of licensed grain storage capacity at the Port of Vancouver. It would also have eliminated competition between the two largest players in the Canadian West Coast Port Terminal grain-handling services market.
• Under the terms of the same consent agreement, SWP has also ended its Vancouver-based joint venture (Pacific Gateway Terminal Ltd.) with Winnipeg-based James Richardson International (JRI), which had been under challenge by Commissioner of Competition Sheridan Scott (the Commissioner).
• JRI itself entered into a consent agreement pursuant to which it will divest two Manitoba-based grain elevators, stemming from its acquisition from SWP of some of AU's inland grain elevators.

The UGG Terminal divestiture process was anything but swift. Following the UGG/ACL merger, the resultant entity, AU, was required to divest primary grain elevators in Alberta and Manitoba, as well as a terminal at the Port of Vancouver. Under the terms of the 2002 Consent Agreement, AU was required to divest six primary grain elevators in the two Prairie provinces in order to assuage competition concerns in certain local markets. If AU was unable to complete the divestiture within an allotted confidential time period, the facilities were to be sold off by a trustee. Five of the six were sold on time, but AU was unable to complete the sixth sale despite numerous deadline extensions granted by the Bureau. The trustee was ultimately employed, and the sixth grain elevator eventually sold.

Similar difficulties were encountered with the Vancouver terminal. Under the 2002 Consent Agreement, AU was given until October 31, 2004 to dispose of one of its two terminals at the port, ultimately choosing the UGG Terminal. However, AU was unable to complete a sale before the deadline, and no fewer than ten extensions were granted by the Bureau in anticipation of an imminent sale.

The Bureau's patience was at an end in August 2005, and it would grant no further extensions. AU applied to the Competition Tribunal requesting that the agreement be rescinded under s. 106 of the Competition Act, due to changed circumstances in light of the amount of uncommitted grain shipped to the Port of Vancouver by independent grain companies. In May of 2006, following a Tribunal decision not to adjourn AU's hearing date, AU officially withdrew its application, and the divestiture was eventually completed over a year later, against the background of the SWP/AU merger.

The structure of the 2007 Consent Agreement appears to be broadly in line with the Information Bulletin on Merger Remedies in Canada issued by the Bureau in September 2006, and designed to avoid further long delays. The 2007 Consent Agreement gave SWP ninety days following its acquisition of AU to make the relevant divestitures to Cargill, laying out a "hold separate" regime over the interim period governing those assets and the employees who worked with them. If the sale could not be completed on time, a divestiture trustee would have been appointed to sell off a different set of assets, although this list would be kept confidential until four months after the trustee was empowered to make the sale. The trustee could be appointed as early as seventy-five days into SWP's sale process.

In the event that the trustee was unable to complete the sale within four months (or after any extensions expired), or even if the Commissioner did not by then feel that a sale was imminent, the agreement empowered her to apply to the Tribunal for an order to facilitate a sale of the "crown jewels," presumably in an attempt to sweeten the package for any prospective buyers. The Commissioner could also request a Tribunal order that SWP divest its entire ownership interest in AU.

Section 106 of the Act allows a consent agreement to be rescinded where "the circumstances that led to the making of the agreement or order have changed and, in the circumstances that exist at the time the application is made, the agreement or order would not have been made or would have been ineffective in achieving its intended purpose." In its submissions to the Tribunal, RONA argued that the consent agreement should be rescinded in light of Home Depot's subsequently confirmed intention to expand into Sherbrooke. The Commissioner opposed the application to rescind the consent agreement.

According to RONA, Sherbrooke was unique among the geographic markets considered by the Competition Bureau (the Bureau) in its 2003 examination of the RONA-Kingfisher transaction, insofar as it was the only market where Home Depot was not present as a competitor. Had it been present, RONA argued, Sherbrooke would have been indistinguishable from other geographic markets, in which case it would not have agreed to divest a store in that market.

The Commissioner submitted that RONA's application should be rejected on the basis that RONA had expected Home Depot to expand into Sherbrooke at some point, with the result that it could not now raise its intended entry as a material change of circumstances. The Commissioner also alleged that RONA had engaged in an abuse of process by deliberately trying to slow the divestiture process, contrary to the spirit of the consent agreement.

Upon evaluating the evidence, the Tribunal accepted RONA's contention that there had indeed been a change of circumstance within the meaning of s. 106 of the Act. According to the Tribunal, in September 2003 Home Depot had had no intention of expanding its operations into Sherbrooke. Therefore, Home Depot's subsequent decision to enter the Sherbrooke market presented a set of circumstances very different from those that led to the registering of the consent agreement.

The Tribunal rejected the Commissioner's argument that RONA could claim no change in circumstances since it had expected that Home Depot would eventually expand into Sherbrooke. The Tribunal distinguished jurisprudence on this point on the basis that the underlying rationale of such jurisprudence has been to prevent parties from failing to reveal facts and then subsequently arguing that they give rise to "new circumstances." The circumstances in this case, the Tribunal pointed out, were very different. Far from trying to hide its view that Home Depot would eventually expand into Sherbrooke, the Tribunal noted that RONA had tried unsuccessfully to convince the Bureau of this fact both before and after signing the consent agreement.

The Tribunal went even further, criticizing the Commissioner's decision to insist that the divestiture take place even after Home Depot's intention to expand into Sherbrooke became clear. The Tribunal went so far as to suggest that the Commissioner has a duty to stay attuned to the changing circumstances regarding the consent agreement, and should have agreed to revise the consent agreement once it had proof of Home Depot's expansion into Sherbrooke. The force and effect of a consent agreement, the Tribunal said, goes beyond merely carrying out its terms, to include ensuring that implementation of the consent agreement continues to make sense in the circumstances.

The Tribunal also rejected the Commissioner's allegation that RONA had engaged in an abuse of process by unnecessarily frustrating the divestiture process. According to the Tribunal, none of RONA's actions throughout the proceedings constituted an abuse of process. Rather, RONA made every effort to divest the Sherbrooke Réno Dépôt store to a buyer who met the criteria outlined in the consent agreement (i.e., "to a buyer wishing to operate the business principally for the retail sale of home improvement products"). Given a limited pool of potential buyers for big-box format stores of this type, RONA was unsuccessful in its attempt to divest the store within the time limits prescribed by the consent agreement, with the result that, as permitted by the consent agreement, the Commissioner appointed a trustee to effect the divestiture.

The Commissioner also alleged that RONA had engaged in an abuse of process by availing itself of certain rights under the consent agreement. However, the Tribunal rejected this allegation as well. The Tribunal noted that the consent agreement was negotiated and signed by both parties, each of whom was represented by competent legal counsel. As such, it could not be an abuse of process for RONA to exercise its rights under the consent agreement (including the right to object to the trustee's divestiture of the Sherbrooke store if the divestiture did not comply with the provisions of the consent agreement).

Stikeman Elliott LLP acted as counsel to Kingfisher in RONA's original 2003 acquisition of the Réno Dépôt and The Building Box stores.

Bill C-19 seeks to implement some long-debated - and in some cases controversial - amendments to Canada's Competition Act (the "Act"). The Commissioner of Competition (the "Commissioner") grouped the proposed amendments into five areas in her appearance before the Committee last Fall:

1. Providing authority for the Tribunal to order restitution for consumer loss resulting from false or misleading representations under paragraph 74.01(1)(a) of the Act1;
2. Enabling the Tribunal to issue an "administrative monetary penalty" (AMP), or fine, for abuse of dominance in any industry, to a maximum of $10 million for a first offence and $15 million for subsequent orders;
3. Repealing the airline-specific provisions of the Act2;
4. Increasing the level of AMPs for civil deceptive marketing practices (to maximums of $750,000 for a first offence and $1 million for subsequent orders against individuals; and to maximums of $10 million for a first offence and $15 million for subsequent orders against corporations); and
5. Repealing the criminal pricing provisions in sections 50 and 51, leaving such practices as predatory pricing and price discrimination to be dealt with as instances of (civil) abuse of a dominant position.

As noted, while few of the proposals in Bill C-19 are without controversy, the Bill appears likely to pass - although speculation as to the exact timing of such passage is made interesting by the lack of a majority government in Ottawa.

With respect to restitution for victims of false or misleading representations, the Commissioner has noted that restitution can already be ordered for similar offences in other countries such as the United States and Australia. With both restitution orders and drastically increased fines in her arsenal, the Commissioner will seriously increase her leverage over prospective defendants. Million-dollar-plus penalties and voluntary settlements of the type agreed to by The Forzani Group Ltd. ($1.7 million) and Suzy Shier Inc. ($1 million) could well become the norm, even for civil offences.

One of the more controversial proposals in Bill C-19 is the introduction of fines for companies who have abused their dominant market positions. As noted, the Tribunal will be empowered to issue fines of up to $15 million (for repeat offenders). This exceeds the maximum fine available for criminal price fixing under the domestic conspiracy provision (section 45). With the Commissioner vigorously pursuing abuse cases such as that brought recently against Canada Pipe3this provision clearly raises the stakes for firms with large market shares in Canada.

The introduction of criminal-sized fines for abuse of dominance also significantly affects the impact of the repeal of the criminal predatory pricing, price discrimination and promotional allowance provisions. The repeal of these provisions has been widely supported, as they require no finding of dominance or anti-competitive effect. That said, firms with large market shares arguably will face more vigorous enforcement as a result of the lower civil burden of proof and the prospect of large fines for abuse of dominance.

FOOTNOTES:

1] Fines are currently available for both criminal and civil misleading representations. A private party harmed by the offence can also sue for damages caused by misleading representations that are "knowingly or recklessly made" (the standard of intent for the criminal offence), regardless of whether criminal charges have been laid.

2] Currently, amongst other things, there are airline-only definitions of "anti-competitive acts" under the abuse of dominance provisions, and the Tribunal is able to issue fines in respect of abuse of dominance only to dominant Canadian airlines. See sections 78 and 79 of the Act.

3] Commissioner of Competition v. Canada Pipe Company Ltd., 2005 Comp. Trib. 3 (Competition Tribunal). See the March 2005 edition of The Competitor for a description of the Tribunal's decision, which rejected the notion that the exclusivity rebates in question were anti-competitive. The Commissioner has appealed the decision.

The Consent Agreement provided that RONA would have a finite period of time to divest the store, failing which the divestiture would be placed in the hands of a trustee. RONA having been unable to sell the store, a divestiture trustee was appointed. Although at first unsuccessful in finding a buyer, the trustee eventually entered into an agreement with a prospective buyer. RONA, however, exercised certain rights under the Consent Agreement to object to the sale negotiated by the trustee, thereby requiring that the divestiture be approved by the Tribunal. RONA also applied to the Tribunal for rescission of the Consent Agreement, which if successful would free it of the obligation to divest the Sherbrooke store.

RONA's application was made pursuant to s. 106, which allows for rescission of a consent agreement in certain circumstances, including where "the circumstances that led to the making of the agreement . have changed and, in the circumstances that exist at the time the application is made, the agreement . would not have been made or would have been ineffective in achieving its intended purpose." In RONA's submission, substantial evidence that Home Depot intends to open a big-box home improvement store in Sherbrooke constitutes such a material change of circumstances. Sherbrooke, RONA argues, was unique among the geographic markets examined by the Competition Bureau in its 2003 examination of the RONA-Kingfisher transaction, insofar as it was the only market where Home Depot was not present as a competitor. Had it been present, RONA submits that Sherbrooke would have been indistinguishable from other geographic markets, in which case it would not have agreed to divest the RONA store in that market.

As the filing was made without the consent of the Commissioner, it seems likely that the Commissioner will oppose RONA's application.

Stikeman Elliott LLP acted as counsel to Kingfisher in RONA's original 2003 acquisition of the Réno Dépôt and The Building Box stores.

The reason for the suspension actually has little to do with the bill itself ; an NDP Committee member proposed the motion out of frustration with apparent delays on the part of the Government to introduce promised legislation to make corporate fines and "administrative monetary penalties" (such as those proposed in Bill C-19 for abuse of dominance and for civil misleading advertising) non-deductible for income tax purposes. The other opposition MPs voted - for various reasons - with the NDP to pass the motion to suspend consideration of the bill, defeating the Liberal MPs in the process (most of whom then left the hearings).

The upshot is that Committee hearings were suspended a week earlier than they would otherwise have been for the holiday season. The Committee will resume its work in January when Parliament reconvenes, but when it will continue its consideration of Bill C-19 remains to be seen. It is likely only a question of time before deliberations resume, but the events of December 2 showed that with a minority government "anything can happen."

Background to Bill C-19

Bill C-19 had its genesis in the Government's June 2003 discussion paper, Options for Amending the Competition Act: Fostering a Competitive Marketplace. Very briefly, the discussion paper proposed changes to the Act in four broad areas. The first area - which is the subject of Bill C-19 - was the strengthening of the Act's civil provisions by introducing additional remedies for non-merger offences (i.e., abuse of dominance, exclusive dealing, tied selling, market restriction and refusal to deal). The discussion paper proposed a trio of new sanctions: administrative monetary penalties (fines), restitution in cases of civil misleading advertising and deceptive market practices, and a private right of action for damages (currently confined to damages for behaviour that is criminal under the Act).

Secondly, the discussion paper proposed reforming the Act's criminal conspiracy section, and replacing it with a dual-track provision. A per se criminal provision would apply to anti-competitive agreements, such as those involving price fixing, market allocation and output restrictions. Other agreements between competitors that are generally pro-competitive but have the potential to prevent or lessen competition substantially would be subject to civil review. The amendments proposed in the discussion paper would also have repealed the Act's criminal pricing provisions, instead addressing discriminatory and predatory pricing under the abuse of dominance provision . Finally, the discussion paper proposed allowing the Commissioner to ask an independent and impartial body with economic expertise, such as the Canadian International Trade Tribunal, to inquire into the state of competition in any industry.

In April of 2004, the Public Policy Forum, an independent non-profit organization mandated to conduct public consultations about the proposals put forward in the discussion paper, submitted its final report. Suffice it to say that the consultations revealed sharp divisions amongst stakeholders with respect to most of the proposed amendments, including the proposal to make civil conduct, such as abuse of dominance, subject to administrative monetary penalties.

Bill C-19: An Overview

Bill C-19 deals with the first and third areas listed above: strengthening of the remedies for the civil provisions of the Act, and de-criminalization of the pricing provisions. There are, however, some key differences between Bill C-19 and the discussion paper proposals in these areas.

The most significant amendment - permitting the Competition Tribunal to, in essence, impose civil fines in respect of abuse of dominance - as proposed in Bill C-19, covers only abuse and not the other civil non-merger provisions. Whereas the discussion paper contemplated unlimited fines, Bill C-19 caps them at C$10 million for first offences and C$15 million for each subsequent offence. Secondly, Bill C-19 seeks to increase the maximum amount of AMPs in respect of deceptive marketing practices (already provided for in the Act), in the case of individuals, to $750,000 for a first offence (now $50,000) and $1 million for repeat offences (now $100,000). The maximum "civil" fine for corporations guilty of "civil" deceptive marketing practices will (if Bill C-19 passes in its current form) be increased to C$10 million for a first offence (now $100,000) and C$15 million for repeat offences (now $200,000). If the public comments on the discussion paper proposals are any indication, the imposition of such serious penalties for non-criminal behaviour may well be controversial. Moreover, the "decriminalization" of the pricing provisions (including predatory pricing, price discrimination and promotional allowances in sections 50 and 51 of the Act), might be said to be a question of form over substance if the Tribunal has the power to impose fines at the same level as those available for criminal convictions. Indeed, the lower burden of proof inherent in civil proceedings will facilitate enforcement of these provisions (although, for price discrimination and promotional allowances, the requirement under the abuse of dominance provision that they be proven to substantially lessen or prevent competition may limit the circumstances in which such proceedings might arise).

As indicated in recent Bureau speeches, the creation of a per se criminal conspiracy offence in respect of so-called "hard core" cartels, and a civil track for other anti-competitive agreements, is the subject of continued study. It is our understanding that the Competition Bureau is working on revised draft language and that another round of consultations on such changes will be held. Accordingly, Bill C-19 leaves the conspiracy provisions untouched.

No mention has been made of the proposed "inquiry" procedure put forth in the discussion paper. As comments were generally opposed to such an amendment, however, it is quite possible that this amendment will not be heard of again.

Finally, the Bill does contain a set of new amendments not originally proposed in the discussion paper. Specifically, Bill C-19 will repeal all of the Act's airline-specific provisions, including the expanded definitions of anti-competitive acts for the purposes of abuse of dominance, and the ability of the Commissioner herself to issue injunctive-like cease-and-desist orders against an airline. The latter provision has been held unconstitutional by the Québec Court of Appeal.

Significance of Bill C-19

Given the import of an expanded AMPs regime under Bill C-19, those at the leading edge of Canada's business community will undoubtedly have to re-think the risks involved with being "too" successful. Whether or not Bill C-19 will have the effect of "chilling" vigorous and effective competition, as is feared by so many, remains to be seen.

Bill C-19 passed first reading in the House on November 2, 2004.

For more information about the contents of this newsletter, please contact the author, Kevin Rushton or the editor, Susan Hutton.

With respect to transit times, CN agreed to chart its performance against the 2003 BC Rail average transit time data, and would face financial penalties if performance benchmarks were not met.  The performance targets applied for the five year period post-closing, with the first year being a penalty-free transition period followed by a four-year period with the penalty regime in place.  The Commissioner of Competition also reserved the right to reinstate the penalty regime for an additional five years if she determined that the transit time covenants had not been respected.
The consent agreement also included safeguards to ensure shippers were not discriminated against with respect to car allocation.

Finally, in order to preserve competition in rates and services for the transportation of grain, certain remedies were introduced that aimed to prevent CN from materially increasing rates and curtailing service levels in the Peace River area.  The consent agreement was registered on July 2, 2004.

In its own statement, La Senza Corp., the then owner of Suzy Shier, stated that Suzy Shier "does not admit any conduct contrary to the Competition Act" but noted that, in recognition of the Bureau's concerns and of the importance of providing accurate information to consumers, Suzy Shier and the Bureau had agreed to file a civil consent agreement with the Competition Tribunal to resolve the matter.

According to the consent agreement, only 12.5% of Suzy Shier sales of the products at issue were made at the "regular" price during the evaluation period and the products were offered for sale at the "regular" price" for only approximately 11% of the time.

The $1 million administrative monetary penalty is the first under the Competition Act's civil "ordinary selling price" provisions, which came into force in 1999. The consent agreement also required Suzy Shier to publish corrective notices in newspapers across Canada and to implement a corporate compliance program to ensure that it meets the requirements of the Competition Act.

The announcement of the settlement was released just a few hours before La Senza Corp. announced that it was selling Suzy Shier to a division of YM Inc. The sale was completed on July 28, 2003. Neither La Senza Corp., nor YM Inc., is bound by the terms of the consent agreement, which applies only to Suzy Shier.