Archive for the 'Amendments' Category
The CBC reported last week that a Montreal-based telemarketing company, which has been accused of defrauding thousands of small businesses in relation to an alleged invoice scheme for never ordered office supplies, is still making calls (see: Montreal Telemarketers in Fraud Case Still Making Calls).
According to the CBC:
“Express Transaction Services Inc. (ETS) and some affiliated companies face several charges under the federal Competition Act and Criminal Code, following an investigation and police raids at its Montreal facilities in 2007.
In fall 2011, the company was charged with fraud and violation under the federal Competition Act.
Several individuals linked to the companies also face charges of deceptive telemarketing and misleading representations under the Competition Act, and criminal fraud charges.
The Competition Bureau said ETS purposely sent out products to businesses even if they were never ordered. ETS then had its call centre make repeated phone calls to retrieve payment.
According to the bureau, the scheme made more than $170 million between 2001 and 2007. The federal Anti-Fraud Centre said thousands of victims were affected.
CBC News has learned that ETS continues to operate out of its Montreal offices, and small businesses across Canada are still receiving phone calls from the company.”
TELEMARKETING LAWS IN CANADA
COMPETITION ACT
The federal Competition Act makes it criminal offences to engage in deceptive telemarketing or to engage in telemarketing unless certain disclosure under the Competition Act is made.
Canada’s contribution to the 11th OECD Global Forum on Competition, held last week in Paris, is now available online: Improving International Co-operation in Cartel Investigations – Global Forum on Competition – Contribution from Canada
Overview
The Global Forum on Competition included discussions on:
Commodities and price volatility:
“This full day session will start with an overview of recent price volatility; discuss its causes and present recent OECD work. Substantive discussions will draw on expert analysis and on the experiences of competition authorities. The day will culminate in a distillation of practical suggestions for competition authorities when faced with issues in these markets.”
Improving international co-operation in cartel investigations:
“This session will examine how the existing frameworks for international cooperation in cartel investigations could be modified or improved. The roundtable will also explore how international co-operation works in other fields, such as bribery, tax and money laundering, to see if any practices can be extrapolated to cartel enforcement.”
State-owned enterprises and competitive neutrality:
“This session will allow participants to hear the preliminary findings of the Report on Competitive Neutrality which is under preparation by the OECD as well as to present country experiences with competitive distortions resulting from an uneven playing field in markets where public undertakings co-exist with private competitors.”
Speeches included remarks by Pascal Lamy (WTO Director General), Otaviano Canuto (World Bank Vice-President), Angel Gurria (OECD Secretary-General) and Frederic Jenny (Chairman of the OECD Competition Committee).
The Wall Street Journal, Bloomberg, Globe and Mail and others have reported that the Competition Bureau (the “Bureau”) is investigating alleged price-fixing in the setting of interbank lending rates.
Interbank rates include the London interbank offered rate (“LIBOR”), Tokyo interbank offered rate (“TIBOR”) and euro interbank offered rate (“Euribor”).
The essence of the allegations in this ongoing and global case appears to be whether, if true, the fixing of interbank rates adversely affected the price of derivative and other financial products (such as credit default swaps, mortgages, etc.).
The Competition Bureau (the “Bureau”) and other Canadian regulatory authorities have markedly increased their enforcement of misleading advertising in the past several years. The following is a brief summary of some of the penalties imposed (or agreed to pursuant to settlement agreements) in Canadian advertising and marketing law cases.
The Competition Bureau announced today that the pre-merger notification size of transaction threshold for 2012 will increase to C $77 million (increased from C $73 million in 2011). The 2012 size of transaction threshold will come into effect on about February 11, 2012 following publication in the Canada Gazette.
The CBC and others have reported on the continued progress of Bill C-10, the “Safe Streets and Communities Act”, which is now undergoing 11 days of Senate committee hearings (the Senate’s legal and constitutional affairs committee) that will hear from about 100 witnesses.
Conservative Justice and Public Safety Ministers Rob Nicholson and Vic Toews are asking Senators to “expeditiously” approve the Bill.
Bill C-10, which completed second reading in the Senate in December, would, among other things, eliminate conditional sentences of two years or less (i.e., sentences served in the community rather than a correctional facility) from being ordered by courts for violation of two of the core criminal offences under the Competition Act: criminal conspiracy agreements (section 45) and bid-rigging agreements (section 47).
FEBRUARY 29, 2012 – Teleconference
The National Competition Law Section of the Canadian Bar Association will be holding a teleconference on February 29, 2012 entitled: “Criminal Conspiracy or Legitimate Competitor Collaboration? Tips for In-House Counsel”
The Vancouver Sun, Montreal Gazette, Huffington Post and others have reported that Rogers has launched constitutional arguments in response to allegations by the federal Competition Bureau that it misled consumers with performance claims in relation to its Chatr cell phone brand.
In particular, according to media reports, Rogers is arguing that the civil “performance claim” provision of the Competition Act is contrary to the freedom of expression rights under the Charter and that the penalties for civil misleading advertising are unconstitutional.
On January 6, 2012, the Competition Bureau announced that two companies pleaded guilty of fixing the price of polyurethane foam and were fined a total of $12.5 million (see: Competition Bureau Sends Signal to Price-Fixers with $12.5 Million Fine).
In making the announcement, the Bureau said:
“’Yesterday’s guilty plea is the first conviction under Canada’s amended conspiracy law,’ said Melanie Aitken, Commissioner of Competition. ‘This investigation highlights the Bureau’s reinvigorated mandate to stop consumer harm caused by price-fixing, and to secure significant fines for these serious criminal offences.’
The charges are the first to arise from the Bureau’s investigation into price-fixing cartel in the polyurethane foam industry. Anyone with information relating to this investigation is encouraged to contact the Competition Bureau.
The Bureau’s investigation benefitted from cooperation under the Bureau’s Immunity and Leniency Programs, which create incentives for parties to address their criminal liability by cooperating with the Bureau in its ongoing investigation and prosecution of other alleged cartel participants.
Under the Competition Act, an agreement between competitors to fix prices, allocate markets or restrict output in Canada is a criminal offence. In March 2010, amendments to the conspiracy provision of the Act came into force.”
The past year has been a busy one for Canadian competition law.
Developments in 2011 include new cases, enforcement and legislation in most key areas including abuse of dominance (the Competition Bureau’s ongoing challenge of The Toronto Real Estate Board and CREA settlement in late 2010), criminal conspiracy (developments in price-fixing class action litigation and some Bureau enforcement), refusal to deal (several important private access section 75 cases, including a decision of the Federal Court of Appeal), contested mergers (in the waste and airline markets), price maintenance (the merchant fees case involving Visa and MasterCard) and misleading advertising (involving Bell Canada, Rogers and others).
The Competition Bureau is testing the new rules under Canada’s Competition Act, which came into force in 2009 and 2010, and private plaintiffs are creating new law in a number of ongoing competition/antitrust class actions in Canada (principally indirect purchaser price-fixing cases relating to the sale and supply of dynamic random access, or “DRAMs”, high fructose corn syrup and computer operating systems).
At the same time, several new pieces of legislation have been introduced including a federal omnibus crime bill, which will eliminate conditional sentences for some competition law offences, and sweeping new anti-spam legislation (Bill C-28 or “FISA“) that once in force will be among the strictest anti-spam regimes in the world.
The Commissioner of Competition, and other federal enforcement officials including the RCMP, have also expressed intentions to adopt tougher enforcement stances in relation to competition law and other white collar crime.
In general, these developments mean that it remains important for Canadian companies, organizations and their executives to maintain a practical awareness of Canadian competition law.
Some of the key competition law and related developments of 2011 include:
On December 5, 2011, a federal omnibus crime bill (Bill C-10) was passed that will, among other things, have the effect of eliminating conditional sentences of two years or less from being ordered by courts for violation of two of the core criminal offences under the Competition Act: criminal conspiracy agreements (section 45) and bid-rigging (section 47).
To quote the Legislative Summary issued with Bill C-10, “conditional sentencing … allows for sentences of imprisonment to be served in the community, rather than in a correctional facility. It is a midway point between incarceration and sanctions such as probation or fines.”
Currently, a number of criteria must be met for a sentencing judge to impose a conditional sentence under the Criminal Code as follows: (i) the offence is not a “serious personal injury offence” (as defined in the Code), (ii) the offence is not a terrorism offence, (iii) the offence is not a criminal organization offence prosecuted by way of indictment for which the maximum term of imprisonment is 10 years or more, (iv) the offence is not punishable by a minimum term of imprisonment and (v) the sentencing judge has determined that the offence should be subject to a term of imprisonment of less than two years, is satisfied that serving the sentence in the community would not endanger the safety of the community and the conditional sentence would be consistent with the fundamental purpose and principles set out in the sentencing guidelines of the Code.
Bill C-10 amends section 742.1 of the Criminal Code to remove the current reference to serious personal injury offences and to provide that a conditional sentence of two years or less may be ordered unless, among other things, the offence is an indictable offence with a maximum term of imprisonment of 14 years or life.
The European Commission announced earlier today that it was opening formal proceedings to investigate sales of e-books. In particular, the Commission has opened a cartel investigation to determine whether several international publishers, including Hachette Livre, Harper Collins, Simon & Schuster and Penguin have engaged in anti-competitive practices with respect to the sale of e-books.
In making the announcement, the Commission said in its news release:
“The European Commission has opened formal antitrust proceedings to investigate whether international publishers Hachette Livre (Lagardère Publishing, France), Harper Collins (News Corp., USA), Simon & Schuster (CBS Corp., USA), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany) have, possibly with the help of Apple, engaged in anti-competitive practices affecting the sale of e-books in the European Economic Area (EEA), in breach of EU antitrust rules. The opening of proceedings means that the Commission will treat the case as a matter of priority. It does not prejudge the outcome of the investigation.
The Commission will in particular investigate whether these publishing groups and Apple have engaged in illegal agreements or practices that would have the object or the effect of restricting competition in the EU or in the EEA. The Commission is also examining the character and terms of the agency agreements entered into by the above named five publishers and retailers for the sale of e-books. The Commission has concerns, that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices (Article 101 of the Treaty on the Functioning of the European Union – TFEU).”
Bloomberg has reported that federal Industry Minister Christian Paradis has again raised the prospect of amending Canada’s Investment Canada Act (the “ICA”) in remarks he made in New York last week (see: Canada Open to Changing Foreign-Takeover Law, Paradis Says).
The Industry Minister’s comments closely follow a C.D. Howe Institute report also issued last week calling for fundamental changes to the ICA to stimulate foreign direct investment in Canada, including a change to the overarching test for foreign investment approval (replacing the current “net benefit to Canada” test with a national interest test) (see: New Publications – C.D. Howe Institute Report – Reforming the Investment Canada Act: Walk More Softly, Carry a Bigger Stick).
The Commissioner of Competition, Melanie Aitken, addressed current enforcement priorities in two engaging and wide-ranging talks in Vancouver this evening: a keynote speech at a reception hosted by the University of British Columbia, National Centre for Business Law at the Four Seasons and a Vancouver Competition Policy Roundtable meeting organized by Professor Tom Ross of the Sauder School of Business.
In a short but interesting recent note, Madam Justice Sandra J. Simpson has proposed changes be made to the federal Competition Tribunal. In an article entitled “The Competition Tribunal 2003-2011 and Beyond”, the Federal Court judge, who sits on the Competition Tribunal, recommendeds that the Tribunal’s jurisdiction should be expanded to include the following:
1. Single damages for parties in private actions;
2. Private actions for abuse of dominance with leave (to which Justice Simpson adds that the Tribunal has exercised its power to grant leave to private parties responsibly);
3. A reference power for parties in negotiations with the Commissioner; and
4. The approval of consent agreements by a judge alone – with written comments from but no intervention by affected parties (which, in Justice Simpson’s view, will “ensure that the Commissioner has a defensible theory of harm to support his or her settlements”).
Reuters Canada, Canadian Business, the Wall Street Journal and other media have reported that the Competition Bureau has issued a “no action” letter clearing Rio Tinto’s Cdn. $654 million friendly takeover offer for junior uranium developer Hathor Exploration.
In making the announcement, Rio Tinto said in its press release:
“Rio Tinto yesterday received Canadian Competition Bureau clearance for its offer, made through an indirect wholly-owned Canadian subsidiary, to acquire all the common shares of Hathor Exploration Limited (“Hathor”) for C$4.70 in cash per common share.
The Commissioner of Competition issued a ‘no action letter’ which constitutes compliance with all requirements of the Competition Act (Canada) in relation to Rio Tinto’s offer for Hathor.
Rio Tinto’s recommended offer values Hathor at approximately C$654 million on a fully-diluted basis and represents a premium to the unsolicited revised offer of Cameco Corporation’s of C$4.50 per common share of Hathor made on 14 November.
Hathor’s board of directors unanimously recommends that Hathor shareholders accept and tender their common shares to Rio Tinto’s offer which is open for acceptance until 5:00pm (Toronto time) on 30 November 2011, unless extended or withdrawn in accordance with its terms.”
See: Rio Tinto Receives Canadian Competition Bureau Clearance for its Offer for Hathor Exploration.
“No action letters” are one of two types of merger clearance (the other being Advance Ruling Certificates, or “ARCs”) available under the Competition Act. Unlike an ARC, however, where a no action letter is issued, the Commissioner may challenge the transaction for up to one year post-closing (a period recently shortened from three years as a result of 2009 amendments to the Competition Act).
Rio Tinto’s $4.70 per-share offer for Hathor, which it raised last week, expires November 30th.
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On October 25, 2011, the Competition Bureau published the Commissioner of Competition’s speech given at the 2011 Canadian Bar Association’s Annual Competition Law Conference in Ottawa.
It is fair to say that the Commissioner’s recent speech presented a singular tone across the civil and criminal competition law areas: enhanced enforcement.
Of the Commissioner’s remarks, some of the more interesting points include the Bureau’s increased focus on reviewing non-notifiable mergers (i.e., transactions that do not trigger the notification thresholds under the Competition Act), the statement that the Bureau has begun to revoke markers in some immunity cases where in its view immunity applicants are not complying with its Immunity Program and a subtle suggestion that the Bureau was preparing to bring, but not quite yet in a position to commence, the first conspiracy cases under the amended section 45 (Canada’s new hard core criminal conspiracy offences). The following are some highlights from the Commissioner’s recent speech.
On December 15, 2010 Canada’s new anti-spam legislation received Royal Assent, which will, when it comes into force, be one of the strictest anti-spam regimes in the world:
An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act (the “Anti-spam Act”).
Earlier this Fall, consultations on two sets of draft Regulations concluded and so the new law may come into effect later this Fall or in the Spring of 2012 (see coming into force information below).
On October 5, 2011 the Ottawa Business Journal, Ottawa Citizen and Vancouver Sun reported that Ontario Justice Ann Alder ruled that an Ottawa bid-rigging case in the technology sector can go to trial.
In this case, the Competition Bureau alleged that a number of companies, including TGP Technology, Spearhead Management, The Devon Group, Brainhunter, Nortak Software and Tipacimowin Technology, rigged bids in relation to IT contracts totaling about $67 million issued by the Canada Border Services Agency, Department of Transport and Public Works (see: Competition Bureau Announces Charges Against Companies Accused of Rigging Bids for Government of Canada Contracts and Backgrounder). Justice Ann Alder dismissed charges against several of the companies (Nortak Software and Tipacimowin Technology).
In making its original announcement in February, 2009, the Bureau said:
“The Bureau found evidence indicating that several IT services companies in the National Capital Region secretly coordinated their bids in an illegal scheme to defraud the government by winning and dividing contracts, while blocking out honest competitors.
The Bureau’s investigation found evidence of criminal activity in 10 competitive bidding processes from 2005, for contracts worth approximately $67 million. The contracts related to IT professional services provided to the Canada Border Services Agency, Public Works and Government Services Canada, and Transport Canada.”
The British Columbia Real Estate Association will be hosting its 2011 Instructor Development Workshop in Whistler from September 22nd to 25th 2011, for instructors of REALTORS in British Columbia.
Steve Szentesi will be facilitating a competition law workshop (amendments to the Competition Act and developments in the first two years in force) on Sunday, September 25th.
For more information about the IDW workshop, event schedule and speakers see BCREA’s website:
BCREA – Instructor Development Workshop
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On September 7, 2011, the federal Competition Bureau announced that it had reached a settlement with Nivea’s Canadian distributor, Beiersdorf Canada Inc., relating to allegedly false or misleading performance claims in its advertising.
In particular, the Bureau took issue with claims that suggested that the use of skin cream could lead to weight loss. Under the terms of the consent agreement negotiated with the Bureau, Beiersdorf has agreed to pay an “administrative monetary penalty” or “AMP” of Cdn. $300,000 (“AMPs” are essentially civil fines), refund Canadian customers and remove its products from Canadian shelves.
In making its announcement, the Bureau said:
“A Bureau investigation determined that Beiersdorf made a number of deceptive claims about its “My Silhouette” product. The misleading representations were displayed on the package and on Nivea’s Web site. The representations stated that:
use of the product could lead to a “reduction of up to 3 centimetres on targeted body parts, such as thighs, hips, waist and stomach”;
My Silhouette “contains a highly effective natural Bio-Slim Complex for a slimmer looking and more defined silhouette”; and
My Silhouette “combines high performance active ingredients for a dual effect of slimming & reshaping.”
Beiersdorf’s representations also created the misleading impression that use of the product could make the skin more toned and elastic.
““Beiersdorf misled consumers by claiming a person could slim down by simply applying a skin cream,”” said Melanie Aitken, Commissioner of Competition. ““Unfortunately, consumers who purchased My Silhouette learned the hard way that there was no such easy fix.””
Under the terms of the consent agreement registered with the Competition Tribunal today, Beiersdorf is also required to publish a corrective notice on Nivea’s Canadian Web site and in major Canadian newspapers, and to pay $80,000 to cover costs associated with the Bureau’s investigation.”
The U.S. Federal Trade Commission has announced that it has filed a $450 million internet fraud civil suit against an Alberta online operator.
According to the FTC, Jesse Willms, an online operator with ten marketing companies, has:
“… raked in more than $450 million from consumers in the United States, Canada, the United Kingdom, Australia, and New Zealand by luring them into ‘free’ or ‘risk-free’ offers, and then charging them for products and services they did not want or agree to purchase. … The defendants used the lure of a ‘free’ offer to open an illegal pipeline to consumers’ credit card and bank accounts.” See: FTC Charges Online Marketers with Scamming Consumers out of Hundreds of Millions of Dollars with “Free” Trial Offers.
The FTC’s complaint alleges, among other things, that Willms and the companies he controls:
- Used deceptive tactics in offering “free trials” for various online products, including acai berry weight-loss pills, teeth whiteners and health supplements.
- Obtained consumers’ credit or debit card account numbers, by enticing them with “bogus ‘free’ or ‘risk-free’ trial offers that supposedly required only small shipping and handling fees, and also promised phony ‘bonus’ offers just for signing up” (and were charged for trial and bonus products plus recurring monthly fees).
- Made false claims about the total cost of products, recurring charges and the availability of refunds.
- Made false weight loss and cancer cure claims in relation to products.
- Provided merchant banks with false or misleading information to acquire and maintain credit and debit card processing services from the banks in light of “mounting chargeback rates and consumer complaints.”
- Concealed important terms and conditions relating to product sales.
According to the FTC, it worked closely with Canadian law enforcement officials, including the federal Competition Bureau, the Royal Canadian Mounted Police, the Alberta Partnership Against Cross Border Fraud and the Edmonton Better Business Bureau.
In Canada, the federal Competition Act contains both civil and criminal provisions dealing with false or misleading representations and also governs a variety of specific forms of marketing conduct including “ordinary selling price” claims, selling above an advertised price, deceptive telemarketing, promotional contests and performance claims.
Generally speaking, the civil misleading advertising provisions of the Act prohibit representations to the public, for the purpose of promoting a product or business interest, that are false or misleading in a material respect. The criminal provisions, which are substantially similar, prohibit false or misleading representations that are made intentionally (i.e., knowingly or recklessly).
Some of the types of claims that have been of concern for Canadian courts and the Competition Bureau in the past include literally false claims, omitting key information relating to the price or terms of sale of products and false claims regarding the performance of products (product performance claims must be supported by “adequate and proper” tests before any claim is made).
As with the FTC claims, the Competition Bureau has also pursued companies for inaccurate use of the term “free” in connection with marketing claims (see: False or Misleading Representations and Deceptive Marketing Practices and Misleading Advertising Guidelines) and has also issued specific guidelines setting out its enforcement position for online marketing and advertising (see: Application of the Competition Act to Representations on the Internet).
As a result of amendments to the Act in 2009, it is also not necessary to show that a misleading claim was made to Canadian consumers or was made in a publicly accessible place. These changes were recently made to address perceived gaps in the Act and to specifically address misleading claims made in Canada targeting foreign consumers (as is alleged in this FTC case, albeit from a U.S. enforcement perspective) and claims originating in places without direct consumer contact (e.g., in the context of online marketing operations).
For copies of the FTC’s complaint and motion for injunction see:
Complaint for Permanent Injunction and Other Equitable Relief
Motion for Preliminary Injunction and Memorandum of Points and Authorities in Support
For Jessie Willms’ news release in reply to the FTC’s allegations see:
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On May 23, 2011, the U.S. Department of Justice announced that it had filed a lawsuit to block H&R Block Inc. from acquiring TaxAct based on concerns that the proposed transaction would further consolidate the “growing U.S. digital do-it-yourself tax preparation software market” from 3 to 2 and eliminate a maverick (TaxAct).
In making the announcement, the U.S. DoJ said:
“’The combination of H&R Block and TaxACT would likely lead to millions of American taxpayers paying higher prices for digital do-it-yourself tax preparation products,’ said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. ‘In addition, TaxACT has aggressively competed in the digital do-it-yourself tax preparation market with innovations such as free federal filing. If this merger is allowed to proceed, that type of innovation will be lost.’
…
According to the department’s complaint, H&R Block’s acquisition of 2SS Holdings would eliminate a company that has aggressively competed with H&R Block and disrupted the U.S. digital do-it-yourself tax preparation market through low pricing and product innovation. By ending the head-to-head competition between TaxACT and H&R Block, American taxpayers would be left with only two major digital do-it-yourself tax preparation providers. This would lead to higher prices, lower quality, and reduced innovation. In addition, by taking control of the TaxACT business, which has been a maverick in the market, it would be easier for H&R Block to coordinate on prices, quality, and other business decisions with the other remaining industry leader – Mountain View, Calif.-based Intuit, which makes personal finance programs such as Quicken and TurboTax – the department said.”
This case is interesting in that in addition to considering market shares and existing remaining competition (according to the DoJ, the top three players including H&R Block and TaxAct account for about 90% of the relevant market), the DoJ is basing its challenge on the fact that in its view TaxAct is also a maverick. Like the U.S., in Canada whether a merging party is a maverick can also be a relevant factor for considering whether competition will be substantially lessened post-merger (though, not surprisingly, whether a party is a maverick can be the subject of considerable debate and maverick cases are relatively rare). In this regard, the Competition Bureau states in its Merger Enforcement Guidelines:
“Pre-merger, effective coordination may be constrained by the activities of a particularly vigorous and effective competitor (a ‘maverick’). An acquisition of a maverick may remove this constraint on coordination by reducing incentives to behave in an aggressive manner. Such an acquisition increases the likelihood that coordinated behaviour will be effective.”
This case is also interesting, if only for being a cautionary tale, in that the DoJ is basing its challenge of the proposed transaction in part on the merging parties’ own internal documents. According to the DoJ, these include statements from H&R Block’s internal emails and presentations that a primary benefit of acquiring TaxAct is “elimination of a competitor” and the “strategic opportunities” include to “eliminate the brand to regain control of industry pricing and further price erosion”.
Given that “4c documents” are a routine and required part of merger notification in the U.S., and that strategic planning documents are also now required for merger notification filings in Canada regardless of complexity (see Notifiable Transactions Regulations, 16(1)(d)),[1] merging parties are well advised to seek competition/antitrust counsel early in the planning stages of a proposed transaction to avoid similar potential issues from arising.
For the complete DoJ news release see: Justice Department Files Antitrust Lawsuit to Stop H&R Block Inc. From Buying TaxAct.
For Canada’s merger control rules see: Competition Act, Part IX – Notifiable Transactions and Notifiable Transactions Regulations.
For an overview of merger control in Canada see: Merger Control and Investment Canada.
[1] Subparagraph 16(1)(d) of the Notifiable Transactions Regulations requires that parties to a transaction, and their affiliates, file “all studies, surveys, analyses and reports that were prepared or received by an officer or director of the corporation … for the purpose of evaluating or analysing the proposed transaction with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into new products or geographic regions …” This requirement to file strategic planning documents as part of a pre-merger notification filing was recently added to the Canadian Notifiable Transactions Regulations as part of amendments to the Competition Act in 2009, and further aligns Canadian merger control rules with that in the U.S. under the HSR Act (the existing 4c documents requirement).
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The Competition Bureau has announced that Kason Industries Inc. plead guilty for its part in a customer allocation conspiracy and was fined $250,000 by the Federal Court of Canada.
In its news release, the Bureau stated:
“The Competition Bureau announced today that Kason Industries Inc. was fined $250,000 by the Federal Court after pleading guilty on March 8, 2011 to a criminal charge that it conspired to allocate customers for the sale of refrigeration and food service equipment components in Canada and the U.S.
Between January 2005 and December 2008, Kason Industries Inc. engaged in meetings with Component Hardware Group Inc., to allocate their major customers, allowing them to maintain uncompetitive prices.
During this period, Kason was responsible for approximately 40% of the overall sales of food service equipment components in Canada and the U.S., worth nearly $3.16 million to their allocated Canadian customers.”
According to the Bureau, its investigation included the cooperation of the parties to the alleged conspiracy under the Bureau’s formal Immunity and Leniency Programs, as well as coordination from the U.S. Department of Justice.
This case is interesting given that Canadian market allocation cases, both involving the allocation of customers or geographic markets, have been relatively uncommon in Canada.
As such, this case may be an indication that the Bureau’s ongoing criminal investigations are focused on testing the boundaries of Canada’s new criminal conspiracy laws, which were significantly amended in 2010 to expressly prohibit market allocation agreements among competitors, in addition to price-fixing and output restriction conspiracies.
For the Bureau’s news release, see: Competition Bureau Exposes Customer Allocation Conspiracy.
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