Archive for March, 2012
On Friday March 9, 2012 the British Columbia Court of Appeal, in an unanimous judgment by Justices Hinkson, Finch and Hall, decided an interesting defamation case involving the publication of a newspaper column in the Vancouver Sun entitled “Ambitious claims to a trillion-dollar jackpot” written by David Baines.
The article in dispute contained allegedly defamatory statements relating to the Honorable Edward M. Lawson, a former Senator and executive of the International Brotherhood of Teamsters (the respondent in this case).
Mr. Baines’ article referred, among other things, to how a company named Arctic Oil and Gas, a “tiny U.S. company with big ambitions and some interesting Vancouver connections” had been promoting itself by claiming ownership of “a 30 per-cent interest in a claim to all the oil and gas resources within the entire Arctic Ocean ‘commons area’” allowing them access to the “Trillion Dollars in oil and natural gas!” in the Arctic. The article also dismissed this claim as overly “ambitious” for a company that “trades at only eight cents per share on the lowly ‘pink sheets’ in the United States”.
The dispute in this case, however, arose in relation to the following underlined portion of the article describing the company’s “Vancouver connections” (the Senator):
“Which makes it all the more curious that a retired Canadian senator would be a director of this company. But more on that later. …
At the same time that Bulldog morphed into Arctic Oil & Gas, Sterling appointed Senator Edward Lawson as a director and gave him 50,000 restricted shares.
Lawson served 34 years in the Canadian Senate before retiring in 2004, making him the longest-serving senator in B.C. history. He also served as international vice-president of the Teamsters Union for more than 26 years, a position which often landed him in controversy.
In June 1988, the US. Department of Justice filed a lawsuit under the Racketeer-Influenced [and] Corrupt Organizations Act alleging that the Teamsters Union and the union’s entire executive board (including Lawson), plus 26 purported mob figures, had hijacked the union from its members.
Several months later, the suit was dropped after union executives signed a settlement agreeing to union reform.
In 2003, the union presented Lawson with the James R. Hoffa Lifetime Achievement Award in honour of the former Teamsters president. This is an award that only a Teamster could love.
Lawson also suffered the embarrassment of being identified as a close associate of Ed Carter, who along with partner David Ward was caught in a huge stock bribery scam in the mid-1980s.
Evidence at the criminal trial of Carter and Ward was that the two promoters gave Lawson shares of their rigged companies, and Lawson flew them, often free of charge, on the Teamsters executive jet he had at his disposal.
In 1986, David Ward’s wife, Carol, and Lawson’s wife, Beverly, became embroiled in another stock fiasco while serving as directors of an Alberta Stock Exchange company called Boston Financial Group Inc.
A Bahamian bank called Charterhouse Bank and Trust, long suspected of acting as a front for insiders, had bought 90 per cent of Boston’s free-trading stock and had promptly dumped $291,000 worth of stock without filing insider trading reports.
The bank claimed it was acting as agent and couldn’t reveal its clients’ identity. Although regulators suspected the stock belonged to insiders or related parties, its beneficial ownership was never established.
Sterling said he met Lawson in Vancouver several months ago. “He offered to come on board [with Arctic Oil & Gas] because he believes that there is a significant benefit to be had for the country of Canada from this project,” he said in an interview Tuesday.”
Trial Decision
The Senator’s defamation claim succeeded at trial and the appellants, including Mr. Baines and several Vancouver Sun editors, appealed taking the position that the lower court judge erred in finding for the Senator.
Appeal
On appeal, the appellants argued that the words in the article were incapable in being defamatory and, if they were capable of being defamatory, they were not in fact defamatory.
In hearing the Appeal, the Court set out some of the essential law of defamation, in particular holding that in defamation actions there are two essential issues: first, the legal issue of whether or not words are capable of being defamatory (determined on a standard of review of correctness); and second, if capable of being defamatory, the factual issue of whether the words are in fact defamatory (typically subject to a standard of reasonableness).
On March 9, 2012, the Competition Bureau launched its first monthly report of concluded merger reviews for the month of February.
16 transactions are included in the inaugural report including Anglo American plc / DB Investments SA and De Beers SA, Cardinal Health Canada Inc. / Futuremed Healthcare Products, Crescent Point Energy Corp. / Wild Stream Exploration, Dundee Real Estate Investment Trust / Whiterock Real Estate Investment Trust, RB98 Inc. and Google Inc. / Motorola Mobility Holdings, Inc., JMC Steel Group Inc. / Lakeside Steel Inc., Sobeys Capital Inc. / Shell Canada Products and Teck Resources Limited / SilverBirch Energy Corporation.
Of the reported transactions, advance ruling certificates (“ARCs”) were issued in four of the transactions and no action letters issued in the other twelve.
The Bureau had announced that it would be launching a new merger registry in early March – see for example: Mergers Update: Competition Bureau to Issue Monthly Merger Review Reports and Competition Bureau Moves to Increase Merger Review Transparency.
There has also been considerable opposition to this new “transparency” initiative by the Bureau – see for example, the Canadian Bar Association’s submission to the Senior Deputy Commissioner of Competition late last fall: CBA letter to Paul Collins.
On March 6, 2012, a Scheduling Order was issued in Commissioner of Competition v. Air Canada/United, one of two current contested merger cases before the Competition Tribunal.
Hearings are scheduled to begin November 13, 2012.
A few days ago, we posted a short note on the Competition Bureau’s announcement that five companies and three individuals were found by the Ontario Superior Court of Justice to have violated the Competition Act in relation to a deceptive marketing operation (see: Advertising Update: $9 Million Penalty and Restitution Obtained in Deceptive Marketing Scheme).
We thought we would post a few more observations about this rather significant case following the issuance of the decision by the Ontario Superior Court.
Facts
The Competition Bureau sought orders for restitution and administrative monetary penalties or “AMPs” (essentially civil fines) in relation to alleged deceptive marketing by a group of related companies that included Yellow Page Marketing B.V., Yellow Publishing Ltd., Yellow Data Services Ltd., Yellow Business Marketing Ltd. and several individual defendants (none related to the Yellow Pages Group (“YPG”), well known and reputable in Canada).
The Bureau alleged that this group of companies misled thousands of Canadian businesses, individuals and organizations to pay more than $2,000 each for “agreed upon” services on the assumption that the target companies were merely updating existing records to obtain free Google advertising. In fact, fine print disclaimers disclosed that the targets were actually signing new two-year contracts.
While unrelated to the YPG, the defendants registered 13 Internet domains for websites that included highly similar trade-marks, colours and designs used by the YPG. The defendants also sent faxes to businesses, individuals and organizations that, according to the Court, were “designed to mislead existing or potential YPG customers” into paying $2,856 to them and which included designs that highly resembled the YPG “Walking Fingers” logo.
Companies responding to the faxes received invoices, which, if not paid, were followed by more invoices, reminder notices or letters.
Law
The Court considered the facts of this case under section 74.01 of the Competition Act (the general civil misleading advertising section of the Act).
Generally speaking, the misleading advertising provisions of the Competition Act prohibit false or misleading statements to the public that are made to promote products (including services) or business interests and that are materially false or misleading (i.e., likely to cause an ordinary or average consumer into purchasing a product or otherwise altering their conduct).
The Court reviewed the relevant law under the general misleading advertising provisions of the Act, including the test for materiality, the “general impression test” (the general impression of a claim is relevant under both the criminal and civil misleading advertising provisions in addition to its literal meaning), the fact that the general misleading advertising provisions apply to claims relating to both products or “any business interest” and the law relating to fine print disclaimers.
With respect to materiality, the Court held:
“The false or misleading representations made by the respondents were material. They were intended to deceive and did, in fact, deceive many Canadian businesses and individuals into believing that they were dealing with YPG, when they signed and returned the Unsolicited Faxes and sent payment to the respondents. Materiality of the false or misleading representations is further evidenced by the fact that a majority of complainants stated that they would never have ordered the service by returning the Unsolicited Faxes had they known that the respondents were unaffiliated with YPG and/or would never have paid the respondents invoices or reminder notices had they not believed that they had been sent by YPG.”
With respect to the fine print disclaimers, the Court held:
“The fact that the fine print of the Unsolicited Faxes stated that returning them would bind the recipient to a two year contract does not reduce its false or misleading nature. The fine print did not clarify that the Unsolicited Faxes had not been sent by YPG and the disclosure was insufficiently prominent.”
With respect to the meaning of “business interest” in section 74.01, the Court construed this phrase broadly holding:
“Similar misrepresentations appear in the respondents’ domain names, invoices, reminder notices and letters sent by the respondents. Although the respondents argue that collection efforts after the contract had been completed were not to increase sales, the relevant provision of the Competition Act refers to promoting “any business interest” and not just sales. The phrase ‘business interest’ must be given a wide meaning and collecting money, and threats made in relation to collection efforts, constitute promotion of the respondents’ business interests.”
The Court also found the defendants’ domain names, invoices, reminder notices and letters to be misleading and rejected the defendants’ argument that a due diligence was available.
Under the penalty provisions of the civil misleading advertising sections, a limited defense is available to the corrective notice, administrative monetary penalty and restitution provisions where a person establishes that they exercised due diligence to prevent the reviewable conduct from occurring.
On March 8, 2012, the Competition Bureau announced that another individual pleaded guilty under section 45 of the Competition Act to fixing the price of gasoline in the ongoing Quebec gasoline price-fixing cartel (see: Individual Fined in Gasoline Price-fixing Cartel).
This investigation is the largest criminal investigation in the Bureau’s history and has been active for about two years.
In making the announcement, the Bureau said:
“The accused, Robert Murphy (now retired), was a territorial manager employed by Sonic. He was sentenced today to pay a fine of $7,500.
Charges were laid in June 2008 and July 2010 against 38 individuals and 14 companies accused of fixing the price of gas at pumps in Victoriaville, Thetford Mines, Magog and Sherbrooke, Quebec. As of today, 22 individuals and six companies have pleaded guilty in this case, with fines totalling over $2.8 million. Of the 22 individuals who have pleaded guilty, six have been sentenced to terms of imprisonment totalling 54 months.”
The Competition Law Section of the Canadian Bar Association has announced the dates for the 2012 Competition Law Fall Conference:
September 19-21, 2012
Hilton Lac-Leamy (Gatineau)
For more information and updates for the conference see:
Weil, Gotshal has published an article in Practical Law entitled “How to Prepare for and Respond to a U.S. Antitrust Raid” (see: How to Prepare for and Respond to a U.S. Antitrust Raid).
Given that there are many similarities between searches (or “dawn raids”) in Canada and the United States, we thought this recent note would be of interest to our clients and Canadian firms.
March is Fraud Prevention Month. On March 5, 2012, Consumer Protection BC published an anti-fraud backgrounder on their blog including information about typical fraudsters, steps for consumers to take where they think they have been a target of fraud and fraud-related case studies from past Consumer Protection BC investigations.
For more see: Consumer Protection BC – Fraud Prevention Month
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
