Archive for August, 2012
I am pleased to be speaking at the Canadian Bar Association’s and Canadian Corporate Counsel Association’s upcoming CBA Canadian Legal Conference in Vancouver on a panel on August 13th: “What In-house Counsel Need to Know About Recent Competition Law Developments”. From the Canadian Bar Association and Canadian Corporate Counsel Association (CCCA):
“Canada’s competition and foreign investment laws are being enforced more vigorously than ever. The Competition Bureau has broad powers allowing them to investigate conduct that might have an anti-competitive impact on the Canadian marketplace, and investigations can involve high-stakes consequences for companies including public stigma, civil or criminal penalties, or unneeded complications arising in the middle of a strategic merger. Private and class actions are also increasingly prevalent in Canada. Hear about recent trends and learn practical tips for spotting issues and minimizing potential liability from experienced in-house and external counsel who will discuss compliance, criminal developments, private actions, mergers and advertising and marketing law developments.”
My presentation will be on recent misleading advertising law developments and trends (“Misleading Advertising Trends & Tips”), with a PowerPoint presentation and paper highlighting recent cases including Rogers, Bell, Yellow Pages, Richard v. Time and best practices for in-house counsel.
Guest post by Jacob Kojfman (Vancouver Securities Law)
In early July, American home improvement giant Lowe’s Cos. (“Lowe’s”) made an unsolicited bid for its Canadian counterpart Rona Corp. (“Rona”). Rona’s special committee evaluated the bid and rejected it; two of Rona’s largest shareholders have also done the same.
Aside from the usual concern about the “hollowing out” of Canada‘s business landscape, there is a much bigger concern for Canadian companies and their boards. What options does a board really have when faced with a hostile bid?
One of the most commonly used tactics is the shareholders rights plan or “poison pill”. The use of poison pills has received a lot more attention the last few years as they have come in front of the securities commissions with varying results. It seems more often than not, a securities commission will cease trade a pill since a board will run out of other alternatives.
In the United States, a reporting issuer facing a hostile bid seems more likely to be able to keep its poison pill in place. In the instance of Airgas, that board was able to continue its pursuit of its strategic plan. In Canada, there seems to be a bigger concern: Canadian boards are powerless.
On August 7, 2012, hearings in the landmark Canadian misleading advertising case Commissioner of Competition v. Rogers Communications Inc. began.
The case, the first constitutional test of increased “administrative monetary penalties” or “AMPs” under the Competition Act (the “Act”) for misleading advertising, promises to be a bit of a battle between the Competition Bureau (the “Bureau”) and Rogers in relation to a few key aspects of Canadian advertising law.
The case relates to certain performance claims made by Rogers in connection with its new cell phone brand Chatr, the effectiveness of disclaimers (like other recent high-profile Canadian advertising cases) and, perhaps the issue most likely to capture public attention, whether the potentially significant civil penalties now possible for misleading advertising are constitutional.
The Bureau is principally taking aim at two claims made by Rogers: that its (at the time) new Chatr cell phone brand had “fewer dropped calls than new wireless carriers” and that customers had “no worries about dropped calls”. According to the Bureau these claims, made to compete with new wireless entrants Mobilicity, Public Mobile and Wind Mobile, were either literally false in some cases (in markets where new entrant cell phone companies’ dropped call rates were superior to Rogers) or, where true, misleading (by conveying the general impression of appreciably lower dropped call rates, when any differences were in reality “imperceptible” to consumers).
The Bureau has also taken the position that certain disclaimers used by Rogers were ineffective in altering the general impression of its performance claims, including the view that some technical statements made by Rogers in disclaimers would be meaningless to the average consumer. For example, some Rogers disclaimers included statements such as: “Based on: cell site density; quality of indoor and underground reception; and seamless call transition when moving out of zone”.
The OECD has issued a new Policy Roundtable report entitled: Remedies in Merger Cases, which includes a discussion of Canada.
Abstract:
“Competition agencies use remedies in merger cases to eliminate any competitive harm that may result as a consequence of a merger. Generally, merger remedies are classified as either structural or behavioural (or conduct). Each of these categories has benefits and drawbacks, which must be carefully considered when deciding which type of remedy to best employ.
Horizontal and vertical mergers generally involve different competitive concerns. These differences must be taken into account when crafting an appropriate remedy. Frequently, competitive concerns in horizontal mergers can be best resolved by a structural remedy, while vertical mergers lend themselves to behavioural remedies or a combination of both.
While such generalizations may be a useful starting point, each transaction should be evaluated based on its own merits. In crafting remedies, competition agencies often seek the views of third parties in order to ensure that an optimal remedy is found.”
Publications: OECD Policy Roundtable Report: Economic Evidence in Merger Analysis – Including Canada
The OECD has issued a new Policy Roundtable report entitled: Economic Evidence in Merger Analysis, which includes a discussion of Canada.
Abstract:
“The OECD Competition Committee debated economic evidence in merger analysis in February 2011. This document includes an executive summary of that debate and the documents from the meeting: a background note by Prof. Mike Walker for the OECD and written submissions: Austria, Brazil, Canada, Chile, China, Denmark, Finland, France, Germany, Greece, Hungary, Indonesia, Israel, Japan, Korea, Mexico, Netherlands, New Zealand, Portugal, Romania, Russian Federation, South Africa, Sweden, Switzerland, Chinese Taipei, Turkey, United Kingdom, United States, the European Union, and BIAC as well as an aide-memoire of the discussion.
With the recent announcement of a proposed friendly take-over of Nexen by the China National Offshore Oil Corporation (CNOOC), some Canadian and international media are asking whether the deal will be blocked under the Investment Canada Act. Questions have been raised regarding the size of the transaction, commercial orientation of CNOOC, policy issues concerning the acquisition of significant Canadian assets by state-owned enterprises (SOEs) and questions as well about the level of China’s foreign investment reciprocity.
This transaction, as well as a number of other Chinese oil related acquisitions in the past few years, has also generated a considerable amount of legal, policy and other commentary in relation to Chinese investment in Canada and the appropriate policy posture for the Canadian Government. There have too also been inevitable comparisons to the recently failed attempt by BHP to acquire Saskatchewan’s Potash Corporation. Despite some speculation as to whether the transaction will get Investment Canada Act clearance, I am going to go slightly out on a limb at this very early stage to hazard that it will. Why?
First, statistically, despite the increasing debate and criticism of Canada’s current Investment Canada Act process, the vast majority of foreign investments have been approved – only two transactions have been rejected since 1985 (of more than 1600 applications for review). Past statistics, of course, are not necessarily an accurate predictor of the result in a process that is highly fact specific and political.
Second, the majority federal Government has made repeated statements that Canada is “open for business”. The most recent of which occurring yesterday, with Canada’s PM heralding a new era for the competitive marketing of grain saying: “Our Government is committed to creating open markets that will attract investment, encourage innovation, create value-added jobs and build a stronger economy for all Canadians.”
Third, the federal Government has increasingly been indicating a desire to strengthen China/Canada trade and investment relations. For example, the Prime Minister completed a significant trade mission to Beijing earlier this year, in which the Conservatives, among other things, reiterated Canada’s desire to strengthen bilateral trade with China and concluded negotiations for the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA). Some of the Prime Minister’s announcements last February in China, which signal a desire to strengthen Canada’s relations with China, include a stated desire to “take relations to the next level and further strengthen [Canada’s] strategic partnership” with China and that “investment flows between Canada and China are at an all-time high contributing significantly to jobs and economic growth in both countries.”
Fourth, with increased political uncertainty relating to Canada’s traditionally most important oil export market – i.e., the U.S. – Chinese investment in Canadian oil production represents at least two benefits: increased necessary capital and more markets.
Fifth, CNOOC appears to have taken many of the right steps to secure approval, including rather fulsome promises to establish Calgary as the head office of its North and Central American operations, maintain Nexen’s current management team and employees, implement and enhance Nexen’s current planned capital expenditure program (maintaining the status quo is not an option under the net “benefit” to Canada test) and to pursue an additional listing on the TSX. Some commentators have said that CNOOC “walks and talks” like a commercial enterprise.
Guest Post by Jacob Kojfman (Vancouver Tech Law Blog)
Apple Inc. (“Apple) may be famous for bringing us 1000s of songs in our pocket with its iPod, and then changing everything again with its iPads. It is also in second place in the smartphone wars, behind Samsung Electronics Co. (“Samsung”). This is not sitting well with Apple, so much so that Apple launched a lawsuit against Samsung. Apple won the first round when it was granted an injunction against Samsung, giving Apple time to catch up in the sales department. That injunction was just the opening act. Now comes the main feature, and if it does go to a jury, who knows what it will mean for these tech titans. Having reviewed Apple’s statement of claim and Samsung’s statement of defence and counterclaim, the central claims are that Apple has certain utility and design patents, trademarks, and trade dress protection and that Samsung is only able to compete because its products “blatantly imitate the appearance of Apple’s…”
Apple’s claim is based on its products being so distinctive and recognizable and that they have been accorded the protection of trade dress. Apple claims that the public will associate Samsung’s products, such as its Galaxy line of tablets, with Apple because Samsung’s products have the “unmistakable Apple look…” Of course, Samsung denies any illegal conduct, and actually points out flaws in Apple’s claim, such as two different definitions of “Apple iPhone Trade Dress”, and denies the distinctiveness of the iPad 2 Trade Dress. Furthermore, Samsung says that it could not have infringed the Apple patents because they are invalid because they fail to satisfy at least one of the conditions of patentability, and that some of Apple’s patents have also been copied and documented by other parties first. Samsung turns the table on Apple by claiming that Apple is violating Samsung’s patents. The implications from this trial could be huge. For one thing, if the jury finds in favor of Apple, it could give Apple the boost it needs in the smartphone wars to overtake Samsung and develop a big lead. It could also answer questions about design – can one protect certain designs as trade dress? After all, there are only so many ways to design a smartphone or tablet.
Law slowly catching up to digital technologies. The law is slowly catching up to the new digital world in which we live. A recent ruling of the Supreme Court of Canada has rejected copyright fees for music downloaded off of the Internet. According to the ruling, downloading music is considered a “private transmission”, while streaming music is still a communication to the public, and are still subject to paying royalties. The Supreme Court said that the online streaming music can be transmitted to large segments of the public and is designed to do just that – be made available to anyone who wants access to it. The Supreme Court rejected the copyright fees for the downloaded music, relying on its judgement in another case in which the decision was that video games do not have to pay royalties to composers for games downloaded from the Internet. The majority decision in that case said that requiring a royalty for music from a downloaded game would violate the principles of technology neutrality, and that the download is not a “communication” under the Copyright Act. These decisions help clarify questions around new ways to listen to music and other technologies. The main thing I get out of these two decisions is judicial clarification about key phrases in the Copyright Act: “communicate” and “to the public”. There are still a lot of questions that need to be answered about digital content and any rights associated with them.
The C.D. Howe Institute has issued a new Commentary entitled Breaking Free: A Post-mercantilist Trade and Productivity Agenda for Canada.
Abstract:
“To revitalize its flagging trade and productivity performance, Canada should adapt its international trade and investment policies to a world of global value chains, evolving trade and investment patterns, and deepening economic integration; according to a new report from the C.D. Howe Institute. In “Breaking Free: A Post-mercantilist Trade and Productivity Agenda for Canada,” Research Fellow Michael Hart says to be more competitive, Canada needs to wean itself more completely from a mercantilist approach best suited to an era in which products and firms had clear national identities, which is rarely the case today. ‘Canada’s trade and investment policies are stuck in the past. We risk being caught flat-footed and side-lined in the highly integrated global marketplace,’ says Professor Hart.”
For a copy of the Commentary see:
Breaking Free: A Post-mercantilist Trade and Productivity Agenda for Canada
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Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
