Archive for the 'Amendments' Category
On May 30, 2012, CRTC officials (Senior General Counsel, John Keogh and General Counsel, Telecommunications, Christianne Laizner) appeared before the Senate Standing Committee on Transport and Communications commenting on CRTC aspects of Bill C-38.
Bill C-38, omnibus legislation that has completed second reading and been referred to Committee would, if passed, amend the Telecommunications Act to eliminate Canadian ownership requirements for small telecommunications companies (carriers with less than 10% market share) and allow the CRTC to recover Do Not Call List (DNCL) administration and enforcement costs from the telemarketing industry through new fees.
These proposed changes were first announced by the Government earlier this year (see our earlier posts here and here).
On May 25th Industry Canada announced it was introducing a new Investment Canada Act (ICA) mediation guideline and would be finalizing Regulations introduced in 2009 to incrementally increase Canada’s ICA review threshold to C $1 billion over four years (see our earlier post).
Industry Canada also issued an annual report discussing the administration of the ICA in 2009 and 2010, recent policy changes and summarizing recent investment activity, the first such report in about twenty years. The following are a few interesting aspects of the Report:
High level trends. The Report states that some of the recent policy changes are intended to address the rise of sovereign investors, need to safeguard Canada’s national security and the market for foreign investment (the “growing global competition for foreign investment”).
Filings. Between April 1, 2009 and March 31, 2010, 437 ICA filings were received (23 applications for review were approved, with a total asset value of $30.8 billion; and 414 notifications were received: 109 for the establishment of new Canadian businesses and 305 relating to acquisitions of control, with a combined asset value of $30.1 billion).
Withdrawn filings. Between June 30, 1985 and March 31, 2010, 172 applications for review and 637 notifications were withdrawn. Two applications (of a total of twelve) were withdrawn following notice to the investors that the Minister was not satisfied that the proposed investments were likely to be of net benefit to Canada. The Report also discusses the blocked Alliant-MacDonald Dettwiler transaction.
Approved applications. In the 2009-10 fiscal year, 23 applications for review were approved, with an average review time of 69 days.
Net benefit to Canada methodology. The Report provides some insight into the Investment Review Division’s methodology for determining whether an investment will be approved (i.e., be found to be of net benefit to Canada, the relevant test), including considering the business’ “likely prospects” of success on a stand-alone basis, what the investor brings to the investment (e.g., capital or expertise not otherwise accessible by the Canadian business being acquired) and potential undertakings. The Report also describes how relevant factors are weighed during a review and states that reviews do not compare competing proposed investments. This discussion is consistent with recent statements by the Government that it would take steps to add increased transparency to Canada’s foreign investment review process. The new report does not, unfortunately, shed much light on the content of the existing net benefit to Canada factors set out in the ICA or how, for example, considerations with no apparent statutory basis (e.g., whether businesses are “strategic assets”, a much used phrase in the BHP/Potash transaction) squares with Investment Canada’s foreign investment review process.
Increased investment activity. In 2009-10, investment activity rose considerably with the total asset value of ICA transactions (applications for review and notifications) almost doubling to $61 billion (increased from $33 billion in 2008-09). The average asset value for reviewable investments increased from $766 million in 2008-09 to $1.34 billion in 2009-10 and the average asset value of notifiable investments increasing from $30 million to $73 million.
Source of investment. U.S. investors represented the largest number of ICA investors over the past five years, followed by EU investors (with U.K. investors representing a large percentage by asset value).
On May 25, 2012, the Minister of Industry Christian Paradis announced that the Government had issued a Mediation Guideline to “make formal mediation procedures available under the Investment Canada Act” (ICA) and that the ICA regulations would be amended to gradually increase the threshold for review of investments involving WTO investors to C $1 billion based on enterprise value (increased from the current threshold of C $330 million based on the book value of the Canadian target company’s assets).
In making the announcement, the Industry Minister said:
“Canada has a strong investment climate, and these targeted changes will ensure that our foreign investment review process continues to encourage investment and spur economic growth,” said Minister Paradis. ‘Foreign investment is vital to the Canadian economy. It helps Canadian companies find new capital and enables them to expand, innovate and create jobs for Canadians.’”
Increased Review Threshold
The announced increase to the WTO investor review threshold follows 2009 amendments to the ICA that had not come into force and that were based on suggestions by the Competition Policy Review Panel, which recommended in its final 2008 Report Compete to Win, among other things, that the ICA review threshold be raised to $1 billion (except for cultural businesses) for two reasons.
First, a higher threshold was, in the Review Panel’s view, consistent with an appropriately narrower and “exceptional” test for intervention under the ICA; and second, to align Canada’s foreign investment review regime with Canada’s position that foreign investment is, except in unique circumstances, beneficial to Canada.
The Review Panel also recommended that the test to calculate the review threshold be changed from the current test (based on the book value of the Canadian business’ assets) to an enterprise value test (to more appropriately reflect the growth of knowledge-based industries and intangible assets – e.g., know-how, IP and other intangible assets).
Once the new Regulations are in force (revised Regulations have not yet been published in the Canada Gazette), the WTO review threshold will initially rise to C $600 million (for two years), then to $800 million (for another two years) and then to $1 billion (and then be indexed going forward based on Canadian GDP as is the case currently).
Mediation Guideline
According to the Minister, the new Mediation Guideline is intended to provide a “voluntary means of resolving disputes when the Minister believes an investor has failed to comply with an undertaking”.
Some of the key features of the new Guideline (presumably based, at least in part, on the prolonged litigation relating to the alleged failure by U.S. Steel to comply with undertakings provided in connection with its acquisition of Stelco) include setting out a process for discussions to resolve concerns relating to the performance of undertakings, the discretion by the Minister to accept new undertakings (both within and independent of the new mediation process) and compliance demands (which may be followed by court proceedings).
The new Guideline also establishes a process for the agreed use of mediators as an alternative to “potentially lengthy and costly legal proceedings.”
Revised Regulations for Comment
Original Regulations that were first published when the ICA was amended in 2009 have been revised to reflect comments received and additional changes to the methodology to calculate enterprise value, and will be subject to a 30-day public comment period before final publication.
Report
Industry Canada has also issued a Report on the administration of the ICA in 2009 and 2010 and has announced that it will be resuming its earlier practice of annual reporting. The new Report, the first annual report relating to the administration of the ICA since 1993, includes an overview of the ICA and its administration, discussions of recent policy developments and a summary of activities under the ICA in 2009 and 2010.
For more see:
Industry Canada News Release
Minister Paradis Announces Additional Improvements to the Foreign Investment Review Process
Backgrounder
Proposed Amendments to the Investment Canada Regulations
Mediation Guideline
ICA Report
Competition Policy Review Panel Report (2008)
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On May 22, 2012, the American Bar Association issued joint Antitrust and International Law Section comments on the Competition Bureau’s revised draft Abuse of Dominance Enforcement Guidelines. (The Bureau issued revised draft Abuse Guidelines for public comment on March 22nd – see: Competition Bureau Issues Revised Abuse of Dominance Guidelines for Comment).
Some of the more interesting points of the ABA Sections’ joint comments include:
Unilateral conduct. The Sections recognize that unilateral conduct is inherently ambiguous (as well as the relative vacuum of section 79 abuse of dominance jurisprudence to date in Canada, unlike some other major jurisdictions including the United States and European Union).
AMPs. The Sections call for additional guidance as to when the Bureau will seek administrative monetary penalties (the current revised draft Guidelines describe when the Tribunal may order AMPs but contain no guidance as to when the Bureau may seek AMPs, which were introduced in March, 2009 and expose companies to penalties of up to $15 million). The ABA Sections specifically recommend that the Bureau “offer guidance on practical aspects of the use of AMPs, including when and why AMP remedies will be sought by the Bureau, the scale of AMPs likely to be sought, and what type of conduct will typically be in issue when AMPs are sought.”
Examples and analysis. The Sections criticize the significant reduction in examples and analysis in the revised draft Guidelines compared to the previous 2001 Guidelines, which the ABA refers to as a “substantial loss of guidance to the business community”.
Intent and joint abuse. The Sections question why the Bureau has chosen to take the position that intent to injure or exclude a competitor is not a necessary element of abuse under section 79 (which is well established in Canada) and call for increased guidance on the Bureau’s position of what will constitute joint dominance (an issue that remains unsettled in Canada). With respect to intent, it is well established that an allegedly dominant firm must engage in intentional anti-competitive conduct (i.e., conduct that is “predatory, exclusionary or disciplinary” toward a competitor).
Replacement of sector and conduct specific guidelines. The Sections ask for clarification as to whether the Bureau’s updated Abuse Guidelines are meant to replace earlier sector and conduct specific abuse related guidelines (including the Bureau’s draft Enforcement Guidelines on Abuse of Dominance in the Airline Industry, grocery abuse guidelines (Abuse of Dominance Provisions as Applied to the Grocery Sector), Information Bulletin on the Abuse of Dominance Provisions as Applied to the Telecommunications Industry and Predatory Pricing Enforcement Guidelines).
Regulated conduct defence. The Sections suggest that earlier language be added once again to the current draft relating to whether (and under what circumstances) the Bureau will consider the application of Canada’s regulated conduct defence (a previously completely common law doctrine, recently partially codified under section 45 of the Competition Act, but which remains unsettled in relation to the Competition Act’s civil reviewable practices provisions including section 79).
The ABA Sections’ comments also address other aspects of the Bureau’s draft Guidelines including the hypothetical monopolist test, degree of market power (and time period during which market power must be exercised for control of a market(s) to exist), business justifications (which the Federal Court of Canada has held can offset allegedly anti-competitive acts) and the interplay between sections 79 (abuse of dominance) and 90.1 (civil agreements provision) of the Act.
For the ABA’s cover letter and comments see:
In March, 2009, sweeping amendments to the Competition Act came into force that included, among many other things, the introduction for the first time in Canada of monetary penalties for abuse of dominance (“administrative monetary penalties” or “AMPs”). Under Canada’s amended section 79, the Competition Tribunal may now order AMPs of up to $10 million ($15 million for subsequent orders).
Since that time, one contested abuse case has proceeded to the Competition Tribunal (the Bureau’s ongoing challenge against The Toronto Real Estate Board, in which the Bureau is seeking only remedial remedies not AMPs) and two new versions of the Bureau’s Abuse of Dominance Enforcement Guidelines have been issued for comment (the current draft version of which, while setting out when the Tribunal may order AMPs in abuse cases, provides no guidance as to when the Bureau will seek them).
On May 15, 2012, the C.D. Howe Institute’s Competition Policy Council issued a report, the result of its third meeting on May 7, 2012, calling for the Bureau to clarify its position as to when it will seek AMPs in abuse cases. (Unlike some provisions of the Act, in Canada the Bureau has exclusive jurisdiction to bring and prosecute abuse cases, which are heard before the federal Competition Tribunal.)
In issuing the Report, the C.D. Howe Institute’s Council said:
“The Competition Bureau should clarify how it will apply its powers under the Competition Act in seeking administrative monetary penalties for abuse of dominance, according to a consensus of the C.D. Howe Institute’s Competition Policy Council, which held its third meeting on May 7, 2012. …
There was a range of views among the Council members about whether AMPs for abuse of dominance are ever appropriate. Some members contended that AMPs are appropriate as a deterrence mechanism. Others expressed the view that the possibility of a firm’s being subject to AMPs would chill efficient arrangements. There was unanimity, however, on the point that the risks of over-deterrence associated with AMPs are real, and that it would be appropriate to know how the Bureau plans to approach the issue of AMPs in particular cases. Accordingly, the Council’s key recommendation is that the Competition Bureau issue guidance and explain the basis on which it will assess the AMPs it seeks.”
Some of the issues discussed in the Council’s Report include the constitutionality of AMPs (as yet to be determined) and a more reticent Bureau in terms of its abuse of dominance enforcement positions.
With respect to the latter, the Commissioner of Competition has indicated in recent public remarks that the markedly shorter draft Abuse Guidelines currently subject to public comments is an effort to let the Competition Tribunal, not the Bureau, decide where the boundaries of section 79 lie (which provides little comfort to firms given that there have only been about ten contested abuse cases since the modern Competition Act was introduced in 1986).
For a copy of the C.D. Howe Institute’s news release and Report see:
On May 8, 2012, hearings began before the Competition Tribunal (Tribunal) in the Visa/MasterCard price maintenance case. The case, filed by the Competition Bureau in late 2010, is the first civil price maintenance case to be heard by the Tribunal following amendments to the Competition Act in 2009 that included the repeal of former criminal price maintenance offences.
In brief, the Bureau is alleging that Visa and MasterCard merchant agreements discourage consumers from using lower-cost methods of payment (e.g., cash, debit cards, etc.) and prevent retailers from declining certain higher fee cards, which has led to an increase in card service fees paid by retailers and corresponding higher retail prices for goods and services.
Section 76 of the Competition Act now makes it a reviewable civil practice for a supplier to influence a customer or reseller to raise prices (or discourage the reduction of prices), including by agreement, where the conduct has an adverse effect on competition. While formerly a “per se” criminal offence with no competitive effects requirement, price maintenance is now a civil reviewable practice that allows the Tribunal to make remedial orders – for example, for conduct to stop or in some cases for supply to be resumed – where it is shown that competition has been adversely affected. Private parties may now also make price maintenance applications for Tribunal orders (with leave from the Tribunal).
Some of the restraints being challenged by the Bureau in this case include restrictions on merchants promoting or encouraging the use of credit cards with lower fees, discouraging the use (or refusing to accept) cards with higher fees and requirements to accept all Visa/MasterCard credit cards.
The Commissioner is seeking an order prohibiting Visa and MasterCard from enforcing agreements preventing merchants from encouraging the use of lower-cost payment methods, including rules preventing retailers from discouraging the use of higher-cost credit cards or refusing to accept certain Visa/MasterCard cards.
For more information about the hearings, pleadings and parties’ cases see:
At the Spring CBA Competition Conference earlier today in Toronto, the Commissioner of Competition, Melanie Aitken, delivered an interesting keynote luncheon speech that provided insight into the Competition Bureau’s recent experience under Canada’s amended Competition Act, current enforcement and future priorities.
Mergers
With respect to mergers, the Commissioner addressed recent efforts (including the 2009 Competition Act amendments) to align Canada’s merger control regime with those of other major jurisdictions, notably the U.S.
The Commissioner also addressed the Bureau’s increased monitoring of non-notifiable mergers, cited some recent merger review related statistics (including the fact that the Bureau has reduced the average time to review complex transactions from about 50 days pre-2009 to about 36 days currently and that the Bureau has triggered second phase reviews (“supplementary information requests” or “SIRs”) in 18 cases over the past three years).
The Commissioner also indicated that the ongoing BC waste case (an ongoing non-notifiable contested merger case) was uncommon, but at the same time made it clear that the Bureau would: (i) not hesitate to litigate appropriate merger cases and (ii) was interested in clarifying the law under the merger provisions of the Competition Act.
Perhaps the Commissioner’s most interesting merger related remarks were those relating to the possibility of collapsing the current standalone efficiencies defense into the general merger provisions of the Competition Act. In this regard, the Commissioner appeared to indicate that Canada’s standalone efficiencies defense was out of step with other major jurisdictions.
On April 29, 2012, the Federal Government announced proposed amendments to the Telecommunications Act that, if passed, would allow the CRTC to recover the cost of Do Not Call List investigations and enforcement efforts directly from the telemarketing industry in the form of fees.
In making the announcement, the Government said:
“Today, the Honourable Christian Paradis, Minister of Industry and Minister of State (Agriculture), announced additional action to protect consumers through sustainable funding for the National Do Not Call List.
‘The National Do Not Call List is a successful program that many Canadians rely on to protect them from unwanted telemarketing calls,’ said Minister Paradis. ‘Today’s announcement reinforces our government’s commitment to protecting consumers.’”
This new proposed initiative to assist with the financing of Do Not Call List investigations and enforcement would be implemented through amendments to the Telecommunications Act, introduced as part of provisions in the federal Jobs, Growth and Long-term Prosperity Act, introduced late last week in the House of Commons (see: Bill C-38).
Other proposed changes as part of Bill C-38 include increasing the transparency of Canada’s Investment Canada Act review process (see: Federal Government announces Investment Canada Act changes to add transparency to Canadian foreign investment review process).
The Government also announced upcoming consultations on the proposed new fee structure for Do Not Call List investigations and enforcement, which, if passed, would come into effect in the Spring of 2013.
Canadian enforcement authorities, including the Competition Bureau and the CRTC, have recently been distinctly more aggressive in seeking penalties in a variety of advertising and marketing law cases – for example the recent sweeping enforcement steps taken by the CRTC against 85 companies for violating Canada’s telemarketing rules: 85 companies face CRTC telemarketing enforcement action.
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
