Archive for the 'Competition Bureau' Category
On August 31, 2011, The Canadian Real Estate Association requested leave to intervene in the Competition Bureau’s abuse of dominance case against The Toronto Real Estate Board to support TREB.
The Competition Tribunal Act allows any person affected by Tribunal proceedings to intervene in proceedings with leave from the Tribunal.
The Tribunal has held that to grant intervenor status, the following elements must be met: (i) the matter alleged to affect the person seeking leave to intervene must be legitimately within the scope of the Tribunal’s consideration (or must be a matter sufficiently relevant to the Tribunal’s mandate); (ii) the person seeking leave to intervene must be directly affected; (iii) all representations made by a person seeking intervenor status must be relevant to an issue specifically raised by the Commissioner; and (iv) the person seeking leave to intervene must bring a unique or distinct perspective to the Tribunal that will assist the Tribunal in deciding the issues before it (see e.g., Commissioner of Competition v. Canadian Waste Services Holdings Inc., 2000 Comp. Trib. 10; Commissioner of Competition v. The Canadian Real Estate Association, 2010 Comp. Trib. 12 (order allowing National FSBO Network Inc.’s motion for leave to Intervene)).
On August 30, 2011, the Competition Bureau announced that five individuals in Alberta were convicted and sentenced of deceptive telemarketing under the Competition Act.
In making the announcement, the Bureau stated:
“The individuals have been convicted of deceptive telemarketing under the Competition Act and of committing fraud over $5000 under the Criminal Code of Canada. The names of the individuals convicted and their respective sentences are:
Garther Cheung and Sukhraj Singh Chana, co-founders of the company, were each sentenced to one year for each of three counts of deceptive telemarketing and to two years in a federal penitentiary for committing fraud over $5,000, all time to be served concurrently.
Pritpal Chana and Ranjit Sangha, both managers of the company, were each sentenced to 16 months for each of three counts of deceptive telemarketing and 16 months for committing fraud over $5,000, all time to be served concurrently. The first eight months will be served as house arrest and the remaining eight months on probation.
Andrea Kyweriga, also a manager, was given a suspended sentence and placed on two years probation after being convicted of two counts of deceptive telemarketing and one count of fraud over $5000.
The five individuals are also prohibited from doing any act or thing that would be directed toward the deceptive telemarketing offence being committed or repeated for the next 10 years.
A sixth individual, Sarah Schaefer, pleaded guilty in 2007 and received a $15,000 fine.”
On July 7, 2011, the Competition Bureau filed an Amended Notice of Application in its abuse of dominance case against The Toronto Real Estate Board (“TREB”).
The Bureau’s Amended Notice of Application follows TREB’s issuance of a proposed policy and rule amendments to allow its broker members to operate “virtual office websites” (“VOWs”) (secure, password-protected websites operated by real estate brokers allowing customers to perform their own MLS searches over the Internet).
The Bureau first challenged TREB back in May (see: Commissioner of Competition and The Toronto Real Estate Board – Notice of Application and Competition Bureau Sues Canada’s Largest Real Estate Board for Denying Services Over the Internet).
The Bureau has taken the position that TREB and its members control the market for residential real estate brokerage services in the Greater Toronto Area, that TREB has engaged in a practice of anti-competitive acts (board rules and policies preventing members from operating VOWs) and that those rules have resulted in a substantial lessening of competition in the residential real estate brokerage services market in the GTA (in particular, blocking real estate firms from offering innovative Internet-based services, including VOWs).
The essence of the Bureau’s abuse of dominance argument was (and remains) that TREB has used its control of its MLS system (each local real estate board in Canada operates its own MLS system) to pass rules that discipline and exclude real estate firms that want to offer VOWs.
On August 15, 2011 Air Canada filed its response in the contested Air Canada / United Continental merger.
In this case, the Bureau seeks to both unwind existing Air Canada / Continental cooperation agreements and also to prevent a proposed cross-border joint venture between the parties under the merger provision of the Competition Act (section 92) and the recently enacted, and as yet untested, civil agreements provision of the Act (section 90.1).
The Air Canada / Continental agreements have involved coordination in relation to code sharing operations, joint fare discounts and incentive programs on trans-border routes (the “Alliance Agreements”).
The proposed merger, which was to be achieved by way of a joint venture, would, according to Air Canada, “complement” its existing JV agreements with Continental and result in “deeper and more comprehensive integration and coordination” on Air Canada / Continental trans-border routes that had previously been possible under the parties’ existing bilateral agreements.
Proposed integration would include joint pricing, joint route planning and scheduling, coordinated marketing, harmonization of sales processes and revenue sharing. In essence, according to Air Canada, the proposed JV would both add to the number of existing Air Canada / United coordinated activities and further formalize existing contractual arrangements.
The case is significant in that it is the first challenge of agreements by the Bureau under the civil agreements provision of the Act passed in 2009 (and which came into force in 2010) and also represents a relatively rare challenge of a merger structured as a joint venture. “Merger” is defined broadly in the Competition Act to include acquisitions of control by “purchase or lease of shares or assets, by amalgamation or by combination or otherwise” (and while there is a merger exception for joint ventures, it is relatively narrowly defined and difficult to apply in practice).
The case is also significant in that it is one of two currently proceeding contested merger cases before the Tribunal, which are the first contested merger cases in six years.
On August 11, 2011 the Competition Bureau issued a Merger Remedies Study, summarizing its review of the effectiveness of merger remedies obtained in 23 cases under the merger provisions of the Competition Act between 1995 and 2005.
The results of the Bureau’s study are to be used to revise its Information Bulletin on Merger Remedies in Canada first issued in 2006 (see: Information Bulletin on Merger Remedies in Canada) and its consent agreement outline template.
135 interviews were conducted with merged entities (20), purchasers (28), customers (60) and third parties (27). According to the Bureau, its remedies study “has been of significant value in confirming that many of the Bureau’s existing policies and procedures relating to the design and implementation of merger remedies are effective and in identifying areas where such policies and procedures could be more effective.”
On July 7, 2011, the Competition Bureau filed an Amended Notice of Application in its abuse of dominance case against The Toronto Real Estate Board (“TREB”).
The Bureau’s Amended Notice of Application follows TREB’s issuance of a proposed policy and rule amendments to allow its broker members to operate “virtual office websites” (“VOWs”) (secure, password-protected websites operated by real estate brokers allowing customers to perform their own MLS searches over the Internet).
The Bureau first challenged TREB in May (see: Commissioner of Competition and The Toronto Real Estate Board – Notice of Application and Competition Bureau Sues Canada’s Largest Real Estate Board for Denying Services Over the Internet).
The Bureau has taken the position that TREB and its members control the market for residential real estate brokerage services in the Greater Toronto Area, that TREB has engaged in a practice of anti-competitive acts (board rules and policies preventing members from operating VOWs) and that its rules have resulted in a substantial lessening of competition in the residential real estate brokerage services market in the GTA (in particular, blocking real estate firms from offering innovative Internet-based services, including VOWs).
The essence of the Bureau’s abuse of dominance argument was (and remains) that TREB has used its control of its MLS system (each local real estate board in Canada operates its own MLS system) to pass rules that discipline and exclude real estate firms that want to offer VOWs.
In its amended Application, the Bureau reinforces its earlier abuse of dominance arguments against TREB by arguing that TREB’s new VOW rules are a further anti-competitive act that would continue to discriminate against brokers wishing to offer VOWs (conduct must be predatory, disciplinary or exclusionary toward a competitor to constitute an anti-competitive act under section 79 of the Act).
In particular, the Bureau argues that by imposing limitations on the types of information available on VOWs that are not in place for traditional brokerages, including historical sales information, which can currently be provided by traditional means (e.g., hand, e-mail or fax), TREB is discriminating against brokers that want to operate VOWs.
In addition to proving that TREB engaged in a practice of anti-competitive acts, the Bureau will also need to show that as a result of TREB’s conduct, competition has been (or will likely be) prevented or substantially lessened, which involves considering whether a target’s market position will likely be maintained or enhanced as a result of its actions.
In this regard, the Bureau makes a number of new arguments including that TREB’s VOW rules would continue to require customers to contact a member broker personally for key information including historical sales data and that TREB’s VOW rules are “vague and ambiguous” so would “impede the entry of innovative real estate models”.
In essence, the Bureau argues that TREB’s proposed VOW rules would operate as a further barrier to entry for real estate brokerages wishing to operate VOWs using TREB’s MLS data, reinforcing the market position of traditional brokerage firms.
Interesting aspects of this case include whether the Bureau will be able to prove that TREB is dominant in the market for residential real estate services in the GTA (given that TREB, as a trade association, does not actually provide residential real estate brokerage services), whether TREB’s MLS system is indeed the essential facility the Bureau argues it is (the Bureau’s case turns in large part on the argument that TREB’s MLS system is an essential input into the provision of real estate services in the GTA, though there has not yet been a decided essential facilities case in Canada) and whether TREB’s rules constitute an anti-competitive act for section 79 of the Act (given the limited case law to date under the modern abuse of dominance provisions, and no direct precedent for the Bureau’s position on anti-competitive acts).
For a copy of the Bureau’s amended Notice of Application see:
Commissioner of Competition and The Toronto Real Estate Board – Amended Notice of Application
For a copy of the Bureau’s Notice of Application see:
Commissioner of Competition and The Toronto Real Estate Board – Notice of Application
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On June 27th, the Competition Bureau announced that would seek to block a proposed joint venture between Air Canada and United Continental which, according to the Bureau, would “monopolize ten important Canada/United States routes, and substantially reduce competition on nine additional routes.”
In making the announcement, the Bureau said:
“The proposed joint venture is effectively a merger between Air Canada and United Continental on all of their Canadian and US operations. It would allow the parties to jointly set prices, capacity and schedules. If allowed to proceed, it will result in:
a monopoly on ten transborder routes;
substantially reduced competition on an additional nine transborder routes; and
significantly higher prices.
In addition to challenging the joint venture, the Commissioner is challenging three existing “coordination agreements” between Air Canada and United Continental. These agreements allow Air Canada and United Continental to coordinate key aspects of competition including, but not limited to, joint pricing and scheduling, as well as revenue sharing. Through these existing agreements, the companies currently have the power to charge passengers inflated fares. Moreover, if these anti-competitive provisions are further implemented, with or without the joint venture, Canadians will pay even more for less choice and higher fares.”
The Bureau has now filed its application in this case (see: Competition Tribunal).
The Bureau’s application, which is only the second contested merger since 2005, has a number of interesting aspects. These include:
Parties’ press releases. The Bureau became aware of the proposed Air Canada/United JV from press releases issued by the parties. In the past, it was thought rather uncommon for the Bureau to become aware of mergers through the media (i.e., as opposed to parties notifying transactions to the Bureau under the pre-merger notification provisions of the Act). This may signal an increasing effort by the Bureau to challenge mergers discovered through media sweeps, either on the basis that they were notifiable or non-notifiable transactions that nevertheless potentially raise substantive competition issues (the Bureau has jurisdiction under the Act to challenge any “merger” as broadly defined in the Act, whether or not it is notifiable, i.e., exceeds the Act’s pre-notification thresholds).
Joint venture challenged as a merger. This case is also interesting as a challenge of a JV as a merger. While joint ventures can in theory be reviewed under four provisions of the Act (as a criminal conspiracy, under the civil agreements provision, as a merger or under the abuse of dominance provisions), challenges of JVs in Canada on merger grounds are relatively rare. Having said that, the definition of “merger” under the Act is very broad, encompassing not only conventional asset and share acquisitions, but also the acquisition of a “significant interest” in a business. While the Bureau has taken the position in its Merger Enforcement Guidelines (MEGs) that acquiring a “significant interest” could include where an acquirer obtained an “ability to materially influence the economic behavior of the business” (such as through control of pricing, purchasing, distribution and marketing decisions), what JVs might in reality be considered a merger has generally been more the subject of speculation than certainty for merging parties and their counsel. In this regard, the Bureau takes the position in its recently filed Application that the proposed merger will, if allowed to proceed, lead to the parties “acquiring or establishing … a significant interest” in each other’s operations, and in particular the ability to make decisions on “all aspects of competitive behavior” that would be “indistinguishable … from common ownership.” As such, if this application proceeds, it may shed needed light on what types of de facto acquisitions may trigger the merger provisions of the Act.
First challenge under section 90.1 (civil agreements provision). The case is also the first challenge by the Bureau under the civil agreements provision (section 90.1) of the Act, which came into force in March, 2010 as part of Canada’s new two-track conspiracy regime. Under section 90.1, the Bureau may make applications to the Competition Tribunal for Tribunal orders where an agreement between actual or potential competitors prevents or lessens competition substantially in one or more markets (or is likely to do so). While it is generally thought that this new civil provision has many parallels to the existing merger provisions of the Act, including the required competitive effects test, evaluative factors for market impacts and an efficiencies defence, this will be the first case to potentially test the meaning and boundaries of this new section. If the case proceeds before the Tribunal, it may clarify key elements of section 90.1 including the meaning of “agreement” and “competitors”, the evaluation of the required competitive effects test and how, if at all, a review under section 90.1 differs in substance from merger review under the merger provisions of the Act.
Attempt to block the transaction. Finally, the case is somewhat noteworthy in that the Bureau is seeking to block the Air Canada/United JV altogether. In Canada, unlike some other jurisdictions, it is relatively unusual for regulators to seek to block a transaction altogether, rather than to negotiate a remedy.
For the Bureau’s news release see:
Competition Bureau Seeks to Block Joint Venture between Air Canada and United Continental
For the Bureau’s Backgrounder see:
For the Bureau’s Tribunal Application see:
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On June 27th, the Competition Bureau issued updated draft Merger Enforcement Guidelines for public comment.
The Bureau’s Merger Enforcement Guidelines, which govern the Bureau’s approach to substantive merger review, have been revised by the Bureau following national roundtable consultations in 2010 and 2011.
For the full news release see:
Competition Bureau Issues Draft Revised Merger Enforcement Guidelines for Comment
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