Canadian COMPETITION LAW

The Canadian Bar Association (CBA) has published a new edition of its Canadian Competition Law Review, which includes articles on indirect purchaser class actions, antitrust immunity agreements, the availability and scale of litigation and investigation costs in private competition law litigation, origins of Canada’s cartel (conspiracy) laws, criminal competition law developments in 2011 and recent merger review developments.

For a copy of the new edition see:

Canadian Competition Law Review 2012, Vol. 25 No. 1

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The Canadian Interactive Advertising Bureau (IAB) has published two new advertising industry related glossaries, that may also be useful to advertising and marketing law lawyers as well: the “real time bidding” (RTB) and social media glossaries.  See: Interactive Advertising Bureau (IAB) – Real Time Bidding (RTB) Glossary and Interactive Advertising Bureau (IAB) – Social Media Glossary.  We have added links these very fine two additions to the body of competition/advertising law definitions to our own Antitrust and Advertising Alphabets.

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Guest post by Jacob Kojfman (Vancouver Securities Law)

Ever year’s proxy-season brings about its share of drama, as reporting issuers fend off hostile take-over bids, or attempted changes in management.  One key player in all of this is the proxy advisory firm.

The Canadian Securities Administrators (“CSA”) have decided to take a much closer look at the role the ISS and Glass Lewis of the world play.  The Ontario Securities Commission (“OSC”) is leading a consultation paper on the possibility of regulating these proxy advisory firms.

Some of the concerns the consultation paper has raised include the potential for conflicts, a perceived lack of transparency, and potential inaccuracies and the limited engagement with issuers.  There are also potential corporate governance implications and the extent of reliance by institutional investors on the proxy advisor recommendations.

I believe that one of the potential areas of concern that the consultation paper raises is without merit.  The lack of transparency and lack of disclosure of how the proxy advisory firm determines its recommendation is not really an issue for the public.  When an institutional investor retains a proxy advisory firm to give it a recommendation, this is a private agreement between the two parties.  While  the recommendation is sometimes made public via news releases, that is often a tactic the investor may take as part of its strategy.  Forcing a proxy advisory firm to disclose its recommendation and the factors it considered could lead to a “free rider” problem – that other institutional investors or even individual investors would be able to take advantage of the recommendation, and more importantly, the reasons behind it, without having to pay for the service.

The New York Stock Exchange Commission on Corporate Governance believes that proxy advisory firms should be held to appropriate standards of transparency and accountability, and recommends that the Securities and Exchange Commission should study these firms for their impact on corporate governance and behaviour.

Proxy advisory firms provide a valuable service to their clients, the institutional investors.  Firms that advise such clients on securities are often exempt from most securities laws because of the sophistication of their institutional client.  I see no reason why proxy advisory firms should not be granted the same treatment.

More importantly, proxy advisory firms are not advising their clients to buy or sell securities, but rather to advise these institutions how to vote their securities in light of good corporate governance principles.

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Guest post by Christine Duhaime (Duhaime Law)

The U.S. government has released a revised version of the Cybersecurity Act of 2012, which would establish a public-private partnership to improve the security of the Internet. Pursuant to the proposed legislation, the private sector would develop voluntary security practices for the Internet which would be subject to oversight from a U.S. government multi-agency council. Private sector participants would be required to share with the multi-agency council, Internet generated information, particularly (but not apparently limited to) connected with potential threats.

The material aspects of the Cybersecurity Act of 2012 are as follows:

1.  Establishment of National Cybersecurity Council with representative from the U.S. Departments of Defence, Justice and Commerce and the intelligence community as well as other federal agencies. The Council will be chaired by the Department of Homeland Security. The purpose of the Council would be to conduct risk assessments of threats and to report and monitor the source of the information and the threats;

2.  Establishment of Private-Public Partnership to develop security practices for vetting and approval by the Council;

3.  Creation of incentives for the private sector to adopt security practices and report to the Council. It is proposed that by joining in the program, private sector participants will limit potential liability for future Internet security issues;

4.  Generate information sharing practices to encourage the private sector to share information about threats with each other and with the federal government. Those that engage in information sharing practices will be protected from liability to some extent; and

5.  Consolidating federal agency reporting by establishing a unified Centre for Cybersecurity and Communications at the Department of Homeland Security and streamlining reporting requirements to ensure that federal agencies are aware of, and address, network vulnerabilities.

On July 19, 2012, President Obama released an Op-Ed piece he wrote that was published in the Wall Street Journal in support of the revised Cybersecurity Act of 2012, that is available at The White House website here.

Some aspects of President Obama’s article are unmistakably reminiscent of the events in the Bruce Willis film “Live Free or Die Hard,“ wherein John McClure foils the plans of cyber-terrorists attacking the infrastructure of the U.S. with an intent to disrupt the power, public utilities, traffic and other computer-controlled systems.

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Guest post by Jacob Kojfman (Vancouver Securities Law)

A favorite topic of discussion of mine on Vancouver Securities Law has been take-over defence tactics.  A recent Ontario Securities Commission (“OSC”) decision has emphasized what the OSC will consider to be valid reasons to keep a shareholder rights plan or “poison pill” in place.

For a while, it seemed as though the securities commissions could not get their reasons for keeping or overturning poison pills straight.  Every decision that comes out of a securities commission now helps corporate counsel better advise their clients.

In a recent decision, the OSC hearing panel threw out the shareholder rights plan of Thirdcoast Limited, which was facing a hostile takeover from Parrish & Heimbecker, Limited.  The reasons were that Thirdcoast’s rights plan was adopted in response to the hostile offer and there was no shareholder support, and there was no other viable option for Thirdcoast, and since P&H kept upping its offer, the poison pill had really run its course.

Once again, this decision reiterates the fact that a company should put together a shareholder rights plan well before it is faced with a hostile takeover.  Shareholders should have an opportunity to vote on adopting the plan.  A board of directors has to remember why it put the plan in place: to find other viable options for the company, and if none exist, then it is time for the poison pill to go.

Contact Jacob at: Jacob@vancouversecuritieslaw.ca

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Global Competition Review (GCR) has published its 2012 edition of The Handbook of Trade Enforcement:

Introduction

“World trade faces a number of challenges that are having a negative impact on demand dynamics across the globe, including instability of regional markets and local crises that unbalance regional trade. A deficit of banking investment in production development, coinciding with increasing measures to reduce state budget expenses, is pushing many manufacturers to more fiercely competitive markets and still lower demand potential. Sovereign debt crises, fluctuations in currency parities and rapidly rising oil prices form new geopolitical risks that national governments cannot ignore. According to the World Trade Organization (WTO), in 2011 world trade expanded by 5 per cent (a fall from 13.8 per cent in 2010) and this growth is expected to slow down to 3.7 per cent in 2012.

Taking into account the macroeconomic developments and the ever-increasing pressure of businesses, both national governments and regional integration organisations may shift towards policies of protectionism. However, it is vital to give credit to another current trend – the development and deepening of regional integration. It creates new opportunities for trade enforcement across larger expanded markets of several countries unified by common regulation. The key players of global trade also look for opportunities in regional integration and the solutions to problems in inter-regional dialogue.

On a regional level we can generate a significant stimulus for cross-border trade. Within one year of the lifting of customs barriers at the internal borders of the Customs Union (between Russia, Belarus and Kazakhstan), the turnover of trade increased by 37 per cent.

The strictness, or otherwise, of the regulations formed by regional integration communities is immaterial; what is important is that supranational regulation is constantly deepening and increasing its influence over regional economies.

The dark side of regionalisation is the risk of new and excessive inter-regional trade barriers replacing similar barriers that previously existed between countries. Such new barriers between larger market entities may become even higher than bilateral barriers between countries.

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Earlier today, the Federal Government announced that the Minister of Industry has approved the acquisition of Viterra Inc. by Glencore International plc., a transaction announced last March.  The Competition Bureau had already issued a no action letter in the transaction on May 4, 2012 (see: Competition Bureau Issues No Action Letter in Glencore/Viterra Merger).

In making the announcement, the Industry Minister made very brief comments saying only that he was “satisfied that the investment [was] likely to be of net benefit to Canada”, that he carefully considered Glencore’s proposed undertakings and referred to Glencore’s press release for details regarding commitments provided by Glencore.  According to media reports, Glencore has agreed to increase capital expenditures in Canada by more than $100 million, contribute to Manitoba “grain industry initiatives” and maintain Viterra’s Regina head office.

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Guest post by Andrei Mincov (Mincov Law Corporation)

On July 12, 2012, the Supreme Court of Canada issued its reasons in five copyright cases (Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright); Re: Sound v. Motion Picture Theatre Associations of Canada; Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada; Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada; and Society of Composers, Authors and Music Publishers of Canada v. Bell Canada).

The results, while quite predictable, are very disappointing for someone who values individual rights, freedom and capitalism.

Howard Knopf in his post A Proud and Progressive Pentalogy Day in Canadian Copyright Law has provided a brief outline of what the five cases stand for.  It’s a good summary of what the cases stand for, but I squarely disagree with Mr. Knopf on his conclusions.  My issues with his position start with the title, namely the use of the word “progressive”. I trust that the use of it is intentional and is in reference to the progressive movement.

You may or may not agree with Glenn Beck, but the important question to ask when using the word progressive, even outside the political context is, “what are we progressing to?”.  In my opinion, we are progressing away from a system where interests of the individual trump interests of the society and towards a system where interests of the “society”, expressed by whoever has the power to claim to be in position to represent such interests, trump interests of each particular individual making up that “society”. This never ends well.

Leaving the technicalities for a future post, I have three big problems with the 5 decisions.

My biggest problem is with paragraphs 9 and 10 of the Bell case, where the Court unanimously held that:

[9] Théberge reflected a move away from an earlier, author-centric view which focused on the exclusive right of authors and copyright owners to control how their works were used in the marketplace: see e.g. Bishop v. Stevens, [1990] 2 S.C.R. 467, at pp. 478-79. Under this former framework, any benefit the public might derive from the copyright system was only “a fortunate by-product of private entitlement”: Carys J. Craig, “Locke, Labour and Limiting the Author’s Right: A Warning against a Lockean Approach to Copyright Law” (2002), 28 Queen’s L.J. 1, at pp. 14-15.

[10] Théberge focused attention instead on the importance copyright plays in promoting the public interest, and emphasized that the dissemination of artistic works is central to developing a robustly cultured and intellectual public domain. As noted by Professor David Vaver, both protection and access must be sensitively balanced in order to achieve this goal: Intellectual Property Law: Copyright, Patents, Trade-marks (2nd ed. 2011), at p. 60.

This is exactly the problem with the current trend. I strongly believe that interests of the public should be completely irrelevant to copyright laws and copyright policy.  Whether copyright laws provide any benefits as a “fortunate by-product” or they actually hurt the public does not really matter.  What matters is whether those who create something that had not existed before have a chance to offer it to the public on THEIR terms, rather than being forced in a situation where they should either not disclose it to the public or expect the public to dictate such terms.

Notice the difference between a situation when the market forces a manufacturer to lower prices not to be squeezed out by the competition (as in copyright owners voluntarily adopting new models depending on granting access to their works for free) and a situation when the government adopts laws that say that those who really want or need to use the manufacturer’s product are entitled to steal from the manufacturer, but no more than 20% of the manufacturer’s total output (as in the government telling copyright owners they cannot sell their works because the public should have the “user right” to use them for free).

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