A few regulatory law developments and news items that caught my eye in the last couple days included:
Consumer Protection BC issued its 2011 Annual Report, which includes some discussion of marketing law enforcement and telemarketing: Debt collection, retail and travel are top questions for Consumer Protection BC.
The CBA National International Law Section has issued a call for papers: Call for papers.
Canada’s long awaited (and seriously criticized by some) Copyright Act amendment Bill (Bill C-11) passed in the House of Commons and is now moving through the Senate: Bill C-11.
The CBA has posted some information regarding its upcoming Canadian Legal Conference in Vancouver (August 12-14, 2012): CBA Canadian Legal Conference.
Health Canada announced new tougher health warnings for tobacco products: Harper Government takes action with larger health warnings on tobacco products – tough new warning labels take effect today.
Canada’s PM announced (and some industry groups, including the Canadian Council of Chief Executives, have praised) that Canada has joined negotiations for the Pacific-region trade agreement (Trans-Pacific Partnership): PM welcomes all-member support for entry into Trans-Pacific Partnership.
And, thank you to Acquisitions International for short-listing me for their M&A Awards 2012 (Legal category): 2012 M&A Awards.
____________________
For more information about our regulatory law services contact: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
The CBA’s National Competition Law Section has posted its letter to the Parliamentary and Senate Standing Committees on Finance and National Finance commenting on the proposed amendments to the Investment Canada Act (ICA) contained in Bill C-38 (for our previous posts on the proposed Investment Canada Act changes see: here and here).
Bill C-38 would, if passed, introduce two changes to the ICA: first, the Federal Government would be authorized to accept security for payment for certain penalties under the ICA, including where undertakings had been breached; second, it would broaden the exceptions to the existing privilege protections under the ICA to allow the Minister of Industry or Canadian Heritage to publicly explain why an investor had been sent a notice under subsection 23(1) of the ICA (a preliminary notice that the Minister was not satisfied that an investment was likely to be of net benefit to Canada, the relevant substantive test under the ICA).
The Section is generally critical of Bill C-38’s “omnibus style” of legislation and lack of “meaningful comment or debate”. The Section also questions whether security payments would increase compliance with undertakings, expresses a concern about the absence of limitations or guidance in the Bill on the circumstances when security may be taken (or the nature or amount) and takes the position that the additional disclosure powers for the responsible Minister under the ICA represents an “inadequate improvement on the status quo” (a criticism echoed by many other observers). In particular, the Section is critical of the permissive nature of disclosure and recommends a requirement to give reasons for Ministerial decisions (and make them public where the Minister approves or rejects an investment).
____________________
For more information about our regulatory law services contact: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
Companies and other organizations, such as trade and professional associations, may exchange information for a wide range of legitimate and pro-competitive purposes. These may include industry research, benchmarking, joint ventures or other business or strategic alliances or in the context of merger negotiations.
Indeed, the exchange of information between companies or association members can have many pro-competitive purposes and effects – for example, facilitating research or production initiatives that would be impossible without cooperation, increasing market transparency and consumer knowledge, leading to enhanced products and services or supporting lobbying and industry advocacy efforts. In this regard, competition enforcement officials, both in Canada and other major jurisdictions, generally acknowledge that markets operate more efficiently when information is relatively free and openly available to industry members.
Having said that, information exchanges – that is the exchange of certain types of competitively sensitive information between competitors, such as price, cost, market, market share, customer, supplier or business or strategic plan information – can represent a significant risk for companies, trade or professional association members (as well as their management and boards) and merging or joint venture partners.
Generally speaking, the exchange of competitively sensitive information between competitors can dampen competitive rivalry by reducing competitors’ uncertainty about their rivals’ competitive and commercial responses. More specifically, the exchange of competitively sensitive information between competitors can raise significant competition law risk under the Competition Act (the “Act”).
In Canada, the principal risk of information exchanges between competitors is that they can lead to agreements that violate section 45 of the Act, which makes it a criminal offence for competitors (or potential competitors) to enter into agreements to fix prices, divide markets or restrict output. Potential penalites under section 45 include criminal fines of up to $25 million (per count), imprisonment or up to 14 years and damages arising from civil actions.
While section 45 does not criminalize information exchanges themselves, the risk of such exchanges between competitors, without appropriate safeguards, is two-fold: first, exchanging (or discussing) competitively sensitive information may result in an agreement that contravenes section 45 (e.g., a price-fixing agreement); and second, an information exchange may be used by a court, the Competition Bureau or a private plaintiff to infer the existence of an agreement that violates section 45 (i.e., be used as “circumstantial” evidence of the existence of an agreement).
Canadian courts have relied on evidence of information exchanges as one basis to conclude that an illegal conspiracy existed and such exchanges are commonly relied on in criminal and civil proceedings in Canada under section 45. Information exchanges have sometimes involved conduct as seemingly straightforward as the discussion of prices at association meetings and in one older, but noteworthy, case, an attempt by industry members to adopt an “open pricing” policy (by exchanging price information with no express agreement to follow the exchanged rates) without contravening section 45.
The American Bar Association, Section of Antitrust Law has published their new edition of Antitrust Law Journal, which includes the following articles: “Dynamic Analysis and the Limits of Antitrust Institutions” (Douglas H. Ginsburg and Joshua D. Wright) and “Does Leegin Liberate the Law Governing Horizontal Conspiracies From Its Vertical Contamination” (M. Laurence Popofsky).
The new edition also includes a series of notes on Neo-Chicago Antitrust topics, including “A Neo-Chicago Perspective on Antitrust Institutions” (D.A. Crane), “Antitrust and the Costs of Movement” (Herbert Hovencamp), “Marrying Neo-Chicago with Behavioural Antitrust” (Max Huffman), “Chicago, Post-Chicago, and Beyond: Time to Let Go of the 20th Century” (B.H. Kobayashi and Timothy J. Muris), “A Neo-Chicago Approach to Concerted Action” (W.H. Page) and “Cartels, Corporate Compliance, and What Practitioners Really Think About Enforcement” (D. Daniel Sokol).
For a copy of the new edition see:
____________________
For more information about our regulatory law services contact: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
On June 15, 2012, the Competition Tribunal released the public version of its decision in the contested BC landfill merger case Commissioner of Competition v. CCS Corporation, allowing the Commissioner’s application and making a divestiture order.
As we wrote in our earlier post, the case, which involves the acquisition by CCS Corporation of Complete Environmental Inc. and its wholly-owned subsidiary Babkirk Land Services, is noteworthy for being the first contested merger case in Canada in six years (since 2005) and an uncommon example of a “prevent” case (mergers in Canada may be challenged under the Competition Act where they either lessen or prevent competition substantially, being the two aspects of the substantive test under section 92 of the Act). While there have been three previous prevent cases considered by the Tribunal in Canada, all of those focused on the substantial lessening aspect of the substantive test under section 92.
The Bureau’s overarching concern in this case was that the completed merger was likely to prevent competition in the hazardous waste disposal service market in the relevant market in Northern British Columbia, given that, in the Commissioner’s view, Complete was ready to enter and compete with the acquirer CCS. In this regard, Complete had obtained regulatory approvals to operate a secure landfill for hazardous solid waste.
The case is also noteworthy as an example of the Bureau’s apparent increased willingness to challenge some transactions post-closing, regardless of size, that may raise competition concerns.
In granting the Commissioner’s application, albeit with a lesser remedy than that sought by the Bureau (i.e., divestiture not dissolution), the Tribunal had some interesting things to say about the analytical framework for “prevent” cases and the competitive effects in this case (all forward looking), efficiencies and the assessment of the appropriate remedy.
A few interesting points from the Tribunal’s decision include:
Substantial Prevention of Competition
The Tribunal found that the completed merger was likely to result in a substantial prevention of competition in the market for the supply of secure landfill services, and in particular that a decrease in average tipping fees of at least 10% would be prevented by the merger.
In coming to this conclusion, the Tribunal applied a “but for” test in assessing competitive effects (i.e., comparing whether the market would, “but for” the merger, be substantially more competitive, or in the Tribunal’s words: “comparing a world in which CCS owns the relevant Secure Landfills … with a world in which Babkirk is independently operated as a Secure Landfill”).
In adopting this test, the Tribunal drew on the Federal Court of Appeal’s decision in Canada Pipe, an abuse of dominance case under section 79 of the Act, finding a parallel between the language in sections 92 (which sets out the substantive test for merger review) and 79 (abuse of dominance).
Interestingly, the Tribunal refused to rely on U.S. authorities suggested by both the Commissioner and CCS to interpret the appropriate analytical framework in a prevent case, finding that they had developed in relation to a different statutory test and were not recently decided.
Entry
In its prevent analysis, the Tribunal held that it should focus on entry, both with respect to existing firms and new entrants. Entry is a key component of the Bureau’s analysis of competitive effects as set out in its Merger Enforcement Guidelines and barriers are a relevant factor under section 93 of the Act that the Tribunal may consider in evaluating the competitive effects of a merger.
Citing Hillsdown, the Tribunal said that “conditions of entry into a relevant market can be a decisive factor in [its] assessment of whether a merger is likely to prevent or lessen competition substantially … because, ‘[i]n the absence of significant entry barriers it is unlikely that a merged firm, regardless of market share or concentration, could maintain supra-competitive pricing for any length of time.’”
While CCS argued that the relevant market was not characterized by significant barriers, pointing to a permissive regulatory approval regime, growing demand for secure waste facilities and short-term contracting practices in the industry, the Tribunal found that effective new entry would likely take a minimum of 30 months from site selection to a complete operational landfill, with no evidence of proposed new entry.
The Tribunal also found that, absent the merger, the vendors (Complete Environmental) would have constructed a new competing secure landfill that would likely have been operational by the fall of 2012 or early 2013.
CCH has reported that the Competition Bureau is set to close three offices.
From CCH:
“As part of the federal government’s recent austerity measures, the Competition Bureau will be closing three regional offices in 2013, sources report.
Offices in Hamilton, Halifax, and Calgary are slated for closure, affecting approximately 30 employees. These locations deal primarily in Fair Business Practices branch enforcement matters such as mass marketing fraud, deceptive telemarketing, deceptive prize notice, and pyramid scheme /multi-level marketing cases. (Editor)”
For more posts from CCH’s competition law blog see:
____________________
For more information about our regulatory law services contact: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
Steve Szentesi & Mark Katz
(First published in Competition Policy International, Antitrust Chronicle)
“As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles. We allege that executives at the highest levels of these companies—concerned that e-book sellers had reduced prices—worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers.”
(Attorney General Eric Holder, April 11, 2012)
“This was competition on the merits, with Apple providing a superior reading platform on a beautiful 10 inch iPad screen, with color, multi-media, and fixed display, and access to millions of future iPad purchasers. This is classic procompetitive behavior that should be celebrated, not condemned through litigation.”
(Apple Answer, May 22, 2012)
“Absent any direct evidence of conspiracy, the Government’s Complaint is necessarily based entirely on the little circumstantial evidence it was able to locate during its extensive investigation, on which it piles innuendo on top of innuendo, stretches facts and implies actions that did not occur and which Macmillan denies unequivocally. For the record, Macmillan did not conspire with other publishers in New York City restaurants.”
(Macmillan Answer, May 29, 2012)
INTRODUCTION
Before the U.S. Department of Justice (“DOJ”) filed its claim in the eBooks case earlier this year, Canadian class action plaintiffs commenced their own proceedings in the provinces of British Columbia, Ontario, and Quebec.[1]
As in the United States, the Canadian actions are challenging the agency eBook distribution model adopted by Apple and five of the world’s largest book publishers.[2] Specifically, the Canadian plaintiffs allege that Apple and the defendant publishers violated Canada’s price-fixing offense under section 45 of the Competition Act (the “Act”). The publishers allegedly committed the offense by collectively agreeing to discontinue their former wholesale distribution models, under which publishers sold eBooks at wholesale prices to distributors who in turn set retail prices, for a new agency model under which publishers set prices with distributors receiving sales commissions.[3]
The Canadian plaintiffs also allege that the publisher defendants illegally agreed not to set eBook prices below Apple’s iBookstore prices (a “most-favored-nation” provision). Finally, the plaintiffs plead a variety of non-statutory grounds for recovery, including certain common law torts (e.g., unlawful interference with economic relations) and—in Québec—claims under the Civil Code of Québec.[4]
As in the United States, the key substantive issue in Canada will be whether the conduct of Apple and the defendant publishers constitutes an illegal conspiracy. In addition, the case raises some uniquely Canadian issues relating to jurisdiction and certification and the interpretation of Canada’s conspiracy offense.
Before addressing these various questions, we provide a brief summary of the competition class action regime in Canada for background purposes.
I am pleased to be delivering the Competition Law and REALTORS course for the Real Estate Board of Greater Vancouver on Monday, June 18th. This course is available to members of Canadian real estate boards. From the Alliance for Canadian Real Estate Education:
“Competition Law and REALTORS®: What You Say and Do Matters was designed by ACRE with the assistance of CREA to help Canadian REALTORS® understand and comply with Canadian competition law. While Canadian competition law applies to all real estate professionals, this course was designed specifically for REALTORS®. This course provides an overview in plain language of Canadian competition law and practical compliance guidelines to assist REALTORS® in complying with Canadian competition law and a number of illustrative case studies.”
____________________
For more information about our regulatory law services contact: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
