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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Global Competition Review (Getting the Deal Through) has recently published several new M&A and regulatory law related global surveys (including Canada) in their rather fine series. From GCR:
Mergers & Acquisitions 2102
“Getting the Deal Through is delighted to publish the fully revised and updated thirteenth edition of Mergers & Acquisitions, a volume in our series of annual reports, which provide international analysis in key areas of law and policy for corporate counsel, cross-border legal practitioners and business people.
Mergers & Acquisitions 2012 examines the law and regulation of business combinations and addresses the most important issues for international deals.
Following the format adopted throughout the series, the same key questions are answered by leading practitioners in each of the 67 jurisdictions featured. New jurisdictions this year include Australia, Bolivia, the Cayman Islands, Delaware, the Republic of Georgia, Indonesia, Kazakhstan, Kuwait, Kyrgyzstan, Pakistan, Peru, Serbia and Tajikistan. Global and EU overviews are also provided.
Many legal disciplines come into play in large M&A deals. In particular, advisers must take account of competition regulation. This volume contains an appendix covering merger control rules across the world. For a more detailed analysis please refer to another volume of the Getting the Deal Through series: Merger Control.”
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:
Advertising Standards Canada (ASC) will be hosting an upcoming seminar on the rather hot topic (if only to advertising law geeks) of disclaimers in Toronto on June 12, 2012.
From the ASC:
“Disclaimers are not an afterthought. In today’s climate they must be top of mind for advertiser and agency professionals – not just their legal counsel.
The Competition Bureau’s recent enforcement actions regarding misleading advertising and the Supreme Court of Canada’s recent guidance on the ‘general impression’ test in its judgment against an advertiser of a contest promotion have made this patently clear. Learn what these recent legal developments mean for the appropriate use, content and placement of disclaimers in advertising. The Supreme Court Case also has implications for how advertisers define the average consumer – this will be a critical factor going forward.
Join ASC and our distinguished panel to learn how you can help ensure your advertising meets regulatory requirements as well as the provisions of Canadian Code of Advertising Standards.”
UBC’s National Centre for Business Law will be hosting its annual TMX Lecture this coming Tuesday, May 29, 2012 from 12:30 – 1:30 at the Four Seasons Hotel in Vancouver. UBC law professor Cristie Ford will discuss “Financial Crisis and Regulatory Design”:
“Regulators, scholars and private sector actors are still working to make sense of the causes of the recent financial crisis. While many contributing factors are now quite well understood, one important factor has not yet garnered the attention it should: the formal structure and design of financial regulatory architecture. Financial regulation, like regulation generally, has been revolutionized over the last few decades. Across North America, Europe, Australia, and the UK, old-fashioned, bureaucratic “command-and-control” regulation has given way to what has come to be known as “flexible regulation.” Drawing on some examples from the recent financial crisis and looking especially at one of the essential founding versions of flexible regulation, Ian Ayres’s and John Braithwaite’s “responsive regulation,” this TMX Lecture considers the subtle but undeniable relationship between flexible regulation scholarship, and real-life financial disaster.”
On May 17, 2012, leave was granted by the Supreme Court (per Justices LeBel, Fish and Cromwell) in the Quebec Dynamic Random Access Memory (DRAMs) case (Samsung Electronics Co., et al v. Option Consommateurs, et al (Que. C.A., Nov. 16, 2011). This case will be consolidated with the two British Columbia indirect purchaser price-fixing cases scheduled to be heard by the Supreme Court in October (Pro-Sys Consultants Ltd., et al. v. Microsoft Corporation, et al. and Sun-Rype Products Ltd., et al. v. Archer Daniels Midland Company, et al.).
This much watched (now trilogy) of cases may finally lead to a resolution in Canada of the unsettled ability of indirect purchasers to bring price-fixing class action suits (the three cases to be heard are conflicting cases – the two British Columbia appellate decisions having denied indirect purchasers standing while the Quebec Court of Appeal took the opposite position allowing indirect purchasers to proceed in the Quebec DRAMs case).
For the Supreme Court’s leave decision see: applications for leave. See also: parties, counsel, summary, factums.
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The U.S. Federal Trade Commission will be holding a very interesting upcoming workshop on advertising and privacy disclosure in online and mobile media on May 30, 2012 entitled In Short: Advertising & Privacy Disclosures in a Digital World.
The workshop, which will also be webcast, will include the following topics: Mobile Privacy Disclosures, Mobile Advertising Disclosures, Social Media Disclosures and Cross-Platform Advertising Disclosures.
Speakers are to include representatives from the Federal Trade Commission, Berkeley School of Information, NetChoice, National Consumers League, Clorox, Facebook, Word of Mouth Marketing Association, Procter & Gamble, the Interactive Advertising Bureau (IAB), Best Buy and others.
For more information see: In Short: Advertising & Privacy Disclosures in a Digital World
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In a bit of a setback to the defendants in the ongoing e-books cartel case, the New York District Court for the Southern District of New York recently dismissed a motion by the defendants to have the plaintiffs’ class action dismissed.
In a detailed judgment, justice Denise Cote provides a rather thorough restatement of pleading rules in federal antitrust cases and evidence required to establish a violation of Section 1 of the Sherman Act (the U.S. federal parallel to section 45 of Canada’s Competition Act), which prohibits unreasonable restraints of trade (including horizontal price-fixing agreements, market allocation agreements and in some instances group boycotts).
Some of the interesting aspects of this recent judgment that stood out to me, and there are a number of others, include:
1. Rather strong language that the Court accepted, at least at this preliminary stage, the plaintiffs’ arguments of a horizontal price-fixing conspiracy. For example, the Court held that the alleged agreement is “fundamentally horizontal”.
2. An acceptance of the plaintiffs’ argument that the relevant standard should be a per se (not rule of reason) review, holding that the alleged agreement is “at root, a horizontal price restraint”. In Canada, section 45 of the Competition Act makes price-fixing, market allocation and supply/output restriction agreements per se illegal, although it largely remains to be seen what types of cases will be challenged by the Competition Bureau under section 90.1 of the Act (which has parallels to the rule of reason standard in the U.S.).
3. A recap of recent U.S. jurisprudence on hub-and-spoke cartels, including discussions of the Interstate Circuit and Toys “R” Us cases.
4. A restatement of the types of indirect (i.e., circumstantial) evidence sufficient to establish a cartel, including simultaneous price changes. In Canada, like the U.S., a number of different types of indirect or circumstantial evidence (sometimes also referred to as “facilitating factors”) can be relied upon to establish a conspiracy, including evidence of meetings, simultaneous price increases and language or conduct that can only be explained by the existence of an agreement.
5. Distinguishing recent U.S. vertical price maintenance decisions, notably the U.S. Supreme Court’s decision in Leegin Creative, from horizontal arrangements between competitors.
6. A general review of the necessary elements to establish a violation of section 1 of the Sherman Act (many of which being the same or paralleling Canadian requirements).
Given that class actions have now also been commenced in Canada (in British Columbia, Ontario and Quebec), it will be interesting to see what arguments, if any, may be made by the defendants in Canada in response to the Canadian plaintiffs’ claims.
For a copy of the Court’s Opinion see:
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
