January 24, 2013
The International Competition Network (ICN) and others have announced a call for nominations for the best antitrust articles for the 2013 Antitrust Writing Awards, which is being co-organized by the Institute of Competition Law and the George Washington University Competition Law Center. From the ICN:
“Application for nominations of the best antitrust articles for the 2013 Antitrust Writing Awards are now being accepted through 31 January. The Steering Committees of the Antitrust Writing Awards, composed of leading enforcers, academics and counsels, will nominate the articles. To apply for nomination, please send an email to contact@concurrences.com with a link to the proposed article and its publication references. Click here to see the Rules for eligible articles. The Board of the Antitrust Writing Awards will announce the winning articles on 9 April, at the eve of the ABA Antitrust Spring Meeting. The Antitrust Writing Awards are co-organized by the Institute of Competition Law and the George Washington University Competition Law Center. These Awards aim at rewarding those who stand out from their peers by publishing the best academic or business articles.”
January 24, 2013
Steve Szentesi
Kevin Wright (Davis LLP)
(with contributions by Jonathan Gilhen – Davis LLP)
Extract from a chapter to be published in CLEBC’s
Annual Review of Law & Practice – 2013
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2012 was a busy year for Canadian competition and foreign investment law, with significant developments in all major areas including misleading advertising, mergers, abuse of dominance, criminal matters (including cartels, bid-rigging and deceptive marketing) and private actions. The following is an overview of some of the key merger and Investment Canada Act developments (with summaries of other significant developments in 2012 to come over the next few days).
MERGERS & INVESTMENT CANADA ACT
CCS
On May 29, 2012, the Competition Tribunal (the “Tribunal”) concluded that the acquisition by CCS Corporation (subsequently renamed Tervita Corporation) of the shares of Complete Environmental Inc. substantially prevented competition and ordered CCS to divest the shares or assets of Complete’s wholly-owned subsidiary Babkirk Land Services Inc. (“Babkirk”). The divestiture order was stayed pending Tervita’s appeal to the Federal Court of Appeal, which was heard on December 10 and 11, 2012.
CCS is the owner of the only two operating secure landfills in North-Eastern British Columbia (“NEBC”) permitted to accept solid hazardous waste. These landfills primarily service oil and gas industry operators seeking to dispose of materials generated through drilling activities. Babkirk had secured regulatory approvals for development of a secure hazardous waste landfill in NEBC.
On January 7, 2011, CCS acquired the shares of Complete from five individuals for just over $6 million. The acquisition fell well below the financial thresholds for mandatory pre-closing notification to the Competition Bureau (the “Bureau”). On January 24, 2011, the Commissioner of Competition (the “Commissioner”) filed an application with the Tribunal seeking a remedy under the merger provisions of the Act. Although Babkirk had not yet constructed a landfill, the Commissioner contended that the acquisition was a merger that prevented, or was likely to prevent, competition substantially by eliminating the only likely imminent competitor for secure landfill services in NEBC. The vendors were also named as respondents since the Commissioner sought an order to dissolve the acquisition. Normally the Bureau’s preferred merger remedy is divestiture by the purchaser.
Following a hearing in late 2011, the Tribunal concluded that the acquisition was a “merger” that “… was more likely than not to maintain the ability of CCS to exercise materially greater market power” and which was “likely to prevent competition substantially.” The Tribunal rejected CCS’s defence that the merger was likely to achieve efficiencies that outweighed any anti-competitive effects. However, the Tribunal held that the Commissioner’s proposed dissolution remedy would be overbroad, intrusive and less effective and ordered divestiture instead.
The Commissioner is normally selective in bringing contested merger cases, with the CCS case being only the 6th contested merger decided by the Tribunal since 1986. The case reinforces that the Commissioner may pursue any merger, including one that is localized or is relatively small in terms of deal size, for up to one year after closing. The case provided an opportunity for the Tribunal to articulate its approach to an alleged prevention (as opposed to a lessening) of competition and for the application of the efficiencies defence under section 96 of the Act.
The decision illustrates that in a prevent case, an order can issue even where the parties did not expect to compete but for the merger. Here, the Tribunal found that although the vendors had intended to operate the Babkirk site as a bioremediation facility primarily, eventually they would have abandoned that plan and they (or new owners) would have competed with CCS directly by landfilling. The Tribunal also ruled that the concept of “merger” is broad and includes the acquisition of non-operational assets obtained in the development of a business.
Investment Canada Act
In January 2013, Industry Canada announced that the threshold under the Investment Canada Act for required advance review of most direct foreign acquisitions (involving investors or purchasers from WTO-member states) of control of Canadian businesses increased from $330 million to $344 million.
New SOE Guidelines
On December 7, 2012, the Minister of Industry announced that the $15.1 billion acquisition of Nexen Inc. by China National Offshore Oil Co. (“CNOOC”) and the $6 billion acquisition of Progress Energy Resources Corp. (“Progress”) by Malaysia’s Petronas had been approved under the Investment Canada Act. The approvals of these takeover bids come after the Canadian government’s rejection in 2010 of the proposed acquisition by BHP Billiton PLC of PotashCorp, which had left some observers with the impression that Canada was growing increasingly hostile to foreign investment.
Concurrently with announcing the approval of the Nexen/CNOOC and Progress/Petronas transactions, the Canadian government announced revisions to Canada’s foreign investment guidelines, which are intended to clarify the review process for investments by foreign state-owned enterprises (“SOEs”).
Under the Investment Canada Act, certain large foreign investments to acquire control of a Canadian business that exceed specified financial thresholds are subject to a review by the Minister to determine whether the transaction is likely to be of “net benefit to Canada” based on six, largely economic, factors (“net benefit to Canada” test) In addition to the review factors enumerated in the Investment Canada Act, the new SOE Guidelines outline key considerations in determining whether a proposed investment by an SOE will be of net benefit to Canada. While the “net benefit to Canada” test will still apply, the government will look at such factors as the governance and commercial orientation of the acquirer, the degree of foreign state control or influence over the acquirer, the extent to which the acquirer conforms to Canadian standards of corporate governance (such as transparency and disclosure), adherence to free market principles, and the likelihood that the new enterprise will operate on a commercial basis.
In the new SOE Guidelines, the definition of an SOE has been expanded to include not only entities owned by a foreign state, but also entities that are directly or indirectly owned, controlled, or influenced by a foreign government, potentially creating uncertainty as to when the new SOE policy regime applies.
The Minister will monitor SOE transactions throughout the Canadian economy, with a specific focus on three factors: (a) the degree of control or influence a state-owned enterprise would likely exert on the Canadian business that is being acquired; (b) the degree of control or influence a state-owned enterprise would likely exert on the industry in which the Canadian business operates; and (c) the extent to which a foreign state is likely to exercise control or influence over the state-owned enterprise acquiring the Canadian business.
The new SOE Guidelines will also target investments in the Canadian oil sands. In the future, acquisitions by foreign SOEs of Canadian oil sands companies will only be found to be of net benefit to Canada on an “exceptional basis”. This approach marks a departure from the former SOE Guidelines, which did not identify specific industries or assets that are considered more sensitive than others.
Finally, the previously announced amendments (that had yet to be implemented) to the Investment Canada Act to increase progressively the financial thresholds for a review of investments by WTO non-SOE foreign investors from $330 million (in 2012) to $1 billion in enterprise value will not apply to proposed takeovers by SOEs, which will remain at $330 million, adjusted annually, based on the book value of assets (not enterprise value).
Monthly Merger Reports
In an effort to increase transparency in its merger review process, in February 2012 the Bureau announced that it would begin publishing on its website a monthly list of completed merger reviews (“Merger List”). The Merger List will list all mergers for which a pre-merger notification was made under section 114 of the Act, a request was made for an advance ruling certificate under section 102, or both, and will also set out the names of the parties to the merger, the industry sector involved and the result of the review by the Bureau, being: (i) “ARC”, signifying issuance of an advance ruling certificate; (ii) “NAL”, signifying the issuance of a “no action letter”, which is a letter from the Commissioner confirming that he does not, at that time, intend to make an application under section 92 of the Act in respect of the merger (or proposed merger); (iii) “CA”, signifying the registration of a consent agreement with the Tribunal; and (iv) “JD”, signifying a judicial decision in respect of the merger (or proposed merger).
Prior to the Bureau’s official announcement, some stakeholders raised concerns with the publication of the Merger List, primarily on the basis that information provided by parties to the Bureau pursuant to the Act is subject to statutory confidentiality obligations under section 29, which does not have an express exception to permit such publication. Notwithstanding the concerns raised by stakeholders, the Bureau commenced publication of the Merger List in February 2012.
January 23, 2013
The Competition Law Section of the Canadian Bar Association has issued a call for papers for its next Canadian Competition Law Review. From the CBA:
“Submissions for the Canadian Competition Law Review are being requested, and should be received by the Editorial Board at the e-mail address shown below, no later than April 1, 2013 for publication in 2013. Academic-quality papers and case comments will be selected for publication on the basis of a double-blind peer reviewed process. Suggested maximum length of full papers is 12,000 words. Papers should be submitted (with authorship removed from title page) to: cancomplrev.@cba.org.”
For more information see: CBA – National Competition Law Section.
January 23, 2013
Steve Szentesi & Kevin Wright (Davis LLP)
Extract from a chapter to be published in CLEBC’s
Annual Review of Law & Practice – 2013
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2012 was a busy year for Canadian competition and foreign investment law, with significant developments in all major areas including misleading advertising, mergers, abuse of dominance, criminal matters (including cartels, bid-rigging and deceptive marketing) and private actions. The following is an overview of some of the key misleading advertising developments (with summaries of other significant developments in 2012 to come over the next few days).
Richard v. Time
(“General Impression” Test & Disclaimers)
In Richard v. Time Inc. (2012 SCC 8), a Quebec resident received a prize mail-out relating to magazine subscription marketing leading him to believe he had won more than $800,000 (the mail-out stated he “WON $833,337.00!” when small print disclaimers disclosed that only a chance to win was being offered). He returned the mail-out, subscribed to the magazine and then requested his prize. When told he had not won, but was merely eligible to participate in a sweepstakes, he sued under the Quebec Consumer Protection Act (“QCPA”). While successful at trial, the Court of Appeal reversed and the recipient appealed to the Supreme Court.
On appeal, the Supreme Court considered the standard for the “general impression” test for misleading advertising under the QCPA. In this regard, advertising can be false or misleading, under some consumer protection legislation as well as the Competition Act (the “Act”), where a claim is literally false or the “general impression” is misleading. This “general impression” test can apply where, for example, a disclaimer fails to alter the overall misleading impression of a “headline” claim, two true claims are made but, when associated, they create a misleading general impression or material information is omitted (e.g., additional pricing, key limitations/conditions, etc.).
The Supreme Court held that the relevant consumer for the QCPA’s general impression test was a “credulous and inexperienced” consumer. Accordingly, courts should view the average consumer as “someone … not particularly experienced at detecting the falsehoods or subtleties found in commercial representations” (both a lower standard than held by the Court of Appeal in this case as well as other cases decided under the Act, where courts have generally held the relevant consumer to be an “average consumer”).
The Supreme Court in this case held that the general impression of the prize mail-out was that the grand prize had been won, which was misleading, and awarded compensatory and punitive damages. The Court also confirmed that in considering whether an advertisement is misleading the entire context, including layout and arrangement of text, must be considered and that fine print disclaimers (in this case “riddled with misleading representations”) failed to cure the otherwise misleading prize claim. Though decided under Quebec law, this case is important in that it has started a debate as to whether Canadian courts will lower the bar for the general impression test for competition law advertising cases.
Yellow Page Marketing
(Misleading Business Claims & Disclaimers)
In Commissioner of Competition v. Yellow Page Marketing, 2012 ONSC 927 (Sup. Ct.), a group of companies and individuals sent faxes designed to lead recipients to believe they were confirming online directory information for the Yellow Pages Group (“YPG”). In fact the companies, which used names and logos resembling YPG, were unrelated to YPG and used fine print disclaimers to sign-up recipients to new two-year online directory contracts with significant fees. The Ontario Superior Court reviewed the relevant law under the general civil misleading advertising provision of the Act (s. 74.01), finding that the faxes were misleading, material and that the fine print disclaimers failed to cure otherwise misleading claims. The penalties ordered by the Court included a ten-year prohibition order, compensating consumers and more than $9 million in AMPs (including more than $1 million against three individuals). This was the highest award to date in contested proceedings for a Canadian misleading advertising case.
Rogers and Rogers/Bell/TELUS Advertising Cases
(Performance Claims and Mobile Advertising)
In two of the most important advertising law developments in 2012, the Competition Bureau (the “Bureau”) challenged Rogers, Bell and TELUS in cases involving performance claims (Commissioner of Competition v. Chatr Wireless Inc., CV-10-8993-00CL (Ont. Sup. Ct.)) (“Rogers”) and price claims for “premium texting” wireless services (Commissioner of Competition v. Rogers Communications Inc., 12-55497 (Ont. Sup. Ct.)) (“Rogers/Bell/TELUS”).
In the Rogers case, the Bureau is challenging two performance claims made by Rogers in relation to its cell phone brand Chatr: that its service had “fewer dropped calls than new wireless carriers” and that customers had “no worries about dropped calls”. The Bureau argues that these claims, made to compete with new wireless entrants, were literally false in some cases (in markets where new entrants’ dropped call rates were superior) and where true, were nevertheless misleading because while giving the general impression of appreciably lower dropped call rates, any differences in performance were in reality “inconsequential and imperceptible”. The Bureau is also arguing that disclaimers used by Rogers, which included language that in the Bureau’s view would be “meaningless” to an average consumer, failed to cure the otherwise misleading general impression of the performance claims. Rogers in turn is challenging the appropriate data and methodology for performance claims made and is also making constitutional challenges to the performance claim provision of the Act (based on Charter freedom of expression arguments) and to the $10 million AMPs that may now be imposed under the Act for misleading advertising (arguing they are criminal in nature, constitute penal consequences and should be given the same procedural safeguards as criminal offences).
In the Rogers/Bell/TELUS case, the Bureau commenced additional proceedings in Ontario against Bell Canada, Rogers Communications, TELUS Corporation (the “Telecoms”) and the Canadian Wireless Telecommunications Association (“CWTA”) for alleged misleading advertising in relation to “premium texting services” (see: Competition Bureau, News Release, “Competition Bureau Sues Bell, Rogers and Telus for Misleading Consumers” (September 14, 2012)). In this second case, the Bureau is alleging that the Telecoms and CWTA facilitated the sale of 3rd party premium-rate digital content (e.g., news, advice, trivia, horoscopes, ringtones, etc.) without adequately disclosing their fees and suggested that some services were free and is seeking $31 million in AMPS and restitution for consumers. The essence of the Bureau’s claim is twofold: first, that the wireless companies made false or misleading representations to the public the general impression of which was that consumers could receive premium text messaging and other services for free (when they were in fact charged for content); and second, that claims were made that consumers were safeguarded from receiving and having to pay unauthorized charges, when the Telecoms collected and facilitated such charges keeping a percentage. The Bureau also argues that the recent lower general impression test from the Supreme Court of Canada’s decision in Richard v. Time (discussed above) should apply, alleging that the Telecoms’ claims were targeted at wireless users including “credulous, inexperienced, and vulnerable” persons, such as children.
Implications of Recent Advertising Cases
While the two telecom cases discussed above were ongoing at the time of writing, several of these cases have established new law, including lowering the bar for the “general impression” test in Quebec (which may be adopted by courts in other provinces), clarifying the meaning of “business interest” in misleading advertising cases, adding to the case law on disclaimers and illustrating some of the factors Canadian courts will consider in imposing the now more significant penalties possible for misleading advertising.
They are also a reminder of some established advertising law principles, including that courts will consider the overall context and impression of challenged advertising, that fine print or overly legalistic disclaimers may not cure otherwise false or misleading headline claims, that the misleading advertising provisions of the Act apply to product and business claims, and that a claim may violate the misleading advertising provisions of the Act where it is either literally false or the general impression is false or misleading.
Finally, these cases illustrate several important enforcement trends, including increased scrutiny of price and performance claims, challenges of fine print disclaimers, a focus on mobile devices and other new technologies, and a willingness by the Bureau to regularly seek the maximum statutory penalties for misleading advertising.
January 22, 2013
The Conference Board of Canada published a news release and report earlier today on Canada/China trade entitled: “Walking the Silk Road: Understanding Canada’s Changing Trade Patterns”. Abstract:
“Canada’s trading patterns have changed fundamentally over the past decade. The Canadian–U.S. trade relationship is waning in importance, while emerging markets, particularly China, are becoming increasingly important. Also, our trade strengths are shifting away from some manufactured products toward professional services and products related to our natural resource wealth. These changes are not just the result of the strong dollar; the growing role of emerging markets and shrinking trade barriers are key drivers. This briefing examines these changes and a wide array of factors affecting them.”
For copies of the news release and report see: here and here.
January 20, 2013
The Canadian Society of Association Executives (CSAE) in Toronto has issued a call for conference speaker proposals for their upcoming 2013 National Conference & Showcase, to be held in Winnipeg in September. I had the honor of speaking at this conference last fall, on the topic of trade associations and competition law compliance. It is an impressive event attended by association executives from across Canada in many sectors. For more information about the conference and speaker proposal process visit the CSAE’s website: CSAE.
January 18, 2013
The Globe has published an interesting new paper by G. Bishop that argues, as have others persuasively, that Canada’s productivity suffers from a lack of competition and innovation in key sectors. Abstract:
“Acting as a background paper for our event The Canada We Want in 2020: Competition Matters, Grant Bishop explores the various policy discussions on the impact of competition. The first part discusses the current context, examining the statutory and regulatory environment in Canada, as well as particular barriers to domestic competition and foreign entry. The second part briefly summarizes theories and evidence of linkages between competition and productivity.”
For copies of the paper and article see: Competition Matters and Barriers to competition must fall if productivity is to gain.
January 17, 2013
For anyone following the unusual, to say the least, story of Manti Te’o and apparent online romance fraud played on him, this may be of interest.
The Competition Bureau, together with a number of other Canadian consumer protection agencies including Consumer Protection BC, the Better Business Bureau and RCMP have published a Top Ten Scams 2013 list describing the “Scam of the Year” together with nine other types of fraud the agencies have been combatting.
Online scams described, along with warning signs, include the following entertaining medley of online ways one can get duped: advertising trolls, online romance scams, affinity fraud, curbers, computer virus fixing schemes, twisted text prizes and pretender invoices.
If nothing else, a very entertaining (if slightly disturbing) read.
For the news release and blog post see: Consumer Protection BC – Top Ten Scams 2013 – Just in case a scam is around the corner and We’re counting down the Top 10 Scams.
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
