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Competition Law Update 2003

The Year in Review 2003

TOP STORIES

Competition Bureau proposes new “per se” conspiracy provision: Agreements between competitors for the purpose of or that have the effect of fixing prices, allocating customers or markets, or restricting output would be illegal even if they do not harm competition. If passed, this provision’s wide scope could make many existing agreements unlawful.

Other proposed amendments include allowing the Tribunal to impose “administrative monetary penalties” (fines) in civil cases and allowing victims of civil to recover damages in court, but only after Tribunal ruling.1

Court refuses to certify indirect purchaser class: In Chadha v. Bayer Inc.,2 the Ontario Court of Appeal refused to certify a class of indirect purchasers of pigments used to colour bricks, but declined to adopt a rule barring claims by indirect purchasers. The Supreme Court has denied leave to appeal. In order to certify future indirect purchaser classes, plaintiffs will need expert evidence showing how they will prove that higher prices were passed on to the indirect purchasers. This will make it considerably more difficult to certify indirect purchaser classes. [See: Court refuses to certify indirect purchaser class...]

Tribunal defines “avoidable cost” concept: In July the Competition Tribunal defined “avoidable costs” in a decision in the Commissioner’s case against Air Canada.3 Since the Bureau will apply the avoidable cost concept in predation cases, the Tribunal’s findings are important. A key aspect of its approach that may apply in other cases is its finding that costs can be avoided through redeployment of a resource associated with a cost from one use to another.

The Tribunal held that most of Air Canada’s costs are avoidable, and found that Air Canada flew below those costs on two routes. The Tribunal stayed its decision – and thus future proceedings in the case – until Air Canada emerges from bankruptcy protection under the .

Earlier in the year, Air Canada succeeded in overturning the Commissioner’s temporary order power when the Quebec Court of Appeal ruled that it offends the Canadian Bill of Rights due process guarantees.4 The Supreme Court has granted leave to appeal. [See: Commissioner's Temporary Order Power Struck]

Tribunal considers new rules that limit disclosure in Canada Pipe and Sears: New Tribunal rules that allow the Commissioner (and other parties) to hide “bad” or exculpatory documents do not offend due process guarantees in the Canadian Bill of Rights, Blanchard J. held in Canada Pipe. It is enough for respondents to know the case they have to meet, which is provided for by rules requiring the Commissioner to produce documents on which she intends to rely.5

However, in Sears, Dawson J. noted that the right to a fair hearing includes the right to make full answer and defence, which “carries with it the right to know all of the information provided to the Commissioner in the affidavits upon which the Commissioner has chosen to rely”.6 The reasoning of Dawson J. is more consistent with rules in both civil and criminal law that require disclosure of all relevant documents.[See: New Rules Constitutional, Tribunal finds]
 

1The proposals and comments can be found at: http://www.ppforum.ca/competitionact/index.html

2Chadha v. Bayer Inc. (2003), 63 O.R. (3d) 22 (C.A.)

3Canada (Commissioner of Competition) v. Air Canada (2003), 26 C.P.R. (4th) 476 (Comp. Trib.)

4Air Canada v. Canada (Attorney General) (2003), 23 C.P.R. (4th) 129 (Que. C.A.)

5Commissioner of Competition v. Canada Pipe Company, 2003 Comp. Trib. 15,

http://www.ct-tc.gc.ca/CMFiles/0030a38OKK-3172004-9927.pdf

6Commissioner of Competition v. Sears Canada Inc., 2003 Comp. Trib. 19, http://www.ct-tc.gc.ca/CMFiles/CT-2002-004_0085_38MTA-452004-1883.pdf
 

The long arm of US antitrust law: The US has been flexing its antitrust muscles outside its borders recently in several areas. In Empagran S.A. v. Hoffman-Laroche, Ltd. (January 2003),7 a federal appeal court held that non-US victims of an international conspiracy to fix prices for vitamins could sue in the US to recover damages they suffered outside of the US. The court held that it had jurisdiction so long as someone in the US could sue for damages from the same conspiracy. There is a split among US courts of appeal on this point. Empagran is being appealed to the US Supreme Court.

If Empagran stands, the US will likely become the jurisdiction of choice for those injured outside of the US by international conspiracies because of the availability of treble damages. But will Canadian courts recognize – and enforce – US courts’ assumption of jurisdiction in cases lacking a “” between the case and the US?

The Federal Trade Commission filed claims in US courts against Canadian telemarketers in at least ten cases. In some, it obtained injunctions. Some of these cases involved cooperation with the Bureau or other Canadian authorities.8 FTC statistics indicate that Canadian companies accounted for 46% of complaints of cross-border telemarketing fraud.

The FTC also sought relief in Canadian courts directly. In U.S. v. Yemec, the FTC obtained an order, a , and other orders, against a Yemec, a seller of Canadian lottery tickets to Americans. In October the Ontario Superior Court dissolved these orders, holding that the FTC does not have standing to commence stand-alone proceedings in Canada.9 It can only bring proceedings where it has an antecedent judgment from a US court.

7Empagran S.A. v. Hoffman-Laroche, Ltd., 315 F.3d 338 (D.C. Cir. 2003)

8Med Plan (http://www.ftc.gov/opa/2003/02/medplan.htm);
Bentley Myers International (http://www.ftc.gov/opa/2003/07/ephedra.htm);
American Business Registry (http://www.ftc.gov/opa/2003/07/ambus.htm);
Duraisami (http://www.ftc.gov/opa/2003/07/duraisami.htm);
Datatech Communications Inc. (http://www.ftc.gov/opa/2003/09/datatech.htm);
Newport Group (http://www.ftc.gov/opa/2003/10/newport.htm);
CSCT (http://www.ftc.gov/opa/2003/02/csct.htm);
Kinito Inc. (http://www.ftc.gov/opa/2003/10/kinito.htm);
Fulfillment Solutions Advantage Inc. (http://www.ftc.gov/opa/2003/12/weightlosscases.htm);
Canada Prepaid Legal Services Inc. ($1 million fine paid to settle: http://www.ftc.gov/opa/2002/12/nagg.htm)

9[2003] O.J. No. 3863

10The Telemarketing Sales Rule, 16 CFR Part 310, establishes a federal “Do-Not-Call Registry” and makes it an “abusive telemarketing act or practice” to call someone whose name is on the registry. Both the FTC and the Federal Communications Commission enforce the Do-Not-Call Registry. Two lower courts declared the registry unconstitutional in September, but the government is enforcing it while those decisions are under appeal. The FTC has taken the position that the Telemarketing Sales Rule applies to Canadian telemarketers calling into the US (see Med Plan, http://www.ftc.gov/opa/2003/02/medplan.htm). For more information on the Do-Not-Call Registry, see https://www.donotcall.gov

11Canada (Commissioner of Competition) v. Falconbridge Ltd. [2003] O.J. No. 1563

12Bureau press release:
http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02556e.html
;
EU Non-opposition decision: http://europa.eu.int/comm/competition/
mergers/cases/decisions/m2922_en.pdf
– Pfizer agreed to two additional divestitures relating to the EU; FTC materials: http://www.ftc.gov/os/caselist/c4075.htm
 

132003 FC 1278, [2003] F.C.J. No. 1603.
 

MERGERS

In January, the Federal Court of Appeal upheld the Tribunal’s finding that Superior Propane’s acquisition of ICG Propane was saved by efficiencies, even though it resulted in a monopoly in a number of markets.

In March, the Federal Court of Appeal dismissed Canadian Waste Services’ appeal from the Tribunal’s decision that its acquisition of the Ridge landfill would substantially prevent and lessen competition. In January 2004 the Supreme Court denied leave to appeal. In May 2003 CWS applied under s. 106 to rescind the Tribunal’s divestiture order, claiming that the circumstances that led the Tribunal to its findings had changed. The Tribunal heard the case in the late fall.

Alcan’s hostile takeover bid for Pechiney, launched in July, succeeded. In 1999, Alcan acquired Alusuisse after its attempt to merge with both Alusuisse and Pechiney was blocked by the EU.14 This time, Alcan got EU approval after offering divestitures.15 The Bureau and US authorities also approved the deal.16

The FTC challenged AspenTech’s acquisition of Hyprotech, an Alberta company, claiming that together they have an 82% market share in the engineering simulation software market.17

 

14See: Case No COMP/M.1663 Alcan/Alusuisse, http://europa.eu.int/comm/competition/mergers/cases/
decisions/m1663_en.pdf
; Case No COMP/M1715 Alcan/Pechiny – “Aborted or withdrawn 14.03.2000”, http://europa.eu.int/comm/competition/mergers/cases/
index/by_nr_m_34.html#m_1715

15Case No COMP/M.3225 – ALCAN / PECHINEY (II), Article 6(2) Non-opposition: http://europa.eu.int/comm/competition/mergers/cases/
decisions/m3225_en.pdf

16Bureau press release: http://strategis.ic.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02731e.html

DOJ materials:
http://www.usdoj.gov/atr/cases/alcan0.htm
EU Non-opposition decision: http://europa.eu.int/comm/competition/mergers/cases/
decisions/m3225_en.pdf

17for materials see: http://www.ftc.gov/opa/2003/08/aspen.htm

18http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02539e.html

19http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02499e.html

20http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02559e.html

21http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02711e.html

22http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02712e.html

23http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02507e.html

24http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02715e.html

25http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02723e.html

26http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02578e.html

27Commissioner of Competition v. Sears Canada Inc., 2003 Comp. Trib. 28

28http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02570e.html

29http://strategis.ic.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02495e.html

30http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/
vwGeneratedInterE/ct02726e.html

31MedPlan: http://strategis.ic.gc.ca/epic/internet/
incb-bc.nsf/vwGeneratedInterE/ct02504e.html
. The FTC also acted against MedPlan.
 

32Materials filed with the Tribunal can be found at: http://www.ct-tc.gc.ca/english/CaseDetails.asp?x=67&CaseID=149#198

33Materials filed with the Tribunal can be found at: http://www.ct-tc.gc.ca/english/CaseDetails.asp?x=67&CaseID=145#329

34Janelle Pharmacy Ltd. v. Blue Cross of Atlantic Canada, [2003] N.S.J. No. 307

35Eli Lilly and Co. v. Apotex Inc. 2003 FC 1171

36Molnlycke AB v. Kimberly-Clarke of Canada Ltd. (1991), 36 C.P.R. (3d) 493

37Skybridge Investments Ltd. v. Metro Motors Ltd., [2003] B.C.J. No. 1106

38Ville de Québec c. Les Constructions Bé-Con inc., [2003] Q.J. No. 2736
 

W. Michael G. Osborne
Affleck Greene McMurtry LLP

W. Michael G. Osborne

Michael is a respected and practised litigator who acts for and advises parties in a wide range of competition matters, a variety of commercial disputes, including contractual disputes, shareholders’ disputes, commercial fraud, and employment matters, and also in administrative law and constitutional issues.

Michael has been admitted as a Fellow of the Chartered Institute of Arbitrators (UK).
Michael is a frequent contributor to newsletters published by the ABA’s Anti-trust Section, The Litigator and often quoted by The Financial Post, The Lawyer’s Weekly, Lexpert Magazine and other publications of interest to the legal community.

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