May 25th, 2015
Landfill merger saved by efficiencies
A landfill merger to monopoly that would prevent prices from falling was saved by efficiencies, the Supreme Court of Canada held. Important principles for merger analysis from this decision include:
- The Competition Tribunal may make predictions about the future based on the evidence before it.
- In determining whether efficiencies brought about by the merger are greater than and offset its anti-competitive effects, the Tribunal should employ a two-step analysis, first comparing quantitative efficiencies and anti-competitive effects, and then qualitative efficiencies and effects, before finally determining whether the total efficiencies outweigh the total anti-competitive effects.
- Anti-competitive effects that can be quantified must be; if the Commissioner fails to do so, the Tribunal cannot treat them qualitatively.
Pest control: parasitic causes of action examined in BC
BC courts have been wrestling with whether common law and equitable claims can be based Competition Act offences, in addition to the statutory cause of action in the Act itself. Parliament intended the Competition Act to be a complete code, thus excluding remedies apart from those provided in the Act, the BC Court of Appeal held in Wakelam.
Following this decision, the BC Supreme Court struck claims of unlawful conspiracy, unlawful interference with economic interests, and constructive trust in Watson, but certified a class action against Visa and MasterCard, major Canadian banks, and other financial institutions, alleging that the credit card interchange fees and rules breach the Competition Act. Claims based on breaches of the criminal price maintenance provisions were statute-barred, since these provisions were repealed more than two years before the action was launched, the court held.
However, less than four months later, another BC Supreme Court judge refused to strike similar claims in a case alleging that Microsoft conspired with various computer manufacturers to gain a monopoly over PC operating systems. The judge said that Wakelam conflicted with the recent SCC decision on the tort of unlawful interference with economic relations in Bram Enterprises, because that case referred to an earlier case holding that a breach of a predecessor to the Competition Act could support the tort of conspiracy.
A third BC judge took the same view in Fairhurst, and certified a class action alleging that De Beers and diamond companies conspired to fix prices for diamonds.
The issue is now before the BC Court of Appeal in Watson.
Class action plaintiffs can obtain wiretap evidence
Class-action plaintiffs can obtain disclosure of wiretap evidence obtained by the Competition Bureau, the Supreme Court of Canada held. The Competition Act does not protect wiretap intercepts as confidential information. Privacy concerns can be addressed through conditions imposed by the court on disclosure, as well as the duty of confidentiality imposed on parties by discovery rules. (See article)
DENSO, Panasonic, and Yamashita Rubber joined the list of those pleading guilty to rigging bids for components sold to Honda and Toyota for cars manufactured in Canada, bringing the total to seven guilty pleas and over $56 million in fines. (See article)
Cruising for a fine: ECU Line Canada Inc., Overseas Container Forwarding, and two of ECU’s executives, pleaded guilty to conspiring to fix ocean freight surcharges, and were fined nearly $1.7 million. (See article)
Microtime and six individuals were charged with rigging bids for IT service contracts with Library and Archives Canada. (See article)
The Bureau laid additional charges alleging a complex bid-rigging scheme for municipal infrastructure contracts in Saint-Jean-sur-Richelieu, Quebec, bringing the total number charged to 13 individuals and 11 companies, relating to contracts worth over $21 million. (See press release)
The Bureau dropped its investigation into alleged collusion in the setting of Yen LIBOR rates due to insufficient evidence. (See Bureau press release)
Proffer information not privileged: Information disclosed to the Bureau during proffers by applicants for immunity or leniency is not protected from disclosure to other accused persons by settlement privilege, an Ontario court held. (See article)
No shortcuts: An evidentiary shortcut that imputes knowledge of documents to an accused runs contrary to the presumption of innocence and is unconstitutional, an Ontario court held. The decision is under appeal.
The transaction size threshold for pre-merger notifications was increased to $86 million in February 2015, up from $82 million in 2014. The party size threshold remains at $400 million. (See article)
Loblaw Companies Limited bagged Shoppers Drug Mart Corporation by agreeing to sell 18 of its retail stores and 9 pharmacies, and to certain behavioural restrictions (see article). The Bureau approved the sale of several Shoppers stores throughout the year. (See article)
The Bureau allowed Medtronic, Inc. to buy Covidien plc after Medtronic agreed to sell Covidien’s drug-coated balloon catheter business to The Spectranetics Corporation. (See article)
Extra! Extra! Read all about it! Transcontinental Inc. agreed to sell 34 of the 74 weekly newspapers it is buying from Quebecor Media Inc. (see article). The Bureau has since approved the sale of 14 of these newspapers. (See article)
TELUS Health agreed to make it easier for pharmacists in Quebec to switch service providers in order to obtain clearance of its acquisition of XD3 Solutions. (See article)
The Bureau allowed Bell Aliant Regional Communications Inc. to buy O.N. Tel Inc. after Bell Aliant agreed to a long-term lease of a portion of O.N. Tel’s network to Bragg Communications Inc. (See the Bureau’s press release)
Bragg backed out of its proposal to buy Bruce Telecom from the Municipality of Kincardine after the Bureau said it would seek to block the merger. (See the Bureau’s press release)
Louisiana Pacific Corporation abandoned its plan to acquire Ainsworth Lumber Co. Ltd. after the Bureau and the US Department of Justice determined that the acquisition would reduce competition for the supply of oriented strand board. (See article)
That’s a wrap: The Bureau allowed Reynolds Consumer Products, Inc. to acquire Novelis Foil Products North America division of Novelis Inc. and Novelis Corporation. (See article)
The Bureau allowed CHS Inc. to buy 7 agri-product retail outlets and 9 anhydrous ammonia businesses from Agrium Inc. (See the Bureau’s press release)
Trucking company TransForce Inc. got the green light from the Bureau to acquire its rival Contrans Group Inc. (See article)
Not Offside: The Bureau concluded that the acquisition by Canadian Tire affiliate FGL Sports Ltd. of Pro Hockey Life Sporting Goods, Inc. was unlikely to check competition in the retail market for hockey equipment. (See article)
Sobeys Inc. sold 22 grocery stores to Overwaitea Food Group LP and Federated Co-operatives Limited, pursuant to a 2013 consent agreement linked to its acquisition of Canada Safeway. (See the Bureau’s press release)
The Federal Court dismissed a challenge by TELUS to new rules requiring consent from the Minister of Industry for “deemed transfers” of cheap spectrum acquired by new entrants to large telcos even after the initial five year moratorium on such transfers. TELUS complained that the Minister had unfairly changed the rules. The court also rejected TELUS’ contention that this rule was invalid because the Commissioner of Competition and Competition Tribunal have jurisdiction over mergers. (Read the Court’s decision)
No action: some of the transactions in which the Bureau issued no action letters were:
- Continental AG’s acquisition of Veyance Technologies, Inc. due to the parties’ settlement agreement with the U.S. Department of Justice.
- Reliance Comfort Limited Partnership’s acquisition of its largest competitor National Energy Corporation.
- Manulife Financial Corporation’s acquisition of Standard Life plc.
- Burger King’s acquisition of Tim Hortons.
- Garda World Security Corporation’s acquisition of G4S Cash Solutions (Canada) Limited.
- Saputo Dairy Products Canada G.P.’s acquisition of Scotsburn Co-operative Services Limited.
- Essilor International S.A.’s acquisition of Coastal Contacts Inc.
- TVA Group’s acquisition of Vision Globale.
Second showing for TREB and the Commissioner: the Commissioner’s challenge to the Toronto Real Estate Board’s MLS® rules will be reheard following the Federal Court of Appeal decision that just because TREB does not compete with its members in the market for real estate services does not mean it cannot be liable under the abuse of dominance provisions. (See decision)
Scalded! Hot water heater rental supplier Reliance agreed to pay a $5 million fine and to make it easier for customers to switch to competitors in order to settle the Bureau’s abuse of dominance allegations. (see Bureau press release) The Tribunal held that the case against Direct Energy can continue even though EnerCare bought it and agreed not to continue Direct Energy’s allegedly anticompetitive practices. (See article; Bureau press release)
Kobo’s attempt to challenge the factual basis underpinning the consent agreement between the Commissioner and ebook publishers was rejected. Challenges are limited to whether the terms of the consent agreement go beyond the type of orders that the Tribunal can issue, whether it alleges the substantive elements of the relevant Competition Act provisions, and whether its terms are unenforceable, for example, because they are too vague. Kobo is appealing. (See article)
When applying for production orders, the Commissioner does not have to lead evidence to prove that his inquiry is bona fide, the Federal Court held in granting orders in the ebooks case against Pearson Canada Inc. and Penguin Canada Books Inc. The Commissioner must make full and frank disclosure, and show that the information sought is relevant and that the order is not excessive, disproportionate or unnecessarily burdensome. (See decision)
Apple Canada Inc. was ordered to hand over documents as part of the Bureau’s investigation into its agreements with wireless carriers.
Alcon Canada began to resupply its anti-allergy drug Patanol after the Bureau began to investigate allegations that it intentionally disrupted the supplies in order to limit or prevent competition from generic drug companies. The Bureau then dropped the inquiry. (see Bureau announcement)
The Bureau discontinued its investigation into allegations that CN implemented a rail pricing strategy for “transloading” of lumber into ocean shipping containers in Vancouver that would make it commercially unprofitable to ship to competitors’ facilities. (See Bureau announcement).
In its Price Maintenance Enforcement Guidelines, the Bureau recognizes that price maintenance can enhance non-price dimensions of intra-brand competition, and promote inter-brand competition. But it can harm competition if it excludes rivals or inhibits competition among suppliers or retailers. (See guidelines)
The Bureau recommended that Toronto should promote taxicab competition by issuing new taxi licences and allowing new software applications that arrange and pay for transportation services.
Large wireless carriers have market power, and are charging new carriers more for roaming than they charge US carriers, the Bureau said in a submission to Canada’s telecom regulator. The Bureau advised the CRTC to prohibit unfair discrimination against new carriers.
OMG GR8 news: Rogers agreed to refund over $5 million to customers that were billed for certain premium text message services, such as trivia questions and ringtones, in order to settle the Bureau’s allegations that it failed to disclose that these services were not free. The case continues against Bell and Telus.
Bad RE-AKTion: Bauer agreed to stop making claims that Bureau alleged created the impression that RE-AKT helmets protected from concussions. (See article)
Weeks after the Bureau cleared National Energy Corporation’s takeover by Reliance Home Comfort, National paid $7 million to settle allegations that its door-to-door salespeople misled consumers by telling them they needed access to their water heaters for safety reasons, legal requirements, or potential upgrades (see article). Earlier in 2014, the Ontario Court of Appeal upheld a finding that National made misleading statements about another competitor, Direct Energy. (See decision)
Duvets go down: At Bureau’s request, home retailer JYSK Canada recalled two duvet brands after testing arranged by the Bureau detected insufficient “down” and “bird of origin” content to qualify for “down” or “goose down” marketing standards. (see Bureau press release)
No longer at this address: A Quebec telemarketing scammer who demanded payment for non-existent business directory listings was sentenced to 18 months in prison after pleading guilty to eight charges of misleading advertising and deceptive telemarketing. (See article)
Error! Job Not Found: In Alberta, an online scammer was sentenced to 2 ½ years in jail for making false representations on an online job opportunities service. He was also ordered to pay $185,000 in restitution to his victims, plus a $164,000 fine. (See article)
Sometimes used clothing donation bins are run by for-profit businesses, with only a small share going to charity, even though the signage may suggest that all the clothes go to charity, the Bureau warned. (See Bureau press release).
Dow Chemical Company and its Canadian affiliate face allegations that they participated in a conspiracy to fix prices for polyether polyol after an Ontario court certified a class action brought on behalf of direct purchasers. (See decision)
An Ontario court certified a class action alleging that Telus and Bell failed to disclose that they rounded time up to the nearest minute when billing for mobile telephone calls. (See decision)
Class action plaintiffs in BC allege that HSBC’s mortgage arm and Household Trust Company did not disclose that part of the title insurance premiums paid to First Canadian Title were for legal fees, thus breaching the Competition Act’s misleading advertising provisions, as well as various provincial consumer protection laws. The court certified the class action. (See decision)
There was no prima facie evidence that Coca Cola misled consumers into purchasing vitaminwater® by misrepresenting its sugar content and health benefits, a Quebec court held in refusing to authorize the class action. (See decision)
Honda agreed to cash payments of $100-$200 plus cash rebates of $500-$1,000 to those who owned or leased a Honda Civic Hybrid between 2003 and 2009 to settle a class action alleging that its hybrid models did not achieve the fuel economy that Honda had claimed. (See decision)
The Ontario DRAM price fixing class proceeding continued to wind up with the addition of four more court-approved settlements: Infineon Technologies AG, Mitsubishi Electronic Corporation, Toshiba Corporation, and Winbond Electronics Corporation, increasing the pot to $79.5 million (up from $61.5 million in 2013). (See decision)
Class action plaintiffs obtained a $6.5 million default judgment against operators of a pyramid selling scheme in the Federal Court. (See decision)
A group of aftermarket filter makers agreed to pay $350,000 to resolve allegations that they fixed prices for aftermarket oil and air filters for cars and trucks. (See decision)
Not Good Enough: an Ontario court refused to approve a settlement agreement between Quiznos franchisees, the defendant franchisors and food supplier, Good Food Service Inc., finding the scope of the release was too broad given the nominal amount of damages. (See decision)
Findings of fact made in US and EU proceedings are not binding in Canada, the BC Supreme Court held in Pro-Sys Consultants Ltd. v. Microsoft Corporation. (See decision)
THE LONG ARM OF THE LAW
Good neighbours: a US court ordered a US company to disclose documents to the US Federal Trade Commission to send to the Bureau in Canada. The Bureau sought the documents for its premium text messaging. (See Bureau press release)
An Ontario judge enforced a request from a US court to obtain evidence from two Ontario residents for a US class action. The court held that concerns about self-incrimination could be dealt with by protections built into the order. (See article)
Going Postal: A Toronto man was sentenced by a US federal court to 10 years in prison for defrauding consumers out of over US$10 million in an advanced-fee credit card scam, following an investigation by the US Postal Inspection Service. (See Bureau press release)
Businessman John Bennett became the first Canadian extradited to the US on antitrust charges after a four-year court battle. He faces bid-rigging, conspiracy, kickback and fraud charges. The company he founded and two of its executives have already pleaded guilty, paid fines, and served time in US prisons. (See article)
Affleck Greene McMurtry’s Competition and Regulatory Law Team
AGM’s competition law team is one of Canada’s leading competition law practices. We defend businesses and individuals facing Competition Bureau inquiries and criminal and administrative prosecutions in the court and the Competition Tribunal. We act for businesses involved in price fixing class actions and other private litigation. We prepare merger notifications. We also help businesses comply with the Competition Act by providing practical advice.