© Affleck Greene McMurtry Competition Law Team. Reproduced with permission.
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Increased regulatory oversight from the Ontario Securities Commission led the Competition Bureau to allow Maple Group to acquire TMX Group and its main competitor, Alpha Trading Systems Inc. Maple also acquired CDS Clearing and Depository Services Inc. Alpha had recently become a full-fledged stock exchange and was competing vigorously with the TMX. The transaction leaves Canada with only one major stock exchange. [See Financial Post comment]
Harsher sentences for price fixing
Price fixing is like fraud and theft and ought to be treated at least as severely, if not more severely, the Federal Court ruled. The Competition Bureau’s leniency bulletin is consistent with sentencing principles in the Criminal Code, but plea bargains with proposed sentences based on a multiple of affected commerce are not sufficient to express society’s abhorrence of these crimes, nor to deter others from price fixing. In order to determine whether the plea bargain is not contrary to public interest, the court needs evidence of aggravating and mitigating factors, such as how much the offender profited from the conspiracy, how it carried out the price fixing, whether it was the ring leader, and its size and market share. As well, there needs to be a serious and very realistic threat of imprisonment in order to deter executives from price fixing.
Despite this, Crampton C.J. reluctantly accepted the $1.5 million fine that Maxzone Auto Parts (Canada) Corp. had agreed to pay for its involvement in an international price-fixing conspiracy of aftermarket replacement automotive lights. His decision heralds a tougher approach to sentencing.
Landfill merger trashed
CCS Corporation’s purchase of Babkirk Land Services Inc. would prevent competition substantially for landfill services for solid hazardous waste from oil and gas producers, the Competition Tribunal concluded. CCS was ordered to sell the shares or assets of Babkirk.
CCS bought Babkirk in 2009. At the time, CCS operated several secure landfills. Babkirk did not. Babkirk had permits to treat and store hazardous waste, and had applied for a permit to build a secure landfill. It received this permit in 2010. The Tribunal found that Babkirk would have entered the market for secure landfill services in competition with CCS, had CCS not acquired it. The merger prevented this competition.
CCS is appealing and has obtained a stay. [See Tribunal decision; Federal Court of Appeal decision]
Tim Hortons lawsuit goes stale
Tim Hortons franchisees lost their challenge to Tim Hortons’ “Always Fresh” model that allegedly reduced the profitability of various food items. The plaintiffs alleged that Tim Hortons violated the Competition Act’s conspiracy and criminal price maintenance provisions by agreeing with its distributor to raise prices for Always Fresh baked goods. These claims were rejected. [See article]
The Commissioner filed abuse of dominance applications against water heater suppliers Direct Energy Marketing Ltd. and Reliance Home Comfort LP. The day after a 2002 consent agreement expired, Direct implemented restrictive return policies and unfair charges to consumers, to make it difficult for consumers to switch to another provider, the Commissioner alleges. Reliance implemented similar policies. The Commissioner is seeking AMPs of $15 million from Direct and $10 million from Reliance. [See Bureau press release; Tribunal filings]
New Commissioner emphasizes building trust
John Pecman took over as interim Commissioner of Competition after Melanie Aitken left mid-way through her term. His “priority for the Bureau in the coming months is – building trust through collaboration between the Bureau and all its stakeholders”. But he is getting tough too, announcing recently that the Bureau will use formal production orders instead of asking parties to produce information voluntarily. [See Vancouver speech; Montreal speech]
Fill ‘er up: several more gasoline retailers, including Suncor Energy Products Inc., Canadian Tire Corporation, Mr. Gas, and Pioneer Energy LP pleaded guilty to fixing the price of gas in certain Quebec and eastern Ontario towns. So far over $3 million in fines have been imposed on 28 individuals and 7 companies. [See Bureau press releases: Suncor; Canadian Tire, Mr. Gas, and Pioneer]
Couche-Tard Inc. escaped price fixing charges after a judge found that the Crown’s repudiation of a settlement agreement irreparably prejudiced the fairness of the proceeding. [See article]
Korean Air pleaded guilty to fixing air cargo prices and was fined $5.5 million. [See Bureau press release]
Three construction companies, Construction G.T.R.L. (1990) Inc., Acoustique JCG Inc., and Entreprises de Construction OPC Inc., pleaded guilty to rigging bids for a hospital expansion in Chicoutimi. [See Bureau press release]
The Bureau’s ongoing clean-up of municipal sewer pipe contracts in Montreal resulted in 23 more bid rigging charges against Kelly Sani-Vac Inc. and two individuals. [See Bureau press release] Colmatec Inc., and Canalisation Nord Américaine Ltée pleaded guilty to bid rigging and were fined $50,000 and $15,000. A Colmatec executive was sentenced to 100 hours of community service and two years’ probation. [See Bureau press releases: June 22, 2012; November 22, 2011; November 22, 2011 backgrounder; August 31, 2012]
A former Ventilex Inc. vice-president faces charges that he rigged bids for residential high-rise building ventilation in Montreal. [See Bureau press release]
Corporate Research Group Ltd. pleaded guilty to rigging bids for federal government real estate advisory contracts and was fined $125,000. [See Bureau press release]
Charges that Progressive Waste Solutions Ltd. and its subsidiary, BFI Canada Inc. violated a July 2010 consent agreement were dropped after the Bureau discovered that its investigators had seen privileged material. [See Bureau press release]
Conditional sentences are no longer available for conspiracy, bid-rigging, and misleading advertising offences following Criminal Code amendments. Nearly all jail sentences to date under these provisions have been conditional sentences. [See Safe Streets and Communities Act]
Class Actions and Private Applications
Five groups of defendants agreed to pay over $29 million to settle allegations that they fixed prices for DRAM memory chips. Plaintiffs allege that Micron, NEC, Hitachi, Samsung, Mitsubishi, and Toshiba conspired to fix prices for DRAM. [See article]
Micron also agreed to pay $300,000 to settle a claim that it participated in a conspiracy to fix prices for SRAM memory chips. Alleged conspirators include Samsung, IBM, and Sony. [See article]
A proposed class action against Whirlpool Canada LP was a “product liability claim for pure economic losses for an allegedly negligently designed non-dangerous product” that disclosed no plain and obvious cause of action, an Ontario court ruled.
Discoverability may apply to the two-year limitation period for private actions under the Competition Act, but does not apply to the effects of a conspiracy, as they are not a part of the offence, the Federal Court of Appeal held. [See article]
Keyless entry: waiver of tort is not available for breaches of BC consumer protection legislation, the BC Court of Appeal ruled. The plaintiffs alleged that locks on Mazda3 cars were defective. [See article]
Mercedes-Benz Canada and BMW stopped consumers from buying their vehicles in the US by convincing Transport Canada to block imports. The regulated conduct defence could not be used to block the proposed class action for conspiracy, a court held. [See decision]
Soft landing: Air Canada and United Continental settled the Bureau’s application to unwind their joint venture by agreeing not to coordinate on 14 routes between Canada and the United States. [See transborder routes and consent agreement]
Despite concerns about increasing concentration and vertical integration in the broadcasting industry, the Bureau allowed media and communications giants BCE Inc. and Rogers Communications Inc. to buy a majority interest in Maple Leaf Sports & Entertainment, Maple Leafs Network Ltd., and Toronto Raptors Network Ltd. [See Bureau press release]
BCE Inc.’s proposed acquisition of Astral was blocked by the CRTC before the Bureau concluded its own review. [See CRTC decision]
Two major distributors of electrical products, WESCO Distribution Inc. and EECOL Electric Corp., got a green light to merge. Manufacturers had bargaining power that would prevent them from exercising market power. [See Bureau press release]
Meat processors Olymel L.P. and Maple Leaf Foods would gain enough market power to foreclose competitors as a result of each buying a pork producer, but this strategy would be unprofitable, the Bureau concluded in allowing the mergers. [See article]
Other mergers for which the Bureau issued No Action Letters include: Transcontinental, Inc.’s acquisition of Quad/Graphics Canada, Inc.; Chartwell Seniors Housing REIT and Health Care REIT Inc.’s acquisition of Maestro Retirement Residences Portfolio; Cardinal Health Canada Inc.’s acquisition of Futuremed Healthcare Products Corporation; and United Technology Corporation’s acquisition of Goodrich Corporation.
The pre-merger notification transaction size threshold was increased to $77 million for 2012 and $80 million for 2013. The party size threshold remains set at $400 million. In a busy year, the Bureau published revised Merger Review Process Guidelines, released Merger Interpretation Guidelines for consultation, published a Merger Review Performance Report in April, and began releasing monthly reports of merger reviews. [See Merger Interpretation Guidelines: #12 and #15; Merger Review Performance Report; Monthly Reports of Merger Reviews]
The Competition Tribunal heard the Commissioner’s applications against the Toronto Real Estate Board and Visa and Mastercard. Decisions are expected in 2013. [See Tribunal filings]
The Insurance Bureau of Canada was ordered to keep supplying the Used Car Dealers Association of Ontario with claims data, pending the hearing of UCDA’s refusal to deal application. [See article] The case settled later. [See article]
The chickens come home to roost: chicken producer Westco cannot collect on an undertaking in damages from an interim order because it deliberately and flagrantly breached that order, the Tribunal decided. [See Tribunal decision]
The Bureau accused Bell, Rogers, TELUS, and CWTA of misleading consumers about the cost of “premium texting services”, and sought $31 million in fines. [See Bureau press release]
Four companies operating a business directory scam were fined $8 million. [See article]
National Energy Corporation was ordered to stop making false and misleading statements about its competitor, Direct Energy Marketing Limited. [See article]
Telus was denied an injunction against Mobilicity’s comparative TV ads. [See article]
Bradley O’Neil lost his appeal from his conviction for fraud, theft, and misleading advertising. O’Neil’s company processed tourist tax refunds, but did not remit the refunds to its clients. [See Court of Appeal decision and Court of Queen’s Bench trial decision]
The plain view doctrine applies to computer searches where the files evincing another crime are immediately recognizable, but it does not permit a further search for additional files that are not in plain view. [See article]
Shocking: There are no defined limits on administrative monetary penalties, the Ontario Court of Appeal said in a case involving penalties for breach of securities laws. The case suggests that even higher AMPs under the Competition Act would be constitutional. [See article]
The Long Arm of US Antitrust
Don’t be evil: the FTC concluded that Google’s “Universal Search” was innovative, not anticompetitive. Google agreed to license standard-essential patents that its competitors need to make mobile phones, tablets, and gaming consoles. Google also agreed to remove restrictions in its AdWords service that discouraged advertisers from using other platforms. [See FTC press release]
Alberta internet marketer Jesse Willms agreed to pay the US Federal Trade commission $359 million to settle allegations that he charged consumers for products and services without their explicit consent. The Bureau helped with the investigation. [See settlement order]
Across the pond
E-book inquiry closed: Apple and four publishers, HarperCollins, Hachette Livre, Simon & Schuster and Macmillan, resolved price fixing allegations by agreeing that retailers, not publishers, would determine e-book prices. [Read the EC press release]
AstraZeneca’s upset stomach: AstraZeneca delayed entry of generic competitors of its anti-ulcer drug and prevented parallel trade by abusing patents and marketing procedures, the European Court of Justice held in reducing AstraZeneca’s fine slightly, to €52.5 million from €60 million. [See decision]