Antitrust/Competition & Marketing Group 2009 Year In Review

Canada

2009 - A Year of Change Mergers Criminal Matters Private Civil Actions For Damages Marketing & Advertising Abuse Of Dominance And Other Reviewable Practices Investment Canada Act International

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2009 – A Year Of Change

Significant amendments to the Competition Act and the Investment Canada Act, contained in Bill C-101, were introduced in Parliament on February 6, 2009, and enacted on March 12, 2009. The amendments are discussed in various of our 2008 and 2009 bulletins2 and to some extent in this bulletin. Key amendments to the Competition Act include the following: (i) establishment of a dual-track criminal/civil regime for agreements with competitors; (ii) repeal of criminal price discrimination, predatory pricing, price maintenance (replaced with a new civil price maintenance provision), and discriminatory promotional allowances provisions; (iii) increased criminal fines for a number of offences, including, among others, conspiracy, bid-rigging, and false or misleading representations; (iv) introduction of significant administrative monetary penalties for abuse of dominance; (v) a new U.S.-style merger notification and review regime and increased size-of-transaction notification thresholds; and (vi) a decrease in the amount of time the Commissioner of Competition has to challenge a transaction after closing (down from 3 years to 1 year). Key amendments to the Investment Canada Act include an increase and change to the WTO investor threshold applicable in the determination of whether an investment must be submitted for ministerial review to assess "net benefit to Canada" and the introduction of a regime to review investments on the basis of national security concerns.

In August 2009, Ms. Melanie Aitken was appointed Commissioner of Competition. Ms. Aitken held the position of Interim Commissioner of Competition following the departure of Ms. Sheridan Scott (the incumbent Commissioner) in January 2009.

Mergers

Fundamental Changes To The Pre-Merger Notification Regime In The Competition Act

Prior to the Bill C-10 amendments, pre-merger notification under the Competition Act was required only where a C $400 million size-of-parties and a C $50 million size-of-transaction threshold were exceeded. Effective March 12, 2009, the size-of-transaction threshold was increased to C $70 million. Moreover, the threshold will henceforth be adjusted annually based on changes in national GDP. (Indeed, the threshold for 2010 is likely to be less than C $70 million.)

Also, the previous 14 and 42-day waiting periods for short-form and long-form notifications have been replaced with a single process for merger notification and review, whereby an initial 30-day waiting period applies but can be extended by the Commissioner of Competition issuing a supplementary information request (SIR), in which case completion is prohibited until 30 days after compliance with the SIR. The information required in connection with the merger notification requirement is to be outlined in amendments to the Notifiable Transactions Regulations.

The Bill C-10 amendments also established a mechanism for the imposition of administrative monetary penalties of up to C $10,000 per day for each day that a party, without good and sufficient cause, has completed a transaction prior to expiration of the applicable waiting periods, contrary to the Competition Act. This is in addition to the pre-existing ability of the Commissioner to impose a fine of up to C $50,000 for failing to comply with the merger notification regime without good and sufficient cause.

Change To The Limitation Period For Proceedings Under The Competition Act In Respect Of Completed Mergers

As mentioned above, the Bill C-10 amendments reduced the time the Commissioner has to challenge a merger before the Competition Tribunal to one year after the merger's substantial completion, down from three years.

Draft Notifiable Transactions Regulations

On April 4, 2009, draft regulations amending the Notifiable Transactions Regulations were published for comment. The amendments are intended in large part to support the amendments to the Competition Act pre-merger notification provisions and also to accomplish long overdue housekeeping such as correcting outdated references. The most significant changes in the draft regulations are the new requirements that copies of legal documents that are to be used to implement a notifiable merger transaction and studies, surveys, analyses and reports prepared or received by a senior officer of the notifying party or its relevant affiliates for the purpose of assessing the proposed transaction be supplied with the notification. The latter requirement is virtually identical to that in item 4c of the U.S. Hart-Scott-Rodino Notification and Report Form.

The new regulations are expected to be promulgated in the near term.

Merger Review Process Guidelines

The guidelines describe the Bureau's general approach to administering the two-stage merger review process established by the Bill C-10 amendments. Specifically, they describe the process the Bureau will follow during the initial 30-day waiting period and after a decision to issue a SIR has been taken. Among other things, in relation to SIRs, the guidelines provide for a pre-issuance dialogue with the parties, limiting the number of custodians to be searched and limiting the time period to which record and data requests are to relate.

The guidelines also introduce the "timing agreement" device, which the Bureau may use where its review has not been completed within the initial 30-day waiting period and the Commissioner has elected not to issue a SIR.

New Efficiencies Bulletin

In March 2009, the Bureau issued its Bulletin on Efficiencies in Merger Review, which is described as a "supplement" to the Bureau's Merger Enforcement Guidelines.

By way of background, the Competition Act contains an efficiencies exception that provides that a merger that prevents or lessens competition substantially or has already done so, may nonetheless not be the subject of a Competition Tribunal order under the substantive merger provisions of the Competition Act if the merger has brought about or is likely to bring about efficiencies that are greater than and will offset the merger's anti-competitive effects, and those efficiencies would likely not be realized if the proposed Competition Tribunal order were made.

The bulletin includes a description of the information that the Bureau states would be useful in its analysis of efficiency claims in general and clarifies its approach to, among other things, assessing dynamic efficiencies and gains in efficiency that are likely to be generated outside of Canada. Importantly, the bulletin states that a thorough assessment of efficiency claims is only necessary in relation to those mergers that raise significant competition concerns.

Merger Litigation And Consent Agreements

In contrast to 2008, which saw important merger litigation including in relation to the Labatt-Lakeport merger and the American Iron & Metal Company Inc.-SNF Inc. merger, there was no new merger jurisprudence in 2009. (The Bureau, after failing to secure an injunction in relation to the Labatt-Lakeport merger and enduring the controversy attached to its application for a section 11 (production) order in relation to that same merger, decided in early 2009 not to challenge the merger based on "insufficient evidence to establish that the transaction is likely to substantially lessen or prevent competition".)

However, in 2009 the Bureau secured consent agreements in relation to (i) the acquisition by Clean Harbors, Inc. of Eveready, Inc.; (ii) the merger of Pfizer and Wyeth; (iii) the merger of Merck and Schering-Plough; (iv) the proposed acquisition by Agrium Inc. of CF Industries; and (v) Suncor's merger with Petro-Canada. Also, in the BASF acquisition of Ciba Holding AG, the Bureau concluded that commitments made to the FTC and the European Union Competition Directorate adequately addressed the Bureau's concerns respecting anticompetitive effects in the supply of certain pigments and no separate consent agreement for Canada was required. A similar approach was adopted in relation to the Dow Chemical acquisition of Rohm and Haas. Our experience suggests this (practical) approach is one that may be employed with increasing frequency in appropriate circumstances.

Criminal Matters

Cases

2009 saw a number of notable convictions by guilty pleas in domestic and international cartel cases.

Ten individuals and six companies have, to date, pleaded guilty, with fines totaling over C $2.7 million, in an alleged domestic cartel fixing retail gasoline prices in Quebec. Of the ten individuals who have pleaded guilty, six have been sentenced to terms of imprisonment, totaling 54 months.

Four air cargo carriers - Société Air France (Air France), Koninklijke Luchtvaart Maatschappij N.V. (KLM), Martinair Holland N.V. (Martinair) and Qantas...