KEY TAKEAWAYS:

  • The Competition Tribunal (Tribunal) requires that consent agreements disclose the basis of the conduct being remedied and the remedy’s rationale.
  • The Tribunal confirms a previous holding that mere allegations of unlawful conduct are insufficient. The Commissioner must conclude that conduct contravenes the Competition Act.
  • The decision will mean greater transparency from the settlement process.

On June 10, 2016, the Tribunal released a decision in Rakuten Kobo Inc. v. The Commissioner of Competition (Kobo), revoking a 2014 consent agreement between the Commissioner of Competition (Commissioner) and four ebook publishers (Respondent Publishers).

Following the 2014 consent agreement between the Commissioner and the Respondent Publishers, Rakuten Kobo Inc., a third-party retailer of e-books, applied to the Tribunal to change or rescind the agreement on grounds that it was based on terms that cannot be the subject of an order of the Tribunal.

The decision applies the standard set out by the Tribunal in the 2014 reference brought by the Commissioner in the same matter (for more information on the 2014 case, see our September 2014 Blakes Bulletin: Competition Bureau Outlines International Merger Priorities and Tribunal Clarifies Third-Party Challenge Rights). In that case, the Tribunal held that a consent agreement must identify each of the substantive elements of the civil provision in question and contain either an agreement that each element has been met or a statement that the Commissioner has concluded that each element has been met and that the investigated party does not contest the conclusion.

In particular, the Tribunal found that in order to exercise its jurisdiction, the Commissioner must provide enough detail to give the Tribunal sufficient understanding of the legal basis for the consent agreement. Because the consent agreement between the Commissioner and the Respondent Publishers did not contain any such information, the agreement was “fatally flawed.”

The Tribunal considered one Respondent Publisher’s argument that public interest considerations favoured the finality of settlement of legal and regulatory disputes reflected in this consent agreement, but found that there may also be public interest considerations favouring the setting aside of settlements. In this case, since the agreement could not sufficiently identify the legal basis underpinning the remedy, the Tribunal was justified in exercising its discretion to rescind the consent agreement.

Clients anticipating negotiating a consent agreement with the Commissioner should take note that:

  • The Commissioner is likely to seek to include more particulars in consent agreements in order to conform to the standard set out by the Tribunal. Negotiations over these particulars may extend the amount of time needed to complete the settlement process.
  • The requirement that additional particulars be listed in the consent agreement may have consequences for parties who may be subject to private actions in relation to the conduct addressed in a consent agreement.
  • The Kobo decision also suggests that the Tribunal is willing to take a more active supervisory role over consent agreements through their recission and variance powers. However, we expect that significant deference will generally be given to consent agreements registered with the Tribunal, so long as they meet the basic standard set out in this decision.