The Canadian Competition Tribunal recently dismissed a jurisdictional challenge by HarperCollins to the Commissioner of Competition’s application for an order prohibiting the implementation of an alleged agreement between HarperCollins and other e-book publishers. The Commissioner’s application is under section 90.1 of the Competition Act (“non-criminal agreements between competitors”). It alleges, broadly speaking, that in 2010, HarperCollins US formed the anti-competitive arrangement in the US with other US publishers and retailer Apple. The decision is significant because it suggests that the existence of anti-competitive effects in Canada attributable to the impugned conduct (even if the conduct takes place outside of Canada) can be sufficient to establish the necessary “real and substantial connection” granting the Competition Tribunal, a creature of statute, territorial jurisdiction.

Background

HarperCollins sought to dismiss the Commissioner’s application at a preliminary stage based on, among other reasons, the Competition Tribunal’s lack territorial jurisdiction over the conduct at issue – namely, that the alleged arrangement forming the basis of the Commissioner’s application was entered into in the United States; not in Canada.

At its core, the Tribunal considered, for the first time, whether a reviewable practice under the Competition Act can apply to conduct or an actor outside Canada and if so, which factors should be considered in assessing the Tribunal’s jurisdiction. As a creature of statute, the Tribunal only has the powers conferred on it by Parliament. The Tribunal is vested with the jurisdiction to hear and dispose of applications under Parts VII.1 and VIII of the Act. The substantive provisions contained in Parts VII.1 and VIII of the Act define the explicit powers granted to the Tribunal in relation to the various reviewable practices described therein. In other words, the Competition Act does not confer open-ended jurisdiction on the Tribunal to deal with any and all competition issues. This is unlike the superior courts of the provinces that have “inherent jurisdiction”.

The Tribunal concluded that in the absence of language in the reviewable practice itself expressly limiting its application only to conduct in Canada (an express territorial limitation), the Tribunal will apply the “real and substantial connection” test to define the boundaries of the Tribunal’s jurisdiction.

Implications

The “real and substantial connection” test generally governs the attribution of jurisdiction to Canadian courts and tribunals. It is a flexible test adapted to the circumstances the case. One element of the impugned conduct with a real and substantial connection to Canada can be sufficient to trigger jurisdiction. In this regard, the Tribunal found that reviewable practices that occur in part outside Canada but involve activities in Canada and have harmful effects in Canada can be subject to the Tribunal’s jurisdiction pursuant to the real and substantial connection test. This is significant as for many reviewable practices under the Act (whether unilateral conduct, mergers or non-criminal agreements between competitors), anticompetitive effects (whether in the form of a substantial lessening or prevention of competition or an adverse effect on competition) forms part of the elements of the reviewable practice itself. Accordingly, the existence of anti-competitive effects in Canada attributable to the impugned conduct (even if the conduct takes place outside of Canada) can be sufficient to establish the necessary “real and substantial connection” granting territorial jurisdiction to the Tribunal.

As a preliminary motion subject to an appeal, this is unlikely the last word on this issue. This is an important development to monitor.