Despite concerns expressed by the Federal Court and members of the private competition law bar, a report released last week is unlikely to change the Commissioner of Competition’s use of ex parte process to obtain orders for the production of documents and information issued under Section 11 of the Competition Act. In fact, the report commends the Commissioner for her use of the process so far, and does not recommend any significant changes going forward.
The Commissioner’s approach to Section 11 orders in her inquiry into the acquisition of Lakeport by Labatt had attracted criticism from the Federal Court in January 2008. The Court struck Section 11 orders against Labatt and Moosehead, finding that representations made by the Commissioner in her ex parte application for the orders were "misleading, inaccurate and incomplete in several material respects."1 The Court’s criticism added to the concerns voiced by many in the private bar in recent years that Section 11 orders have become too broad, too frequently used, and too burdensome, especially for third-party market participants whose conduct is not being examined by the Competition Bureau.
Following the Court’s reasons, Brian Gover, a respected Toronto lawyer, was appointed to advise the Commissioner and the Deputy Minister of Justice on the process followed by the Commissioner to obtain Section 11 orders. Mr. Gover’s report, dated June 19, 2008, was released publicly by the Commissioner on August 12, 2008. The Report largely commends the Commissioner’s approach to Section 11 orders. It also says the Court’s findings in Labatt were unwarranted, even though the Commissioner did not appeal the Court’s findings or include a review of the decision as part of Mr. Gover’s terms of reference.
Section 11 of the Act allows the Commissioner to obtain court orders, on an ex parte basis (that is, without notice to the respondent to the order), for the production of documents and information. Section 11 orders are used regularly by the Bureau in both criminal and civil inquiries, including mergers, to obtain extensive and detailed information from the targets of an inquiry as well as third-party market participants.
The Gover Report found that the Bureau uses its Section 11 power appropriately, conducts its role responsibly and properly balances the burden on the targets of the orders, including third parties, against the need to obtain the information for an inquiry. Some of the highlights of the Report include:
- It confirms the Commissioner’s position that ex parte applications should be the norm for seeking Section 11 orders, and found that the respondents should not be given notice of an application for a Section 11 order unless limited "special circumstances" exist, such as the successful challenge to a Section 11 order in the context of the same inquiry. Some in the private bar have argued that notice should be the norm, at least in civil inquiries, and the use of the ex parte process should be the exception.
- It recommends that the Bureau open a dialogue with potential respondents before and after launching an application for a Section 11 order except where there is urgency or a concern that records could be destroyed. This dialogue may operate to reduce the burden on respondents. (Most would agree that this is a good idea. However, the Report goes on to indicate that such a dialogue should not be binding on the Bureau.)
- To obtain a Section 11 order, the Commissioner should only have to confirm two statutory pre-conditions: the existence of an inquiry and that the respondent is likely to have information relevant to the inquiry. This view diverges from past decisions of the Federal Court that have not been successfully appealed or overruled, which held that the Commissioner should provide a description of the nature of the alleged conduct, the basis for her decision to conduct an inquiry and her reasons for believing that conduct has occurred.2
- Counsel to the Commissioner should attend in person with respect to every ex parte application for a Section 11 order rather than seek such orders by written application and should disclose prior Section 11 orders in the same inquiry to the Court, as well as the existence of any dialogue with the respondent that occurred in advance of the application.
- The Bureau ought not to bear the burden of determining whether it has already received the same or similar information in the context of another inquiry or voluntary information request. This is curious considering the Report itself indicates that the Bureau takes the position that it may properly retain information produced in another inquiry for the purposes of a second inquiry into unrelated conduct.3
- An investigative tool similar to the "Second Request" process used in the US should be adopted to permit additional means to get information from merging parties with an automatic extension of the waiting period while the parties are compiling the sought-after information. Such a process would remove the supervisory role of the courts altogether for information requests to merging parties.
The Gover Report also sheds some light on the Bureau’s internal processes before seeking a Section 11 order. Prior to February 2007, every application was reviewed by a Strategic Policy Advisor in the Compliance and Coordination Branch with accumulated expertise. This process was discontinued prior to the Section 11 orders sought in the Labatt/Lakeport merger (although there was no public disclosure of its cessation). After the Federal Court’s critical reasons in that case, the Bureau implemented a new approval process that requires the unanimous approval of a three-member panel consisting of the Assistant Deputy Commissioner responsible for the inquiry, Senior Counsel of the Competition Law Division (without carriage of the file) and the Special Economic Advisor to the Commissioner. The Gover Report recommends that this process remain in place, and that the Bureau and Department of Justice review its efficacy within two years.
The Gover Report has been received with skepticism by the private competition law bar. His review involved limited dialogue with recipients of Section 11 orders or their counsel. Consultation with those who have been on the receiving end of Section 11 orders would have, in all likelihood, resulted in a more balanced report. It is widely recognized that the Commissioner’s investigative powers, including the need to seek ex parte Section 11 orders, are necessary for effective enforcement of the Competition Act. However, the Bureau’s more frequent use of ex parte Section 11 orders in the context of civil inquiries has been the subject of criticism, especially when directed against third-party market participants who must expend considerable time and resources to respond to the orders. Further, the Bureau’s unwillingness to discuss the terms of Section 11 orders in the past (certainly before, and even after they were issued) had left respondents with litigation as the only way to address their concerns. Mr. Gover’s recommendation that the Bureau open a dialogue with respondents before issuing a Section 11 order makes sense. Apart from that, the Gover Report will do little to address concerns.