Introduction

The principal Canadian competition law theme in 2012, as with the year before, was enforcement. Among other things, the Competition Bureau (the “Bureau”) successfully completed its challenge in respect of the CCS Corporation-Complete Environmental Inc. merger. It also secured a consent agreement as a consequence of its challenge of the Air Canada – United Continental joint venture under the merger and civil competitor collaboration provisions of the Competition Act (the “Act”). The abuse of dominance proceeding against the Toronto Real Estate Board continued as did the price maintenance proceeding against VISA and MasterCard. Cartel enforcement also continued with new charges being laid (including in relation to retail gasoline, sewer services and ventilation contracts) and new plea bargains being achieved (e.g. foam, automotive lights, air cargo, construction and real estate advisory services contracts).

Cartel-related class actions continued to proliferate in 2012, but the future of that method of private enforcement will be largely dependent on the outcome of two appeals to the Supreme Court of Canada respecting indirect purchaser claims.

2012 also saw Melanie Aitken resign as Commissioner of Competition. The highly experienced John Pecman has taken over as Interim Commissioner of Competition and a search for a permanent replacement has been started.

And, as in 2011, the Investment Canada Act (the “ICA”) continued to make headlines in 2012; this time in relation to changes to enforcement policy with respect to state-owned enterprise transactions.

Our Bulletin reports on these and other developments.

Mergers

Enforcement Policy; Administration of the Competition Act

Pre-merger Notification Interpretation Guidelines

The Bureau published for consultation draft pre-merger notification interpretation guidelines respecting (i) issues pertaining to the determination of assets in Canada and gross revenues from sales in, from or into Canada; (ii) the requirement to submit a new pre-merger notification and/or request for an advance ruling certificate where a proposed merger transaction is amended; and (iii) duplication arising from transactions between affiliates. The consultation process has been concluded and issuance of the final guidelines is pending.

Merger Review Performance Report

The Bureau also published a Merger Review Performance Report which provides an update on the performance of the Bureau’s Mergers Branch. The report contains a summary of new and updated merger-related publications and guidelines published by the Bureau during the previous two years as well as statistics relating to pre-merger notification filings, requests for advance ruling certificates (“ARCs”) and merger reviews.

New Filing Thresholds

Pre-merger notification under the Act is required where both size-of-parties and size-of-transaction thresholds are exceeded. The size-of-parties threshold is exceeded where the parties, including their respective affiliates, together have assets in Canada or gross revenues from sales in, from or into Canada that exceed $400 million. That threshold remains unchanged for 2013.

The size-of-transaction threshold increased to $80 million (up from $77 million), effective January 12, 2013.

Merger Register

As part of the Bureau’s “transparency initiative”, in March 2012 the Bureau commenced publishing a monthly report of concluded merger reviews.

Updated Merger Review Process Guidelines

In January 2012, the Bureau issued updated Merger Review Process Guidelines that replaced its 2009 guidelines and that reflect the considerable experience the Bureau has gained with respect to the two-stage merger review process since its introduction in September 2009. The updated guidelines provide increased guidance on the supplementary information request process, including pre-and post-issuance dialogue and custodians and the use of timing agreements.

Cases

Divestiture in CCS Corporation Acquisition of Complete Environmental Inc.

The Bureau filed an application with the Competition Tribunal in January, 2011 to challenge CCS Corporation’s acquisition of Complete Environmental Inc., which owned a proposed hazardous waste landfill site. The Bureau’s application alleged that the transaction would lead to a substantial prevention of competition in the market for the disposal of hazardous waste within Northeastern British Columbia. The Bureau requested that the Competition Tribunal dissolve the transaction or, alternatively, order a divestiture of the site and related assets.

The Competition Tribunal (“Tribunal”) ruled in favour of the Commissioner, and ordered CCS Corporation to divest the hazardous waste landfill site. The decision was upheld by the Federal Court of Appeal.

The case is noteworthy in several respects: (i) it marks the Bureau’s first court challenge to a merger since 2005; (ii) the transaction had not been subject to pre-merger notification; (iii) dissolution was sought by the Commissioner (but refused by the court); and (iv) the theory of competitive harm was based on a prevention as opposed to a lessening of competition.

Changes to Joint Venture Between Air Canada and United Continental

In June 2011, the Commissioner filed an application with the Competition Tribunal to prohibit a proposed joint venture between Air Canada and United Continental. The Commissioner asserted that the joint venture would monopolize 10 Canada/US routes and substantially reduce competition on nine additional routes, leading to increased prices and reduced consumer choice. The Commissioner also asserted that the proposed joint venture would allow the parties to jointly set prices, capacity and schedules and would result in significantly higher prices. The application was made under both the merger and the new (as of March 2010) civil competitor collaboration provisions. The matter was settled in 2012 pursuant to a consent agreement which prohibits Air Canada and United Continental from coordinating on key aspects of competition on 14 transborder routes.

United Technology Corporation’s Acquisition of Goodrich Corporation is Cleared

In July, 2012, the Bureau concluded its review of United Technology Corporation’s proposed acquisition of Goodrich. The Bureau focused its review on the effect of the proposed transaction on competition in various aviation product markets in Canada. While the Bureau contended that the proposed transaction would have resulted in the lessening of competition in the manufacture and sale of certain aircraft parts and components, and have a downstream effect on Canadian airline companies that purchase aircraft containing these products, the Bureau concluded that remedial orders issued by antitrust authorities in the U.S. and Europe sufficiently mitigated the potential anti-competitive effects in Canada. In conducting its review, the Bureau worked closely with the U.S. Department of Justice’s Antitrust Division and the European Commission.

Maple-TMX Transaction is Cleared

Following a prolonged review of Maple Group’s bid to acquire TMX Group, as well as Alpha Group and Canadian Depository Services and in light of the Ontario Securities Commission’s (“OSC”) “recognition orders”, the Bureau issued a no-action letter (“NAL”) in respect of the transaction. The Bureau had previously communicated to Maple that it had serious competition concerns, primarily in two areas: equities trading and post-trade services, including clearing, settlement and depository services. The Bureau noted that the measures contained in the recognition orders changed the regulatory environment sufficient to substantially mitigate the Bureau’s competition concerns. The Bureau had provided input and advice to the OSC for its consideration relating to the potential impact on competition that could result from the proposed transaction.

Bell and Rogers Acquisition of Maple Leafs Sports and Entertainment is Cleared

The Bureau issued a NAL in respect of the acquisition by BCE Inc. (“Bell”) and Rogers Communications Inc. (“Rogers”) of a majority interest in Maple Leaf Sports & Entertainment Ltd., Toronto Maple Leafs Network Ltd., and Toronto Raptors Network Ltd. (together, “MLSE”).

Bell and Rogers are both vertically-integrated media and communications companies that provide telecommunications services, internet access, television distribution services, and television, radio and digital media. Bell is also a minority owner of the Montreal Canadiens franchise and the Bell Centre in Montreal, while Rogers’s assets include the Toronto Blue Jays franchise and the Rogers Centre. MLSE’s assets include sports franchises, broadcast and entertainment assets, the Air Canada Centre and other facilities in Toronto. These assets include the Toronto Maple Leafs, the Toronto Raptors, the Toronto FC and the Toronto Marlies franchises, and three English-language digital specialty television services: Leafs TV, GoITV, and NBA TV Canada.

The Bureau’s release announced the issuance of the NAL without discussion of its underlying analysis in the case, indicating also that the Bureau would continue to monitor concerns regarding incremental concentration and vertical integration in the broadcasting industry. For its part, the Canadian Radio-television Telecommunications Commission concluded that the transaction would have no material impact on market power and that its vertical integration code and dispute resolution processes would be sufficient to address any allegations of abuse of market power.

Cardinal Health’s Acquisition of Future Med Healthcare Products is Cleared

On February 16, 2012, the Bureau issued an NAL in respect of Cardinal Health’s acquisition of Future Med Healthcare Products.

While the Bureau concluded that the transaction would reduce the number of full-line distributors of medical supplies and surgical equipment serving Quebec markets, it determined that expansion by one or more competing distributors within the relevant or adjacent markets was likely, and such expansion would likely constrain an exercise of market power by the merged entity.

Chartwell and Healthcare REIT’s Acquisition of Maestro Retirement Residence is Cleared

In April, 2012, the Bureau issued an NAL in respect of Chartwell and Healthcare REIT’s acquisition of Maestro Retirement Residence. The Bureau focussed its review on the types of retirement residences to be acquired and the local nature of competition among retirement residences. The Bureau found that, owing to the differences in services offered by the retirement residences and demand considerations, Independent Supportive Living programs (ISL) and Assisted Living programs (AL) are separate product markets. (The level of care provided by ISL programs can range from providing minor additional services beyond a place to live, to assistance with meals, homemaking and personal care. In contrast, AL programs provide tenants with a more comprehensive package, including services such as assistance with daily living activities, housekeeping and more specialized care programs. The Bureau concluded that tenants requiring AL services typically do not view ISL programs as effective substitutes.)

The Bureau examined the potential competitive effects of the transaction in 21 local markets in Quebec, Ontario, Alberta and British Columbia. Ultimately, the Bureau issued an NAL to the parties in light of the ability that most retirement residences have to substitute ISL and AL services, and, coupled with the level of effective remaining competition, low barriers to entry by new players and expansion by existing ones, and high vacancy rates in many overlap markets.

Transcontinental’s Acquisition of Quad/Graphics Canada is Cleared

In February, 2012, the Bureau issued an NAL in respect of Transcontinental’s acquisition of Quad/Graphics Canada. Among the key considerations for the Bureau, notwithstanding the increased concentration among printers in Canada, was the observation that U.S. printers are becoming increasingly significant in the bidding process for large Canadian flyer contracts.

Pork mergers are Cleared

The Bureau reviewed two proposed vertical mergers in the pork industry. On October 16, 2012, Olymel L.P. entered into an agreement to acquire Big Sky Farms Inc., the largest independent hog producer in Western Canada, pursuant to a receivership sale process. On November 1, 2012, Maple Leaf Foods Inc. announced that it had agreed to acquire Puratone Corporation, the second largest independent hog producer in Western Canada.

The Bureau conducted its reviews separately and in the order that they were filed. The Bureau ultimately issued NALs to both Olymel and Maple Leaf.

The Bureau considered whether post-transaction Olymel or Maple Leaf would have the ability and incentive to totally or partially foreclose rivals' access to live hogs in upstream markets (input foreclosure) or to limit or cease their purchases of live hogs from upstream rivals (customer foreclosure), and if so, whether such would likely result in a substantial lessening or prevention of competition in upstream markets or among pork processors for the sale of pork primal cuts in the downstream market.

In both investigations, the Bureau concluded that the mergers were unlikely to lead to a substantial lessening or prevention of competition for a number of reasons, including the inability to create or increase market power upstream due to an excess demand for hogs and the inability to create or increase market power downstream due to, among other factors, effective remaining competition.

Bureau Clears WESCO Distribution’s Proposed Acquisition of EECOL Electric

The Bureau cleared WESCO’s proposed acquisition of EECOL Electric Corp. by issuing an NAL in respect of the transaction. The Bureau focused its review on the competitive effects of the proposed acquisition on the distribution of electrical components in Canada and found that while WESCO and EECOL were significant competitors in parts of Western Canada and that they held substantial market share in many of these markets, mitigating factors existed that would likely prevent a potential exercise of market power by WESCO.

The Bureau found there to be low and high voltage product segments, within the general category of electrical components. In the low voltage segment, the Bureau found that there were at least two effective competitors other than WESCO and EECOL that would remain post-merger in each relevant geographic area. Although barriers to entry were considered to be relatively high by certain industry participants, the Bureau found that the key manufacturers had significant bargaining power with distributors. Manufacturers also had the ability to switch distributors to discipline a potential price increase.

The Bureau found that the high voltage segment in Western Canada was highly concentrated with HD Supply Power Solutions, being the most significant remaining competitor. Similarly, barriers to entry in the high voltage segment were considered relatively high, with incumbents holding exclusive distribution rights to key brands. However, the Bureau concluded that manufacturers would have the incentive to switch distributors or sponsor new entry in the event that distributors materially raised prices to customers.

Abuse of dominance and other reviewable practices

Toronto Real Estate Board

In May, 2011, the Commissioner filed an application for an order from the Tribunal under section 79 of the Act (abuse of dominance) prohibiting the Toronto Real Estate Board (“TREB”) from enacting or enforcing rules that prevent or discriminate against TREB members that wish to use TREB’s multiple listing service (“MLS”) system to offer services over the Internet. The Commissioner alleges that the TREB substantially or completely controls the supply of residential real estate brokerage services in the Greater Toronto Area by reason of its ability to control access to and use of the TREB’s MLS system, that TREB rules restricting the ability of brokers to provide customer access to certain MLS data online through, for example, virtual online websites, are discriminatory, preclude innovative brokerage business models and constitute a practice of anti-competitive acts, and that the practice has limited or prevented competition substantially. TREB responded that, among other things, it is exercising its copyright in the MLS system. The case was heard by the Tribunal in 2012 and a decision is pending.

Air Canada and United Continental

In Commissioner of Competition v. Air Canada and United Continental (discussed above in the context of mergers) the Commissioner secured a remedy for the first time under the civil competitor collaboration provision of the Act in respect of existing alliance and marketing agreements between Air Canada and United and Air Canada and Continental. As noted above, the matter was settled pursuant to a consent agreement.

Visa/MasterCard

The Commissioner filed an application in 2010 against Visa and MasterCard under the resale price maintenance provision of the Act, seeking to strike down Visa and MasterCard rules that prevent merchants from imposing a surcharge on credit card payments and from discriminating between customers on the basis of the credit card submitted, and that require merchants to honour all cards. Visa and MasterCard oppose the application on numerous grounds including, among other things, that the rules do not maintain prices or relate to resale of Visa or MasterCard products, and that there is no adverse effect on competition. The application was heard by the Tribunal in 2012 and a decision is pending.

Used Car Dealers of Canada ("UCDC")

The private application brought by UCDC in 2011 under section 75 of the Act (refusal to deal) seeking an order requiring the Insurance Bureau of Canada (“IBC”) to supply certain vehicle accident and claims data to UCDC is scheduled to be heard beginning July 30, 2013. In 2012, the Tribunal dismissed a request by IBC for rescission of an interim supply order that had been issued on consent by the Tribunal pursuant to section 104 (interim orders) of the Act. In so doing, the Tribunal held that any such request must be brought under section 104 of the Act, and not section 106 (review or variance of consent orders). On the merits of its request, IBC argued that it could not comply with the interim order, as one of its members had directed it not to provide its data to UCDC. The Tribunal held that a member’s decision to change its mind on the supply of its data in a manner that would frustrate the interim order was not a justification for reconsideration of the order, particularly when the member was well aware of the initial order and when IBC had purported to act on behalf of its members. The Tribunal further held that, had there been a change in circumstances justifying reconsideration, the interim order remained appropriate under the 3-part RJR-MacDonald test for injunctive relief.

Direct Energy Marketing Limited and Reliance Comfort Limited Partnership

The enhanced level of enforcement action in respect of the abuse and other reviewable practice provisions of the Act that we have seen over the past few years continued in 2012 with the filing of two applications by the Commissioner for relief under the abuse provisions against Direct Energy Marketing Limited and Reliance Comfort Limited Partnership respectively. The applications allege that Direct Energy and Reliance have abused their dominant position in the relevant markets for the supply of water heaters and related services to residential customers by imposing exclusionary water heater return policies and procedures, and that this conduct has substantially lessened and prevented competition. Significantly, the Commissioner is seeking the maximum administrative monetary penalties (“AMPs”) provided for in the Act of $15 million against Direct Energy and of $10 million against Reliance on the basis that, amongst other factors, the anti-competitive conduct is similar to conduct prohibited by a 10-year consent order issued by the Tribunal against Direct Energy in February, 2002.

New Abuse of Dominance Guidelines Issued

In September, 2012, the Bureau released new abuse of dominance guidelines (the “2012 Guidelines”). The new guidelines replace the abuse of dominance guidelines issued by the Bureau in 2001 as well as previous guidance documents issued by the Bureau on the application of the abuse provisions to the airline, grocery and telecommunications industries and on predatory pricing. Arguably the most significant aspect of the 2012 Guidelines is the considerable reduction in the guidance they provide. The detailed analysis of different types of anti-competitive conduct contained in 2009 draft guidelines was not included in the 2012 Guidelines. In addition, although the Act was amended in 2009 to provide for the imposition of AMPs for abuse of dominance, the 2012 Guidelines provide no guidance on the factors that will be considered by the Bureau in determining the level of AMP sought. At the same time, the 2012 Guidelines adopt a more expansive approach to both market power and the intent required to establish an anti-competitive act.

The 2012 Guidelines confirm the 35% market share “safe harbour” and add that behaviour by a firm with a market share between 35 and 50% will generally only be investigated further “if it appears likely that the firm is likely to increase its market share through the alleged anti-competitive conduct within a reasonable period of time”. With regards to joint dominance, the 2012 Guidelines state that “Similar or parallel conduct is insufficient, on its own, for the Bureau to consider those firms to hold a jointly dominant position” but provide limited additional guidance on this issue.

With regards to the intent requirement for anti-competitive acts, the 2012 Guidelines state that in addition to acts that are intended to have a negative effect on a competitor that is predatory, exclusionary or disciplinary, “certain acts not specifically directed at competitors could still be considered to have an anti-competitive purpose” - a proposition that goes beyond the existing jurisprudence.

The discussion of the substantial lessening or prevention of competition element of abuse has also been revised to reflect the “but for” analysis endorsed by the Federal Court of Appeal in Canada (Commissioner of Competition) v. Canada Pipe Co.

Cartels and other criminal prohibitions

Cartel, bid-rigging, and deceptive marketing matters were an enforcement priority for the Bureau in 2012. A number of charges were laid and convictions obtained through guilty pleas in 2012, as described below. There were also legislative amendments increasing sanctions for anticompetitive conduct.

Price Fixing

  • Further charges were laid in connection with a Bureau investigation of alleged fixing of retail gas prices in Québec. Fourteen individuals and one corporation entered guilty pleas in 2012. The investigation, which began in 2008, has resulted in $3 million in total fines. In addition, six individuals have received prison sentences totaling 54 months. Four corporations pleaded guilty to fixing retail gas prices in the Ontario and received fines totaling $2.5 million.
  • The Superior Court of Québec overturned the decision of the Director of Public Prosecutions to renege on a plea agreement in R. v. Couche-Tard Inc. Alimentation Couche-Tard Inc. was charged with fixing retail gas prices in Québec. Pursuant to the plea agreement, the accused disclosed its defence strategy to the Bureau, which the court believed had irreparably prejudiced the fairness of the trial.
  • Domfoam International Inc. and Valle Foam Industries (1995) Inc. pleaded guilty to fixing prices of polyurethane foam over an 11-year period and were fined a total of $12.5 million.
  • Maxzone Auto Parts (Canada) Corp. pleaded guilty to fixing prices of aftermarket replacement automotive lights. The Bureau recommended a fine representing 10% of the volume of affected commerce ($1.5 million) due to Maxzone’s participation in the Bureau's leniency program. The Federal Court endorsed the recommendation, but signaled that future plea deals may be rejected unless there is evidence that the various objectives of sentencing have been duly considered.
  • Korean Air Lines Co. Ltd. pleaded guilty to fixing air cargo fuel surcharges over a four-year period and was fined $5.5 million.

Bid-Rigging

  • Construction companies pleaded guilty to bid-rigging related to the 2003 expansion of the Chicoutimi Hospital in Québec. They were fined a total of $100,000.
  • A joint investigation of the construction industry by the Bureau and the Unité permanente anticorruption of the Sûreté du Québec resulted in 77 charges being laid against 9 corporations and 11 individuals. The accused allegedly colluded with regard to various municipal infrastructure projects. Charges include bid-rigging, corruption in municipal affairs, extortion, and fraud.
  • Kelly Sani-Vac Inc. and two individuals were charged with bid-rigging for sewer services contracts pursuant to a broader Bureau investigation in Québec. Colmatec Inc. and its operations director pleaded guilty to similar charges. Colmatec was fined $50,000, and the operations director was sentenced to 100 hours of community service and two years' probation.
  • Corporate Research Group Ltd. pleaded guilty to bid-rigging for real estate advisory service contracts with the Canadian government. The company was fined $125,000 and is subject to a court order.
  • A sixth individual was charged with rigging bids for a private ventilation contract for a Montreal high-rise. Five individuals and eight corporations were similarly charged in 2010. Les Entreprises Promécanic Ltée has since pleaded guilty and has been fined $425,000.
Class actions and other litigation

In October 2012, the Supreme Court of Canada heard arguments regarding the scope of indirect purchaser claims in Canada. The Court had granted leave to appeal the British Columbia Court of Appeal’s decisions in Pro-Sys Consultants Ltd. v. Microsoft Corporation (Microsoft) and Sun-Rype Products Ltd. v. Archer Daniels Midland Company (SunRype). Microsoft and SunRype were 2-to-1 majority decisions concluding that indirect purchasers of allegedly price-fixed products have no cause of action recognized in law. These findings suggested a departure from the trend of previous decisions that signaled greater opportunities for indirect purchaser plaintiffs to achieve certification. Conversely, in Option Consommateurs v. Infineon Technologies AG, the Québec Court of Appeal allowed indirect purchaser plaintiffs to proceed with their price-fixing claim. The court expressly disagreed with the British Columbia Court of Appeal’s decisions in Microsoft and Sun-Rype. The class action bar is eagerly awaiting the Supreme Court of Canada's decision and reasons.

In Fairview Donut Inc. v. The TDL Group Corp., an Ontario court dismissed claims asserted by franchisees of Tim Hortons against the franchisor under the price maintenance and conspiracy provisions of the Competition Act. The plaintiffs alleged that the franchisor, through its “Always Fresh” model and distribution system, violated these provisions of the Competition Act by using agreements and promises to fix, maintain or unreasonably enhance the prices of “Always Fresh” baked goods, thereby raising prices and reducing franchisee profits. The court concluded that certification of a class action was appropriate but then granted the defendants summary judgment dismissing the franchisees’ claims. The appeal of this decision was dismissed.

Marketing and advertising

Rise of the Credulous Consumer

The question as to whether the general impression conveyed in an ad can be corrected by “small print” statements was considered by the Supreme Court of Canada.

The case involved a publisher’s “Official Sweepstakes Notice” announcing that the recipient had won a large cash prize. That announcement was conditioned in smaller print stating that the recipient had to return the notice by the deadline and then have his/her entry selected in a draw still to be held.

In finding that the ad was misleading, the Supreme Court used the following analysis:

  • the general impression has to be analyzed objectively - without regard to the intelligence of the consumer.
  • the fact that there is no evidence that anyone had actually been mislead is not relevant - the issue is whether the advertisement could mislead someone.
  • the general impression test involves taking the entire ad into account - not just the wording but also the layout, design, size of text, images, etc. used in the advertising.
  • lastly and most importantly, the general impression test is to be applied from the perspective of a consumer who is “credulous and inexperienced” and “takes no more than ordinary care to observe that which is staring him or her in the face upon first contact with an advertisement” - the Court of Appeal had previously ruled that the appropriate consumer was a consumer “with an average level of intelligence, scepticism and curiosity”.

While the case involved Quebec’s Consumer Protection Act and not the Act, the take away for Canadian advertisers is to be careful regarding the general impression that may be conveyed by their advertising in its entirety from the perspective of a credulous and inexperienced consumer. Small print disclaimers may not be sufficient to protect them from liability especially if the small print is intended to correct rather than simply clarify the general impression conveyed by the advertising.

Wireless Service Providers Sued

The Bureau has commenced legal proceedings against three major Canadian wireless service providers and an industry association requiring them to stop misleading advertising that promotes costly "premium texting services" seeking to prohibit them from advertising that allegedly promotes costly “premium texting services” under the misleading advertising provisions of the Act.

The Bureau is seeking customer refunds and a $10 million administrative monetary penalty from each of the service providers and a $1 million penalty from the association.

The Bureau’s position is that the service providers, in conjunction with the association, facilitated the sale to their own customers of premium-rate digital content (such as trivia questions and ringtones) for fees that had not been adequately disclosed. In some cases, customers were allegedly misled into believing that this content was free, when it was not. The service providers allegedly shared in the fees that were charged.

Canada Says “Me too” to U.S. Advertising Class Actions

The trend for Canadian copycat class actions based on actions commenced in the United States continues.

Two such actions recently settled in Canada, one involving performance claims by a sports shoe manufacturer and the other a reusable water bottle manufacturer regarding the BPA free nature of its product offering. Both actions were based on similar class actions started in the United States.

AMPs Challenged in Misleading Advertising Case

One of Canada’s major wireless service providers that is defending itself against the Bureau’s claim that its advertising claims regarding the number of dropped calls was misleading is taking issue with the potential $10 million administrative monetary penalty that is being sought as part of the Bureau’s action.

The argument is that the proceedings are essentially criminal in nature because the $10 million potential AMP is of a magnitude that it should be considered to be a criminal penalty. Because the wireless service provider, as part of the civil process under the Act, is required to disclose all relevant documents to the Bureau, the service provider is arguing that it is being denied its right against self-incrimination guaranteed under section 11 of the Canadian Charter of Rights and Freedoms.

Canada’s Anti-Spam Law Update

Canada’s federal anti-spam legislation which regulates commercial electronic messages such as emails is expected to come into force in the latter part of 2013.
Given that the penalties for non-compliance can be significant, companies that use emails as part of their marketing and advertising strategies should be undertaking the measures necessary to ensure that they have the express or implied consent to continue to communicate with their consumers before this legislation comes into effect.

The Ontario Superior Court of Justice held that five corporations and three individuals had engaged in a deceptive marketing scheme that duped consumers into entering contracts for listings in an online business directory. The convicted persons were ordered to pay administrative monetary penalties totaling $9,035,000 as well as full restitution to the victims.

The Québec Court of Appeal upheld the Superior Court's decision in Express Transaction Services Inc. c. Canada (Attorney General). The lower court dismissed an application challenging a search and warrants executed by the Competition Bureau and the Royal Canadian Mounted Police in 2007. Their investigation into a $172 million fraudulent telemarketing scheme resulted in charges against five individuals and four corporations.

Investment Canada Act

Revised Stated Owned Enterprise (SOE) Policy

Concurrent with the Industry Minister’s December 7, 2012 announcement of his allowance of the proposed acquisitions by CNOOC, a Chinese SOE, of Nexen and by Petronas, a Malaysian SOE, of Progress Energy was the release by the Industry Minister of Revised SOE Guidelines under the ICA.

While the Industry Minister had promised that revised SOE Guidelines would be issued in connection with the two decisions, surprisingly only modest changes to the existing SOE Guidelines were made. The real substance of the policy changes was, in fact, disclosed in a speech given the same day by Prime Minister Stephen Harper.

The Prime Minister’s statement in that speech that the two SOE decisions were “not the beginning of a trend, but the end of a trend” clearly signaled that future acquisitions of control of Canadian businesses by foreign SOEs are going to be assessed under a more onerous government policy.

One common theme in the new SOE policy is a concern with the “influence” that foreign governments may, directly or indirectly, have on Canadian businesses and the Canadian economy through their SOEs. The Prime Minister’s speech made it clear that, in the future, the onus under the ICA will be on the foreign SOE investors to demonstrate, on a case by case basis, that such concern is unfounded.

While not going into detail, the Prime Minister has indicated that there will be limits within certain industry sectors to the amount of foreign SOE ownership, control and influence that will be acceptable to Canada. With respect to the oil sands in particular, Canada has decided that existing foreign SOE control of oil sands development has reached the point at which further such foreign state control would not be of net benefit to Canada, the message being that no further acquisitions of control of oil sands businesses by foreign SOEs will be permitted, barring exceptional circumstances.

In particular, the energy sector seems to be an area of concern to the Government as well as industries where Canada itself has exited government ownership. Harper stated:

To be blunt, Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead.

In summary, foreign SOEs will continue to be treated differently from foreign non-SOEs under the ICA. In fact, the bar for approvals of investments has been raised and additional restrictions have been imposed:

  • foreign SOEs will not benefit from the forthcoming increased review thresholds (i.e., they will be subject to the existing $330 million asset value review threshold).
  • Canada will have the ability to extend the timeline for national security reviews in the case of foreign SOE investments.
  • increased foreign SOE scrutiny - in particular, review of SOE investments will include the following considerations:
    • the degree of control or influence of the foreign SOE on the Canadian business being acquired;
    • the degree of control or influence the foreign SOE would exert on the industry involved;
    • the extent to which the relevant foreign government controls or influences the foreign SOE - the Policy Statement stipulates that the investor will need to demonstrate freedom from political influence. 

Increase to Review Threshold

The monetary threshold below which direct investments in Canadian businesses by non-Canadians (other than SOEs) who qualify as WTO investors generally do not require Ministerial approval under the ICA is $344 million for 2013.