On January 28, 2008 a Federal Court Judge rebuked the Commissioner of Competition for having provided “misleading, inaccurate and incomplete” information to the court in support of an ex parte request for an order that required Labatt Brewing Company (Labatt) and Lakeport Brewing Income Fund (Lakeport) to each produce “a copious amount of records.” It is hoped that this decision will lead the Competition Bureau to be more reasonable and measured than it recently has been with respect to such orders, which have sometimes required merging parties (and even third parties) to provide an extensive and burdensome amount of information in as little as ten days, including over the Christmas period.

Background

Ex parte applications are applications made without notice to the responding party. On November 6, 2007 the Commissioner of Competition (the Commissioner) made an ex parte application to the Federal Court for an order under section 11 of the Competition Act (the Act) requiring the production of extensive information by 15 respondents, including Labatt and Lakeport. That order was issued on November 8, 2007. Eight of the respondents to that order, including Labatt and Lakeport, had previously been subjected to section 11 orders issued by Justice Noel in February, 2007. Labatt alone had provided the Commissioner with over 138,620 pages of information in response to the February 2007 order, after experiencing a file server crash, incurring substantial costs to restore lost data and incurring “in the vicinity of $750,000 in external legal costs alone.”

In addition, prior to the February 2007 orders, Labatt had provided the Commissioner with approximately 10,000 pages of records and information in its statutory filing and submission with respect to its proposed acquisition of Lakeport.

Moreover, the Commissioner had also obtained extensive information from industry participants in connection with a 2003 inquiry and the reviews that it carried out in 2006 in relation to the sale of Sleeman Breweries Ltd. Sleeman ultimately was acquired by Sapporo Breweries Ltd., but not before Labatt submitted a “huge volume” of information in connection with its rival bid for the company.

On November 23, 2007 Labatt and Lakeport brought a motion to have the November 8th order set aside or varied on the grounds that the order was based on misleading, inaccurate or incomplete disclosure provided to the court by the Commissioner, and that much of the information sought by the Commissioner was not relevant to her inquiry.

The Court’s Decision

After noting that “[a] party seeking ex parte relief has the duty of ensuring that the Court is apprised of all of the relevant facts,” the court observed that this:

duty of the utmost good faith imposes ‘a super-added duty to the court and the other parties to ensure that as balanced a consideration of the issue is undertaken as is consonant with the circumstances.’

Justice Mactavish found that this standard had not been met for a number of reasons. The three principal reasons were as follows: First, the Commissioner did not make the court aware of her representative’s prior representation to the court, in connection with the section 100 proceeding, that the information provided in response to the orders issued by Justice Noel in February 2007 “would likely be sufficient for the purposes of her inquiry” into the proposed acquisition of Lakeport by Labatt. Justice Mactavish rejected the Commissioner’s position that she had no obligation to inform the court about the previous submission to another judge of the court, and that the previous submission was irrelevant. Justice Mactavish stated that had she known about that prior representation, she:

would not have granted the order that [she] did without some explanation from the Commissioner as to why so much additional information and documentation was now required.

Second, Justice Mactavish held that the fact that the Commissioner included copies of Justice Noel’s February 2007 orders in the materials she filed in support of her November 2007 application:

does not excuse the disingenuous and misleading representations made in the Commissioner’s written submissions, which stated that ‘None of the records or information sought has previously been requested from the respondents.’

Third, Justice Mactavish noted that the material provided by the Commissioner:

does not even mention the [2003] inquiry, or make any reference to the information requested from Labatt and Lakeport through section 11 orders made in that context.

She added that:

little mention is made of the extensive involvement of the Commissioner’s office in examining the state of competition in the beer market in Ontario over the last four years.

She observed that the Commissioner also had not mentioned “the voluminous information that her office has accumulated from various sources within the industry, including Labatt and Lakeport, over this period.” These were found to be “material omissions,” particularly given the “considerable overlap” between the information that had to be produced in response to the 2003 orders and the information sought in the November 2007 order.

Significance of the Decision

In February 2007, the National Competition Law Section of the Canadian Bar Association suggested to the Competition Bureau (the Bureau) that it would be helpful to include a statement in the Bureau’s bulletin on section 11 orders:

to the effect that it is the Commissioner’s policy to place before the court all information that reasonably can be considered relevant to the court’s consideration of the question of whether it is appropriate to issue an order in the circumstances, especially if the application is made ex parte.

The court’s decision can be expected to increase the pressure on the Bureau to act on this suggestion and to implement internal procedures to ensure meaningful implementation of the revised policy.

The CBA has also suggested that the Bureau reduce its reliance on the ex parte procedure, seek more narrowly tailored orders, be more willing to negotiate the content of such orders, and set more reasonable deadlines for responding to such orders. The nature of some of the court’s comments in this case may provide the catalyst to effect long overdue reforms in these areas.