A recent decision by Justice K.M. van Rensburg of the Ontario Superior Court of Justice has affirmed the applicability of the Regulated Conduct Doctrine (RCD) as a possible defence to conduct prohibited by the Competition Act while also clarifying the extent to which evidence is necessary in order to assert the defence.  

In Fournier Leasing Company Ltd. v. Mercedes-Benz Canada Inc. the plaintiffs, a group of automobile dealers who import BMW, Mercedes Benz, and Mini vehicles into Canada, brought a motion to certify a class proceeding against BMW and Mercedes Canada for conduct that they alleged breaches Part VI of the Competition Act and also constitutes a tort. In regards to the Competition Act claims, the plaintiffs in their pleading alleged the existence of a conspiracy between the two car manufacturers and their dealers.

The plaintiffs’ business of importing vehicles from the United States is subject to a regulatory regime known as the RIV program, jointly administered by Transport Canada and the Canada Border Services Agency (CBSA). Under this regime, all vehicles imported into Canada must be inspected and certified under the Motor Vehicle Safety Act in order to ensure that they comply with Canadian motor vehicle safety standards. Central to this regulatory regime is the existence of an admissibility list maintained by Transport Canada which provides a list of vehicles that are admissible, and therefore importable, into Canada from the United States.

The plaintiffs have alleged that between 2006 and 2007 Mercedes and BMW demanded that Transport Canada remove all of their vehicles from the admissibility list in an effort to prevent Canadians from importing vehicles from the U.S., where the cars were priced significantly lower. The allegation, therefore, is that Mercedes and BMW conspired to limit the supply of vehicles, contrary to subsection 45(1) of the Competition Act.

In their defence, Mercedes and BMW brought a motion to strike the plaintiffs’ pleadings for failure to disclose a cause of action. In this motion, BMW and Mercedes raised the RCD in support of the view that the claims relating to the alleged breach of Part VI of the Competition Act had no hope of success since the impugned conduct was authorized by the federal government under a comprehensive regulatory scheme.

Justice van Rensburg rejected Mercedes and BMW’s claim that, under the circumstances, it was plain and obvious that simply invoking the RCD would suffice to exclude any action taken by them from the application of Part VI of the Competition Act. In this regard, Justice van Rensburg relied on the Federal Court’s decision in Mansoor Electronics Ltd. v. BCE Mobile Communications Inc. where Richard J. refused to strike a claim under the Competition Act on the basis that the RCD must be pleaded in the Statement of Defence so that a court may give due consideration to its application on such facts as are adduced at trial.

Besides establishing that the RCD must be pleaded as part of a defence and facts adduced in support, Justice van Rensburg affirmed the applicability of the RCD as a defence that may be relied on by parties that engage in conduct authorized under valid provincial or federal legislation. In this respect, she found that:

The authorities are clear. In order for the regulated conduct exception or defence to apply, the actions in question must have been directed or authorized by the statute or regulation. The fact that the importation program is administered by Transport Canada and the CBSA under a legislative scheme is not sufficient.

In the result, Justice van Rensburg refused to strike the pleadings relating to the allegations of conduct contrary to Part VI of the Competition Act. The motion was allowed, however, in part, in respect of the aspects of the pleadings that related to the claims made in tort.