Court File No. CT-2014-002 THE COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34, as amended; AND IN THE MATTER OF an inquiry commenced under section 10 of the Competition Act, relating to certain alleged anti-competitive conduct in the markets for ebooks in Canada;
AND IN THE MATTER OF the filing and registration of a consent agreement pursuant to section 105 of the Competition Act;
AND IN THE MATTER OF an amended application under section 106(2) of the Competition Act, by Rakuten Kobo Inc. to rescind or vary the Consent Agreement between the Commissioner of Competition and Hachette Book Group Canada Ltd., Hachette Book Group, Inc., Hachette Digital, Inc.; HarperCollins Canada Limited; Holtzbrinck Publishers, LLC; and Simon & Schuster Canada, a division of CBS Canada Holdings Co. filed and registered with the Competition Tribunal on February 7, 2014, under section 105 of the Competition Act.
BETWEEN: RATUKEN KOBO INC. Applicant - and-THE COMMISSIONER OF COMPETITION; HACHETTE BOOK GROUP CANADA LTD., HACHETTE BOOK GROUP, INC., HACHETTE DIGITAL, INC; HARPERCOLLINS CANADA LIMITED; HOLTZBRINCK PUBLISHERS, LLC; AND SIMON & SCHUSTER CANADA, A DIVISION OF CBS HOLDINGS CO.
Respondents
RESPONSE OF SIMON & SCHUSTER CANADA, A Division of CBS Holdings Co. (Kobo 's Amended Notice ofA pplication under s. 106(2))
- 2 -Peter Franklyn (LSUC #24049V) Mahmud Jamal (LSUC #38632A) Osler, Hoskin & Harcourt LLP First Canadian Place 100 King Street West Toronto, ON M5X 1B8
Tel: 416.362.2111 Fax: 416.862.6666 pfranklyn@osler.com mjamal@osler.com
Counsel for the Respondents Simon & Schuster Canada, a division of CBS Canada Holdings Co.
TO: The Registrar Competition Tribunal Thomas D' Arey McGee Building 90 Sparks Street, Suite 600 Ottawa, Ontario KlP 5B4
AND TO: Department of Justice Competition Bureau Legal Services 50 Victoria Street, 22nct Floor Gatineau, Quebec K1AOC9
John Syme General Counsel Tel: (819) 953-3903 Fax: (819) 953-9267
Jean-Sebastien Gallant Senior Counsel Tel: (819) 953-3899 Fax: (819) 953-9267
Esther Rossman Counsel Tel: (819) 994-4045 Fax: (819) 953-9267
Counsel for the Commissioner
- 3 -AND TO: Nikiforos Iatrou Mandy L. Seidenberg Bronwyn Roe WeirFoulds LLP 4100 - 66 Wellington Street West P.O. Box 35, Toronto-Dominion Centre Toronto, ON M5K 1B7
Tel: 416-365-1110 Fax:416-365-1876 niatrou@weirfoulds.com mseidenberg@weirfoulds.com broe@weirfoulds.com
Counsel for the Applicant AND TO: Linda Plumpton James Gotowiec Torys LLP 30th Floor, 79 Wellington Street West Box 270, TD South Tower Toronto, ON M5K 1N2
Tel: 416-865-8193 Fax:416-865-7380 lplumpton@torys.com jgotowiec@torys.com
Counsel for the Respondents Hachette Book Group Canada Ltd., Hachette Book Group, Inc. and Hachette Digital, Inc.
AND TO: Katherine L. Kay Danielle Royal Stikeman Elliott LLP 5300 Commerce Court West 199 Bay Street Toronto, ON M5L 1B9
Tel: 416-869-5507 Fax:416-947-0866 kkay@stikeman.com droyal@stikeman.com
Counsel for the Respondents HarperCollins Canada Limited
- 4 -AND TO: Randal Hughes Emrys Davis Bennett Jones LLP 3400 One First Canadian Place P.O.Box 130 Toronto, ON M5X 1A4
Tel: 416-777-7471 Fax:416-863-1716 hughesr@bennettjones.com davise@bennettjones.com
Counsel for the Respondents Holtzbrinck Publishers, LLC
- 5 -BACKGROUND 1. On February 6, 2014, the Commissioner of Competition ("Commissioner") and four publishers (the "Settling Publishers") entered into a consent agreement (the "Consent Agreement" or "Agreement") to resolve the Commissioner's concerns with respect to certain alleged anti-competitive conduct. The Agreement was filed and registered with the Tribunal on February 7, 2014 under s. 105 of the Competition Act, R.S.C. 1985, c. C-34, as amended ("Act").
2. On February 21, 2014, Kobo filed an application ("Original Application") with the Tribunal under s. 106(2) of the Act seeking to have the Agreement rescinded or varied. Kobo also sought an order staying the implementation of the Agreement pending the disposition of its s. 106(2) application.
3. On March 18, 2014, the Tribunal stayed the implementation of the Agreement. 4. On April 15, 2014, the Commissioner referred the following question to the Tribunal pursuant to s. 124.2(2) of the Act (the "Reference"):
What is the nature and scope of the Tribunal's jurisdiction under subsection 106(2) and, in that connection, what is the meaning of the words 'the terms could not be the subject of an order of the Tribunal' in subsection 106(2) of the Act?
5. On September 8, 2014, the Tribunal released its decision regarding the Reference (the "Reference Decision").
6. On September 17, 2014, Kobo appealed the Reference Decision to the Federal Court of Appeal ("FCA").
7. On December 22, 2014, during a case management conference before the Tribunal, the Commissioner's counsel stated that the Commissioner was prepared to consent to the relief sought in Kobo's s. 106(2) application.
8. On December 22, 2014, the Tribunal ordered that the s. 106(2) Application proceedings continue to be suspended pending the decision by the FCA regarding Kobo's appeal of the Reference Decision. The Tribunal stated in its reasons that:
"[I]f the Commissioner seeks to rescind the Consent Agreement without the agreement of all the signatories to the agreement, he must do so within the statutory framework, including s. 106(1) of the Act". 9. On June 18, 2015, the FCA dismissed Kobo's appeal of the Reference Decision. 10. On August 13, 2015, Kobo filed an application for leave to appeal the FCA's dismissal with the Supreme Court of Canada ("SCC").
- 6 -11. On November 30, 2015 Kobo filed an Amended Notice of Application ("Amended Application") seeking essentially the same relief as sought in the Original Application, as well as additional relief as set out in para. 6.1 of the Amended Application.
SIMON & SCHUSTER CANADA'S POSITION 12. As the Commissioner pointed out in his Response filed March 3, 2014, the Original Application (and now the Amended Application) seeks to transform a negotiated resolution among consenting parties into a contested proceeding on the merits of the case. Not only is this inconsistent with the purpose underlying s. 105 of the Act (i.e., to allow for the expeditious resolution, on consent, of matters that are under investigation by the Commissioner), it is also inconsistent with a proper interpretation of subsection 106(2) of the Act.
13. Simon & Schuster Canada's position is that the Agreement should be upheld and should not be rescinded for the following reasons.
14. Simon & Schuster Canada entered into the Agreement in good faith following extensive and vigorous negotiations with the Commissioner. It did so for a variety of legitimate commercial and financial reasons, including the desire to avoid the financial burden of litigation and in order to achieve a timely commercial resolution that was consistent and aligned with its U.S. settlement.
15. Simon & Schuster Canada always has been and remains ready and willing to abide by its commitments under the Agreement.
16. As recognized by the Tribunal in its reasons dated December 22, 2014 (referred to in para. 8 above), the Commissioner cannot and should not be allowed to unilaterally resile from, rescind, or vary the Agreement. As noted by the Tribunal, there is a statutory framework under the Act for the variation of consent agreements and the Commissioner must satisfy certain legal requirements under s. 106(1)(a) before the Tribunal is entitled to rescind or vary a consent agreement.
17. The Commissioner concluded an agreement with the Settling Publishers (including Simon & Schuster Canada) to discontinue his inquiry as regards the Settling Publishers based on a negotiated set of commitments made by the Settling Publishers as set out in the Agreement.
18. Simon & Schuster Canada submits that the Reference Decision itself does not vitiate or require the rescission of the Agreement, nor does it require the Tribunal to rescind the Agreement. As noted in para. 126 of the Reference Decision, it merely contemplates that the Tribunal "may assess" whether the Agreement contains the language contemplated in the Reference Decision (referred to as the "Reference Terms"), and then exercise its discretion in light of all the circumstances to determine whether the Agreement should be upheld, varied or set aside (the last sentence in para. 126 of the Reference Decision states that the Tribunal "may vary or set aside a consent agreement where it determines that either of these conditions have not been satisfied" (emphasis added)). The language of the Reference Decision is permissive and contemplates the exercise of the Tribunal's discretion.
19. The same is true of s. 106(2) of the Act. It provides that even if Kobo were to establish that the terms of the Agreement could not be the subject of an order of the Tribunal, the Tribunal has
- 7 the discretion, but is not required, to grant the relief sought (i.e., the Tribunal may choose to uphold the Agreement).
20. To now rescind the Agreement on the grounds that it does not contain the Reference Terms would undermine the administration of justice and the enforcement of the Act, as it would retroactively call into question the enforceability of other existing Consent Agreements that have previously been entered by the Commissioner with respondents in other matters and that are still in force and do not comply with the Reference Terms.
21. For the foregoing reasons, Kobo' s Amended Application should be dismissed. 22. The Competition Act, R.S.C. 1985, c. C-34, as amended. 23. The Competition Tribunal Act, R.S.C. 1985, c. 19 (2nd Supp), as amended. 24. The Competition Tribunal Rules, SOR/2008-141. 25. The Federal Court Rules, SOR/98-106. 26. Such further and other grounds as counsel may advise and the Tribunal may permit. DATED AT Toronto, Ontario on December 22, 2015.
Peter Frankl (L UC #24 49V) Mahmud Jamal (LSUC #3 32A) Osler, Hoskin & Harcourt LLP First Canadian Place 100 King Street West Toronto, ON M5X 1B8
Tel: 416.362.2111 Fax: 416.862.6666 pfranklyn@osler.com mjamal@osler.com
Counsel for the Respondents Simon & Schuster Canada, a division of CBS Canada Holdings Co.
File No. CT-2014-002 COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34, as amended; AND IN THE MATTER OF an inquiry commenced under section 10 of the Competition Act, relating to certain alleged anti-competitive conduct in the markets for Ebooks in Canada;
AND IN THE MATTER OF the filing and registration of a consent agreement pursuant to section 105 of the Competition Act;
AND IN THE MATTER OF an amended application under section 106(2) of the Competition Act, by Rakuten Kobo Inc. to rescind or vary the Consent Agreement between the Commissioner of Competition and Hachette Book Group Canada Ltd., Hachette Book Group Inc., Hachette Digital, Inc.; HarperCollins Canada Limited; Holtzbrinck Publishers, LLC; and Simon & Schuster Canada, a division of CBS Canada Holdings Co. filed aid registered with the Competition Tribunal on February 7, 2014, under section 105 of the Competition Act.
BETWEEN: RAKUTEN KOBO INC. Applicant - and -THE COMMISSIONER OF COMPETITION, HACHETTE BOOK GROUP CANADA LTD., HACHETTE BOOK GROUP, INC., HACHETTE DIGITA L INC., HARPERCOLLINS CANADA LIMITED, HOLTZBRINCK PUBLISHERS, LLC, and SIMON & SCHUSTER CANADA, A DIVISION OF CBS CANADA HOLDINGS CO.
Respondents RESPONSE OF SIMON & SCHUSTER CANADA, A Division of CBS Holdings Co. (Kobo's Amended Notice ofA pplication under s. 106(2))
Peter Franklyn (LSUC #24049V) Mahmud Jamal (LSUC #38632A) Osler, Hoskin & Harcourt LLP First Canadian Place 100 King Street West Toronto, ON M5X 1B8
Tel: 416.362.2111 Fax: 416.862.6666 pfranklyn@osler.com mjamal@osler.com
Counsel for the Respondents Simon & Schuster Canada, a division of CBS Canada Holdings Co.