Case Documents

PUBLIC VERSION COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C., 1985, c. C-34, and the Competition Tribunal Rules, SOR/2008-141;

AND IN THE MATTER OF the proposed acquisition by La Coop federee of a minority interest in Gestion BMR Inc.;

AND IN THE MATTER OF the filing and registration of a consent agreement pursuant to section 105 of the Competition Act.

BETWEEN: THE COMMISSIONER OF COMPETITION Applicant -and-LA COOP FEDEREE -and -147755 CANADA INC. -and -GESTION BMR INC. Respondents

CONSENT AGREEMENT RECITALS: A. La Coop federee ("LCF") proposes to acquire from 147755 Canada Inc. ("Holdco") a minority interest in Gestion BMR Inc. (together with Holdco, ··BMR'") (the "Transaction");

B. The Commissioner has concluded that the Transaction is likely to result in a substantial lessening and/or prevention of competition in the retail sale of hardware products and building materials in certain regions of Quebec and that the implementation of this Agreement is necessary to ensure that any substantial lessening

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PUBLIC VERSION and/or prevention of competition will not result from the Transaction; C. Respondents do not admit but will not for the purposes of this Agreement, including execution, registration, enforcement, variation or rescission, contest the Commissioner's conclusions that (i) the Transaction is likely to result in a substantial lessening and/or prevention of competition in the retail sale of hardware products and building materials in certain regions of Quebec; and (ii) the implementation of this Agreement is necessary to ensure that any substantial lessening and/or prevention of competition will not result from the Transaction.

NOW THEREFORE the Respondents and the Commissioner agree as follows: I. DEFINITIONS [1] Whenever used in this Agreement, the following words and terms have the meanings set out below:

(a) "Act'' means the Competition Act, R.S.C., 1985, c. C-34, as amended; (b) "Affected Retailers" means the franchisees of the Affected Retail Stores;

(c) "Affected Retail Stores" means the stores identified in Confidential Schedule A to this Agreement;

(d) "Affiliate" means an affiliated corporation, partnership or sole proprietorship within the meaning of subsection 2(2) of the Act;

( e) "Agreement" means this Consent Agreement, including the schedules hereto, and references to a "Part", "Section'', "Paragraph" or "Schedule" are, unless otherwise indicated, references to a part, section, paragraph or schedule of or to this Agreement;

(f) "Applicable Respondent" means a Respondent who has a franchise agreement with an Affected Retailer;

(g) "BMR" means Holdco and Gestion BMR Inc; (h) "Business Day" means a day on which the Competition Bureau's office in Gatineau, Quebec, is open for business;

(i) "Closing Date'' means the date upon which the Transaction is completed; (j) "Commissioner" means the Commissioner of Competition appointed under the Act;

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PUBLIC VERSION (k) "Confidential Information" means competitively sensitive, proprietary and all other information that is not in the public domain, and that is owned by or pertains to a Person or a Person's business, and includes, but is not limited to, manufacturing, operations and financial information, customer lists, price lists, contracts, cost and revenue information, marketing methods, patents, technologies, processes, or other trade secrets;

(I) "Franchise Termination" means the termination of franchise agreements with the Affected Retail Stores pursuant to Part II of this Agreement;

(m)"Holdco" means 147755 Canada Inc; (n) "Interpretation Act" means the Interpretation Act, R.S.C. 1985, c. 1-21, as amended;

(o) "LCF" means La Coop federee, its directors, officers, employees, agents, representatives, successors and assigns; and all joint ventures, subsidiaries, divisions, groups and affiliates of La Coop federee, and the respective directors, officers, employees, agents, representatives, successors and assigns of each. For greater certainty, LCF does not include co-operatives that are members of La Coop federee;

(p) "Monitor" means the Person appointed pursuant to Part IV of this Agreement (or any substitute appointed thereto), and any employees, agents or other Persons acting for or on behalf of the Monitor;

(q) "Monitor Agreement" means the agreement described in Section 12 of this Agreement;

(r) "Parties" means the Commissioner and Respondents collectively, and "Party" means any one of them;

(s) "Person" means any individual, sole proprietorship, partnership, joint venture, firm, corporation, unincorporated organization, trust, or other business or government entity, and any subsidiaries, divisions, groups or Affiliates thereof;

(t) "Records" means records within the meaning of subsection 2(1) of the Act; (u) "Respondents" means LCF and BMR; (v) "Transaction" means the transaction described in the first recital to this Agreement; and

(w) "Tribunal" means the Competition Tribunal established by the Competition Tribunal Act, R.S.C. 1985, c. 19 (2nd Supp.).

II. TERMINATION OF FRANCHISE AGREEMENTS [2] One or the other of the Respondents shall terminate the franchise agreement entered into with the Affected Retail Stores no later than December 31, 2014.

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PUBLIC VERSION Before December 31, 2014, the Applicable Respondent cannot proceed with any termination procedure without the assurance that the Affected Retailer has entered into a franchise agreement with a competing retail sales banner or has taken the necessary steps to keep its retail business independent from Respondents.

[3] Notwithstanding the terms of the franchise agreement, each Franchise Termination shall take effect on the date chosen by the Affected Retailer (no later than December 31, 2014). Each Affected Retailer will be able to terminate its franchise agreement in accordance with the terms of termination provided therein, by giving at least thirty (30) days' notice to the Applicable Respondent.

[4] The Applicable Respondent shall not impose any penalties or other fees on the Affected Retailer as part of the Franchise Termination.

[5] Notwithstanding the terms of the franchise agreement, the Applicable Respondent shall buy back from the Affected Retailer, at cost, any resalable inventory, whether private label or other, normally repurchased by a franchisor or supplier as part of a change in banner and shall reimburse the total costs incurred by the Affected Retailer to return said inventory, including transportation costs.

[6] The Applicable Respondent shall pay all amounts owing to the Affected Retailer, including but not limited to, rebates, discounts and dividends, provided the Affected Retailer is not in default of the terms of its franchise agreement, without prejudice to the Applicable Respondent's right to collect from the Affected Retailer any amounts that the Applicable Respondent may be owed by the Affected Retailer.

III. INTERIM PRESERVATION MEASURES AND TRANSITIONAL ASSISTANCE

[7] Prior to each Franchise Termination, the Applicable Respondent shall maintain the services provided to each Affected Retailer and each Affected Retail Store in the regular and ordinary course of business and in accordance with the Applicable Respondent's past and current practices, and shall take commercially reasonable measures so as not to negatively impact the continued economic viability and the competitiveness of each Affected Retail Store.

[8] The Applicable Respondent shall compensate the Affected Retailer for costs reasonably incurred by the Affected Retailer that are directly related to entering into a franchise agreement with a competing retail banner or keeping its retail business independent from Respondents, including but not limited to, costs associated with the removal of the Applicable Respondent's advertising signs. For greater certainty, the Applicable Respondent shall not compensate the Affected Retailer for costs normally borne by a franchisor or a supplier as part of a change in banner.

[9] The Applicable Respondent shall provide reasonable assistance to the Affected Retailer to facilitate the signing of a franchise agreement with a

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PUBLIC VERSION competing retail banner or to continue its retail business independent from Respondents. The Applicable Respondent shall provide reasonable assistance to the Affected Retailer to facilitate obtaining all consents and waivers from third parties that are necessary to permit the transition to another banner or establishment of an independent business, including the assignment to, and assumption by, an Affected Retailer or a Person designated by the Affected Retailer of all material contracts, approvals and authorizations; provided, however, that the Applicable Respondent may satisfy this requirement by certifying that the Affected Retailer entered into an agreement directly with one or more third parties which make such assignment and assumption unnecessary.

[10] Respondents shall not enter into, terminate or amend a contract, or take any action whatsoever to adversely affect any obligations in any of Respondent's contracts with, or exclusively related to, an Affected Retailer or an Affected Retail Store, except as necessary to comply with this Agreement. If one of Respondents enters into, terminates, amends or alters a contract entered into with a franchisee or a franchise located within a thirty (30) kilometre radius of an Affected Retail Store, the Applicable Respondent shall ensure that the Affected Retail Store receives treatment at least as favourable as that accorded to said franchisee or said franchise.

IV.MONITOR [11] The Commissioner may appoint a Monitor responsible for monitoring compliance by Respondents with this Agreement. Such appointment may occur at any time following registration of this Agreement. A reference in this Agreement to specific monitoring functions or tasks that are to be undertaken by the Monitor shall in no way detract from the Monitor's general power and duty to monitor all aspects of Respondents' compliance with this Agreement.

[12] Within 5 Business Days after the appointment of the Monitor, Respondents shall submit to the Commissioner for approval a proposed Monitor Agreement with the Monitor and the Commissioner that transfers to the Monitor all rights and powers necessary to permit the Monitor to monitor compliance by Respondents with this Agreement.

[13] Within 5 Business Days after receipt of the proposed Monitor Agreement referred to in Section 12, the Commissioner shall advise Respondents whether or not he approves the terms of the proposed Monitor Agreement. If the Commissioner does not approve the terms of the proposed Monitor Agreement, he shall prescribe alternative terms for the Monitor Agreement that would be required to obtain his approval and Respondents shall incorporate such terms into a final Monitor Agreement with the Monitor and the Commissioner.

[14] Respondents consent to the following terms and conditions regarding the Monitor's rights, powers, duties, authority and responsibilities, and shall include such terms in the Monitor Agreement:

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PUBLIC VERSION (a) The Monitor shall have the power and authority to monitor Respondents' compliance with this Agreement, and shall exercise such power and authority and carry out the duties and responsibilities of the Monitor in a manner consistent with the purposes of this Agreement and in consultation with the Commissioner.

(b) The Monitor shall have the authority to employ, at the expense of Respondents, such consultants, accountants, legal counsel and other representatives and assistants as the Monitor reasonably believes are necessary to carry out the Monitor's duties and responsibilities.

(c) The Monitor shall have no obligation or authority to operate or maintain the Affected Retail Stores.

(d) The Monitor shall act for the sole benefit of the Commissioner, maintain all confidences and avoid any conflict of interest.

(e) The Monitor shall have no duties of a fiduciary nature to Respondents. (t) The Monitor shall provide to the Commissioner every 30 days after the date of the Monitor's appointment, a written report concerning performance by Respondents of their obligations under this Agreement. The Monitor shall, within 3 Business Days, respond to any request by the Commissioner for additional information regarding Respondents' compliance.

[15] Subject to any legally recognized privilege, the Applicable Respondent shall provide to the Monitor full and complete access to all personnel, Records, information (including Confidential Information) and facilities relevant to monitoring Respondent's compliance with this Agreement.

[16] Respondents shall take no action that interferes with or impedes, directly or indirectly, the Monitor's efforts to monitor Respondents' compliance with this Agreement.

[17] The Applicable Respondent shall fully and promptly respond to all reasonable requests from the Monitor that are directly related to monitoring Respondent's compliance with this Agreement and shall provide all information the Monitor may reasonably request. Respondents shall identify an individual who shall have primary responsibility for fully and promptly responding to such requests from the Monitor that are directly related to monitoring Respondent's compliance with this Agreement on behalf of Respondents.

[18] Respondents may require the Monitor and each of the Monitor's consultants, accountants, legal counsel and other representatives and assistants to sign an appropriate confidentiality agreement Commissioner; provided, however, that such agreement shall not restrict the Monitor from providing any information to the Commissioner.

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in a form satisfactory to the

PUBLIC VERSION [19] The Commissioner may require the Monitor and each of the Monitor's consultants, accountants, legal counsel and other representatives and assistants to sign an appropriate confidentiality agreement relating to materials and information the Monitor may receive from the Commissioner in connection with the performance of the Monitor's duties.

[20] Respondents shall be responsible for all reasonable fees and expenses properly charged or incurred by the Monitor in the course of carrying out the Monitor's duties under this Agreement. The Monitor shall serve without bond or security, and shall account for all fees and expenses incurred. In the event of any dispute: (i) such accounts shall be subject to the approval of th'e Commissioner; and (ii) Respondents shall promptly pay any account approved by the Commissioner.

[21] Respondents shall pay all reasonable accounts submitted by the Monitor within 30 days after receipt.

[22] Respondents shall indemnify the Monitor and hold the Monitor harmless against any losses, claims, damages, liabilities or expenses arising out of, or in connection with, the performance of the Monitor's duties, including all reasonable fees of counsel and other expenses incurred in connection with the preparation or defence of any claim, whether or not resulting in any liability, except to the extent that such losses, claims, damages, liabilities, or expenses result from malfeasance, gross negligence or bad faith by the Monitor.

[23] Respondents shall indemnify the Commissioner and hold the Commissioner harmless against any losses, claims, damages, liabilities or expenses arising out of, or in connection with, the performance of the Monitor's duties, including all reasonable fees of counsel and other expenses incurred in connection with the preparation or defence of any claim, whether or not resulting in any liability, except to the extent that such losses, claims, damages, liabilities, or expenses result from malfeasance, gross negligence or bad faith by the Monitor.

[24] If the Commissioner determines that the Monitor has ceased to act or has failed to act diligently, the Commissioner may remove the Monitor and appoint a substitute Monitor. The provisions of this Agreement respecting the Monitor shall apply in the same manner to any substitute Monitor. ' [25] The Monitor shall serve such time as is necessary to monitor Respondents' compliance with this Agreement.

V. COMPLIANCE [26] Within 5 Business Days after the Closing Date, LCF shall provide written confirmation to the Commissioner of the Closing Date.

[27] Respondents shall provide a copy of this Agreement to each of their own and their Affiliates' directors, officers responsibility for any obligations under this Agreement within 3 Business Days after the date of registration of this Agreement. Respondents shall also provide

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and employees having managerial

PUBLIC VERSION Affected Retailers with a copy of this Agreement within the time frames set out in Confidential Schedule A. Respondents shall ensure that their respective directors, officers, employees and agents with responsibility for any obligations under this Agreement receive sufficient training respecting Respondents' responsibilities and duties under this Agreement, and the steps that such individuals must take in order to comply with this Agreement.

[28] Respondents shall not, for a period of five (5) years after the Closing Date, directly or indirectly acquire any interest in the Affected Retail Stores, including, but not limited to, any acquisition, partnership agreement or franchise agreement, without the prior written approval of the Commissioner.

[29] For a period of 2 years after the Closing Date, Respondents shall not, without providing advance written notification to the Commissioner in the manner described in this Section, directly or indirectly:

(a) acquire any assets or shares of, or any other interest in any retail hardware or building material store located within a thirty (30) kilometre radius from an Affected Retail Store; or

(b) consummate any merger or other combination, included but not limited to, any partnership agreement or franchise agreement, relating to a retail hardware or building material store located within a thirty (30) kilometre radius from an Affected Retail Store.

If a transaction described in (a) or (b) is one for which notice is not required under section 114 of the Act, the appropriate Respondent shall supply to the Commissioner the information described in section 16 of the Notifiable Transactions Regulations at least thirty (30) days before completing such transaction. The appropriate Respondent shall certify such information in the same manner as would be required if section 118 of the Act applied. The Commissioner may, within thirty (30) days after receiving the information described in section 16 of the Notifiable Transactions Regulations, request that the appropriate Respondent supply additional information that is relevant to the Commissioner's assessment of the transaction. In the event that the Commissioner issues such a request for additional information, the appropriate Respondent shall supply information to the Commissioner in the form specified by the Commissioner and shall not complete such transaction until at least thirty (30) days after the appropriate Respondent has supplied all such requested information in the form specified by the Commissioner.

[30] Six (6) months after the date of registration of this Agreement and annually for the next two (2) years on the date of filing the first affidavit or certificate, and at such other times as the Commissioner may require, Respondents shall file an affidavit or certificate, substantially in the form of Schedule B to this Agreement, certifying their compliance with Parts II, III and V of this Agreement and setting out the following information in detail:

(a) the steps taken to ensure compliance; 8

PUBLIC VERSION (b) the controls in place to verify compliance; and (c) the names and titles of employees who have oversight qf compliance. [31] If LCF, BMR or the Monitor becomes aware that there has been or likely has been a breach of any of the terms of this Agreement, such Person shall, within two (2) Business Days after becoming aware _of the breach or likely breach, notify the Commissioner thereof, and shall provide details sufficient to describe the nature, date and effect (actual and anticipated) of the breach or likely breach. Respondents shall provide confirmation of their compliance with this provision in all affidavits and certificates of compliance filed with the Commissioner pursuant to Section 30 of this Agreement.

[32] Respondents shall notify the Commissioner at least thirty (30) days prior to: (a) any proposed dissolution of either of Respondents; (b) any other change in either of the Respondents including, but not limited to, a reorganization, material acquisition, disposition or transfer of assets, or any fundamental change for purposes of a Respondent's incorporating statute, if such change may affect compliance obligations arising out of this Agreement.

[33] For the period commencing when this Agreement is registered and ending five (5) years after the Closing Date, for purposes of determining or securing compliance with this Agreement, and subject to any legally recognized privilege, Respondents shall, upon written request given at least two (2) days in advance to Respondents by the Commissioner, permit any authorized representative(s) of the Commissioner, without restraint or interference:

(a) to access, during regular office hours of Respondents on any Business Day(s), all facilities and to inspect and copy all Records in the possession or control of Respondents that the Commissioner believes are necessary for determining or securing compliance with this Agreement, which copying services shall be provided by Respondents at their expense; and

(b) to interview such officers, directors or employees of Respondents as the Commissioner requests regarding such matters.

VI. DURATION [34] This Agreement shall become effective on the date when it is registered, and shall remain in effect for five (5) years following the Closing Date, except that Parts II and III of this Agreement shall be effective only until the Franchise Terminations are complete.

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PUBLIC VERSION VII. NOTICES [35] For a notice, report, consent, approval, written confirmation or other communication required or permitted to be given under this Agreement to be valid,

(a) it must be in writing and the sending party must use one of the following methods of delivery: (1) personal delivery; (2) registered mail; (3) courier service; (4 ) facsimile; or (5) electronic mail; and

(b) it must be addressed to the receiving party at the address(es) listed below, or to any other address designated by the receiving party in accordance with this Section:

if to the Commissioner: Commissioner of Competition Competition Bureau Canada Place du Portage, 21st Floor 50 Victoria Street, Phase I Gatineau, Quebec KlA OC9

Attention: Commissioner of Competition Fax:819-953-5013 E-mail: mergernotification@cb-bc.gc.ca

with a copy to: Steve Sansom Competition Bureau Legal Services Department of Justice Place du Portage, 22nd Floor 50 Victoria Street, Phase I Gatineau, Quebec KlA OC9 Fax:819-953-9267 E-mail: steve.sansom@cb-bc.gc.ca

if to LCF: La Coop federee 9001 De l'Acadie Boulevard, Suite 200 Montreal, Quebec H4N 3H7

Attention: Claude Lafleur, Chief Executive Officer Fax:514-383-7027 E-mail: claude.lafleur@lacoop.coop

with a copy to:

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PUBLIC VERSION McCarthy Tetrault, LLP Suite 2500 1000 De La Gauchetiere Street West Montreal, Quebec H3B OA2

Attention: Madeleine Renaud Fax:514-875-6246 E-mail: mrenaud@mccarthy.ca

and Dominic Therien Fax:514-875-6246 E-mail: dtherien@mccarthy.ca

if to BMR: 147755 Canada Inc. I Gestion BMR Inc. 200-1501 Ampere Street Boucherville, Quebec J4B 5Z5

Attention: Yves Gagnon, President Fax:450-655-1766 E-mail: ygagnon@bmr.co

with a copy to: BCF, LLP 25th Floor 1100 Rene-Levesque Boulevard West Montreal, Quebec H3B 5C9

Attention: Richard Epstein Fax: 514-397-8515 E-mail: richard.epstein@bcf.ca

[36) A notice, consent or approval under this Agreement is effective on the day that it is received by the receiving Party. A notice, consent or approval is deemed to have been received as follows:

(a) if it is delivered in person, by registered mail or by courier, upon receipt as indicated by the date on the signed receipt;

(b) if it is delivered by facsimile, upon receipt as indicated by the time and date on the facsimile confirmation slip;

(c) if it is delivered by electronic mail, when the recipient, by an email sent to the email address for the sender stated in this Section or by a notice delivered by another method in accordance with this Section, acknowledges having received that email, with an automatic ·'read

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PUBLIC VERSION receipt" not constituting acknowledgment of an email for purposes of this Section.