Competition Tribunal Tribunal de la Concurrence CT - 1990 / 001 – Doc # 44 IN THE MATTER of an application by the Director of Investigation and Research for orders pursuant to section 92 of the Competition Act, R.S.C., 1985, c. C-34, as amended;
AND IN THE MATTER of the direct and indirect acquisitions by Southam Inc. of equity interests in the businesses of publishing The Vancouver Courier, the North Shore News and the Real Estate Weekly
B E T W E E N: The Director of Investigation and Research Applicant - and - Southam Inc. Lower Mainland Publishing Ltd. Rim Publishing Inc. Yellow Cedar Properties Ltd. North Shore Free Press Ltd. Specialty Publishers Inc. Elty Publications Ltd.
Respondents
CONSENT INTERIM ORDER
Date of Hearing: March 7, 1991 Presiding Member: The Honourable Mr. Justice Max M. Teitelbaum Counsel for the Applicant: Director of Investigation and Research Stanley Wong Mary L. Ruhl
Counsel for the Respondents: Southam Inc. Lower Mainland Publishing Ltd. Rim Publishing Ltd. Yellow Cedar Properties Ltd. North Shore Free Press Ltd. Specialty Publishers Inc. Elty Publications Ltd.
Neil R. Finkelstein Jay D. Kendry
COMPETITION TRIBUNAL CONSENT INTERIM ORDER
The Director of Investigation and Research v. Southam Inc. et al
FURTHER TO the application of the Director of Investigation and Research ("Director") pursuant to section 92 of the Competition Act, R.S.C., 1985, c. C-34, as amended, ("the Act");
AND FURTHER TO the application of the Director for an interim order pursuant to section 104 of the Act to preserve each of the businesses (as hereinafter defined) as independent, viable, ongoing and competitive businesses in order to preserve competition in the market and the Tribunal's ability to order appropriate relief pending final disposition by the Tribunal of the application pursuant to section 92 of the Act;
AND ON READING the notice of application for an interim order pursuant to section 104 of the Act; the affidavit of André Brantz sworn on March 4, 1991 and the exhibits thereto; the affidavit of David Perks sworn on March 6, 1991 and the exhibits thereto; and the notice of application pursuant to section 92 of the Act;
AND ON HEARING the submissions of counsel for the parties on Thursday, March 7, 1991;
AND ON CONSIDERING the draft consent interim order filed on consent of both parties on March 15, 1991;
THIS TRIBUNAL ORDERS AGAINST ALL RESPONDENTS EXCEPT YELLOW CEDAR PROPERTIES LTD. THAT:
Definitions 1. For the purposes of this order the following definitions will apply: (a) "businesses" means the businesses of publishing the newspapers called the North Shore News and The Vancouver Courier and the real estate advertising publication called the Real Estate Weekly (comprised of 14 zoned editions), and "business" means one of them;
(b) "company" means each of North Shore Free Press Ltd. ("NSFP"), Rim Publishing Inc. ("Rim"), Elty Publications Ltd. ("Elty"), Specialty Publishers Inc. ("Specialty") and Lower Mainland Publishing Ltd. ("LMPL"), and "companies" means all of them;
(c) "confidential information" means competitively sensitive or proprietary information of the businesses other than information which is known to Southam Inc. or LMPL from sources other than the companies or the businesses;
(d) "divest" means to sell, transfer, assign, grant any option for the purchase of, pledge or otherwise dispose of or encumber; (e) "LMPL" means Lower Mainland Publishing Ltd.; (f) "managers" means the managers of each of the businesses who are specified in Schedule "A";
(g) "monitors" means the monitors to be appointed to monitor compliance of the businesses within the terms of this interim order;
(h) "person" means any natural person, corporation, association, firm, partnership or other business or legal entity;
(i) "Southam Group" means Southam Inc. and all of its directly and indirectly-owned subsidiaries.
Maintain Current Ownership 2. Southam Inc. will not directly or indirectly divest its interests in the businesses, NSFP will not divest the North Shore News, Rim will not divest The Vancouver Courier and Elty will not divest the Real Estate Weekly, and none of Southam Inc., LMPL or any of the companies will directly or indirectly divest any shares of any body corporate which owns or operates any of the businesses.
3. None of Southam Inc., LMPL or any of the companies will issue, or cause to be issued, any additional equity securities, or rights or options to acquire additional equity securities, of any of the companies, amend the articles, by-laws, memoranda or other constating documents of any of the companies, or do any other act which may directly or indirectly alter the ownership of the companies or the businesses from that which existed on May 8, 1990 in the case of Rim, Elty, Specialty, The Vancouver Courier and the Real Estate Weekly and on February 1, 1991 in the case of NSFP and the North Shore News, without the consent of the Director. However, NSFP may acquire shares in Rim from Phillip Hager and Peter Ballard upon the exercise of their put rights entered into on May 8, 1990 and Southam Inc. may acquire shares in LMPL from the Madison shareholders upon the exercise of their put rights entered into on May 8, 1990.
Maintain Competitiveness of the Businesses 4. Southam Inc. and LMPL will cause, to the extent permitted by this interim order, the companies to, and each of the companies will:
(a) carry on its business in the ordinary course of business in accordance with generally prevailing industry standards;
(b) use best efforts to preserve and enhance the goodwill of the businesses; (c) use best efforts to maintain each of the businesses at at least the same level of competition as existed prior to May 8, 1990; (d) use best efforts to enhance the competitiveness of each of the businesses without regard to whether its competitors are members of the Southam Group; and
(e) not knowingly take any action that adversely affects the competitiveness, assets, operations or financial status of any of the businesses.
5. In particular, but without limiting the generality of paragraph 4, Southam Inc. and LMPL will not cause the companies to, and none of the companies will, other than in the ordinary course of business or with the approval of the Director:
(a) divest any assets of any of the businesses to any person;
(b) reduce any aspect of the businesses' level of service to any customers for advertising services;
(c) terminate without replacement any lines of credit for, or financial guarantees on behalf of, any of the businesses or make any other material changes to the financial arrangements of the businesses; (d) curtail marketing, sales, promotional or other activities of any of the businesses in connection with the solicitation of existing or prospective customers for newspaper advertising services; or
(e) except as is necessary to comply with the terms of this interim order, terminate or alter any current employment, salary or benefit agreements for any executive, managerial, sales or marketing personnel of any of the businesses.
Maintain Independent and Separate Businesses 6. Southam Inc. and LMPL will cause, to the extent permitted by this interim order, the companies to, and the companies will:
(a) take all steps necessary to ensure that each of the businesses is maintained as a separate and independent business;
(b) not take any steps toward integrating the assets, management, operations or books and records of any of the businesses with those of Southam Inc. or any other person; and
(c) maintain, in accordance with generally accepted accounting principles, separate and complete financial ledger books and records of material financial information for each of the respective businesses.
7. Subject to paragraph 20, Southam Inc. and LMPL will not directly or indirectly receive, have access to, or use any confidential information relating to the businesses, except as is necessary to comply with the terms of this interim order, and except for confidential financial information required by the accountants of Southam Inc. and LMPL to prepare their standard financial reports.
8. None of the companies will divulge any confidential information relating to the businesses to any person, except as is necessary to comply with the terms of this interim order and except for confidential information required by the accountants of Southam Inc. and LMPL to prepare their standard financial reports.
9. None of Southam Inc., LMPL or any of the companies will: (a) enter into or withdraw from any contracts or arrangements in regard to the businesses or make any changes to their operation that would have the effect of
materially inhibiting or unreasonably delaying the divestiture of the businesses or materially reducing the value of the businesses;
(b) without the consent of the Director, relocate, destroy or dismantle any fixed assets of any of the businesses unless, due to circumstances beyond the control of Southam Inc. or the companies, a business is forced to move, relocate or dismantle any of its assets to preserve such assets and Southam Inc. has notified the Director; or
(c) enter into any agreement to lease any assets of the businesses, or real property occupied by the businesses, to any other person, without the consent of the Director.
10. Notwithstanding the foregoing, Southam Inc., LMPL, the companies and the businesses may participate in the Vancouver Area Newspaper Network ("VanNet"). Any rights of any of the companies or the businesses to participate in VanNet will be fully assignable (without any consent or approval or loss of rights on transfer) to any subsequent owner or operator of such business.
Management 11. Southam Inc., LMPL and the companies will not alter, or cause to be altered, the boards of directors, officers or managers of any of the companies as set forth in Schedule "A" except:
(a) to replace directors, officers and managers who have voluntarily resigned, died or become disabled or whose office or employment has been terminated; or
(b) as is necessary to comply with the terms of this interim order; provided, however, that no replacement director, officer or manager will be appointed or elected without the consent of the Director.
12. Within 10 business days of the date of this interim order, each of Rim, NSFP, Specialty and Elty will remove from office any director, officer or manager who currently, or at any time during the effectiveness of this interim order, serves as a director, officer or manager of any other company or business in the Southam Group. Notwithstanding the foregoing, Mr. John Collison may continue his present duties for 30 business days from the date of this interim order (or such later date as the Director may approve or the Tribunal directs), on which date he will cease to serve as a director, officer or manager of any company or business in the Southam Group other than Elty, Specialty and the Real Estate Weekly except as otherwise approved by the Director.
13. Each of Rim, NSFP and Elty will provide a copy of this interim order to the managers of its respective business and will direct its managers to operate and manage the business in accordance with the terms of this interim order.
14. Subject to paragraph 4, Southam Inc. and LMPL will not directly or indirectly seek any confidential information in connection with, or, without the consent of the Director, exert or attempt to exert any influence, direction or control over, the managers or operational, sales, distribution, circulation, marketing or financial decisions of the businesses, including without limitation, decisions relating to:
(a) advertising rates; (b) persons who advertise in the newspapers published by the businesses; (c) production, printing, materials procurement, marketing, distribution and other costs; (d) contracts with third parties; (e) accounting procedures and other financial information; (f) editorial policies; (g) strategic planning; and (h) administration. Monitors 1. (a) Southam Inc. and LMPL will cause Rim, Elty and NSFP to, and Rim, Elty and NSFP will each appoint, an employee of the Southam Group to act as a monitor for its respective business, who will be responsible for monitoring the business as is necessary to ensure compliance with this interim order.
(b) The appointment of each of the monitors will be subject to the approval of the Director and if a monitor has not been appointed for each of the businesses within 30 business days after the date of this interim order, the Tribunal, upon the application of the Director, will appoint such monitor on behalf of the company.
(c) The same individual may be appointed to act as the monitor for each of the businesses. (d) In the event that any of the monitors is unable to perform his duties under the terms of this interim order because of death, disability, termination for cause, or any other reason, Rim, Elty or NSFP, as the case may be, will appoint, subject to the Director's approval, a new monitor within 15 business days. Should a new monitor not be so appointed, the Tribunal, upon the application of the Director, will appoint a new monitor on behalf of the company.
(e) If, in the Director's opinion, a monitor is not fulfilling the obligations of the monitor pursuant to this interim order, the Director may request that the company for which such monitor is acting appoint a new monitor who will be subject to the Director's approval. If a new monitor has not been appointed within 20 business days, the Director may apply to the Tribunal for such an appointment.
(f) All remuneration and expenses of each of the monitors will be paid by Southam Inc. or the company which appointed the monitor, provided such monitor is an employee of Southam Inc. In the event that the Tribunal appoints a person who is not an employee
of Southam Inc. as a monitor, all remuneration and expenses of such monitor will be paid by the Director.
(g) Each monitor will be permitted to perform his regular duties in addition to his duties as monitor to the extent permitted by this interim order, provided such monitor is an employee of Southam Inc.
(h) Each of the companies will give its monitor unlimited access to: (i) the premises of the company and its business; (ii) any information relating to the operations and assets of the company and its business; and
(iii) meetings of management of the company; as is required by the monitor to fulfill his obligations pursuant to the terms of this interim order.
(i) None of Southam Inc., LMPL or the companies will exert or attempt to exert any influence, direction or control over any of the monitors which has or could have the effect of adversely affecting the discharge of his duties under the terms of this interim order.
16. Each of Rim, Elty and NSFP will direct its monitor to discharge his responsibilities on the following terms:
(a) in the event that a monitor determines, in his reasonable opinion, that Southam Inc., LMPL or a company is in default of any of the terms of this interim order, the monitor will notify the Director and Southam Inc. of such breach;
(b) the monitors will not consult with Southam Inc. or any other member of the Southam Group except as is necessary to ensure compliance with this interim order;
(c) the monitors will not communicate confidential information about the companies or the businesses to any person except to the extent required by the terms of this interim order;
(d) the Director will have the right to request from the monitor from time to time, and forthwith upon such request the monitor will provide to the Director and to Southam Inc., a written report relating to a company's compliance with the terms of this interim order;
(e) the monitor will not be subject to personal liability for any breach by him or by any of the companies, Southam Inc. or LMPL of any of the terms of this interim order.
General
17. Notices, reports or other communications required or permitted by this order will be in writing and will be given by personal delivery to the party to whom such notice is to be given or by registered mail or telecopier to the address or telecopier number below:
If to the Director: Stanley Wong Davis & Company 2800 - 666 Burrard Street Vancouver, B.C. V6C 2Z7 Telecopier: 604-687-1612
Counsel for the Director of Investigation and Research If to the Respondents: Glenn F. Leslie Blake, Cassels & Graydon Box 25, Commerce Court West Toronto, Ontario M5L 1A9 Telecopier: 416-863-4257
Counsel for Southam Inc.
18. In the event that the Director's approval is sought pursuant to this interim order and such approval is not granted, or if a decision of the Director is unreasonably delayed or withheld, the respondents may apply to this Tribunal for directions.
19. The terms of this order are in effect until the Tribunal orders otherwise.
20. Nothing in this interim order prohibits the obtaining and use of confidential information by any respondent or other person for the purposes of the application.
21. Nothing in this interim order prohibits Mr. Sam Grippo, Mr. Bruce Aunger, Mr. John Collison or Mr. David Perks from talking to any manager or other person to ensure compliance with this interim order and including, in particular, to ensure compliance with paragraphs 4, 6, 7, 8 and 14.
DATED at Ottawa, this eighteenth day of March, 1991, with reasons to be issued at a later date.
SIGNED on behalf of the Tribunal by the presiding judicial member.
(s) Max M. Teitelbaum Max M. Teitelbaum
SCHEDULE "A" TO CONSENT INTERIM ORDER Managers Real Estate Weekly John Collison The Vancouver Courier Peter Farris Ballard Roger Phillip Hager
North Shore News Peter Speck Douglas Foot
Officers and Directors North Shore Free Press Ltd. Peter Speck (Director, President) Douglas Foot (Director, Vice-President, Secretary) J. William Gannon (Alternate Director)
Rim Publishing Inc. Roger Phillip Hager (Director, President) Peter Farris Ballard (Director, Secretary)
Specialty Publishers Inc. John Collison (Director, President, Secretary)
Elty Publishing Ltd. John Collison (Director, President, Secretary)