THE COMPETITION TRIBUNAL
IN THE MATTER of the Competition Act, R.S.C. 1985, c. C-34, as amended; and AND IN THE MATTER OF an application for orders pursuant to section 74.1 of the Competition Act for conduct reviewable pursuant to paragraph 74.0l(l)(a) and subsection 74.01(3) of the Competition Act.
BETWEEN: THE COMMISSIONER OF COMPETITION Applicant - and-HUDSON'S BAY COMPA NY Respondent RESPONSE OF HUDSON'S BAY COMPA NY (Motion to Amend Notice of Application)
I. The Respondent, Hudson's Bay Company ("HBC") submits this Response to the Motion of the Commissioner of Competition (the "Commissioner") to amend his Notice of Application (the "Amendment Motion").
I. OVERVIEW 2. The Amendment Motion comes on the heels of the Tribunal's December 7, 2017 decision (the "Decision") which substantially dismissed the Commissioner's motion for a Further and Better Affidavit of Documents from HBC (the "Production Motion"). On the Production Motion, the Commissioner sought to require HBC to produce "tens of thousands" of additional documents related to its pricing and sales of sleep sets during the period from "February 2015 until the present" (the "Disputed Time Period") on the purported basis that
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- 2 his (unamended) Notice of Application alleged that HBC had engaged and continues to engage in reviewable conduct contrary to subsection 74.01(3) of the Competition Act, R.S.C. 1985, c. C-34 (the "Act") during the Disputed Time Period. 3. In its Decision, the Tribunal flatly rejected the Commissioner's position, finding that documents "from the Disputed Time Period having to do with HBC's purported deceptive ordinary price representations" concerning sleep sets were not relevant to the Application, because a "plain reading of the Commissioner's Notice of Application" indicated that HBC's impugned conduct allegedly "took place prior to the Disputed Time Period (from July 19, 2013 to October 30, 2014)" in respect of only the four "specified sleep sets" identified by the Commissioner in his Application. 1 Thus, contrary to the Commissioner's contention on the Production Motion, the Tribunal found HBC was not "substantially non-compliant with the Scheduling Order" in respect of its document production in this proceeding.2 4. Having essentially lost his Production Motion, the Commissioner is now agam seeking to inject the Disputed Time Period into this case by other means - that is, by amending his pleading with respect to HBC's alleged contravention of subsection 74.01(3) of the Act. In his Notice of Motion for the Amendment Motion, the Commissioner suggests that his proposed amendments simply seek "to clarify the erroneous impression given by the original Notice of Application" that his allegations with respect to deceptive ordinary sale price representations were limited to the four specified sleep sets and did not apply to the Disputed Time Period. 3 The Commissioner further states that, if the Amendment Motion is 1 Order and Reasons for Order of the Tribunal, dated December 7, 2017 [Decision], Exhibit B to the Affidavit of Lucy Esposito, sworn January 26, 2018 [Esposito Affidavit], at paras 25, 29 2 Ibid, at para 38 3 Notice of Motion dated January 23, 2018 [NOM], Grounds for the Motion, at para d
- 3 granted there may need to be "some minor consequential amendments to the Scheduling Order," but that "the November 2018 dates for a hearing can be preserved." 4 5. In HBC's respectful submission, the positions taken by the Commissioner on the Amendment Motion are untenable. As a threshold matter, the Tribunal held in the Decision that, based on a "plain reading" of the original pleading, the Commissioner's allegations with respect to the purported contravention of subsection 74.01(3) of the Act were limited to four sleep sets sold by HBC prior to the Disputed Time Period. 5 The Commissioner has not appealed the Decision. It thus does not lie in the mouth of the Commissioner to assert that there was any erroneous impression about the original Notice of Application that the proposed amendments are designed to clarify. 6. Moreover, far from being a matter of mere clarification, the proposed Amendments would dramatically expand the scope of this proceeding. The Commissioner now proposes to allege, among other things that "[g]rossly inflated regular price representations were and continue to be made by HBC to the public about all or substantially all of its sleep sets, and HBC has no expectation that the market would validate any of its regular prices on sleep sets. " 6 Thus, if permitted, the proposed amendments would double the length of the relevant time period covered by the Application and vastly increase the number of sleep sets at issue between the parties (well beyond the current pleading and, indeed, the scope of the Commissioner's prior investigation into HBC' s marketing of sleep sets), thereby substantially expanding the case HBC has to meet in this proceeding.
4 Ibid, at para h 5 Decision, Esposito Affidavit Ex B, at paras 24 to 29 6 Proposed Amended Notice of Application, at para 53
- 4 -7. In light of the actual scope of the proposed amendments to the Notice of Application, the Commissioner's suggestion that the currently scheduled November 2018 hearing dates in this proceeding could be preserved if the Amendment Motion were granted is disingenuous. Although the Commissioner now proposes, as an alternative, that the additional document production necessitated by the proposed amended Notice of Application could be "dealt with by way of undertakings at discovery'', 7 that suggestion is directly contrary to the Commissioner's position on the Production Motion that "tens of thousands" of documents from the Disputed Time Period were required to be produced by HBC before proceeding to examinations for discovery. 8 The document production required in response to the proposed amended Application would take at least 3 - 4 months for HBC to make. 9 Thus, it is readily apparent that if the Amendment Motion were granted, an entirely new Scheduling Order, with hearing dates well into 2019 would be required for this proceeding. 8. The Commissioner had years to bring his case against HBC and chose to limit his proceeding as set out in the original Application. HBC joined issue with the Commissioner on the basis of the original pleading, the parties agreed to (and the Tribunal made) the existing Scheduling Order on that basis, and HBC has proceeded with document production and preparations for discovery accordingly. Fundamentally altering the scope of the proceeding now would clearly prejudice HBC and result in substantial delays. 9. Accordingly, HBC respectfully submits that the Amendment Motion should be denied, with costs to HBC.
7 NOM, Grounds for the Motion, at para g 8 Esposito Affidavit, at para 13 9 Affidavit of Beth Alexander, sworn November 10, 2017 [Alexander Affidavit], at para 14; Memorandum of Fact and Law of the Commissioner of Competition, dated November 28, 2017 [Production Motion Factum], at para 3
- 5 -II. THE INTERESTS OF JUSTICE FAVOUR DENIAL OF THE AMENDMENT MOTION
10. Whether to permit an amendment to a pleading at any stage of a proceeding lies within the discretion of the Tribunal. Such amendments may be permitted where they would assist in determining the real questions in controversy between the parties, provided that allowing the amendment would not result in an injustice to the other party (not compensable by an award of costs) and the interests of justice would be served by the amendment. 11. The factors which bear on the Tribunal's exercise of its discretion include the timeliness of the motion to amend, the extent to which the proposed amendments would delay the expeditious hearing of the matter, the extent to which the position of the opposite party would be undermined, and whether the amendments would facilitate consideration of the true substance of the dispute. 12. HBC submits that these factors overwhelmingly favour denial of the Amendment Motion in the circumstances of this proceeding. A. The Commissioner had years to bring and frame his case against HBC 13. This matter has a long history. On March 11, 2014, the Commissioner commenced an inquiry into HBC's marketing practices in relation to sleep sets. The Commissioner advised HBC of the commencement of the inquiry in April 2014. 10 10 Esposito Affidavit, at para 3
- 6 -14. Over the following several months, communications took place between BBC's counsel and the Competition Bureau ("Bureau"), during which HBC voluntarily provided the Bureau with certain documents related to its sleep set marketing practices. 11 15. On January 30, 2015, the Commissioner obtained from the Federal Court an order pursuant to paragraphs ll(l)(b) and ll(l)(c) of the Act (the "Section 11 Order"), which required HBC to make written returns of information and produce certain records relevant to the Commissioner's inquiry into sleep sets. 12 16. The requirements imposed on HBC by the Section 11 Order applied to the time period from March 1, 2013 to January 30, 2015 (the "Relevant Time Period"). Moreover, the Section 11 Order did not apply to all of the sleep sets marketed by HBC during the Relevant Time Period, but rather only to 18 distinct sleep sets specifically identified therein. 13 17. Over the next several months, HBC devoted substantial time and resources, at considerable expense, to making production of documents and information in response to the Section 11 Order. That production was completed by April 30, 2015. 14 18. Nearly a year later, on April 20, 2016 the Commissioner obtained another order from the Federal Court, this time pursuant to paragraph l l(l)(a) of the Act, requiring certain of BBC's current and/or former employees to attend for oral examination. The Commissioner
11 Ibid, at para 4 12 Ibid 13 Ibid, at para 5 & Ex A 14 Ibid, at para 6
- 7 conducted those oral examinations of HBC employees over a two-week period in June 2016. 15 19. The Commissioner did not file his Notice of Application commencing this proceeding until February 22, 2017. Thus, the Commissioner had nearly three years from the time the inquiry was commenced to investigate, develop and plead his claim against HBC. 20. As the Tribunal held in its Decision on the Production Motion, the "language that the Commissioner use[ d] in his Notice of Application" made it very clear that his allegations concerning BBC's deceptive ordinary price representations were limited in time and scope. 16 The Commissioner pleaded that "[f]rom the various sleep sets offered by HBC, the Commissioner identified" four sleep sets "for review under subsection 74.01(3) of the Act" and the alleged reviewable conduct in respect of those "specified sleep sets" took place in 2013 and 2014. 17 Thus, the subsequent Disputed Time Period (from February 2015 onward) was not relevant to the Commissioner's case against HBC under subsection 74.01(3) of the Act as pleaded in the Application. 21. Now, nearly one year after commencing this proceeding and close to four years after beginning his inquiry, the Commissioner seeks to drastically expand his case against HBC by way of the Amendment Motion. The Commissioner now seeks to allege that deceptive ordinary selling price "representations were and continue to be made by HBC to the public about all or substantially all of its sleep sets." 18 15 Ibid, at para 7 16 Decision, Esposito Affidavit Ex B, at para 29 17 Notice of Application, Alexander Affidavit Ex A, at para 26 18 Proposed Amended Notice of Application, at para 53
- 8 -22. The proposed new allegations go far beyond the original pleading - and the Commissioner's investigation, as reflected in the scope of the Section 11 Order - in two respects. First, within the existing "Relevant Time Period", the Commissioner seeks to put dozens of additional sleep sets at issue. Moreover, the Commissioner also seeks to put in issue all of the distinct sleep sets marketed by HBC during the Disputed Time Period, thus (more than) doubling the time frame in which the purported reviewable conduct under subsection 74.01(3) of the Act is said to have occurred. 23. In his Notice of Motion for the Amendment Motion, the Commissioner does not identify any newly discovered information which precipitated the requested amendments or any explanation for why the proposed allegations could not have been made in his original pleading. Rather, the Commissioner simply seeks a pleading "do over". 24. Under these circumstances, the (un)timeliness factor weighs heavily against granting the Amendment Motion. B. The proposed amendments are prejudicial to HBC and would cause delay in the hearing of this proceeding 25. HBC filed its Response to the Commissioner's Application on April 10, 2017 and the Commissioner filed his Reply on April 24, 2017. 26. Following the closing of the pleadings, the parties engaged in discussion concerning a schedule for this proceeding, which resulted in the Scheduling Order issued by the Tribunal on May 26, 2017. The Scheduling Order provided (among other things) for document
- 9 production to be made by the end of September 2017, examinations for discovery to be conducted by February 23, 2018 and for the hearing to commence on November 19, 2018. 27. In accordance with the Scheduling Order, HBC served its Affidavit of Documents and made its document productions on September 29, 2017. HBC produced approximately 10,000 documents (in addition to the approximately 27,000 documents which had been provided to the Bureau in response to the Section 11 Order), which it had taken HBC (with the assistance of a third party document services provider) approximately four months to gather, review and prepare for production, at considerable expense to HBC. 19 28. HBC did not collect, review or produce documents concerning its sale and marketing of sleep sets during the lengthy Disputed Time Period on the grounds that such documents were not relevant to the Commissioner's case under subsection 74.01(3) of the Act. On November 14, 2017, the Commissioner brought his Production Motion seeking to compel HBC to produce its documents for the Disputed Time Period. In support of the Production Motion, the Commissioner's affiant deposed to her belief that HBC had "tens of thousands" of "relevant" documents for the Disputed Time Period. 20 As an annex to his Memorandum of Fact and Law in support of the Production Motion, the Commissioner filed a chart identifying the various broad categories of documents which he was seeking from HBC in respect of the Disputed Time Period. 21 The Commissioner's position was that he could not 19 Esposito Affidavit, at paras 9-10 & Ex C 20 Alexander Affidavit, at para 14 21 Production Motion Factum, Annex A
- 10 proceed with examinations for discovery without production of such purportedly relevant and unquestionably voluminous documents. 22 29. Having now substantially lost his Production Motion, the Commissioner's transparent purpose in bringing the Amendment Motion is to inject the lengthy Disputed Time Period into this case. The Commissioner's request to dramatically expand his case against HBC under subsection 74.01(3) of the Act mid-way through the course of this proceeding is inherently prejudicial to HBC. HBC cannot defend itself against the case which the Commissioner now proposes to bring against it - which would put in issue all (dozens of) sleep sets marketed by HBC over a four-year period as opposed to four sleep sets sold over a two-year period - on the basis of the existing documentary record, which excludes the entire Disputed Time Period. Nor could HBC adequately prepare its witness(es) for examinations for discovery without first identifying and reviewing HBC's relevant documents covering that Period. 30. Indeed, given the nature of the proposed amendments, the Commissioner's suggestion in his Notice of Motion that only minor adjustments to the Scheduling Order need be made and the existing November 2018 hearing dates in this proceeding could be preserved if the Amendment Motion were granted simply attempts to pile prejudice on top of prejudice to HBC. Notwithstanding his position on the Production Motion that he could not proceed to examination for discoveries without having received documents from the Disputed Time Period, the Commissioner now proposes to proceed to discoveries on the amended pleading
22 Ibid, at para 3
- 11 and deal with "additional documentary request[s]" via "undertakings at discovery." 23 Clearly, given the scope of the relevant documents for the Disputed Time Period contended for by the Commissioner on the Production Motion, production for that Period (if the Amendment Motion were granted) could not be done by way of discovery undertakings at all, let alone under the existing schedule, without fundamentally impairing BBC's ability to defend this proceeding. 31. BBC's position (consistent with its evidence on the Production Motion) is that, ifthe Amendment Motion were granted, it would require approximately four months (at further considerable expense to HBC) to make production of the relevant documents in respect of the Commissioner's expanded pleading, 24 at which time the parties would essentially be back in the position they were in on September 29, 2017 in respect of the current Application. 32. It is thus readily apparent that the existing November 2018 hearing dates cannot be preserved if the Amendment Motion is granted and that an amended Scheduling Order with new dates for the completion of document production and all subsequent steps would be required, which Order would need to provide for substantially later hearing dates, well into 2019, in this proceeding. 33. HBC respectfully submits that the inherent prejudice to HBC and substantial delays in the hearing of this proceeding that would result from the proposed amendments are such that the interests of justice favour denial of the Amendment Motion.
23 NOM, Grounds for Motion, at para g 24 Esposito Affidavit, at para 13
- 12 -III. CONCLUSION 34. The proposed amendments to the Commissioner's Application are untimely, inherently prejudicial to HBC and antithetical to the interests of justice in this proceeding. 35. Accordingly, HBC requests an Order dismissing the Amendment Motion, with costs to HBC. 36. In the alternative, if the Amendment Motion is granted, HBC seeks an amendment of the Scheduling Order permitting it 3 - 4 months to make further documentary production and otherwise adjusting the schedule to provide for a hearing commencing no earlier than May 2019. 37. Competition Tribunal Rules, SORJ2008-141, Rule 34(1). 38. Federal Courts Rules, SORJ98-106, Rule 75. 39. Such further and other grounds as counsel may submit and the Tribunal accept. THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the Motion:
40. The Affidavit of Lucy Esposito, sworn January 26, 2018; 41. The pleadings and prior proceedings herein, including the materials filed on the Commissioner's Production Motion; and 42. Such further and other evidence as counsel may submit and the Tribunal consider.
- 13 -ALL OF WHICH IS RESPECTFULLY SUBMITTED at Toronto, this 26th day of January, 2018.
Eliot N. Kolers STIKEMAN ELLIOTT LLP 5300 Commerce Court West 199 Bay Street Toronto, Ontario M5L 1B9
Eliot N. Kolers Phone: (416) 869-5637 Fax: (416) 947-0866 Email: ekolers@stikeman.com
Mark E. Walli Phone: (416) 869-5577 Email: mwalli@stikeman.com
William S. Wu Phone: (4 16) 869-5259 Email: wwu@stikeman.com
Counsel for the Respondent
TO: ATTORNEY GENERAL OF CANADA Department of Justice Canada Competition Bureau Legal Services Place du Portage, Phase 1 50 Victoria Street, 22nd Floor Gatineau, QC KlA OC9
Alexander Gay Phone: (819) 994-3068 Email: alex.gay@canada.ca
Katherine Rydel Phone: (819) 994-34045 Email: katherine.rydel@canada.ca
- 14 -Counsel for the Commissioner of Competition AND TO: THE REGISTRAR Competition Tribunal Thomas D'Arcy McGee Building 1 90 Sparks Street, Suite 600 Ottawa, ON KIP 5A4