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 e-books 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 application under section 106(2) of the Competition Act, by 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: 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 THE COMMISSIONER OF COMPETITION (Motion to Strike Notice of Reference)
-1-
Department of Justice Competition Bureau Legal Services 50 Victoria Street, 22 nd Floor Gatineau, Quebec K1A 0C9
John Syme (LSUC #29333H) General Counsel Tel: (819) 953-3903 Fax: (819) 953-9267
Parul Shah (LSUC #55667M) Counsel Tel: (819) 953-3889 Fax: (819) 953-9267
Esther Rossman (LSUC #54414R) Counsel Tel: (819) 994-4045 Fax: (819) 953-9267
Counsel for the Commissioner TO: The Registrar Competition Tribunal Thomas D’Arcy McGee Building 90 Sparks Street, Suite 600 Ottawa, Ontario K1P 5B4
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
-2-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
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
-3-AND TO: Peter Franklyn Mahmud Jamal 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.
-4-OVERVIEW 1. The question the Commissioner of Competition (“Commissioner”) has referred to the Competition Tribunal (“Tribunal”) is proper. It is a pure question of law relating to the interpretation of a provision in Part VIII of the Competition Act (the “Act”) that falls squarely within subsection 124.2(2) of the Act. The Tribunal’s determination of the reference question will benefit the parties, the Tribunal, future litigants and the public at large by resolving an overarching legal question relevant to the current application and all future applications under subsection 106(2) of the Act.
2. The use of the reference process is appropriate in this case. The Commissioner may refer a question of law to the Tribunal “at any time”. If the Tribunal agrees with the Commissioner’s interpretation of subsection 106(2) of the Act, the Commissioner’s reference (the “Reference”) will almost certainly obviate the need for further proceedings. Even if the Tribunal does not agree with the Commissioner’s interpretation, the Tribunal’s determination of the Reference question at the outset of this proceeding will clarify the scope of the case and guide the parties at each step going forward.
3. Kobo’s motion to strike should be dismissed, with costs.
-5-A. The Commissioner Refers a Proper Question 4. The Commissioner has referred a proper question to the Tribunal under subsection 124.2(2) of the Act.
5. The question is a pure question of law relating to the interpretation of subsection 106(2) of the Act. The Commissioner asks the Tribunal to interpret 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 to determine the nature and scope of the Tribunal’s jurisdiction. The question is neither academic nor overly broad.
6. Rather, the question is a question of general application: it raises an overarching legal question regarding the Tribunal’s jurisdiction under subsection 106(2) of the Act that is relevant to this proceeding and all future subsection 106(2) proceedings. It also does not require a “factual foundation” for its determination.
7. The Tribunal’s determination of the Reference will resolve any uncertainty regarding the Tribunal’s jurisdiction under subsection 106(2) of the Act. The Reference is therefore to the benefit of the parties, the Tribunal, future litigants and the public at large.
8. In its motion, Kobo confuses the nature of the question that the Commissioner has referred to the Tribunal for determination. Kobo argues that the Tribunal must interpret subsection 106(2) of the Act flexibly, depending on the facts of
-6-each case and the section in relation to which the consent agreement is filed, such that there is no legal standard that can be applied to all applications made under the provision. Kobo appears to argue, therefore, that the interpretation of subsection 106(2) is not a question of law, but a question of application or mixed law and fact. Kobo’s position, if accepted, would be wholly inconsistent with established case law that defines what constitutes a “question of law”, including Burns Lake Native Development Corp. v. Canada (Commissioner of Competition), in which the Tribunal held, and the Federal Court of Appeal affirmed, that similar questions about the interpretation of subsection 106(2) were pure questions of law. 1 9. Setting aside this confusion, it is clear that Kobo’s real complaint is that it disagrees with the Commissioner’s interpretation of subsection 106(2) of the Act and how that interpretation applies to the facts of this case.
10. As set out in the Commissioner’s Reference Record, the Commissioner interprets the words “the terms could not be the subject of an order of the Tribunal” in subsection 106(2) of the Act to mean that the nature and scope of the Tribunal’s jurisdiction to rescind or vary a consent agreement is limited to determining whether (i) the terms are terms that could be contained in an order issued by the Tribunal or (ii) the terms are so vague or ambiguous that they are unenforceable or would lead to “no enforceable obligation”. The Tribunal’s
1 2005 Comp. Trib. 19, Tab A, at paras. 28-29, affirmed 2006 FCA 97, Tab B at paras. 19-20.
-7-jurisdiction under subsection 106(2) of the Act does not extend to a consideration of the facts.
11. The Commissioner submits that the foregoing interpretation applies to all consent agreements filed and registered under section 105 of the Act.
12. This interpretation of subsection 106(2) is consistent with Parliament’s intention to streamline the process for all consent agreements filed and registered under section 105 of the Act and to make the process less costly and more certain for the parties to consent agreements. The Commissioner further argues that Kobo’s interpretation would frustrate this purpose.
13. That the parties have conflicting interpretations of subsection 106(2) of the Act does not render the Reference question improper. Indeed, the purpose of the Reference is to resolve the conflict regarding the interpretation of subsection 106(2) of the Act for this proceeding and all future subsection 106(2) proceedings.
14. There is no basis for striking the Reference on the ground that the Commissioner has not referred a proper question to the Tribunal.
-8-B. The Reference Process is Appropriate 15. The Act provides the Commissioner with the ability to, at any time, refer to the Tribunal for determination a question of law, jurisdiction, practice or procedure in relation to the application or interpretation of Parts VII.1 to IX of the Act.
16. The Commissioner made the Reference so that an overarching question of law relating to the interpretation of subsection 124.2(2) of the Act can be determined expeditiously at the outset of this proceeding.
17. If the Tribunal agrees with the Commissioner that the scope of a subsection 106(2) proceeding is limited to considering whether the “terms” are terms that the Tribunal could not order, and does not include consideration of the facts of the “case”, then there will be no need for the proceeding to continue. This flows from the fact that Kobo has not alleged that the “terms” of the consent agreement are “terms” that could not be contained in a Tribunal order.
18. Even if the Tribunal does not accept the Commissioner’s interpretation of subsection 106(2) of the Act, the Reference will nonetheless clarify an overarching legal question in this proceeding. It will provide the parties with clear direction as to the nature and scope of the matter. Without that direction, the parties will embark on a proceeding with fundamentally differing views as to the scope of the proceeding and what arguments and evidence may be relevant. The Tribunal’s determination of the Reference will therefore be beneficial.
-9-19. Kobo is not prejudiced by the Reference. The Tribunal has issued a stay of the consent agreement. Kobo’s evidence in this proceeding demonstrates that pending the Tribunal’s determination of Kobo’s application, Kobo can continue to charge Canadian consumers higher prices for its e-books than would have been the case if the consent agreement was in force.
20. Further, Kobo’s allegation that the Reference will delay this proceeding is hollow. If the Reference is heard after 25 June 2014, it would be the strike motion, not the Reference, that would have caused delay. To the extent that Kobo argues that the Reference will delay the proceeding because “an appeal of the Tribunal’s Reference decision is all but assured”, the claim is speculative. Further, it does not constitute a basis for striking the Reference.
21. The Reference is not clearly improper. Consequently, no basis exists for striking the Commissioner’s Reference.
22. Kobo’s motion to strike should be dismissed, with costs.
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-11-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 e-books 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 application under section 106(2) of the Competition Act, by 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: 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
INDEX CASES 1. Burns Lake Native Development Corp et al. v. Commissioner of Competition et al., [2005] C.C.T.D. No. 19
2. Burns Lake Native Development Corp et al. v. Commissioner of Competition et al., 2006 FCA 97
Case Name: Burns Lake Native Development Corp. v. Canada (Commissioner of Competition)
Applicants' Motion to Strike Commissioner's Reference Order and Reasons for Order IN THE MATTER OF the Competition Act, R.S.C. 1985, c.C-34, as amended; AND IN THE MATTER OF the acquisition by West Fraser Timber Co. Ltd. of Weldwood of Canada Limited; AND IN THE MATTER OF an application under Section 106(2) of the Competition Act by Burns Lake Native Development Corporation, Lake Babine Nation, Burns Lake Band, Nee Tahi Buhn Indian Band to rescind or vary the Consent Agreement between the Commissioner of Competition and West Fraser Timber Co. Ltd. and West Fraser Mills Ltd. filed and registered with the Competition Tribunal on December 7, 2004, under s. 105 of the Competition Act; AND IN THE MATTER OF a motion by the Applicants to strike the Reference of the Commissioner of Competition filed April 4, 2005. Between: Burns Lake Native Development Corporation, Council of Lake Babine Nation and Emma Palmantier, on her own behalf and on behalf of all members of Lake Babine Nation, Council of Burns Lake Band and Robert Charlie, on his own behalf and on behalf of all Members of Burns Lake Band and Council of Nee Tahi Buhn Indian Band and Ray Morris, on his own behalf and on behalf of all Members of Nee Tahi Buhn Indian Band, applicants, and The Commissioner of Competition, West Fraser Timber Co. Ltd. and West Fraser Mills Ltd., respondents
[2005] C.C.T.D. No. 18 2005 Comp. Trib. 19 File no.: CT-2004-013
Registry document no.: 30 Canada Competition Tribunal Ottawa, Ontario
Before: Simpson J., Presiding Judicial Member Heard: May 18, 2005. Decision: June 1, 2005.
(51 paras.) Appearances: For the applicant: Burns Lake Native Development Corp. et al. Orestes Pasparakis For the respondent: Commissioner of Competition Melanie Aitkin Duane Schippers Derek Bell
West Fraser Timber Co. Ltd. James Musgrove
. . . . . . . . Applicants' Motion to Strike Commissioner's Reference Order and Reasons for Order
1 This motion is brought by Burns Lake Native Development Corporation et al. (the "Applicants") for an order to strike the notice of reference filed by the Commissioner of Competition (the "Commissioner") in the context of the Applicants' application to rescind or vary a
consent agreement (the "Consent Agreement") made between the Commissioner and West Fraser Mills Ltd. and West Fraser Timber Co. Ltd ("West Fraser").
I. THE PROCEEDINGS TO DATE The Consent Agreement 2 On December 7, 2004, the Commissioner and West Fraser entered into the Consent Agreement in connection with West Fraser's acquisition (the "Merger") of Weldwood of Canada Limited ("Weldwood"). Under the terms of the Consent Agreement, West Fraser was obliged to divest, among other things, its post-merger 89.8% interest in the Burns Lake Mill, the Decker Lake Mill, certain timber harvesting rights, and associated assets ("Mill Assets and Timber Rights").
3 The Consent Agreement was registered by the Tribunal on December 7, 2004, at which time it acquired the same force and effect as if it were an order of the Tribunal.
The Applicants' Application to rescind or vary 4 On February 3, 2005, the Applicants filed a Notice of Application for an order to rescind or vary the Consent Agreement, under subsection 106(2) of the Competition Act, R.S.C. 1985, c.C-34 as amended in 2002 (the "Act"). The Notice of Application and the Statement of Grounds and Material Facts were both amended on February 11, 2005, to add West Fraser as a Respondent. The terms "Section 106 Application" and "Statement of Grounds" will be used to refer to the amended versions of the documents.
5 Without dealing in detail with the underlying corporate structure, it is fair to say that in broad terms the Applicants are aggrieved because they participated as minority shareholders in a satisfactory long term joint venture with a partner who operated the Mill Assets and Timber Rights to their satisfaction. As a result of the divestiture requirement in the Consent Agreement, they are faced with the prospect of a new unknown joint venture partner.
6 The Applicants submit that the Consent Agreement must be rescinded or varied to take into account the Applicants' various interests in the divestiture of the Mills Assets and Timber Rights. These interests include their Aboriginal land claims. The grounds for their position are described in the Statement of Grounds in the following terms:
(i) subsections 105(3) and (4) of the Competition Act, which permit directly affected persons to be subject to and/or impacted by an order of the Tribunal without a fair hearing, are contrary to the Canadian Bill of Rights and inoperative; (ii) by entering into the Consent Agreement, the Commissioner has breached her duties to the First Nations and the First Nations peoples of Burns Lake, including her fiduciary duties, duty to consult, and duty to accommodate; and
(iii) the Consent Agreement could not be the subject of an order of the Tribunal. There is no evidentiary record on which to find that there has been a substantial lessening of competition and, in the absence of such evidence, there is no basis in law for a Tribunal to order the divestiture of the Mill Assets and Timber Rights.
The Reference 7 On April 4, 2005, the Commissioner filed a Notice of Reference pursuant to subsection 124.2(2) of the Act (the "Reference"). The Reference consists of three questions ("Questions"), which will be presented in their entirety later in these Reasons. Basically, the Commissioner is asking the Tribunal (i) to determine the scope and meaning of "directly affected person" and whether the term applies to the Applicants, (ii) whether it is necessary at the time a consent agreement is registered with the Tribunal to file evidence of substantial lessening or prevention of competition, and (iii) whether the Tribunal is authorized under subsection 106(2) to engage in a de novo review of the impact of a merger.
The Case Conference 8 A case conference was held on April 13, 2005. At that time, the presiding judicial member indicated that although she considered a reference to be the appropriate procedure for addressing whether the Applicants are directly affected, she would be willing to entertain a motion by the Applicants alleging that the contents of the Questions were inappropriate. Accordingly, the Applicants filed this motion on April 22, 2005 to strike the Reference.
The Appeal 9 During the case conference described above, the judicial member also dealt with the Applicants' submission that the reference procedure (as distinct from the contents of the Questions) was inappropriate and that the Tribunal's gap rule should be used to require the Commissioner to move to strike the Section 106 Application. The judicial member decided that the reference procedure was appropriate. That ruling was appealed when the Applicants filed a Notice of Appeal in the Federal Court of Appeal on April 25, 2005.
This Motion 10 In this motion, the Applicants state that none of the three Questions posed in the Reference should be considered. However, as will be later described, Question 3 is no longer at issue. With regard to Question 2, while the Applicants acknowledge that it is an appropriate question for a reference, they ask that it be heard as part of the main hearing in the Section 106 Application rather than on a separate reference to avoid delay.
11 The hearing was held in Ottawa on May 18, 2005, and oral submissions were made by all parties. The Applicants and the Commissioner both filed written material but West Fraser did not.
At the end of the hearing, only one issue was left for post-hearing written submissions. It was whether the material facts pleaded in the Applicants' Reply would be accepted as true on the Reference. The Tribunal received written submissions from the Commissioner on May 20, 2005, from the Applicants on May 30, 2005 and again from the Commissioner on May 30, 2005. These submissions were considered only on the issue of the Reply. To the extent that the submissions dealt with other issues, they were not appropriate and have been disregarded.
II. THE ISSUES 12 The first issue is whether the Questions fit within subsection 124.2(2) of the Act. To decide this issue, the following questions must be addressed:
(a) What is the evidence to be considered on the Reference in this case? (b) What are the parameters of the Reference power in subsection 124.2(2) of the Act? (c) Are the Questions appropriate?
13 The second issue is whether, if Questions 1 and 2 are appropriate on the Reference, there are any other reasons why they should not be heard.
A. ISSUE 1 (1) The Evidence 14 The Commissioner's Memorandum of Argument of April 1, 2005 made it clear at paragraph 60 that the Questions were to be considered on the Reference on the basis that the facts pleaded by the Applicants in their Statement of Grounds were true. After the Reference was filed, the Commissioner filed her Response in the Section 106 Application and, in due course, the Applicants filed their Reply.
15 In the Reply the Applicants pleaded facts which they say show how, in a competition law sense, they are directly affected by the Consent Agreement.
16 The Commissioner argued at the hearing of the motion that the Reply should not form part of the pleadings to be accepted as true on the Reference. She said that the Applicants' case crystallized when she filed the Reference and that the Tribunal is not entitled to consider the facts raised in the Reply. However, in her subsequent written submissions dated May 20, 2005, the Commissioner conceded, for the purpose of the Reference, that the material facts (if any) contained in the Reply may be considered on the Reference. Accordingly those facts, like those in the Section 106 Application, will be treated as true on the Reference.
17 Accordingly, the Reference will be based on the facts alleged in the Applicants' Statement of
Grounds and their Reply and those facts will be treated as true for the purpose of the Reference. (2) The Parameters of the Reference Power 18 The Applicants say that subsection 124.2(2) of the Act is identical for all practical purposes with section 18.3 of the Federal Courts Act, R.S.C. 1985, c. F-7, and that it should therefore be interpreted according to the case law related to that section.
19 However, I have not been persuaded that the two sections are virtually identical. In my view, there are significant differences between the relevant sections of the Act and the Federal Courts Act. For ease of comparison, they are set out below:
THE COMPETITION ACT Reference by Commissioner 124.2(2) The Commissioner may, at any time, refer to the Tribunal for determination a question of law, jurisdiction, practice or procedure, in relation to the application or interpretation of Parts VII.1 to IX.
* * * Renvois par le commissaire 124.2(2) Le commissaire peut, en tout temps, soumettre au Tribunal toute question de droit, de compétence, de pratique ou de procédure liée à l'application ou l'interprétation des parties VII.1 à IX.
THE FEDERAL COURTS ACT Reference by federal tribunal
18.3 (1) A federal board, commission or other tribunal may at any stage of its proceedings refer any question or issue of law, of jurisdiction or of practice and procedure to the Federal Court for hearing and determination.
* * * Renvoi d'un office fédéral
18.3 (1) Les offices fédéraux peuvent, à tout stade de leurs procédures, renvoyer devant la Cour fédérale pour audition et jugement toute question de droit, de compétence ou de pratique et procédure.
20 The first difference concerns the time when a reference may be brought. In the case of 18.3(1), a reference can only be brought in the context of a proceeding before a federal tribunal. However, under the Act, a reference is possible "at any time". For this reason, I have concluded that subsection 124.2(2) allows the Commissioner to refer a question to the Tribunal which is not raised in the context of a case. This means that the determinations made on a reference under 124.2(2) of the Act need not be dispositive of a "live" or case-related issue. In other words, the Commissioner may bring a free-standing reference which is not related to an inquiry under the Act or litigation before the Tribunal.
21 Secondly, although both provisions refer to questions of law, jurisdiction, practice and procedure, the language which qualifies those words is found only in the Act. It says that the questions must be in relation to the "application" or "interpretation" of specific parts of the Act. The word "application" suggests to me that questions on a reference to the Tribunal under 124.2(2) may properly deal with the issue of how the Act applies to the facts of a particular case.
22 Both provisions indicate that the questions are for determination and I accept the Applicants' submission that the Tribunal has not been given the power to "consider" questions, which is available to the Supreme Court under subsection 53(1) of the Supreme Court Act, R.S.C. 1985, c. S-26.
23 The Applicants also state that the case law under section 18.3 of the Federal Courts Act applies to section 124.2(2) of the Act and establishes principles relevant to this reference. Specifically, the Applicants rely on the Federal Court of Appeal's decisions in Public Service Staff Relations Act (Canada) (Re), [1973] F.C. 604 (C.A.), Martin Service Station Ltd. v. Canada (Minister of National Revenue), [1974] 1 F.C. 398 (C.A.) and Rosen (Re), [1987] 3 F.C. 238 (C.A.) to argue that questions in the Reference must be posed so that the Tribunal (i) determines one or more issues and does not merely provide an advisory opinion, (ii) disposes of an actual fact situation in a case rather than a hypothetical question, and (iii) deals only with material facts which are agreed or are not in dispute.
24 Counsel for the Applicants also argued that a reference cannot answer a mixed question of fact and law. When law is applied to facts, according to the Applicants, the Tribunal is deciding a mixed question of fact and law (see Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 758 at paragraph 35). They submit that such questions are outside the jurisdiction of the Tribunal on a Commissioner's reference under subsection 124.2(2) because the subsection refers only to questions of law.
25 However, I have not been persuaded that Southam applies. It is clear to me that, in Southam, the Supreme Court was describing a mixed question in the context of an adversarial hearing. In my
view, in situations such as this Reference, in which no material facts are in dispute for the purpose of the Reference, it cannot be said that questions of fact are involved. There will be no questions of fact on the Reference and no findings of fact will be made.
26 The exercise of determining the law and then determining how it applies to undisputed facts is, in my view, a question of law which is appropriate for a reference under subsection 124.2(2) of the Act.
(3) Are the Questions appropriate? 27 Question 1 (a) What is the nature and scope of the interest sufficient to satisfy the "directly affected" requirement for standing in subsection 106(2) of the Act?
28 The Applicants say that this question is inappropriate because it seeks an advisory opinion, not a determination of a legal issue. However, I find that the Tribunal is asked to interpret the words "directly affected" and decide their meaning. The answer to the question will impact the application of section 106 of the Act and, therefore, falls squarely within the provisions of 124.2(2).
29 I recognize that this question will not, by itself, be dispositive of an issue before the Tribunal in this case. However, as discussed above, there is no requirement that a reference under subsection 124.2(2) relate to a specific case. Given that a question of law can be a matter of interpretation only, the fact that the question is determinative of an issue is sufficient.
30 Questions 1(b) and (c) (2) In particular; must an applicant under subsection 106(2) be "affected": (i) in relation to competition; and (ii) in relation to its substantive rights and/or pecuniary interests?
(3) In particular, must an applicant under subsection 106(2) be affected "directly" in that the alleged effect must be:
(i) suffered (or threatened to be suffered) by the applicant exclusively as a consequence of the Consent Agreement, and not as a result of other factors, influences, or circumstances; and (ii) imminent and real; and not hypothetical or speculative?
31 The Applicants' say that these questions are also inappropriate because, although more precise
than question 1(a), they call for opinions which will not be dispositive of issues in a case before the Tribunal.
32 For the reasons given above, this submission is not accepted and I find that the questions are appropriate.
33 Question 1(d) As to the application of subsection 106(2), have the Applicants, as grouped below, disclosed in their Notice of Application herein facts which, if proved, establish that they are "directly affected" for the purposes of subsection 106(2):
(i) Burns Lake Native Development Corporation, a body corporate established in 1974 (the "Corporation"); (ii) Council of Burns Lake Band, Council of Lake Babine Nation, Council of Nee Tahi Buhn Indian Band (the "Bands"); and (iii) Robert Charlie, Emma Palmantier and Ray Morris (the "Chiefs")?
34 The objection to this question is that it requires an application of the law to the facts and is, therefore, a mixed question of fact and law which cannot be considered in a Commissioner's reference under subsection 124.2(2) of the Act.
35 As discussed above, there are no facts in dispute which are material to the issue of standing. Accordingly, no questions of fact will be considered and no findings of fact will be made during the Reference. For this reason, I find that this question is not properly characterized by the Applicants as a mixed question of fact and law. In my view, it is best characterized as a question of jurisdiction relating to the application of the Act. At its core is the question of whether the Tribunal has jurisdiction to entertain the Applicants' Section 106 Application. If the Applicants are not directly affected by the Consent Agreement, they have no standing and the Tribunal has no jurisdiction to hear their Section 106 Application. In my view, this question is appropriate for the Reference.
36 The Commissioner accepts and the Applicants agree that on the Reference, when dealing with Question 1 (d), the Commissioner will have to show that it is plain and obvious that the Applicants are not directly affected within the meaning of subsection 106(2) of the Act.
37 Question 2 At the time a consent agreement is registered under section 105 of the Act, are parties required to file evidence to substantiate that the merger or proposed merger is likely to substantially lessen or prevent competition without the remedial terms in the consent agreement? If so, is the absence of such filed evidence sufficient to support a finding that "the terms could not be the subject of
an order of the Tribunal" as required to be established by an applicant under subsection 106(2) of the Act?
38 The Applicants have conceded that this is a proper question. 39 Question 3 In an application under subsection 106(2) of the Act to vary or rescind the terms of a consent agreement, is the Tribunal authorized, by the language "that the terms could not be the subject of an order of the Tribunal," to engage in a de novo review of whether the merger or proposed merger is likely to substantially lessen or prevent competition?
40 The Commissioner agreed during the hearing not to proceed with this question on the Reference because the Applicants made it clear that they had no intention of asking the Tribunal to engage in a de novo analysis of whether there was a substantial lessening or prevention of competition. The Commissioner, in her written submissions dated May 20, 2005, attempted to put post-hearing conditions on this concession. This portion of the written submissions has been disregarded because, as noted above, counsel's right to file further submissions was restricted to the relevance of the Reply.
B. Issue 2 - Other Reasons Not to Hear the Reference 41 The Commissioner's submission is that the Tribunal must hear the Reference if it finds that the questions fall within the ambit of subsection 124.2(2). I am not persuaded by this submission. Subsection 124.2(4) does not oblige the Tribunal to hear a reference - it simply indicates the procedure to be followed if the Reference is entertained. There could be circumstances in which the Tribunal might decide not to hear a reference even though it posed appropriate questions. That being so, I will consider the Applicants' submissions on this subject.
42 The Applicants ask that the Reference not be heard because there are "huge" disputes between the parties and a hearing is required for their resolution. I agree that there are significant disagreements which will be considered if this matter proceeds to a hearing. However, for the purpose of the Reference, all the Applicants' allegations of material fact will be accepted. In these circumstances, the fact that the Commissioner may dispute those allegations in the future, is not a reason to decline to hear a proper reference.
43 The Applicants also say that, in spite of their agreement that Question 2 is appropriate, the Reference should not proceed because it is unreasonable to delay a hearing on the merits for a question which could easily be dealt with at the hearing.
44 This submission illustrates a situation in which the Tribunal might exercise its discretion not to hear a reference. However, the facts do not support the submission in this case. Since Question 1,
in its entirety, is proper for the Reference, and since the reference power in subsection 124.2(2) of the Act provides for the threshold determination of issues in a summary way and since the answers to Question 1 will decide the issue of standing, I have concluded that it would not be appropriate to exercise my discretion against the Reference for reasons of expedition.
45 The Applicants also argue that the Reference should not proceed because they have raised constitutional issues relating to their allegations that the Commissioner had a duty to consult them about the Consent Agreement. The Commissioner counters that the issue of standing is a proper preliminary issue in a constitutional matter, and cites and refers to four Supreme Court of Canada decisions to support this argument : Canada (Min. of Justice) v. Borowski [1981] 2 S.C.R. 575; Canadian Council of Churches v. Canada (Minister of Employment and Immigration) [1992] 1 S.C.R. 236; Finlay v. Canada (Minister of Finance) [1986] 2 S.C.R. 607; and Nova Scotia (Board of Censors) v. McNeil [1976] 2 S.C.R. 265. In these cases, the issue was whether the Applicants had public interest standing and the Court applied the facts of the Applicants' situations to its definition of the required interest to decide the issue as a preliminary matter. In my view, it is therefore clear that standing is a question which may be decided as a preliminary issue even though constitutional issues will be considered if a case proceeds.
46 This case, however, is different in that the duty to consult (i.e. the constitutional issue) may be argued on the Reference as well as at a future hearing on the merits if the matter proceeds. The questions on the Reference will be whether the facts are sufficient to give rise to the duty to consult and, if so, whether the existence of the duty is relevant to the definition of directly affected. In my view, the fact that a constitutional issue may be argued during the Reference on standing does not preclude the determination of standing as a preliminary matter when all relevant facts are admitted.
47 The Applicants further submit that the presence of constitutional issues bars the Reference because the law is clear that such issues should not be addressed in a factual vacuum. However, as discussed earlier, there will be no such vacuum on the Reference. All the Applicants' material facts will be accepted as true by the Tribunal.
48 The Applicants have alleged that section 2 of the Canadian Bill of Rights (1960, c. 44) is infringed in two respects. Firstly, they state that the Reference should not proceed because the decision on the Reference might deprive them of a hearing on the merits. It is accurate to say that if the Applicants have no standing, their Section 106 Application will not proceed, but that outcome is not contrary to section 2. The section does not require a hearing when the party has no standing. Secondly, the Applicants say that subsections 105(3) and (4) of the Act are incompatible with subsection 2(e) of the Bill of Rights because the consent agreement registration process did not provide the Applicants with a fair hearing. This allegation is not relevant to standing and, in my view, it does not operate to bar the Reference.
49 Finally, the Applicants say that the Reference should not proceed because the Commissioner failed to comply with the Tribunal's Practice Direction dated August 30, 2002, when she filed the
Notice of Reference and failed to file a supporting affidavit. The relevant text of the Practice Direction reads as follows:
98. (2) A notice of reference shall be accompanied by: (a) an affidavit or affidavits setting out the facts on which the reference is based or an agreed statement of facts; and
... * * * 98. (2) Sont joints B l'avis de renvoi : a) un ou des affidavits indiquant les faits sur lesquels s'appuie le renvoi ou un exposé conjoint des faits;
(...) 50 The Commissioner's response is that she made it clear in paragraph 60 of her Memorandum of Argument for the reference dated April 1, 2005 that the relevant facts were those pleaded by the Applicants and that, in these circumstances, an affidavit is not required. I agree. It would serve no useful purpose to file an affidavit which simply exhibits the Applicants' pleadings. Accordingly, this submission does not provide a basis for refusing to entertain a proper reference.
51 FOR ALL THESE REASONS, THE TRIBUNAL ORDERS THAT: (i) Questions 1 and 2 remain in the Reference, (ii) Question 3 is hereby struck from the Reference, and (iii) The Applicants are to pay to the Respondent, the Commissioner of Competition, her costs of this motion which are hereby fixed in the amount of $1,000.00. (iv) The Commissioner of Competition is granted leave to file a fresh Memorandum of Argument to address any allegations in the Reply which she identifies as new.
DATED at Ottawa, this 1st day of June, 2005. SIGNED on behalf of the Tribunal by the presiding judicial member. (s) Sandra J. Simpson cp/e/qlscl
Case Name: Burns Lake Native Development Corp. v. Canada (Commissioner of Competition)
IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34, as amended; and ss. 3 and 49 of the Competition Tribunal Rules, Can. Reg. SOR/94-290 AND IN THE MATTER OF the acquisition by West Fraser Timber Co. Ltd. of Weldwood of Canada Limited AND IN THE MATTER OF an application under Section 106(2) of the Competition Act by Burns Lake Native Development Corporation, Lake Babine Nation, Burns Lake Band, Nee Tahi Buhn Indian Band to rescind or vary the Consent Agreement between the Commissioner of Competition and West Fraser Timber Co. Ltd. and West Fraser Mills Ltd. filed and registered with the Competition Tribunal on December 7, 2004, under s. 105 of the Competition Act Between Burns Lake Native Development Corporation, Council of Lake Babine Nation and Emma Palmantier, on her own behalf and on behalf of all members of Lake Babine Nation, Council pf Burns Lake Band and Robert Charlie, on his own behalf and on behalf of all members of Burns Lake Band and Council of Nee Tahi Buhn Indian Band and Ray Morris, on his own behalf and on behalf of all members of Nee Tahi Buhn Indian Band, appellants, and Commissioner of Competition, West Fraser Timber Co. Ltd. and West Fraser Mills Ltd., respondents
[2006] F.C.J. No. 372 [2006] A.C.F. no 372 2006 FCA 97 2006 CAF 97 346 N.R. 140
47 C.P.R. (4th) 343 146 A.C.W.S. (3d) 631 Dockets A-189-05, A-276-05 Federal Court of Appeal Toronto, Ontario
Evans, Sharlow and Malone JJ.A. Heard: March 6, 2006. Judgment: March 7, 2006.
(25 paras.) Administrative law -- Judicial review and statutory appeal -- Deference to expertise of decision-maker -- Appeals from decisions of Competition Tribunal dismissed -- The Commissioner had power to make a reference at any time -- The facts were not in dispute for the purpose of the reference.
Appeals by Burns Lake Native Development from the Competition Tribunal's orders that a reference question was not procedurally improper as having been brought by the Commissioner after Burns Lake had filed their proceeding, and that a reference question was not substantively improper on the ground that the Tribunal was being asked to decide abstract or hypothetical questions, or questions that were of mixed fact and law.
HELD: Appeals dismissed. The Tribunal did not err in holding that the Commissioner's power to make a reference at any time enabled the Commissioner to refer a question arising in the course of a proceeding before the Tribunal instituted under the Act to which the Commissioner was party. The Tribunal held that the reference question would be answered on the assumption that the facts set out by Burns Lake in their application and reply were true. In these circumstances, the facts were not in dispute for the purpose of the reference.
Statutes, Regulations and Rules Cited: Competition Act, R.S.C. 1985, c. C-34, ss. 7, 105, 106(2), 124.2(1), 124.2(2) Competition Tribunal Act, R.S.C. 1985, c. 19 (2nd Supp.) Federal Courts Act, R.S.C. 1985, c. F-7., ss. 18.3, 18.3(1)
Counsel: Orestes Pasparakis and D. Michael Brown, for the appellants. Melanie Aitken and Derek Bell, for the respondent, Commissioner of Competition. James Musgrove, for the respondent, West Fraser Timber Co. Ltd. et al.
[Editor's note: An amendment was released by the Court on June 28, 2006. The changes were not indicated. This document contains the amended text.]
The judgement of the Court was delivered by 1 EVANS J.A.;-- In these consolidated appeals the Burns Lake Native Development Corporation and others ("the appellants") appeal from orders of the Competition Tribunal, dated April 13, 2005, and June 1, 2005. The appellants say that the Competition Tribunal erred in making orders upholding the procedural propriety of a reference to the Tribunal by the Commissioner of Competition, and ordering that Question 1 of the reference proceed to hearing.
2 The reference by the Commissioner asks the judicial member of the Tribunal to determine questions pertaining to the interpretation of the words "directly affected" in subsection 106(2) of the Competition Act, R.S.C. 1985, c. C-34 ("the Act"), and their application to particular facts.
3 Subsection 106(2) provides: (2) A person directly affected by a consent agreement, other than a party to that agreement, may apply to the Tribunal within 60 days after the registration of the agreement to have one or more of its terms rescinded or varied. The Tribunal may grant the application if it finds that the person has established that the terms could not be the subject of an order of the Tribunal.
* * * (2) Toute personne directement touchée par le consentement -- à l'exclusion d'une partie à celui-ci -- peut, dans les soixante jours suivant l'enregistrement, demander au Tribunal d'en annuler ou d'en modifier une ou plusieurs modalités. Le Tribunal peut accueillir la demande s'il conclut que la personne a établi que les modalités ne pourraient faire l'objet d'une ordonnance du Tribunal.
4 The Commissioner made this reference in response to an application by the appellants under subsection 106(2) requesting the Tribunal to rescind or vary certain terms in a consent agreement
entered into by the Commissioner and two companies ("West Fraser"), following West Fraser's acquisition of Weldwood of Canada Co. Ltd.. The consent agreement was registered by the Tribunal in accordance with section 105 of the Act. The appellants named the Commissioner and West Fraser as respondents to their application.
5 The appellants allege, among other things, that they will be injured by a provision in the consent agreement requiring West Fraser to divest itself of certain timber mill interests and harvesting rights. They say also that the consent agreement is invalid because there was no evidence that the acquisition would lessen competition substantially, and it was entered into in breach of the Commissioner's duties to First Nations peoples of Burns Lake.
6 The Commissioner made her reference to the Tribunal pursuant to subsection 124.2(2) of the Act, which provides:
(2) The Commissioner may, at any time, refer to the Tribunal for determination a question of law, jurisdiction, practice or procedure, in relation to the application or interpretation of Parts VII.1 to IX.
* * * (2) Le commissaire peut, en tout temps, soumettre au Tribunal toute question de droit, de compétence, de pratique ou de procédure liée à l'application ou l'interprétation des parties VII.1 à IX.
7 The propriety of Question 1 of the reference is still in dispute. It is as follows:
1. (a) What is the nature and scope of the interest sufficient to satisfy the "directly af-fected" requirement for standing in subsection 106(2) of the Act?
(b) In particular, must an applicant under subsection 106(2) be "affected":
(i) in relation to competition; and (ii) in relation to its substantive rights and/or pecuniary interests?
(c) In particular, must an applicant under subsection 106(2) be affected "directly" in that the alleged effect must be:
(i) suffered (or threatened to be suffered) by the applicant exclusively as a consequences of the Consent Agreement, and not as a result of other factors, influences, or circumstances; and (ii) imminent and real, and not hypothetical or speculative?
(d) As to the application of subsection 106(2), have the Applicants, as grouped below, disclosed in their Notice of Application herein facts which, if proved, establish that they are "directly affected" for the purposes of subsection 106(2):
(i) Burns Lake Native Development Corporation, a body corporate established in 1974 (the "Corporation"); (ii) Council of Burns Lake Band, Council of Lake Babine Nation, Council of Nee Tahi Buhn Indian Band (the "Bands"); and (iii) Robert Charlie, Emma Palmantier and Ray Morris (the "Chiefs")?
8 The Commissioner referred this question in the interests of settling legal questions likely to recur relating to the standing of parties to make a subsection 106(2) application, and to determine, on the basis of the relevant legal tests, if the appellants had standing to make their application as persons "directly affected". If the Tribunal were to answer the questions (and especially Question 1(d)) in the manner advocated by the Commissioner, it would probably not be necessary for the Tribunal to enter into the merits of the appellants' application. Delay in determining the subsection 106(2) application may also prejudice the interests of West Fraser.
9 The judicial member of the Tribunal, acting as the case management judge of the subsection 106(2) application, made two orders respecting the reference which are the subject of these appeals. First, she held that the reference was not procedurally improper as having been brought by the Commissioner after the appellants had filed their subsection 106(2) proceeding. This is the subject of the appeal in Court File No. A-189-05.
10 Second, she held that Question 1 was not substantively improper on the ground that the Tribunal was being asked to decide abstract or hypothetical questions, or questions that were of mixed fact and law. The Commissioner is only authorized by subsection 124.2(2) to refer to the Tribunal questions of law, jurisdiction or procedure.
11 I should add that the Tribunal has now held a two-and-a-half-day hearing on the question of whether the appellants are "directly affected" by the consent agreement. Its decision is under reserve. In an attempt to obtain a ruling from the Tribunal that would obviate the need for a possibly lengthy hearing on the merits of the subsection 106(2) application, the Commissioner accepted that
the "plain and obvious" standard applicable to motions to strike should also apply to the determination of the reference.
12 Having described the background to the appeals, I shall discuss each separately. The A-189-05 appeal 13 I am not persuaded that the Tribunal erred in holding that the Commissioner's power to make a reference under subsection 124.2(2) "at any time" enables the Commissioner to refer a question arising in the course of a proceeding before the Tribunal instituted under the Act to which the Commissioner is party.
14 In view of the plain meaning of the words "at any time", it is not justifiable to limit their scope by reading in words to the effect that no question may be referred in connection with a proceeding which had already been initiated before the Tribunal and to which the Commissioner was party. That the Commissioner, like the appellants, may raise an issue by way of a motion to strike is irrelevant. The fact that there may be an overlap between subsection 124.2(2), as interpreted by the Tribunal, and subsection 124.2(1) is not a reason for imposing implied limits on the words "at any time".
15 Counsel for the appellants submitted that the words "at any time" must be construed in their context. He argued that, since subsection 124.2(2) was located in the Competition Act, not the Competition Tribunal Act, R.S.C. 1985, c. 19 (2nd Supp.), it should not be regarded merely as a rule of procedure applicable to proceedings before the Tribunal.
16 I do not agree. Section 7 of the Competition Act creates the office of Commissioner. Since subsection 124.2(2) confers a power on the Commissioner it is not surprising to find it included in the Competition Act, rather than the Competition Tribunal Act. It is not a provision governing the procedure of the Tribunal, but a power exercisable by the Commissioner in the administration of the Act.
17 Nor am I persuaded that the appellants were denied a fair hearing when the Tribunal rendered its decision on the basis of a case management telephone conference. The propriety of the use of the reference procedure once a proceeding had commenced was fully argued before the Tribunal, both in writing and orally. In these circumstances, fairness did not require the Tribunal to permit the appellants to bring a formal motion to strike the reference.
The A-276-05 appeal 18 In the alternative, the appellants advance two grounds for saying that the Tribunal erred in denying their motion to strike Question 1 from the reference.
19 First, they argue that the Commissioner may refer a question under subsection 124.2(2) only if
it has a factual foundation. They allege that parts (a), (b), and (c) of Question 1 are academic, hypothetical or advisory in nature. They rely on jurisprudence of this Court dealing with questions referred by administrative tribunals under the similarly worded section 18.3 of the Federal Courts Act, R.S.C. 1985, c. F-7.
20 I do not accept this argument. An application may be made under subsection 124.2(2) outside the context of a specific proceeding, while a federal tribunal may refer a question to the Federal Court under section 18.3(1) "at any stage of its proceedings". Consequently, the case law under section 18.3 does not, in my view, help the appellants.
21 As for part (d) of Question 1, the appellants rely on Canada (Director of Research & Investigation) v. Southam Inc., [1997] 1 S.C.R, 748, to argue that the application to the stated facts of the statutory words "directly affected" is a question of mixed fact and law, not a question of law alone, and is thus not authorized by subsection 124.2(2). The appellants submit that a reference question must be based on undisputed facts and that Question 1(d) was not, since many of the facts that they asserted in the statement of grounds in their subsection 106(2) notice of application are disputed by the Commissioner.
22 The Tribunal held that Question 1(d) would be answered on the assumption that the facts set out by the appellants in their subsection 106(2) application, and reply, were true. In these circumstances, I do not agree that the facts were in dispute for the purpose of the reference.
23 The appellants concede that whether they have standing as persons "directly affected" to make a section 106(2) application would have been a question of law if the facts on which the reference was based were not in dispute. However, for reasons already given, I agree with the Tribunal that the facts were not in dispute.
24 The Commissioner also points out that subsection 124.2(2) states that a question about the interpretation or application of the Act may be referred to the Tribunal, and that Parliament therefore must have contemplated that some questions of statutory application were questions of law.
Conclusion 25 For these reasons, I would dismiss both appeals with costs payable to the Commissioner by the appellants. Costs were not requested by counsel for West Fraser.
EVANS J.A. SHARLOW J.A.:-- I agree. MALONE J.A.:-- I agree.
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 E-books 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 application under section 106(2) of the Competition Act, by 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.
B E T W E E N:
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 CANADA HOLDINGS CO.
Respondents RESPONSE OF THE COMMISSIONER OF COMPETITION (Motion to Strike Notice of Reference)
DEPARTMENT OF JUSTICE COMPETITION BUREAU LEGAL SERVICES 50 Victoria Street, 22 nd Floor Gatineau, Quebec K1A 0C9
John L. Syme (LSUC:29333H) Parul Shah (LSUC: 55667M) Esther Rossman (LSUC: 54414R)
Tel: 819-953-3903 Fax: 819-953-9267 john.syme@cb-bc.gc.ca
Counsel to the Commissioner of Competition
File No. CT-2014-002 COMPETITION TRIBUNAL