Documentation

File No.: CT-2011-008 Registry Document No.: ........

COMPETITION TRIBUNAL IN THE MATTER of the Competition Act, R.S.C. 1985, c. C-34, as amended. AND IN THE MATTER of an Application by the Used Car Dealers Association of Ontario under section 75 of the Competition Act.

BETWEEN: USED CAR DEALERS ASSOCIATION OF ONTARIO Applicant - and -

INSURANCE BUREAU OF CANADA Respondent REPLY SUBMISSIONS OF THE APPLICANT PURSUANT TO SECTION 39 OF THE COMPETITION TRIBUNAL RULES

McMILLAN LLP Barristers & Solicitors 181 Bay Street, Suite 4400 Toronto, Ontario, M5J 2T3

A. NEIL CAMPBELL, LSUC# 31774T Tel: Fax: E-mail: CASEY W. HALLADAY, LSUC# 45965G Tel: Fax: E-mail: Solicitors for the Applicant

416-865-7025 416-865-7048 neil.campbell@mcmillan.ca 416-865-7052 416-865-7048 casey.halladay@mcmillan.ca

-2- TO: The Registrar Competition Tribunal The Thomas D’Arcy McGee Building #600-90 Sparks Street Ottawa, Ontario K1P 5B4 Tel: 613-957-7851 Fax: 613-952-1123 AND TO: Melanie Aitken Commissioner of Competition Competition Bureau 50 Victoria Street Gatineau, Québec K1A 0C9 Tel: 819-997-3301 Fax: 819-997-0324 AND TO: Insurance Bureau of Canada 2235 Sheppard Avenue East Atria II, Suite 1100 Toronto, Ontario M2J 5B5

-3- REPLY SUBMISSIONS OF THE APPLICANT PURSUANT TO SECTION 39 OF THE COMPETITION TRIBUNAL RULES

I. Overview 1. UCDA submits this Reply to the Tribunal to respond to certain of the assertions made by IBC in its Response submissions and, in so doing, to focus and clarify the arguments before the Tribunal on this application.

2. The key theme of IBC’s Response is that the Tribunal should not exercise its discretion to make an order under section 75 of the Competition Act because certain insurers have not consented to UCDA receiving access to the data which underlies IBC’s Web Claims Search application, the product for which supply is sought in this case. As this Reply will demonstrate, that argument is fatally flawed as it:

(a) ignores the fact that the legal agreements between the parties explicitly state that IBC owns the data in question, thereby negating the need for insurers’ consents;

(b) confuses use of the Web Claims Search application, the product at issue in this proceeding, with access to Automobile Statistical Plan (“ASP”) data, a separate product not at issue in this proceeding;

(c) ignores the fact that the data underlying the Web Claims Search application is provided by insurers pursuant to a statutory reporting obligation, and as such is not subject to their ongoing consent or control; and

(d) overlooks the inherent power of the Tribunal to make orders affecting third parties in addition to the respondent in a proceeding.

3. IBC further suggests that an order to resume supply to UCDA should not issue as IBC’s decision to terminate its longstanding relationship with UCDA was made with IBC’s “best business judgment”. However, a supplier’s “business judgment” is not an element of section 75 of the Act, nor should it be — otherwise any anti-competitive refusal to deal could be justified on this highly subjective and self-serving basis.

-4- 4. IBC also argues that it has legal and reputational concerns that should preclude the granting of an order under section 75. These arguments are not relevant to the requisite analysis under section 75. In any event, they have been over-stated, and are fully addressed by UCDA in this Reply.

5. IBC suggests that flaws in the functionality of the Web Claims Search application should prevent the Tribunal from issuing a remedial order. These claims have also been overstated, particularly given that IBC continues to supply this product to numerous other parties. In more than 13 years and over two million Auto Check™ searches, UCDA has never received a dealer complaint regarding the quality or accuracy of the Auto Check™ service. Furthermore, prior to terminating UCDA’s membership, IBC had never raised such concerns.

6. Finally, IBC also briefly contests UCDA’s ability to satisfy the requisite elements of section 75 of the Act. As this Reply will also demonstrate, each element of section 75 is clearly made out in this case.

II. Responses To The Material Facts Cited By IBC In Its Response 7. UCDA denies the allegations set out in paragraphs 10, 13(b), 13(c), 13(d), 13(g), 15-16, 18, 21, 30, 35, 49, 54-55, 57-59, and 65-67 of IBC’s Response.

8. UCDA has no knowledge of the allegations set out in paragraphs 13(a), 13(f), 17, 19-20, 22-29, 31-34, 36-38, 42-46, 50, 52, 61-64, and 68-69 of IBC’s Response.

9. Importantly, IBC has dealt at length with matters that do not relate to the application before the Tribunal. In particular, UCDA notes that the allegations set out in paragraphs 13(d)-13(g), 30-38, 56-61, and 67-68 of IBC’s Response relate exclusively to ASP data, a product not in issue in these proceedings.

10. UCDA admits the facts set out in paragraphs 8, 9, 11, 12, 39, 40, 41, 47, 51, and 53 of IBC’s Response.

III. Responses To The Grounds On Which IBC Opposes The Application

-5- 11. In addition to its arguments on the test to be met under section 75 of the Act, IBC raises several additional issues intended to sway the Tribunal from ordering a continuation of the 13-year supply relationship between the parties. For greater clarity, UCDA has organized and will respond to these arguments as follows:

Insurer consents are not relevant to the relief sought in this application. Even if such consents were relevant, the underlying data is collected by IBC only as agent for the province of Ontario and the insurers do not own or control the data.

Even if insurer consents were relevant, the Tribunal has the power to make orders affecting the rights of third parties, and has frequently done so.

Any references to IBC’s “business judgment” are self-serving and superfluous to the required analysis under section 75.

There are no legal and reputational concerns risks to IBC as it is merely a compiler of data, and the ultimate product at issue is marketed and provided by UCDA — not IBC — to its motor vehicle dealer members.

The functionality issues raised by IBC in respect of the Web Claims Search application have been overstated, particularly in respect of a product that IBC continues to market, and in any event are irrelevant to this application.

(a) Insurer Consents Are Not Relevant To The Relief Sought In This Application 12. In the first paragraph of its Response, IBC suggests that the Tribunal cannot issue a remedial order in this case as “IBC does not own the data that UCDA seeks to access.” Yet both of the two principal documents defining the relationship between UCDA and IBC — the 1997 Associate Member Vehicle Information Agreement (at paragraph 2(f)) and the 2006 Access Agreement (at paragraph 2.2) — explicitly state that IBC has title to the vehicle accident history information sought by UCDA. IBC’s present assertions that it cannot be the subject of a Tribunal order as it is not the owner of the underlying data strike UCDA as entirely self-serving given the contrary provisions of these documents, both of which were drafted by IBC.

13. In any event, UCDA submits that insurer consents are entirely irrelevant as this application concerns the Web Claims Search application. IBC acknowledges in numerous places in its Response that insurer consents have not been required in respect of the Web Claims Search

-6- application and only relate to ASP data (see, e.g., paragraphs 2(b), 13(g), 32, 48, 50, 51, 54, 56, 59, and 71(c)). This is consistent with the trade terms throughout the 13-year course of dealings between the parties: at no time during the supply relationship did IBC ever require any insurer consents for UCDA to use the Web Claims Search application.

14. By raising the consent issue on this application, which seeks only reinstatement of supply of the Web Claims Search application, IBC continues to invoke the “straw man” fallacy and substitute arguments that may relate to another product (i.e., ASP data) not in issue in this proceeding. UCDA submits that the issue of insurer consents is entirely irrelevant to the issues before the Tribunal on this application.

(b) Even If Insurer Consents Were Relevant To This Application, Insurers Have No Rights Over The Underlying Data At Issue In This Case

15. Even if the subject of insurer consents were relevant to this application (which is denied for the reasons set out in Part (a) above), no such consents would be required. Such data has been disclosed pursuant to a statutory reporting obligation under the Ontario Insurance Act, and is not owned or controlled by the insurers.

16. As admitted by IBC, in paragraph 13(g) of its Response, IBC only holds the vehicle accident history data that is obtained through its Web Claims Search application in its role as a contractual service provider to the General Insurance Statistical Agency (“GISA”). GISA, in turn, received the data as an “agency […] designated to compile the data” on behalf of the Financial Services Commission of Ontario (“FSCO”) under section 101(2) of the Insurance Act. The data was originally provided to FSCO by insurers carrying on business in Ontario pursuant to a statutory obligation to do so, under section 101.1 of the Insurance Act.

17. Section 101.1 of the Insurance Act stipulates that “[e]very insurer shall provide the Superintendent or an agency designated by the Superintendent with information prescribed by the regulations about applications for insurance and claims made to the insurer at such times and subject to such conditions as are prescribed by the regulations.” (emphasis added) Once such data is provided, it is controlled by FSCO.

-7- 18. GISA’s own policies acknowledge this. In its Policy on Access to Information and Protection of Privacy, GISA states (at page 1):

The data collected by GISA or its service provider for its participating jurisdictions, and including without limitation any and all Exhibits, Standard Reports, Ad Hoc Reports, information and documents derived from such data (collectively, the “Member Owned Information”), are the respective property of GISA's participating jurisdictions. The Member Owned Information of each participating jurisdiction is subject to the provincial laws of such jurisdiction including any freedom of information and privacy legislation of such province. (emphasis added)

19. Ontario is a “participating jurisdiction”, and has appointed GISA as its statistical agent. IBC is the “service provider” to GISA. GISA’s policy on access to information clearly states that any data collected by GISA, or by IBC on behalf of GISA, for a province is “the respective property” of that province and subject to provincial laws. Thus, in the present case the underlying data held by IBC is not controlled by insurers. IBC cannot therefore claim that it is prevented from continuing to disclose this data to UCDA, as it has consistently done since 1998, due to the objections of insurers.

(c) Even If Insurer Consents Were Relevant, The Tribunal May Make Orders Affecting The Rights Of Third Parties, And Has Done So

20. Finally, even if insurer consents were relevant to this application (which is denied for the reasons set out above), the Tribunal’s remedial powers include the ability to order a resumption of supply without such consents. For example, in Canada (Director of Investigation & Research) v. Southam Inc., the Tribunal stated that “[c]onsiderations of harm or inconvenience to the respondents or third parties or other factors are not relevant in assessing the effectiveness of a proposed remedy.” 1 The Tribunal expressed similar views in the Gemini litigation. 2 Therefore, any theoretical harm or inconvenience to third party insurers — which as demonstrated above would not occur in any case — should not be accorded any weight in this case.

1 (1992), 47 C.P.R. (3d) 240 at 246 (emphasis added). 2 See Canada (Director of Investigation & Research) v. Air Canada (Reasons for Order Varying Consent Order) (1993), 51 C.P.R. (3d) 143 at 149, 153-159; and Canada (Director of Investigation & Research) v. Air Canada (Reasons for Order Varying Consent Order) v. Air Canada (Reasons and Order), (1993), 49 C.P.R. (3d) 7 at 65.

-8-

(d) References To IBC’s “Business Judgment” Are Self-Serving And Superfluous To The Section 75 Analysis

21. At various points, beginning at paragraph 4 of its Response, IBC argues that the Tribunal should not grant UCDA’s application for relief because doing so would contravene IBC’s “best business judgment”. Accepting this argument would set a highly subjective standard, found nowhere in the language of section 75, by which all future refusals to deal could be justified by the simple assertion that the supplier had exercised “good judgment”.

22. In any event, UCDA submits that IBC’s conduct does not exemplify “good judgment”. As set out in the Beattie Affidavit, IBC terminated UCDA’s longstanding Associate Membership in the IBC in a high-handed manner, without providing reasons, and did so immediately following UCDA’s reasonable request to acquire additional data regarding the dollar-value of claims.

23. IBC further attempts to justify its behaviour by repeatedly claiming that UCDA is the only third party commercial user of Web Claims. This contention is flawed for several reasons. First, the number of users of a product or service is irrelevant to the analysis under section 75 of the Act. Second, even if it were relevant, IBC admits at paragraph 17 of its Response that other commercial users of the Web Claims Search application do exist, such as private investigative agencies and independent insurance adjusters. Effectively, IBC’s real argument appears to be that UCDA should be denied supply because it uses the Web Claims Search application for a different end-use application than others (i.e., as a basis for used vehicle accident history searches). However, this is no basis for justifying an anti-competitive refusal to deal: UCDA’s use of the Web Claims Search application differs from that of others because UCDA is an industry association for used motor vehicle dealers in Ontario. Its 4,600 member dealers account for more than 70% of the used vehicles sold in Ontario, and create a significant demand for the Auto Check™ service.

24. Thus, IBC’s warning at paragraph 1(b) that “[i]f this Tribunal orders that IBC supply access to Web Claims Search to UCDA, then IBC will be compelled to provide such access to the

-9- only remaining third party commercial user” of the Web Claims Search application rings hollow. In any event, the “compulsion” that IBC warns of is no more than the resumption of a pre-existing supply relationship that lasted more than a decade.

25. Finally, in a similar vein IBC argues that its conduct is beyond review because the termination of UCDA was “not motivated by any competitive concerns”. In fact, section 75(1)(e) focuses on anti-competitive effects, not anti-competitive intent. IBC’s submission also ignores the basic design of section 75 of the Act, which governs the vertical relationship between supplier and customer. Given this vertical relationship, refusals to deal will often not be motivated by “competitive concerns”. Nevertheless, UCDA has, using the limited information available to it prior to discovery, detailed various links between IBC and UCDA’s competitor, CarProof, in the Beattie Affidavit. The Tribunal has taken note, at paragraphs 59-61 of its decision granting leave in this matter, of these links and concluded that “it is possible that the Termination occurred as a result of IBC’s wish to support CarProof’s business objectives […].”

(e) There Are No Legal Or Reputational Risks To IBC In Continuing Its Longstanding Supply Of The Web Claims Search Application To UCDA

26. IBC repeatedly suggests that a supply order under section 75 could subject it to legal or reputational risks since, by sourcing data from the Web Claims Search application, UCDA’s Auto Check™ business “possibly misrepresents vehicle accident claims history information to potential purchasers of used vehicles”. Among the numerous flaws with this argument, UCDA would highlight that:

(i) The Auto Check™ service has provided used vehicle accident histories for 13 years. During that time, UCDA members have conducted over two million Auto Check™ searches, and UCDA has not received a single complaint from a dealer regarding the quality or accuracy of the Auto Check™ service. Any concerns about the quality of the Web Claims Search application are belied by the fact that IBC never raised such concerns prior to terminating supply to UCDA, and that IBC continues to supply the Web Claims Search application to users through the IBC web portal.

-10- (ii) Furthermore, IBC faces no risk, reputational or otherwise, in respect of purchasers of used vehicle accident histories or purchasers of used vehicles. It is merely a compiler of data. It has no relationship with purchasers of used vehicle accident histories or of used vehicles.

(iii) The Auto Check™ service is available only to motor vehicle dealers that are members of the UCDA. UCDA’s members are sophisticated entities, well aware of their legal obligations as participants in a regulated industry, and are aware that an Auto Check™ search may not necessarily provide a complete accident claims history of a used vehicle.

(iv) Moreover, in the extremely unlikely event of a claim against IBC, the 2006 Access Agreement governing IBC’s relationship with UCDA provides IBC with “bulletproof” protection. Drafted by IBC, the agreement contains an express limitation clause (at paragraph 7.3(a)), stipulating that:

IBC makes no Warranties with respect to the Information, including any Warranties that the Information will be accurate, complete or up-to-date, or free of errors or omissions, in whole or in part, or that the Information will be fit for any purpose. (emphasis added)

(v) The Access Agreement also disclaims any liability of IBC in respect of the data provided, and requires UCDA to indemnify IBC for any claim made against IBC in connection with the provision of the data.

(vi) The predecessor agreement between IBC and UCDA, dating from 1997, contained similarly thorough protections for IBC’s benefit.

27. IBC has also suggested, at paragraphs 5, 16, and 76, that privacy law considerations militate against granting UCDA’s application. IBC contends that complying with a remedial supply order would force it to “violate established principles” of privacy law. It is telling that IBC has not cited or specified any legislation in support of this assertion for, as IBC is well aware, UCDA has never had access to any information protected by privacy laws through the Web Claims Search application. At paragraph 18 of its Response, IBC admits that UCDA can only search the Web Claims Search application by VIN or license plate number. (In fact,

-11- UCDA can only search the Web Claims Search application by VIN.) Any suggestion that the Tribunal’s remedial powers are constrained by the application of privacy laws in this case is simply inaccurate. Furthermore, IBC itself admits (for example, at paragraph 40 of its Response) that the 2006 Access Agreement which IBC drafted contains “robust provisions relating to privacy”, which would address any theoretical privacy concern.

(f) The Functionality Issues Raised By IBC Regarding The Web Claims Search Application Have Been Overstated, And Are Irrelevant To This Application

28. IBC attempts to make much of the fact that the Web Claims Search application is, in its own words, an “antiquated and outdated” application and may produce “false negative” results. However, despite these allegedly fatal flaws, the Web Claims Search application continues to be marketed and supplied to users through the IBC website, at <https://apps.ibc.ca/ibc.site/menu>.

29. In fact, quite to the contrary, UCDA and its member dealers have consistently found that the data from the Web Claims Search application, when integrated into UCDA’s Auto Check™ business, serves a valuable purpose. As IBC admits at paragraph 29 of its Response, the Web Claims Search application is “a helpful tool” for investigators and underwriters. It serves a similar purpose for automobile dealers, as one of numerous tools available to them for learning about the history of a used vehicle. There is an obvious demand for the Auto Check™ service — over the past 13 years, UCDA’s member dealers have conducted over two million Auto Check™ searches. Furthermore, despite this vast number of searches, UCDA has never received a complaint from a dealer regarding the quality or accuracy of the Auto Check™ service.

30. Finally, as pointed out at paragraph 57 of its Response, prior to July 2010, IBC never expressed any concerns about the reliability of the Web Claims Search application, and after that time continued to supply UCDA on condition that UCDA “inform its members that the fact a particular VIN does not register a ‘hit’ on the database must not be taken as proof that the vehicle associated with that VIN had not been involved in a collision resulting in costly repairs.” UCDA has complied with this request. In summary, no basis exists for IBC to

-12- attempt to justify its refusal to deal on the grounds of the functionality of the Web Claims Search application.

IV. All Of The Legal Elements Of Refusal To Deal Have Been Established In This Case 31. Section 75(1) of the Competition Act sets out a five-part test that an applicant must meet in order to obtain a remedial order from the Tribunal. Unlike arguments relating to insurer consents, business judgment and reputational harm — to which IBC has devoted the bulk of its Response, and which UCDA has refuted above — the five elements of section 75 are the relevant issues for the Tribunal’s consideration. Each of these elements exists in the present case.

(a) Section 75(1)(a): UCDA Has Been Substantially Affected By IBC’s Refusal To Deal

32. IBC’s termination of its longstanding supply of the Web Claims Search application has deprived the Auto Check™ business of an essential input, forcing UCDA to suspend this service. The provision of vehicle accident history searches based on Web Claims data generated 100% of Auto Check™’s revenues and profits. Auto Check™, in turn, accounted for more than half of UCDA’s net income. As one of the most important benefits that UCDA offers to its members, the elimination of the Auto Check™ business also has caused significant damage UCDA’s credibility and reputational harm among existing and prospective dealer members.

33. IBC’s Response does not address the Section 75(1)(a) criterion in any meaningful way, apart from the bare assertion that “IBC denies that UCDA has been substantially affected in its business”.

(b) Section 75(1)(b): UCDA Is Unable To Obtain Adequate Supply Of The Web Claims Search Application Because Of Inadequate Competition Among Suppliers In The Market

34. IBC is the only source of integrated industry-wide vehicle claims data, and is refusing to deal with UCDA. The present case is the very definition of “inadequate competition among suppliers” — there is no other supplier to whom UCDA can turn. IBC attempts to respond to this argument in two ways, neither of which is persuasive. First, it claims that its own