Documentation

CT-2006-10 THE COMPETITION TRIBUNAL IN THE MATTER OF THE COMPETITION ACT, R.S., 1985, c. C-34; AND IN THE MATTER OF an inquiry pursuant to subsection lO(l)(b)(ii) the Competition Act relating to the marketing practices of Imperial Brush Co. and Kel Kem Ltd. (c.o.b. as Imperial Manufacturing Group).

AND IN THE MATTER OF an Application by the Commissioner of Competition for an order pursuant to section 74.1 of the Competition Act.

BETWEEN: THE COMMISSIONER OF COMPETITION Applicant -and-IMPERIAL BRUSH CO. LTD. AND KEL KEM LTD. (c.o.b. AS IMPERIAL MANUFACTURING GROUP)

Respondents AFFIDAVIT OF ANNA PROESTAKIS (Sworn December 7, 2006) (Motion for Particulars and an Amended Response)

Roger Nassrallah Jim Marshall Stephane Lilkoff Counsel for the Commissioner of Competition Competition Law Division, Department of Justice

Concord Building 280 Albert Street, 10th Floor Ottawa (Ontario) K1AOH5

Phone: ( 613) 954-0818 Fax: (613) 954-0964

Counsel for the Commissioner (Applicant)

Index TAB 1. Affidavit of Anna Proestakis (Sworn December 7, 2006) 2. Exhibit 1 - Notice of Application (filed September 11, 2006) 3. Exhibit 2 - Response (filed November 24, 2006)

Affidavit

CT-2006-10 THE COMPETITION TRIBUNAL IN THE MATTER OF THE COMPETITION ACT, R.S., 1985, c. C-34; AND IN THE MATTER OF an inquiry pursuant to subsection 10( 1) (b )(ii) the Competition Act relating to the marketing practices of Imperial Brush Co. and Kel Kem Ltd. (c.o.b. as Imperial Manufacturing Group).

AND IN THE MATTER OF an Application by the Commissioner of Competition for an order pursuant to section 74.l of the Competition Act.

BETWEEN: THE COMMISSIONER OF COMPETITION Applicant -and-IMPERIAL BRUSH CO. LTD. AND KEL KEM LTD. (c.o.b. AS IMPERIAL MANUFACTURING GROUP)

Respondents AFFIDAVIT OF ANNA PROESTAKIS (Sworn December 7, 2006) (Motion for Particulars and an Amended Response)

I, ANNA PRO EST AKIS, of the City of Ottawa, in the Province of Ontario, MAKE OATH AND SAY:

1. I am a paralegal employed by the Department of Justice, Canada, Competition Law Division. I have assisted counsel for the Commissioner of Competition and have been actively involved in this file since June 2006. Since that time, I have maintained the file, performed legal research, and attended meetings. I have personal knowledge of the matters set out in the notice of motion and I believe it and the following to be true.

2. The Commissioner of Competition filed a Notice of Application on September 11, 2006. Attached to this affidavit and marked as Exhibit 1 is a certified true copy of this Notice of Application.

3. The Respondents served counsel for the Commissioner with a Response dated November 24, 2006. Attached to this affidavit and marked as Exhibit 2 is a certified true copy of this Response.

4. I provide this affidavit for purposes of the Applicant's Motion for an Amended Response on behalf of the Commissioner of Competition and for no other purpose.

a.-£~ Anna Proestakis SWORN before me in the City of Ottawa in the Province of Ontario this 7th day of Dec --~.-rrT1T"£""'\

Exhibit 1

I .......T O THE THIS IS EXH IBIT ·················P.····:~c.u. tJ't /I {Vo}.M.l(.11.,.,..ri,. •• AFFIDAVIT OF···· P.t · O · f · ) JA... • •• swoRN·a·e;;oR"e.Mfi.rj:tis·.::::·.:::i. ·: : , r ·r . ~ ~ ·· . · . · ······· oAv Of. ... i"'v::.r.o ""..', b eC••. . b..... " ~~u ? ......................................... . ................... •i, 'ssi' N'eR FOR oArHs File No. (-r[- ) ; .'- b - l / { · THE COMPETITION TRIBUNAL IN THE MATTER OF THE COMPETITION ACT, R.S., 1985, c. C-34; AND IN THE MATTER OF an inquiry pursuant to subsection lO(l)(b)(ii) of the Competition Act relating to the marketing practices of Imperial Brush Co. Ltd. and Kel Kem Ltd. (c.o.b. as Imperial Manufacturing Group).

AND IN THE MATTER OF an Application by the Commissioner of Competition for an order pursuant to section 74.1 of the Competition Act.

BE TWEEN: THE COMMISSIONER OF COMPETITION COMPETITK* 1RABUNAL Applicant TRIBUNAL DE lA CONCZ:,ENCE -and-F ('~ P L SEP 11'-w06 g IMPERIAL BRUSH CO. LTD. AND KEL KEM LTD. E V D I (c.o.b. AS IMPERIAL MANUFACTURING GROUP) REGISTRAR - R&GISTRAIRE T OTTAWA, ON I [',(',{~I . Responde~ts NOTICE OF APPLICATION TAKE NOTICE that the Applicant will make an Application to the Compet.ition Tribunal (the "Tribunal") pursuant to subsection 74.1 (I) of the Competition Act (the "Act") for a determination that the Respondents have engaged, and continue to engage, in reviewable conduct contrary to paragraph 74.0 I (I )(b) of the Act, and for an order in relation to the Respondents, the particulars of which are set out in paragraphs 20-25 of this Application.

AND TAKE NOTICE that in support of this Application, the Applicant will rely on the following Statement of Grounds and Material Facts.

Page 1 of 9

STATEMENT OF GROUNDS AND MATERIAL FACTS I. GROUNDS FOR APPLICATION 1. The Applicant submits that in connection with the promotion and sale of the products described in paragraphs 4-9 oft his Application, the Respondents have engaged, and continue to engage in reviewable conduct, contrary to paragraph 74.01 (l)(b) of the A ct. Specifically, the Respondents, for the purpo:;e of promoting, directly or indirectly, the supply or use of the SUPERS WEEP Chimney Cleaning Log, the KEL KEM Chimney Creosote Cleaner, and the KEL KEM Creosote Conditioner (collectively the "Products"), and/or their business interests, have made and continue to make representations to the public in the form of statements regarding the perfonnance or efficacy of the Products, which statements are not based on adequate and proper t~sts.

IT. MATERIAL FACTS (a) The Parties 2. The Applicant is the Commissioner of Competition, appointed under section 7 of the Act. 3. The Respondent Imperial Brush Co. Ltd., is a company incorporated in the province of New Brunswick. The Respondent Kel Kem Ltd. is a company incorporated in the province of Ontario. The Respondents are part of a group of companies which operate under the name Imperial Manufacturing Group.

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(b} The Products (i) SUPERSWEEP Chimney Cleani112 Lo2 4. The SUPERS WEEP Chimney Cleaning Log (henceforth the "Log") is a product shaped and packaged as a log, intended to be burned in fireplaces, wood stoves, and other similar wood burning appliances. Representations are made on the packaging of the Log, in the form of text and images, as to its performance and efficacy in chimney cleaning.

5. These representations include, but are not limited to, the following: (a) Product name: Chimney Cleaning Log; (b) Helps Prevent Chimney Fires; (c) Helps Eliminate Dangerous Creosote In Your Chimney; (d ) Images on the packaging making the above representations or in support thereof. (ii) KEL KEM Chimney Creosote Cleaner 6. The KEL KEM Chimney Creosote Cleaner (henceforth the "Cleaner") is a liquid product sold in a one litre spray bottle. Representations are made on the packaging of the Cleaner as to its performance and efficacy in modifying creosote in chimneys.

7. These representations include, but are not limited to, the following: (a) Product name: Chimney Creosote Cleaner; (b) Reduces hard or glazed creosote to an ash; (c) Non-corrosive; (d ) Non-combustible. Page 3 of 9

(iiil KEL KEM Creosote Conditioner 8. The KEL KEM Creosote Conditioner (henceforth the "Conditioner") is a product, in powder form, sold in a 450 gram container. Representations are made on the packaging of the Conditioner as to its performance and efficacy in modifying creosote in chimneys.

9. These representations include, but are not limited to, the following: (a) Product name: Creosote' Conditioner; (b) It can inhibit the rate of creosote buildup and reacts with most chimney deposits to reduce their adhesiveness; (c) Non-corrosive; (d ) Non-toxic. (c) Reviewable Conduct under paragraph 74.0l(l)(b) of the Act 10. Paragraph 74.0l(l)(b) reads as follows: Misrepresentations to p1Jblic 74.01 (1) A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, ( ... ] (b) makes a representation to the public in the form of a statement, warranty or guarantee of the perfom1ance, efficacy or length of life of a product that is not based on an adequate and proper test thereof, the proof of which lies on the person making the representation ...

Page 4 of 9

(d) Form of Representations 11. The Respondents are responsible for the packaging, marketing and distribution of the Products, and have distributed them for sale or re-sale in various locations across Canada since the respective introduction ofe ach Product. The representations made on the packaging of the Products have been consistent throughout the period the Products have been sold in Canada.

12. The Log was introduced into th~: Canadian market in or around July, 2003. The precise dates of introduction into the Canadian market oft he Cleaner and Conditioner are unknown to the Applicant.

13. The representations include st1tements and/or guarantees as to the performance and/or efficacy of the Products as set out in paragraphs 4-9 of this Notice of Application.

(e) Testing 14. In December 2003, the Applicarit, pursuant to her mandate to administer and enforce the Act, requested that the Respondents provide information to prove that statements made about the performance and/or efficacy of the Log were based on adequate and proper testing, as required by the Act.

15. In May 2004 the Applicant, pursuant to her mandate to administer and enforce the Act, requested that the Respondents provide information to prove that statements made about the performance and/or efficacy oft he Cleaner and the Conditioner were based on adequate and proper testing, as required by the Act.

16 . In response to each request, th·~ Respondents provided certain documents which did not Page 5 of 9

satisfy the Applicant that what testing was done met the requirements of the Act. 17. Without attempting to limit in any way the general obligation of the Respondents to prove the adequacy and propriety ofa I1 y test upon which statements regarding the perfo nnance and efficacy of the Products are bas(:d, the Applicant provides the following observations. With respect to the Log, documents provided by the Respondents suggest that limited testing was done before and after the product was released into the Canadian market. The testing done by the Respondents did not appear to establish reliable results as it lacked repetition and did not account for factors which could affect the perfonnance of the Log.

18. With respect to the Cleaner and Conditioner, the testing done by the Respondents amounted to anecdotal information and did not account for factors which could affect the performance of the Cleaner and Conditioner.

19. The Applicant makes the foregoing statements after having had the benefit ofreviewing all of the information provided and relied upon by the Respondents in substantiation of the statements, warranties or guarantees made with respect to the perfo nnance and/or efficacy of its Products. This information was provided at the Commissioner's request and with the assurance of confidentiality as required by ss. 10(3) and 29(1) of the Act.

III. Order Sought The Applicant seeks the following: 20. An order that the Respondents and any person acting on their behalf or for their benefit, including all directors, officers, employees, agents or assigns of the Respondents, or any other person or corporation acting on behalf of the Respondents or any successors thereof

Page 6 of 9

(hereinafter the foregoing perseons are referred to as the "Respondents"), shall for a period of I 0 years from the date of suc:1 order, cease making, causing to be made, or permitting to be made, by any means whatsoever, representations to the public for the purpose of promoting the use of the produ1~ts known as the Supersweep Chimney Cleaning Log, Kel Kem Chimney Creosote Cleaner and/or Kel Kem Creosote Conditioner or any similar product, in the form of a statemt:nt, warranty or guarantee of performance or efficacy of the products, made on the packaging of the products or elsewhere, unless or until the Respondents perform such adequate and proper tests as are necessary to substantiate such statements, warranties or guarantees. Without limiting the generality of the foregoing, such representations include representations regarding the Products', or any similar product's, capacity to:

a. clean or assist in cleaning chimneys; b. reduce, remove, condition, or otherwise affect creosote; c. prevent, eliminate or otherwise affect chimney fires. d. help prevent chimney fires; e. help eliminate dangerous creosote in a chimney; f. reduce hard or glazed creosote to an ash; g. inhibit the rate of creosote build-up and react with most chimney deposits to reduce their adhesiveness. 21. And further, without limiting the generality of the foregoing, such representations include representations regarding the products' or any similar product's characteristics as:

a. non-corrosive; b. non-combustible; c. non-toxic. Page 7 of 9

22. An order requiring the Respond·~nts, within 30 days oft he issuance of any order the Tribunal makes in connection with this Application, to publish a notice or notices, in such manner and at such times as the Tribunal may specify, to bring to the attention of the class of persons likely to have been reached or affected by the Respondents' conduct: the name under which the Respondents carry on business; and, the Tribunal's determination with respect to this Application. The notice or noti1;es would include:

a. a description of the reviewable conduct, b. the time period and geographical area to which the conduct related, and c. a description ~f the manner in· which any representation or advertisement was disseminated.

23. An order that the Respondents,. within 30 days of the issuance of any order the Tribunal makes in connection with this matter, provide a copy of that order to all distributors, agents or other persons who are engaged or have been engaged in the promotion. marketing. distribution or sale of the Products during the period the Products have been marketed in Canada through to the date of the issuance of the Tribunal's order;

24. An order that Respondents, within 30 days of the issuance of any order the Tribunal makes in connection with this matter, withdraw all promotional materials which are in the possession oft he Respondents' distributors, agents or other persons who are engaged or have been engaged in the promotion, marketing, distribution or sale oft he products, including any units of the products;

25. An order that the Respondents pay an administrative monetary penalty or monetary penalties in an amount to be determined by the Tribunal upon hearing submissions from the Applicant; and,

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26. Such further and other order as to this Honourable Tribunal seems just. IV. Procedural Matters 27. The Commissioner requests that this proceeding be conducted in the English language. 28. The Commissioner requests the hearing of this application be heard in the City of Ottawa. 29. The address of the Responden~. is: Imperial Brush Co. Ltd. and Kel Kem Ltd. 40 Industrial Park Street Richibucto, NB E4W 4A4 DA TED at Gatineau, Quebec, this 11th day of September, 2006. "Lome Ptack" Lome Ptack Counsel for the Commissioner of Competition

Competition Law Division, Department of Justice Place du Portage, Phase 1 SO Victoria Street Gatineau , Quebec K 1A OC9

Telephone: (819) 956-6891 Facsimile: (819) 953-9267

File No. THE COMPETITION TRIBUNAL IN THE MATTER OF THE COMPETITION ACT, R.S., 1985, c. C-34;

AND IN THE MATTER OF an inquiry pursuant to subsection lO(l)(b)(ii) of the Competition Act relating to the marketing practices of Imperial Brush Co. Ltd. and Ke! Kem Ltd. (c.o.b. as Imperial Manufacturing Group).

AND IN THE MA TIER OF an Application by the Commissioner of Competition for an order pursuant to section 74.1 of the Competitiol'I Act.

BE TWEEN: THE COMMISSIONER OF COMPETITION

Applicant

-aod-IMPERIAL BRUSH CO. LTD. AND KEL KEM LTD. (c..o.b. AS IMPERIAL MANUFACTURING GROUP) Rapondeot

NOTICE OF APP LI CA TlON Jim Marshall, Sr. Counsel for the Commissioner of Competition Telephone: (819) 997-2834 Facsimile: (819) 953-9267

Lorne Ptack, Counsel for the Commissioner of Competition Telephone: (819) 956-689 I Facsimile: (819) 953-9267

Competition Law Division Department of Justice ofC anada Place du Portage, Phase 1 SO Victoria Street Gatineau, Quebec KIA OC9

Exhibit 2

NOV.2~.2006 15:18 9024213130 CHOM #1505 P.003 /010 File No. CT· 2006 - 010 The Competition Tribunal In the matter of The Competition Act, RS., 1985, c. C-34; And io the matter of an inquiry pursuant to subsection 10( JX h)(ii) of The Cmnpe.lilio11 Ar:/ relating to the marketing practices of imperial Ilrush Co. Ltd. and Kel Kem Ltd. (c.o.b. as Jmperial Manufacturing Group)

Between· The Commissioner of Competition COMPETITION TRIBUNAL Applicant TRIBUNAL DE LA CONCURRENCE p - arid -L NOV 14 2006 ldJ.-g Imperial Brush Co. Ltd. and Kcl Kem Ltd. E U D (c.o.b. as Imperial Manufacturing Group) f REGISTRAR· REGllTtWR& T I () 001 Respondents OTTAWA. ON Response of lmperi~I Brush Co. Ltd. and Kel Kem Ltd. I. The Respondents file this Response to the Notice of Application of the Commissioner filed September 11, 2006 in accordance with the Tribunal's Order dated November 9, 2006 extending the time for serving and Ii ling.

2. The Respondent, imperial Brush Co. Lld. ("Imperial Brush"), .is incorporated under lhe laws of New Bnmswick and has irs head office and principal place of business at 40 Industrial Park Street, Rich1bucto, New Brunswick. It is principally engaged in the manufacturing and sale of bn1shes for sweeping of chimneys. It also sold the product known as the Supersweep™ Chimney Cleaning Log.

3. The Respondent, Kel Kem Ltd. ("Kel Kem"), is incorporated under the laws of Ontario and has its head otlicc and principal place of business at 2430 Winston Park Drive:,

THIS IS EXHIB1T ...........~ ···~q:3t.Jt.O~~ AFFIDAVIT OF• •• ./3YJ(.)fi.. .. r;.!.:. ... ' ....... • ~·u ............ .. swof.i.N'6"E:F0° 0 E 0 0 ME THis::::::i.T.r.1 ...... DAY oF ... JJet.~ m ....... o.P.~ ......

CHOM 111505 P.004 /010 NOV.24.2006 15:18 9024213130 - 2 •

Oakville, Ontario. lt manufactures and distributes the products idenlified as Kel Kem Chimney Creosote Cleaner and Kem Kem Creosote Conditioner.

4. While the companies arc described as members of the imperial Manufacturing Group, they carry on business independently. No partnership exists between them. Kel Kem is a wholly~owned subsidiary of Imperial brush.

The Producb SUPERSWF,tpnt Chimney Cleaning Log 5. The SUPERSWEEP™ Chimney Cleaning Log (the "Supersweep Log") is no longer manufactured or distributed. imperial Brush acknowledges that representations were made on the packaging of the Supcrsweep Log as follows:

(a) The name of the product -- Chimney Cleaning Log - represented that the product, when used in accordance with instructions, performed a cleaning function in a chimney;

(b) When used in accordance with instructions, the Supcrsweep Log would help prevent chimney fires;

(c) When used in accordance with instructions, the Supcrsweep Log would help eliminate dangerous creosote.

Those representations are fair representations of the perfom1ance and efficacy of the product, and arc based on adequate and proper tests.

6. The packaging of the Supersweep Log also included the following representations: "The SUPDRSWEEPTM Chimney Cleaning Log can be of benefit in a proper chimney-cleaning program. It is not intended as a substitute for inspection and cleaning by a properly qualified professional."

125892/1183 79&9v1

NOV.24.2006 15:18 902,213130 CHOM 111505 P. 005 I 010 - 3 -7. When taken together, the general impression conveyed by these representations arc a fair description M the perfonnance and efficacy or the product, and are based on adequate

and proper ti::sts.

8. The Supersweep Log consists of comprei;sed hardwood sawdust and shavings, to which chemical substances have been added. The chemical substances arc the active ingredients which perform the cleaning function. These substances can be - and arc ­used separately. The log is merely a delivery mechanism for the chemical substances. These substances have been in use for many years and their effectiveness has been described in technical literature.

9. The adequate and proper tests of the Superswecp Log referred to m the preceding paragraphs include:

(a) Controlled tests performed by lmpcrial Brush under the supervi~ion of independent engineers and consultants; and

(b) Experience of lmperiaJ Brush, its consultants, and persons involved in the cleaning and maintenance of chimneys over many years.

Kcl Kem Chimney Creosote Cleaner l 0. Kel Kem Chimney Creosote Cleaner ("Creosote Cleaner") is a liquid product. Kcl Kem acknowledges that representation~ on the package are as follows:

(a) The prnduct name, Chimney Creosote Cleaner, represents that the product, when used as instructed, hall the effect of removing creosote from chimneys;

(b) The product has the effect of reducing the hard, glazed form of creosote, causing it to be burned and reduced lo an ash;

(c) "fbe product is non~corrosivc, in that it does not cause corrosion of the stove or chimney;

/2 ~892/1/637?6')v1

NOV.24.2006 15:18 9024213130 CHOM #1505 p, 006 /010 - 4 -(d) The product is non-combustible, in that, when used as instructed (or when sprayed on an open fire), it docs not ignite rather, the solvents evaporate and the manganese salt is carried by the hot flue gasses to Lhe chimney where it reacts with the creosote.

Those representations are a fair representat~on of the performance and efficacy of the product, and are based on adequate and proper tests.

11. The packaging of Creosote Cleaner also included the following statement immediately following the statement that the product reduces creosote to ash:

" ... reduces hard or glazed creosote to an ash when used as directed. For a clean. safe chimney, remove residue by brnshing."

and below that on the label: "NOTE; Chimney Creosote Cleaner nor any other chemical can eliminate the need for a brushing. Professional btushing is required at least once a year, and more often under severe buildup conditions."

12. When taken together, the general impression conveyed by these representations arc a fair description of the performance and efficacy of the product, and are based on adequate and proper tests.

13. The Creosote Cleaner consists of a solution of manganese salts in water and isopropyl alcohol. The manganese salts (specifically manganese nitrate) are the active ingredients which perfom1 the cleaning function. The water and alcohol are merely a solvent to operate as a delivery mechanism for the manganese salts. Manganese has been in use for many years for this putpol>e and its effectiveness has been described in technical literature.