Documentation

THE COMPETITION TRIBUNAL BETWEEN: THE COMMISSIONER OF COMPETITION - and-SEARS CANADA INC.

WRITTEN SUBMISSIONS OF THE RESPONDENT, SEARS CANADA INC.

(Re Documentary Evidence)

COMPETITION TRIBUNAL TRIBUNAL DE LA CONCURRENCE FILED I PRODUIT September 24, 2004 Jos LaRose for I pour REGISTRAR I REGISTRAIRE OTTAWA, ONT # 0157a

Tel: (416) 216-6000 Fax: (416) 216-3930

Counsel for the Respondent, Sears Canada Inc.

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Tribunal File No. CT-2002-004 Applicant Respondent

Ogilvy Renault Barristers and Solicitors Royal Bank Plaza, South Tower Suite 3800, 200 Bay Street Toronto, Ontario MSJ 2Z4 William W. McNamara Marvin J. Huberman Stephen A. Scholtz Teresa Walsh Philip Kennedy Martha A. Healey

Tribunal File No. CT-2002-004 THE COMPETITION TRIBUNAL BETWEEN: THE COMMISSIONER OF COMPETITION Applicant - and-SEARS CANADA INC. Respondent WRITTEN SUBMISSIONS OF THE RESPONDENT (Re Documentary Evidence)

1. These are the submissions of Sears Canada Inc. ("Sears") in response to the Commissioner of Competition's Submission Re: Documentary Evidence filed in this proceeding on September 10, 2004 (the "Commissioner's Submissions").

OVERVIEW 2. The Commissioner's Submissions provide an overview of the basis for the Commissioner's allegation that certain documents ought to admitted into evidence in this proceeding for the truth of their contents. The Commissioner, in this regard, relies on certain exceptions to the evidentiary rule against the admission of hearsay evidence. The Commissioner also submits that she relies on the documents for evidence of a belief purportedly held either by Sears or by another person. In this later case, the Commissioner submits that she does not rely on an evidentiary exception to provide the basis upon which the Commissioner suggests documents ought to be admitted and, further, interpreted in this proceeding.

3. Sears' position is that in the present case, documents that form part of the record in this proceeding (i.e. documents received as exhibits at the Hearing) must be reviewed and assessed in light of s. 69 of the Competition Act (being the basis under which they were tendered at the

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- 2 -Hearing). Where a document requires interpretation, the Commissioner cannot attempt to assert an interpretation of the document as established fact. That is a matter the Tribunal must assess in light of the totality of the evidence in the proceeding. Sears objects to the conclusions the Commissioner says may (or indeed must) be taken from the documents in the guise of an evidentiary exception to the hearsay rule.

INTERPRETATION OF EVIDENCE 4. Sears, in its Written Submissions Re: Ordinary Price Representations ("Sears' Initial Submissions"), has provided a detailed overview of the interpretation that it says ought to be given to key documents in issue in this proceeding. In Sears' submission, rules of evidentiary exceptions cannot be used as an attempt to bolster an interpretation proposed by the Commissioner. That is the very issue that the Tribunal must determine.

5. The Commissioner relies on four bases for the admission of categories of documents into evidence:

(a) section 69 of the Competition Act (the "Act"); (b) section 30 of the Canada Evidence Act; (c ) the common law doctrine of possession; and ( d) the common law exception of necessity and reliability. 6. It is important to note that the basis upon which the document, such as, for example, the Sears Documents (as defined by the Commissioner) were tendered at the hearing was s. 69 of the Act.

7. It was not until final argument that the Commissioner expanded the grounds upon which the documents were tendered into evidence and, from there, similarly expanded the conclusions that the Commissioner to be drawn from the documents.

8. With respect, it is too late to raise these issues. Had the Commissioner intended to rely on other doctrines or bases for admission (assuming, of course, that other doctrines or bases are applicable, which Sears does not admit), that reliance ought to have been disclosed in order to permit Sears an opportunity to challenge the Commissioners interpretation of applicable evidentiary doctrines during the course of the actual hearing.

- 3 -SECTION 69 OF THE COMPETITION ACT- A REBUTTABLE PRESUMPTION 9. Section 69(2) of the Act provides as follows: In any proceedings before the Tribunal or in any prosecution or proceedings before a court under or pursuant to this Act,

(a) anything done, said or agreed on by an agent of a participant shall in the absence of evidence to the contrary, be deemed to have been done, said or agreed on, as the case may be, with the authority of that participant;

(b) a record written or received by an agent of a participant shall in the absence of evidence to the contrary, be deemed to have been written or received, as the case may be, with the authority of that participant; and

( c) a record proved to have been in the possession of a participant or on premises used or occupied by a participant or in the possession of an agent of a participant shall be admitted in evidence without further proof thereof and is prima facie proof

(i) that the participant had knowledge of the record and its contents,

(ii) that anything recorded in or by the record as having been done, said or agreed on by any participant or by an agent of a participant was done, said or agreed on as recorded and, where anything is recorded in or by the record as having been done, said or agreed on by an agent of a participant, that it was done, said or agreed on with the authority of that participant, and

(iii) that the record, where it appears to have been wr1tten by any participant or by an agent of a participant, was so written and, where it appears to have been written by an agent of a participant, that it was written with the authority of that participant.

(emphasis added) 10. S. 69 creates a limited, and rebuttable, presumption to be applied to a document associated with a participant in a proceeding (in this case Sears) and, in the case of s. 69(2)( c) the reference to "prima facie proof' speaks to proof absent evidence to the contrary.

R. v. Independent Order of Foresters (No. 2) (1986), 14 C.P.R. (3d) 254 (Ont. Dist. Crt.).

11. The Commissioner alleges that Sears did not "object" to the admission of the documents. This is incorrect. Sears challenged the admission of documents under section 69 and, to the extent necessary, led evidence to rebut any presumption associated with such documents.

- 4 -12. In order to derive meaning from certain documents, an interpretation or analysis must be made of the documents themselves in light of section 69 of the Act and the totality of the evidence presented during the Hearing. For example, in the Commissioner's Submissions, the Commissioner references documents relating to the Sears' 1999 Spring Review and raises issues relating to National Brand and Private Label Strategies. These are issues upon which the Tribunal heard a considerable amount of evidence and which must be reviewed and interpreted by the Tribunal.

13. In its Initial Submissions, Sears noted that the Spring 1999 Automotive Reviews (Exhibit CA-30) were created by the Buyer, Stan Keith, and the National Business Manager, Vince Power, for a twice-a-year presentation to Sears' CEO and senior executive team. The Automotive Reviews provided details of the introduction of new product lines and set out how Sears would address its tire retailing competition.

Written Submissions of the Respondent, Sears Canada Inc. (Re: Ordinary Price Representations), paragraph 109.

14. Sears noted in its Initial Submissions that despite the breakdown between "national brand" and "private label" marketing strategies with respect to the pricing of these products, Sears' multiple-tier pricing strategy was adopted across all tire offerings, whether flag (national) brand or private label, and tires in the Sears' line-up were priced rationally relative to one another. The good, better, best line structure was reflected in a range of pricing that was clearly rational and competitive at both the high and low ends of the product offerings, as respectively represented by the Michelin RoadHandler T Plus and the BF Goodrich Plus.

Written Submissions of the Respondent, Sears Canada Inc. (Re: Ordinary Price Representations), paragraph 110.

15. In its Initial Submissions, Sears also noted that the Commissioner's contention was that these documents demonstrate Sears' lack of good faith in relation to its regular prices for the Tires. The Commissioner pointed, in particular, to the phrase "every day pricing" within the pricing strategy description and contended that the only logical interpretation of this phrase was that it referred to Sears' 2-for pricing, and that this therefore undermined Sears' contention that its single unit price was both its regular price and a price offered in good faith.

- 5 -Written Submissions of the Respondent, Sears Canada Inc. (Re: Ordinary Price Representations), paragraphs 111, 113.

16. Sears' concern was that the hasty conclusion drawn by the Commissioner failed to take into account the context in which, and the purpose for which, the documents were prepared. As Mr. Cathcart testified, the Automotive Reviews were part of an intense presentation made to Sears' CEO. The purpose of the presentation, as Mr. Cathcart explained, was to convey to senior management how the Sears' Automotive team intended to respond to the competition's EDLP or promotional pricing strategies. The meaning or interpretation of any document, therefore, must be considered in light of the whole of the evidence before the Tribunal.

Written Submissions of the Respondent, Sears Canada Inc. (Re: Ordinary Price Representations), paragraph 114.

17. By virtue of a misapplication of evidentiary exception, the Commissioner is asking the Tribunal to ascribe to documents certain meaning extending far beyond the purview of s. 69 of the Act. Sears addressed the issue of the Spring Review at the hearing of the application and, indeed, in Sears' Initial Submissions as noted above. In Sears' submission, the meaning or interpretation to be drawn from such documents is a matter for the Tribunal to assess after reviewing, assessing and weighing all the evidence in light of s. 69 of the Act.

18. Importantly, and as discussed in greater detail below, the Commissioner purports to ascribe meaning to the Spring 1999 Review (Exhibit CA-30) - and suggests that the document ought to be admitted for the "truth of its contents" - when one of the key parties involved in the preparation of the document was available, but not permitted, to testify at the Hearing.

19. Sears sought to have Mr. Vince Power (the co-author of CA-30) testify at the Hearing. In support of that request, counsel for Sears noted that witnesses who would be better able to speak to the documents (i.e. Mr. Power) were available to testify at the proceeding. The Commissioner opposed this request - a request that would have permitted the Tribunal to have the benefit of the evidence of a person involved in the preparation of a document at issue in the proceeding.

20. Sears submits that having opposed the attendance of a witness who would have been able to speak specifically to the content of the Spring Review, it is not now open to the Commissioner to attempt to use an evidentiary exception to ascribe an interpretation to a document when there

- 6 ­was viva voce evidence on the document in question and the Commissioner herself opposed the receipt of testimony from the co-author of a document in issue.

21. As counsel for Sears noted at the motion seeking leave to add Mr. Power and Ms. Drever as witnesses:

Mr. McNamara: At any rate, Your Honour, where we find ourselves now quite simply is instead of a lineup of three witnesses, a lineup of five, evidence which, in my submission, was all fairly encompassed by the three original willsays and is now virtually unchanged, but will be given by the appropriate witnesses, i.e. those who have personal knowledge or [are] otherwise the right witnesses to give evidence.

(emphasis added) Pub. Hr. Tr., Vol. 2, 266 (4-12), October 21, 2003. 22. It is for the Tribunal to interpret documents and to determine what "facts" documents are evidence of and to consider whether those facts, when viewed in the context of the entire body of evidence, establish reviewable conduct. The weight to be accorded to such documents and the meaning to be ascribed to such documents and indeed the conclusions to be drawn from any documents must be assessed by the Tribunal and in light of s. 69 of the Act.

R. v. Rolex Watch Co. of Canada Ltd., (1980), 50 C.P.R. (2d) 222 (Ont. C.A.) at 226.

Sunbeam Corp. (Can.) Ltd. v. R., [1969] S.C.R. 221. NO NOTICE WAS GIVEN UNDER S. 30 OF THE CANADA EVIDENCE ACT 23. Section 30(7) of the Canada Evidence Act provides as follows: 30.(7) Unless the court orders otherwise, no record or affidavit shall be admitted in evidence under this section unless the party producing the record or affidavit has, at least seven days before its production, given notice of his intention to produce it to each other party to the legal proceeding and has, within five days after receiving any notice in that behalf given by any such party, produced it for inspection by that party.

(emphasis added) Canada Evidence Act, R.S. 1985, c. C-5 24. In the Commissioner's Submissions, the Commissioner now alleges that she gave notice under the Canada Evidence Act. In support of this position, the Commissioner relies on the fact that the documents were listed in the Commissioner's Disclosure Statement and included in the

- 7 -Joint Book of Documents prepared and filed by the parties in this proceeding. With respect, the Commissioner's purported use of the Competition Tribunal Rules (which mandate the preparation of disclosure statements) cannot be used to circumvent the direct requirements of the Canada Evidence Act. Counsel to the Commissioner has, in fact, twice admitted that no notice was given under the Canada Evidence Act.

25. In preparing for oral argument in this proceeding, counsel for Sears wrote to counsel for the Commissioner to verify that in fact no notice was given under the Canada Evidence Act. By e-mail dated June 26, 2004, Ms. Healey wrote to Mr. Syme posing the following question:

John, would you please provide us with a fax copy of the Commissioner's notice under s. 30 of the [Canada Evidence Act].

Many thanks. Martha 26. Mr. Syme responded by e-mail on June 27, 2004: Martha, As you know, the Commissioner did not provide notice under s. 30 (i.e., had notice been provided, it would have been provided to you and your colleagues).

See you tomorrow. John

27. Similarly, in oral argument, the question of whether notice had been given under the Canada Evidence Act was raised. Mr. McNamara noted that it was common ground that no notice had been given, and Mr. Syme confirmed this understanding to be true:

Mr. W.W. McNamara: ... There was no notice under the Canada Evidence Act, I think that is common ground.

Mr. J.L. Syme: Yes it is, Your Honour. The Chairperson: Yes.

(emphasis added) E-mail correspondence M. Healey and J. Syme, June 26-27, 2004.

(emphasis added) Pub. Hr. Tr., Vol. 31, 5019 (13-16), August 20, 2004.

- 8 -28. The question raised by counsel to Sears in advance of oral argument was to confirm that no notice had been given under the Canada Evidence Act. Counsel to the Commissioner confirmed (twice) that that was the case. The Commissioner cannot now purport to re-create notice out of a document required by the Tribunal Rules and which neither the Commissioner nor Sears understood was provided in fulfilment of the requirements of the Canada Evidence Act (or in the case of the Commissioner intended to serve as notice). The Commissioner cannot, similarly now, after the close of the proceeding, purport to rely on the Canada Evidence Act when indeed this legislation did not form part of her case. The Commissioner based the admission of certain documents, for example, the Sears Documents, entirely on the operation of s. 69 of the Act.

29. Quite apart from the absence of notice under the Canada Evidence Act, the Commissioner has not established that the documents that it purports to include in the "notice" were all, in fact, business records prepared in the ordinary course of business. As the Nova Scotia Court of Appeal noted in R. v. Wilcox:

Is Exhibit 24 admissible under the conunon law business records exception to the hearsay rule? All respondents accept R. v. Monkhouse, ... as an accurate statement of the requirements for such admissibility. The following passage from the judgment of Laycraft, C.J.A., for the Court at p. 732 sets out the applicable principles:

In his useful book, Documentary Evidence in Canada (Carswell Co., 1984), Mr. J.D. Ewart sununarized the conunon law rule after the decision in Ares v. Venner as follows at p. 54:

... the modem rule can be said to make admissible a record containing (i) an original entry (ii) made contemporaneously (iii) in the routine (iv) of business (v) by a recorder with personal knowledge of the thing recorded as a result of having done or observed or formulated it (vi) who has a dutv to make the record and (vii) who had not motive to misrepresent. Read in this way, the rule after Ares does reflect a more modem, realistic approach for the conunon law to take towards business dutv records.

To this summary, I would respectfully make one modification. The "original entry" need not have been made personally by a recorder with knowledge of the thing recorded. On the authority of Ormand, Ashdown, and Moxley, it is sufficient if the recorder is functioning in the usual and ordinary course of a system in effect for the preparation of business records ...

(emphasis added) R. v. Wilcox, [2001] N.S.J. No. 85 at para 49.

- 9 -30. The Commissioner's disclosure statement (the alleged "notice") included, for example, an index ofrecords produced pursuant to the order issued by Justice Dube under s. 11 of the Act; copies of preprint advertising, a chronological listing of newspaper advertisements, copies of newspaper proofs, facsimile or e-mail correspondence, letters between counsel relating to responses to undertakings, documents prepared for the purposes of the Commissioner's inquiry as required under s. 11 of the Act and, indeed, documents of analysis prepared by the Commissioner's staff.

Commissioner of Competition, Disclosure Statement. 31. The Commissioner asks the Tribunal to determine that the Commissioner's Disclosure Statement, which clearly contains documents not prepared in the ordinary course of business, somehow serves as the notice required under s. 30 of the Canada Evidence Act and as notice to a party, after the close of a hearing, that if there were any documents prepared "in the ordinary course of business", those records would be relied upon for the truth of their contents. Such an approach would entitle the Commissioner to produce any number of records she wished under the guise that they could be submitted for the truth of their contents whether or not they actually were business records prepared in the ordinary course of business and notwithstanding viva voce, or other documentary, evidence relating to those documents.

32. Sears notes that the Commissioner did serve Sears with a Request to Admit to which Sears responded. The Request to Admit was prepared in standard form and served on Sears. Sears submits, therefore, that to the extent the Commissioner was searching for admissions by Sears, she did so by way of a Request to Admit and not by way of notice under the Canada Evidence Act. The Commissioner is not entitled to now seek to rely on a document prepared for an entirely different purpose (documentary disclosure) as a required notice under the Canada Evidence Act.

33. The preparation of a Joint Book of Documents is, similarly, no notice that the Commissioner intended to, or did, serve notice under the Canada Evidence Act.

DOCTRINE OF POSSESSION 34. As noted in the Commissioner's Submissions, the common law doctrine of possession is based on possession of a document. However, assuming the doctrine applies in the face of s. 69

- 10 ­of the Act, the document is inadmissible to prove the truth of its contents unless the possessor has recognized, adopted or acted upon it. In order to make any such determination, there must first be an assessment or review of the available evidence. It is not sufficient to simply review the document and to draw conclusions the Commissioner says ought to flow from the document. The Tribunal heard the evidence of Messrs. Cathcart, McKenna and McMahon. This evidence must be considered and any documents received into evidence must be assessed in light of the available evidence.

35. However, givens. 69 of the Act this doctrine is not applicable. As noted in The Law of Evidence in Canada:

18.61 Corporations are capable of possessing documents. Although the case law has arisen mainly in the context of prosecutions for restraint of trade, the issue may arise in both civil and criminal proceedings. Unless governing legislation has specific provisions addressing the issue of the admissibility of documentary evidence, the common law documents in possession doctrine applies.

(emphasis added) Sopinka, J., S.W. Lederman, A.W. Bryant, The Law of Evidence in Canada, 2nd ed., Butterworths: Toronto, 2002 at 1031.

36. In the present case, s. 69 of the Act speaks to the admissibility of documents in possession (s. 69(2)(c)) and 1s the applicable authority in the present proceeding (as set out above). It was, in addition, the basis upon which the Commissioner sought to introduce documents, for example the Sears' Documents, into evidence.

3 7. As noted in The Law ofE vidence: In proceedings under the Competition Act, the common law co-conspirator evidentiary rule has been abrogated. Although this statutory provision makes the document found in possession of one party prima facie evidence against the co-conspirator, its evidentiary value may be challenged.

The Law ofE vidence, supra, at 1034. R. v. Ro/ex Watch, supra. Sunbeam Corp. (Canada) Ltd. v. R., supra. R. v. Anthes Business Forms Ltd., (1975) 10 O.R. (2d) 153 (CA), affd [1978] 1 S.C.R. 970.

- 11 -38. As the Ontario Court of Appeal noted in R. v. Anthes (at 188): Parliament, in enacting what is now s. 45, clearly intended to create a presumption of fact that documents written or received by an agent of a "participant" were written or received with the authority of that participant; that those persons appearing from the documents or otherwise shown to be officers, agents, servants, employees or representatives of a participant acted with authority; and that anything recorded in a document as having been done, said or agreed upon by a participant or an agent of a participant was in fact done, said or agreed upon as recorded, and where done, said or agreed upon by an agent, then it was done, said or agreed upon with the authority of the participant. In short, the common law principles and rules of evidence enunciated in Ash-Temple, supra, were abrogated by Parliament.