Documentation

PUBLIC VERSION

THE COMPETITION TRIBUNAL IN THE MATTER OF an application for orders pursuant to section 74.1 of the Competition Act for conduct reviewable pursuant to paragraph 74.01(1)(a) and subsection 74.01(3) of the Competition Act;

BETWEEN: THE COMMISSIONER OF COMPETITION HUDSON'S BAY COMPANY

NOTICE OF MOTION OF THE RESPONDENT (Motion to Strike)

TAKE NOTICE THAT the Respondent, will make a motion to the Competition Tribunal ("Tribunal") on a date to be determined or as soon thereafter as the motion may be heard.

THE MOTION IS FOR: 1. an order striking out the report of the proposed expert, Theodore L. Banks, dated December 18, 2018 (the "Banks Report");

2. in the alternative to paragraph 1, an order striking out such parts of the Banks Report that the Tribunal finds to be inadmissible;

3. an order striking out the witness statement of Adam Zimmerman affirmed December 19, 2018 (the "Zimmerman Statement);

4. an order striking out Schedules B and C of the Commissioner's letter to counsel for Hudson's Bay Company ("HBC") dated January 4, 2019 (the "Rule 72 Notice");

5. costs of this motion; and 6. such further and other relief as counsel may request and the Tribunal deems just. THE GROUNDS FOR THE MOTION ARE: 7. It is well established that Tribunal proceedings attract the highest level of procedural fairness. The procedural fairness obligations require the Commissioner to disclose to

File No. CT-2017-008

Applicant - and — Respondent

2 HBC evidence that is relevant and admissible in the proceedings. Pre-hearing disclosure is an important aspect of procedural fairness;

8. The Commissioner's pre-hearing disclosure is fundamentally flawed and inconsistent with the requirements of procedural fairness in the following three respects:

(a) the Banks Report disregards the proper role of an expert witness described in Competition Tribunal Rules, SOR/2008-141 (the "Tribunal Rules") Rule 77 and Federal Courts Rules, SOR/98-106 (the "FC Rules") Rules 52.2 and 279;

(b) the Zimmerman Statement is replete with opinion evidence, argument and hearsay contrary to Tribunal Rule 68(2);

(c) the blanket listing of over 98,000 documents in Schedules B and C of the Rule 72 Notice by the Commissioner is inconsistent with the purpose of the rules on pre-hearing disclosure and denies the Respondent procedural fairness;

Motion to Strike the Banks Report 9. Mr. Banks is an American-trained lawyer in private practice who is also president of a consulting firm that the Competition Bureau ("Bureau") hires to serve as a "compliance monitor";

10. Mr. Banks has fundamentally misconceived the proper role of an expert witness; 11. The Banks Report, which runs to 143 paragraphs in length, is patently improper and inadmissible on numerous grounds, including because:

(a) Mr. Banks impermissibly encroaches on the province of this Tribunal by offering legal conclusions, including those based on his own interpretation of section 74.01 of the Competition Act, R.S.C., 1985, c. C-34 (the "Act"). The interpretation of the statute and the application of the statute to the facts is a core judicial function which is not a proper area for an expert to purport to make findings or draw legal conclusions;

(b) Mr. Banks repeatedly and improperly makes factual findings on contested matters under the guise of expert "opinion". It is wholly inappropriate for any expert to engage in such fact-finding, and such "opinion" is inadmissible as a matter of law; and

(c) The Banks Report is not neutral or impartial in its review and examination of the evidence. Mr. Banks simply adheres to and promotes the theory of the case being advocated by the Commissioner, and offers improper advocacy dressed up as expert opinion;

12. The patent improprieties of Mr. Banks' evidence (and the evident inadmissibility of his Report) are encapsulated by the summary of "conclusions" found in Part VII (paragraphs 135-143), in which Mr. Banks, among other things:

(a) purports to determine what section 74.01(3) of the Act requires as a matter of law, makes findings of fact concerning HBC's regular prices for mattresses

3 (even though HBC's evidence is not in the record and no hearing has been held), and concludes that HBC has engaged in reviewable conduct;

(b) purports to discern the legal "test" for "good faith" (on the basis of his reading of the Tribunal's decision in Sears) and uses his test to impugn HBC's advertising compliance program, stating that it "should have been accurate, providing instructions that followed the applicable law," but instead "its coverage of establishing an OSP was deficient, particularly with regard to establishment of good faith";

(c) dismisses HBC's "due diligence" defence (provided for by s.74.1(3) of the Act), concluding that "HBC did not use due diligence to ensure its advertising was in compliance with the law"

(d) astonishingly concludes that there is "no evidence of any corporate attempt to implement an effective compliance program" even though he does not claim to have spoken to anyone at HBC about NBC's corporate culture or compliance and gives this opinion before HBC has even presented its evidence in chief in this proceeding;

(e) argues, parroting a position taken by the Commissioner on several occasions before the Tribunal, that "it is probable that the compliance weaknesses with regard to an accurate OSP would impact all products sold at HBC" — notwithstanding that (i) the Tribunal has noted the lack of logic in the Commissioner's position, and the lack of any evidence to support contraventions of the Act by HBC in respect of any other product (let alone "all products"); and (ii) Mr. Banks, who is seemingly willing to find facts in favour of the Commissioner at will, offers no such evidence in the Banks Report; and

(f) opines on the "optimal remedy" he claims should be made against HBC in this proceeding, which remedy (i) was not even sought by the Commissioner in his Application; and, (ii) unsurprisingly, would involve the adoption of compliance "procedures" recommended by his consulting firm's client, the Bureau;

13. The law is clear that the Commissioner cannot seek to have an expert witness argue (and decide) his case from the witness box;

14. The Banks Report is inadmissible in its entirety and should be struck; Motion to Strike the Zimmerman Statement 15. The Commissioner has delivered the witness statement of Adam Zimmerman, the Senior Competition Law Officer with the Bureau who conducted the primary investigative work related to this proceeding, as part of the Commissioner's pre­hearing disclosure under Tribunal Rule 68;

16. Tribunal Rule 68(1) requires that the Commissioner serve witness statements setting out the lay witnesses' evidence in chief and Tribunal Rule 68(2) provides that witness statements shall include only fact evidence that could be given orally by the witness together with admissible documents as attachments or references to those documents;

4 17. The Zimmerman Statement is inadmissible because it is replete with opinion evidence, argument, speculation and hearsay;

18. The Zimmerman Statement improperly contains factual findings and opinions (based on inferences drawn from HBC's discovery evidence) with respect to every contested issue in this proceeding in the guise of "investigation findings";

19. Opinion evidence from lay witnesses is admissible in very limited circumstances and only when the opinion is based on facts that were actually observed by the witness in question. None of the evidence relied on by Mr. Zimmerman for his opinions is within his direct knowledge;

20. Mr. Zimmerman's opinions and conclusions are based entirely on HBC's documentary disclosure and discovery evidence. Indeed, over 140 paragraphs of the Zimmerman Statement consist of quotations from transcripts from the discovery of HBC representatives (including several that are used multiple times);

21. The Zimmerman Statement improperly contains legal arguments based on its factual findings. For instance, the Statement provides Mr. Zimmerman's interpretation of the OSP Guidelines and the Sears decision and contains 14 pages of argument as to the appropriate remedy in this case should the Commissioner be successful in establishing his case. The lengthy arguments in the Zimmerman Statement are blatantly not admissible evidence in chief;

22. The Zimmerman Statement also contains inadmissible hearsay, including statements regarding the views of other members of the Investigation Team and information provided to the Investigation Team by others. The hearsay evidence in the Zimmerman Statement does not meet the requirements of necessity or reliability and is therefore not admissible;

23. The Zimmerman Statement is essentially a closing argument for the Commissioner's case as opposed to a statement of facts within the knowledge of Mr. Zimmerman. It does not meet any of the requirements under Rule 68 and is so flawed that it ought to be struck in its entirety;

The Rule 72 Notice is Improper and Abusive 24. Rule 72 of the Tribunal Rules requires that the Commissioner provide a list of the documents to be admitted in evidence without further proof in accordance with section 69 of the Act at least 45 days before the commencement of the hearing;

25. Section 69 of the Act applies to the admissibility of documents at trial, and presumes that a "participant" (such as the Respondent) has both knowledge of the existence of documents and the truth of their contents for any documents proved to have been in the possession of or on the premises used or occupied by the participant or its agents;

26. The Commissioner's Rule 72 Notice provides that "the Commissioner proposes the documents attached hereto be admitted without further proof' and attaches three Appendices consisting of some 98,752 documents. In particular:

5 (a) The documents listed at Appendix B consist of HBC's complete documentary disclosure materials (94,576 documents) including those submitted under Section 11 orders; and

(b) The documents listed in Appendix C consist of 4,176 documents described as "representations and court documents" and appear to be a list of all documents listed in the affidavits of documents submitted by the Commissioner.

27. The Rule 72 Notice as it relates to the documents at Appendix B and Appendix C is a fundamental misuse of Tribunal Rule 72 and section 69 of the Act;

28. The Appendix B and C documents ought not be made subject to the blanket application of section 69 presumptions;

29. The effect of the Rule 72 Notice in its current form will be to disregard fundamental principles of natural justice, including audi alteram partem, by obscuring the case against the Respondent under a mountain of presumptively admissible documents and denying it a meaningful opportunity to respond;

30. The Commissioner's attempt to admit into evidence without further proof some 98,752 documents is abusive, inconsistent with the purpose of the Rules on pre­hearing disclosure and deny the Respondent procedural fairness;

31. Furthermore, the documents described in Appendix C were neither in the possession of or on premises used or occupied by the Respondent or its agents and therefore cannot be a part of a Rule 72 Notice list;

32. The Respondent therefore seeks to strike Appendix B and Appendix C from the Rule 72 Notice, without prejudice to its ability to address the application of section 69 presumptions at the hearing of the merits;

33. The Competition Act, sections 69; Competition Tribunal Rules, rules 2(1), 68, 72, 77; the Canadian Bill of Rights, section 2(e), and the Federal Courts Rules, rules 52.2

and 279; and

34. Such further or other grounds as counsel may advise and the Tribunal may permit. THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the motion: 1. report of Theodore L. Banks dated December 18, 2018, without its appendices; 2. statement of Adam Zimmerman affirmed December 19, 2018, without its appendices; 3. the Commissioner's letter to HBC counsel dated January 4, 2019; 4. the pleadings and prior proceedings herein; and 5. such further or other material as counsel may advise and this Tribunal may permit. DATED AT TORONTO, ONTARIO this 8th day of February, 2019.

6 SIGNED BY: 5/b..„_". jr Eliot N. Kolers r 1-J STIKEMAN ELLIOTT LLP 5300 Commerce Court West 199 Bay Street Toronto, Ontario, M5L 1B9

Eliot N. Kolers Phone: (416) 869-5637 Email: ekolersstikeman.com

Mark E. Walli Phone: (416) 869-5277 Email: mwallistikeman.com

Patricia Joseph Phone: (416) 869-5642 Email: piosephstikeman.com

Counsel for Hudson's Bay Company

AND COPIES TO: ATTORNEY GENERAL OF CANADA Department of Justice Canada Competition Bureau Legal Services Place du Portage, Phase 1 50 Victoria Street, 22nd Floor Gatineau, QC K1A 0C9

Alexander Gay (LSUC: 37590R) Tel: (819) 994-3068 Email: Alex.Gaviustice.oc.ca

Derek Leschinsky (LSUC: 48095T) Tel: (819) 956-2842 Email: Derek.Leschinskvacanada.ca

Katherine Rydel (LSUC: 581431) Tel: (819) 997-2837 Email: Katherine.Rvdelacanada.ca

Counsel for the Commissioner of Competition AND TO: THE REGISTRAR Competition Tribunal Thomas D'Arcy McGee Building 90 Sparks Street, Suite 600 Ottawa, ON K1P 5B4 Tel: (613) 956-7851 Fax: (613) 952-1123

PUBLIC VERSION File No. CT-2017-008 THE COMPETITION TRIBUNAL IN THE MATTER OF an application for orders pursuant to section 74.1 of the Competition Act for conduct reviewable pursuant to paragraph 74.01(1)(a) and subsection 74.01(3) of the Competition Act.

THE COMMISSIONER OF COMPETITION Applicant - and -

HUDSON'S BAY COMPANY Respondent

NOTICE OF MOTION OF THE RESPONDENT STIKEMAN ELLIOTT LLP 5300 Commerce Court West 199 Bay Street Toronto, Ontario M5L 1B9

Eliot N. Kolers Tel : (416) 869-5637 Email: ekolersstikeman.com

Mark E. Walli Tel: (416) 869-5277 Email: mwallistikeman.com

Patricia Joseph Tel : (416) 869-5642 Email: piosephstikeman.com

Counsel for Hudson's Bay Company