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CT-2021-002 THE COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34, as amended; AND IN THE MATTER OF the acquisition of Tervita Corporation by Secure Energy Services Inc.;
AND IN THE MATTER OF an application by the Commissioner of Competition for an order pursuant to section 92 of the Competition Act.
BETWEEN:
COMMISSIONER OF COMPETITION
— and —
SECURE ENERGY SERVICES INC.
Applicant
Respondent
WRITTEN REPRESENTATIONS OF THE COMMISSIONER OF COMPETITION
(Respondent’s Motion to Compel Answers to Questions Refused on Discovery)
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Part I: Overview
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The Commissioner of Competition (“Commissioner”) has already produced over 150,000 records including 80 market contact notes that relate to inquiry of the former Tervita Corporation’s acquisition of Newalta (the “Newalta Inquiry”). At the examination for discovery and in answers to undertakings, the Commissioner answered questions about facts learned related to the Newalta Inquiry and the relevance of those facts to the current application.
Secure Energy Services Inc. (“Secure”) seeks answers to questions that invite economic analysis, opinion, or conclusions related the Commissioner’s investigation of the Newalta Inquiry. Such questions are improper regardless of whether they are about the current application or investigations of previous transactions. They are improper because the Commissioner proves a merger is anticompetitive with factual statements from market participants and expert opinion evidence. The Commissioner at the hearing cannot prove, for example, elasticity of demand or relevant product markets by providing internal analysis – it can only be proved with reference to admitted and accepted facts and expert opinion.
Answers to these questions are also not required to remedy an information imbalance as Secure alleges. The Commissioner has disclosed to Secure all relevant documents and facts in his possession, power and control from the Newalta Inquiry – this is not disputed. The Commissioner has fully complied with his discovery obligations – Secure’s motion should be dismissed.
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Part II: Summary of Facts
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The examination of the Commissioner’s representative took place over 2 days and answered approximately 599 questions. Secure now moves to compel the Commissioner to answer 24 questions which can be classified as questions that invite economic analysis, opinion or conclusions from the Commissioner in the Newalta Inquiry (the “Newalta Opinion Questions”). Those questions were properly refused.
A number of the Newalta Opinion Questions are duplicative seeking the same information. For example over 15 of the Newalta Opinion Questions essentially ask did the Commissioner conduct any anticompetitive effects analysis1, estimate deadweight loss2 or estimate elasticity of demand3.
There is no dispute that the Commissioner has disclosed to Secure all documents from the Newalta Inquiry with relevant facts. For example, the Commissioner produced all of the responses to requests from information (“RFI”), notes from 80 calls with market contacts and any documents provided by market contacts.4 This includes notes from calls with Secure and RFI responses made by Secure during the Newalta Inquiry.5
During discovery, the Commissioner’s representative answered questions about notes from market contacts from the Newalta Inquiry with information relevant to the present application.6
1 The Commissioner of Competition’s Responding Motion Record (“Commissioner’s Responding Motion Record”), Tab 2, Affidavit of Mallory Kelly, affirmed January 26, 2021 (“Kelly Affidavit”), Exhibit D, Transcript f rom the Examination for Discovery of Jacqueline Byers dated December 13, 2021 (“Byers Transcript Day 1”), Question 350, p. 721. 2 Kelly Affidavit, Exhibit D, Byers Transcript Day 1, Question 355, p. 722. 3 Kelly Affidavit, Exhibit D, Byers Transcript Day 1, Question 359, p. 723. 4 Kelly Affidavit, Exhibit D, Byers Transcript Day 1, Questions 100-105, p. 603. 5 Kelly Affidavit, Exhibit A, Newalta Inquiry Market Contact Notes and Exhibit B Secure Responses to Requests for Information from the Newalta Inquiry. 6 Kelly Affidavit, Exhibit D, Byers Transcript Day 1, Questions 187-195, p. 639, and Questions 196-201. p.
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Where the Commissioner’s representative was unable to answer relevant questions about facts from the Newalta Inquiry that information was provided in answers to undertakings. For example:
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Day 1 66:1
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MS.HENDERSON: Will you provide us with a summary of any facts the Commissioner learned in his review of the Newalta transaction that support the use of a customer-based approach to define the geographic markets in this case?
MR. HOOD: I'm not going to give an undertaking to give all facts. We're certainly -- again, this type of issue's been litigated in front of the Tribunal and VAA. We can identify some of the major sources of information from that transaction that would support the finding of customer-based market just following the guidance from the Tribunal Board. We're not going to- there's hundreds of thousands of documents in that transaction.We’re not going to review all of them.
MS. HENDERSON: We’ll give you. like, some of the significant sources of information that we learned from that transaction that would support a customer-based market.
Significant sources of information collected during the Tervita-Newalta review which support a customer-based market with respect to provision of Waste Services include: • Secure's May 17, 2018 response to the Bureau’s request for information. From page 5 of this response, Secure wrote: "transportation is a significant cost incurred by the customer, therefore a service provider may have an advantage to its nearest competitor based on the location (meaning their facility is significantly closer or has easier to access due to river valleys/bridges/roadsymountains etc.) to the customer. Customers consider the total cost of the Service fees, plus the transportation expense. Therefore, a service provider may consider the next nearest facility location in determining the price for Services'. This describes the process by which a Waste Services provider may charge customers individual prices based on their location. • Call with Secure conducted on June 21, 2018, in which a Secure employee was asked whether it is fair to say that price discrimination may occur on the basis of
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whether a customer is also a competitor. A Secure employee on the call confirmed this was true.
Evidence from Tervita documents that Tervita offered discounts to certain customers depending on location, volumes commitments and the rates offered by its competitors. Some examples of the internal discussions related to 'Discount
Offer Authorizations' or DOAs include:
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51. Day 2 76:10
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Q. Does the Commissioner have facts that Newalta engaged in price discrimination prior to its acquisition by Tervita?
A.I think the Commissioner would have data from Newalta. like, the- relevant to that issue, but I I don't know the answer sitting here - to your specific question. I think. to . Q So you don't know if there are any facts other than the data that the Commissioner has that Newalta engaged in price discrimination?
A.Idon't know. Q. Okay. If the Commissioner has any such facts, counsel, will you provide a summary?
MR. HOOD: Yes. MS. HENDERSON: Okay. Including any facts contained in documents over which the Commissioner is otherwise claiming
privilege?
MR. HOOD: Yes. significant sources pursuant to the direction from the Tribunal in the VAA case about what these types of undertakings should look like.
o o
TER 00034094 TER 00009707
Newalta appears to use a‘CSP" form to request approval of customer and facility specific price changes.
Examples of Newalta charging customer-specific prices includes: r' email 1rorr -3 email begins: " As mentioned, I'd like to offei |preferentia ncing for the 3000 6000m3/mo emulsion you are expectin ronnh iew drill in September 2017". - ^^^^^^^^ ^ NEW00095 ^̂ o ^ 24, 2017 email from New ^alta Manager requests approval of a CSP fojHHHpmiat Stettler. The email notes "We are competing against Temt ia Valle ^ oHn̂ mulsion and $6.50/m3 is the rate that fis being charged by|mim They state the list price as “$11 CT and $9/m3 water ^d^isposal", and a proposed pn ^ce of “$10 CT and $6.50/m3 water disposal". Cindy Aardema replies. “Approved".
NEW036742 - Sept. 2016 email chain discusses lowering the price of drilling mud disposal for three customers inc
at Fox Creek. Angie Walenstein emai anager.Warren Scholze, and others: "Please e-mail me back with your approvals to have drilling mud lowered to 140 for these 3 customers". Warren Scholze responds “Approved". In addition, see the sources of information provided in response to undertaking #9.
It is undisputed that the facts related to the Newalta Inquiry are potentially relevant to the present application. Secure’s responses to the Commissioner’s request for information from the Newalta Inquiry contain a number of relevant factual
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7 Kelly Af fidavit, Exhibit D, Byers Transcript Day 1, Question 159, p. 627 (also see the Commissioner’s Answers to Undertakings at 9) and Exhibit E, Transcript from the Examination for Discovery of Jacqueline Byers dated December 14, 2021 (“Byers Transcript Day 2”), Question 148, p . 622 (also see the
Commissioner’s Answers to Undertakings at 51).
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admissions. During discovery of Secure’s representative in the current application, Mr. Engel, Commissioner’s counsel canvassed some of those factual admissions.8
10. These questions were answered by Mr. Engel because they asked for facts. At no time did the Commissioner ask Mr. Engel questions that invite economic analysis or opinion. In fact, Secure’s counsel was consistently clear that Mr. Engel evidence was limited to factual admissions.9
Part III: Submissions – Secure’s questions are improper
11. The Commissioner’s response contains a list of the Newalta Opinion Questions and the Commissioner response to each questions.10 Broadly, the Newalta Opinion Questions that ask for the Commissioner’s analysis, opinion, and conclusions from the Newalta Inquiry are not proper for two reasons: (1) questions that seek economic opinion and analysis are not relevant; and (2) there is no “informational imbalance” in favour of the Commissioner with respect to the Newalta Inquiry, such that ordering production of the Commissioner’s internal thought process could be required to correct any unfairness between Secure and the Commissioner.
12. Questions that ask the Commissioner to provide opinion and analysis on facts are irrelevant regardless of whether they are about the current application or past transactions. At the hearing – the Commissioner proves a merger is anticompetitive through witness statements from market participants, admissions obtained from Secure on discovery, and independent expert opinion evidence. The Commissioner does not testify to provide his opinion on effects or relevant markets. The Commissioner’s internal opinion on markets or analysis whether from the current
8 Commissioner’s Refusals Motion Record, Exhibit F, Transcript from the Examination for Discovery of David Engel, dated December 22, 2021, Question 1342-1368, p. 538-545 and Questions 1407-1426, p. 556-562. 9 Commissioner’s Refusals Motion Record, Exhibit F, Transcript from the Examination for Discovery of David Engel, dated December 22, 2021, Question 35, p. 70, and Question 419, p. 205.
10 Commissioner’s Responding Motion Record, Tab 1, Appendix “A” – Refusals Chart, p. 5.
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investigation or the Newalta Inquiry is irrelevant to the determinations the Tribunal has to make.
13. This is supported by the Tribunal jurisprudence which is clear that the examining party is not entitled to conclusions or economic opinions. For example, in Southam, the Tribunal held that questions seeking opinions or requiring conclusions do not need to be answered.11 Further, in NutraSweet, the Commissioner was not required to provide definitions of economic terms because the questions related to the Commissioner’s position:
[b]oth questions (i.e. that with respect to acquisition cost and that with respect to long run average cost) relate to the position which the Director proposes to take as opposed to the facts upon which that position is based. On discovery it is facts which have to be disclosed, not the conclusion, which either party intends to argue, should be drawn from those facts.12
14. In VAA, the Tribunal held that several of VAA’s requests were improper because “they invite economic analysis, opinion or conclusions from the Commissioner on certain issues, or require comparative analyses between different price and non-price factors as opposed to the facts themselves (NutraSweet at paras 23, 38; Southam at paras 12-13). Such requests essentially seek to reveal how the Commissioner assessed and interpreted facts and therefore need not be answered”13.
15. The Tribunal’s decision in Live Nation does not, contrary to Secure’s submission, support Secure’s position on this motion. The pleadings in that case raised an issue that is not raised here. In Live Nation, the respondent had pled that the Commissioner was stopped from pursuing his application against Live Nation because the Commissioner had reviewed the conduct in the past and declined to
11 Canada (Director of Investigation and Research) v Southam Inc, (1991), 38 CPR (3d), at paras 16-19, Book of Authorities (“BOA”), Tab 1. 12 Canada (Director of Investigation & Research) v NutraSweet Co, [1989] CCTD No 54, BOA, Tab 2. 13 The Commissioner of Competition v Vancouver Airport Authority, 2017 Comp Trib 16, at para 69, BOA,
Tab 3.
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take action.14 No such allegation has been made here. In fact, Secure is not seeking information about the conduct of the investigation rather the Commissioner’s opinions and analysis from the Newalta Inquiry.
16. No information imbalance. Secure does not need the answers to the Newalta Opinion Questions to remedy the “informational imbalance” it alleges.15 As described above, it is not contested that Secure has been provided with all of the facts the Commissioner learned from the Newalta Inquiry relevant to the present application. During its examination of the Commissioner’s representative, Secure had full opportunity to and did explore facts the Commissioner learned from the Newalta Inquiry and their relevance to the current application.
17. Secure argues an alleged unfairness has occurred by mischaracterizing the information it provided in the Newalta Inquiry as ‘analysis’.16 Because Secure provided its so-called ‘analysis’ from the Newalta Inquiry, Secure submits it is only fair that it see the Commissioner’s ‘analysis’ from the Newalta Inquiry.
18. Secure’s reciprocity argument is based on the faulty premise that the parties are in reciprocal relationship. The Commissioner is charged with a statutory duty to enforce the Competition Act while Secure is a market participant. Secure is entitled to learn from the Commissioner the facts relevant to the application. Secure is not entitled to documents that are otherwise irrelevant simply because it responded to a request for information from the Commissioner in the Newalta Inquiry.
19. Secure, like several other market participants contacted during the Newalta Inquiry, voluntarily made written factual statements to the Commissioner in response to a request for information from the Commissioner. During the examination of Secure’s representative, Commissioner’s counsel canvased different factual statements made asking for Secure’s representative to confirm whether those factual statements were true today. Commissioner’s counsel did not ask Mr. Engel for
14 The Commissioner of Competition v Live Nation Entertainment, Inc et al, 2019 Comp Trib 3 (“Live Nation”) at paras 14-16, BOA, Tab 4. 15 Secure Motion Record, Tab 3, Written Representations of Secure Energy Services Inc., para 27 p. 397.
16 Secure Motion Record, Tab 3, Written Representations of Secure Energy Services Inc., para 5, p. 390.
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economic analysis and opinion. In fact, Secure’s counsel was consistently clear that Mr. Engel could only testify as to fact.
20. Similarly, Secure was provided with the information the Commissioner learned from the Newalta Inquiry. During discovery of the Commissioner’s representative, Secure’s counsel had the opportunity to ask any questions about those facts and their relevance to the pleadings. Contrary to Secure’s allegations, it can and has informed itself about the facts from the Newalta Inquiry and how they apply to the present application.17
21. Secure also alleges answers to the Newalta Opinion Questions are necessary to prevent prejudice because “the Commissioner has used Mr. Harington’s expert analysis regarding the Tervita/Newalta Merger to cross-examine him”.18 Mr. Harington’s report was produced to the Commissioner by Tervita as part of the Newalta Inquiry. If the Commissioner’s economic expert in the present application, Dr. Nathan Miller, had provided a report in the Newalta Inquiry it would be relevant and producible, however, Dr. Miller was not involved in the Newalta Inquiry.
22. Cross-examining an expert on their previous report is an appropriate line of cross-examination. In fact, Secure cross-examined the Commissioner’s economic expert, Dr. Miller, using Dr. Miller’s previous reports from the Commissioner’s application against Parrish & Heimbecker.19 Such cross-examination does not make relevant what is not relevant or open the door to the Commissioner’s internal analysis.
23. If the Commissioner is required to answer the Newalta Opinion Questions it would create unfairness and prejudice for the Commissioner. The Commissioner can only seek facts from Secure during discovery. As described above, the Tribunal has made it clear that it is not proper for the Commissioner to ask Secure whether Tervita conducted an analysis of elasticity of demand in the Newalta Inquiry (Secure has merged with Tervita meaning all the activities of Tervita – including any internal
17 See para 4 in fact section above. 18 Secure Motion Record, Tab 3, Written Representations of Secure Energy Services Inc., para 27 p. 397. 19 Kelly Affidavit, Exhibit C, Cross Examination Transcript of Nathan Miller dated July 21, 2022, Questions
55-61, p. 545.
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analysis it may have conducted - vest with Secure). This question is not proper because it seeks opinion evidence that can only be the subject of expert economic evidence at the hearing.
24. For these reasons, the Commissioner submits that the Newalta Opinion Questions are improper and he should not be compelled to answer it.
Part IV: Order Sought
25. The Commissioner respectfully requests that this motion be dismissed it its entirety with his costs of the motion.
ALL OF WHICH IS RESPECTFULLY SUBMITTED THIS 26TH DAY OF JANUARY, 2022.
ATTORNEY GENERAL OF CANADA Department of Justice Canada Competition Bureau Legal Services Place du Portage, Phase I 50 Victoria Street, 22nd Floor Fax: 819.953.9267
Jonathan Hood Tel: 647.625.6782 jonathan.hood@cb-bc.gc.ca
Paul Klippenstein Tel: 819.934.2672 paul.klippenstein@cb-bc.gc.ca
Ellé Nekiar Tel: 819.360.8760 elle.nekiar@cb-bc.gc.ca
Counsel to the Commissioner of Competition
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List of Authorities 1. Canada (Director of Investigation and Research) v Southam Inc , (1991), 38 CPR (3d).
2. Canada (Director of Investigation & Research) v NutraSweet Co, [1989] CCTD No 54.
3. The Commissioner of Competition v Vancouver Airport Authority , 2017 Comp Trib 16.
4. The Commissioner of Competition v Live Nation Entertainment, Inc et al, 2019 Comp Trib 3.
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CT-2021-002 THE COMPETITION TRIBUNAL IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34, as amended;
AND IN THE MATTER OF the acquisition of Tervita Corporation by Secure Energy Services Inc.;
AND IN THE MATTER OF an application by the Commissioner of Competition for an order pursuant to section 92 of the Competition Act.
BETWEEN: COMMISSIONER OF COMPETITION Applicant — and —
SECURE ENERGY SERVICES INC. Respondent
WRITTEN REPRESENTATIONS OF THE COMMISSIONER OF COMPETITION
(Respondent’s Motion to Compel Answers to Questions Refused on Discovery)
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