Date:
20080122
Docket:
A-192-07
Citation:
2008 FCA 22
CORAM: RICHARD
C.J.
NOËL
J.A.
SHARLOW
J.A.
BETWEEN:
THE
COMMISSIONER OF COMPETITION
Appellant
and
LABATT BREWING COMPANY LIMITED
LAKEPORT BREWING COMPANY LIMITED
LAKEPORT BREWING LIMITED PARTNERSHIP
ROSETO INC.
TERESA CASCIOLI
Respondents
REASONS FOR JUDGMENT OF THE
COURT
(Delivered
from the Bench at Ottawa, Ontario, on January
22, 2008)
SHARLOW J.A.
[1]
The
Commissioner of Competition is appealing the March 28, 2007 order of Justice
Phelan, sitting as Presiding Judicial Member of the Competition Tribunal. His
reasons were issued on March 30, 2007 (2007 Comp. Trib 9). In the order under
appeal, Justice Phelan dismissed the Commissioner’s application for an interim
order under paragraph 100(1)(a) of the Competition Act, R.S.C.
1985, c. C-34, in relation to what was then the proposed acquisition by Labatt
Brewing Company Limited of all of the units of Lakeport Brewing Income Fund.
Mootness
[2]
The
acquisition was completed on March 29, 2007, rendering this appeal moot. The
Commissioner has argued that the appeal should be heard despite its mootness.
The respondents have objected to the appeal being heard.
[3]
As
indicated at the opening of the hearing, we concluded that this appeal should
be heard despite its mootness because it raises a point of law that is likely
to recur, and because the time constraints associated with a decision to grant
or deny an application under paragraph 100(1)(a) of the Competition
Act renders such decisions evasive of appellate review (Air Canada v.
Canada (Commissioner of Competition)(C.A.), [2002] 4 F.C. 598, at paragraph
21; Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342, at page
364).
Standard of Review
[4]
A
decision to grant or deny an interim order under paragraph 100(1)(a) of
the Competition Act is a discretionary decision. This Court will not
intervene in a discretionary decision unless it is based on an error of law or
a wrongful exercise of discretion in that no weight, or no sufficient weight,
was given to relevant considerations, or consideration was given to irrelevant
factors: Elders Grain Co. v. Ralph Misener (The) (C.A.), [2005] 3 F.C.R.
367, at paragraph 13.
[5]
The
Commissioner argues that the order under appeal is based on a misinterpretation
of paragraph 100(1)(a) of the Competition Act. This is a question
of law for which the standard of review is correctness: Air Canada v. Canada
(Commissioner of Competition) (C.A.), [2002] 4 F.C. 598 at paragraph 43; Canada
(Commissioner of Competition) v. Superior Propane Inc. (C.A.), [2001] 3
F.C. 185 at paragraph 88; Canada (Commissioner of Competition) v. Canada
Pipe Co. (C.A.), [2007] 2 F.C.R. 3 at paragraph 34.
Facts
[6]
The
basic facts are not in dispute. Labatt and Lakeport are both in the business of
brewing and selling beer. Prior to the events that gave rise to this case, they
were competitors. On February 1, 2007, Labatt announced its intention to
acquire all of the units of Lakeport. Shortly thereafter, the Commissioner
started to consider the consequences of the proposed acquisition on
competition.
[7]
On
February 12, 2007, Labatt and Lakeport provided the Commissioner with a large
volume of information pursuant to section 114 of the Competition Act and
section 17 of the Notifiable Transactions Regulations SOR/87-348. By
virtue of paragraph 123(1)(b) of the Competition Act, and
applicable securities regulations, the proposed acquisition could not be
completed before March 29, 2007.
[8]
Upon
reviewing the information submitted by the parties, the Commissioner concluded
that there was a basis for commencing an inquiry of the proposed acquisition
under paragraph 10(1)(b) of the Competition Act. The purpose of
the inquiry was to determine whether an application to the Competition Tribunal
under section 92 of the Competition Act was warranted. The
Commissioner’s inquiry commenced on February 15, 2007.
[9]
By
March 21, 2007, the Commissioner had concluded that further time was required
to complete the inquiry. On that date, the Commissioner made an application for
an interim order under paragraph 100(1)(a) of the Competition Act
to prohibit the respondents from closing or taking steps toward closing the
proposed acquisition.
Discussion
[10]
There
are three conditions that must be met before an interim order is granted under
paragraph 100(1)(a) of the Competition Act:
1. The Commissioner
must certify that an inquiry is being made into a proposed transaction under
paragraph 10(1)(b) of the Competition Act.
2. The
Commissioner must be of the opinion that more time is required to complete the
inquiry.
3. The Tribunal
must be satisfied that if the interim order is not granted, a person is likely
to take action that would substantially impair the ability of the Tribunal to
make an order under section 92 to remedy the effect of the proposed transaction
on competition because that action would be difficult to reverse.
[11]
It
is undisputed that the first two conditions were met. Only the third condition
is in issue.
[12]
The
current version of paragraph 100(1)(a) of the Competition Act was
enacted in 1999. Under the predecessor provision, the Commissioner was required
to satisfy the Competition Tribunal that the proposed transaction was
reasonably likely to prevent or lessen competition substantially. That
requirement ceased to exist upon the enactment of the current version of
paragraph 100(1)(a). The Commissioner argues that in this case, Justice
Phelan interpreted and applied paragraph 100(1)(a) as though that
requirement were still there.
[13]
Having
carefully reviewed the reasons for the order under appeal and the
Commissioner’s submissions, we are all of the view that there is no merit to
the Commissioner’s argument.
[14]
It
is apparent that Justice Phelan was aware of the 1999 amendment to paragraph
100(1)(a), and the purpose and implications of the amendment. That is
evident from paragraphs 9 through 13 of his reasons. The Commissioner, however,
is concerned about paragraphs 48, 49 and 63 of Justice Phelan’s reasons, which
read as follows (our emphasis):
48. The
Commissioner must establish that the impairment to the Tribunal's ability to
remedy is substantial. The nature and level of proof will be dictated by the
circumstances of the case, but it is not sufficient to say that pre-merger
conditions cannot be restored or compensated. The Commissioner must
establish that absent an order, the Tribunal's remedies post-merger would not
be effective to eliminate the SLC.
49. On the record
before me, I am not satisfied that the Commissioner has met this threshold. Much of the
evidence before the Tribunal was addressed to whether the Hold Separate
Agreement ("HSA") proposed by the Respondents was appropriate or
adequate. For reasons later discussed, the merger must be assessed against
paragraph 100(1)(a) without regard to the Hold Separate Agreement in which the
Commissioner refuses to participate and in which the Commissioner's involvement
is essential.
[…]
¶63. The
Commissioner argued that by allowing the acquisition to go forward, the
Tribunal was depriving itself of the possibility of eventually, in a section 92
application, ordering the parties not to merge. However, the Commissioner did
not show how the lack of that remedy would substantially impair the Tribunal
from remedying the effect on competition, if an SLC or an SPC were established.
In other words, the Commissioner did not show that the acquisition prevented
the Tribunal from imposing remedies which could be sufficient to remedy the SLC,
and that by losing the possibility of forbidding the merger, the Tribunal was
substantially impaired.
[15]
The
Commissioner argues that Justice Phelan has essentially reformulated paragraph
100(1)(a) in a way that has the effect of restoring, as a condition to
the obtaining of an interim order, the requirement that that the Commissioner
establish the particulars of the substantial lessening of competition perceived
by the Commissioner, as well as the remedies that would be needed to eliminate
the substantial lessening of competition.
[16]
In
contrast, the Commissioner proposes an interpretation of paragraph 100(1)(a)
that would make the obtaining of an interim order virtually automatic in the
case of a proposed transaction, if the Commissioner commences an inquiry and
expresses the opinion that more time is required to determine whether an
application should be sought under section 92 to stop proposed transaction. The
Commissioner suggests that the only limitation on obtaining of an interim order
in such a case would be the Competition Tribunal’s residual discretion to
refuse an order if the Commissioner has acted in a patently unreasonable manner
or is not acting in good faith, or if the application for an interim order is
an abuse of process. We do not agree that Parliament intended the role of the
Competition Tribunal to be so limited.
[17]
Nor
do we agree with the Commissioner’s interpretation of the comments of Justice
Phelan quoted above. In our view, Justice Phelan was explaining, correctly,
that in assessing whether the third condition for the issuance of an interim
order is met, the Competition Tribunal must consider the effectiveness of the
available section 92 remedies in the absence of an interim order, assuming
there is a determination that the proposed transaction would, or would be
likely to, prevent or lessen competition. In the factual context of this case,
that necessarily required an understanding of the nature of the potential
lessening of competition that prompted the inquiry, the kinds of remedies that
might be sought by the Commissioner in the event the inquiry resulted in a
section 92 application, the action sought to be forbidden, what would be
required to reverse that action, and the potential effectiveness of the
available section 92 remedies with and without an interim order.
[18]
As
we read Justice Phelan’s reasons, he did not refuse to grant the interim order
because of any failure on the part of the Commissioner to establish that the
proposed acquisition was reasonably likely to prevent or lessen competition
substantially. Rather, he found the Commissioner’s application for an interim
order to be deficient in that it failed to establish that, without an interim
order, the Tribunal’s remedial powers under section 92 would be substantially
impaired. That conclusion was not wrong in law, and was reasonably open to him
on the record.
[19]
This
appeal will be dismissed with costs.
“K. Sharlow”
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