Canada: Competition Tribunal Maintains Interim Supply Order Despite Third Party Objections In Used Car Dealers Case

On March 16, the Competition Tribunal rejected a motion by the Insurance Bureau of Canada for the rescission of an interim supply agreement in its ongoing dispute with the Used Car Dealers Association of Ontario despite objections from one of IBC's members, holding that the industry association had also bound its members when it agreed to the interim supply agreement. The decision, which has the effect of maintaining a mandatory supply order despite the objections of an IBC member which had directed IBC not to supply its confidential information, has important implications for industry associations and their members.

UCDA is a not-for-profit trade association representing motor vehicle dealers in Ontario. Among other services, it provides a service called "Auto Check", which allows dealers to verify accident history information about vehicles they intend to sell. IBC, which collects and provides the data for the Auto Check service, is a not-for-profit corporation made up of 139 member insurance companies. On June 17, 2011, IBC terminated UCDA's access to its insurance data, and UCDA was forced to suspend its Auto Check service. The reasons for the termination, and UCDA's allegations that the termination constituted a "refusal to deal" contrary to section 75 of the Competition Act, are described in our earlier article. Meanwhile, the parties agreed to an interim supply agreement pursuant to which IBC would continue to supply UCDA with claims data while the case was before the Tribunal, and the agreement was formalized by an order of the Tribunal.

Two weeks after the interim supply order was issued, State Farm (a member of IBC) directed IBC not to supply its data to UCDA. State Farm claimed in a letter that, as a matter of business policy, it had chosen not to make claims information available to third-party commercial operations. IBC thereafter sought to rescind the interim supply order on the grounds that, because of technological limitations, the only way it could implement State Farm's direction would be to remove UCDA's access entirely (and thereby breach the interim supply order) or remove State Farm's data from its service, diminishing the service's effectiveness for all users.

The Tribunal first considered whether there were "changed circumstances" which justified reconsidering the supply order. The Tribunal noted that State Farm had been made aware of UCDA's application for an interim supply order, and found that State Farm knew or ought to have known about the proceedings; nonetheless, State Farm took no steps to object and did not intervene or participate in the present motion. It further found that IBC had known about the technical limitations of its system and nevertheless agreed to the interim supply order; IBC was therefore the "maker of its own mischief". Moreover, the Tribunal noted that State Farm had provided no evidence of its corporate policy, and in fact continued to supply data to another third party commercial enterprise, Carproof (a competitor of UCDA's Auto Check service), purportedly in violation of such a policy. In denying IBC's motion for rescission of the order, the Tribunal found that State Farm's "new-found" objection was "unduly convenient in frustrating the Interim Supply Order" and that, in the circumstances, "a change of mind is not a change of circumstances."

The Tribunal further found that even if State Farm's instructions to IBC had been enough to constitute a "change of circumstances", the circumstances did not meet the tripartite test for injunctive relief established in RJR-MacDonald v. A.G. Canada. The Tribunal found that UCDA would suffer irreparable harm if its Auto Check service had to be discontinued, while IBC would lose only some goodwill in its relationship with State Farm.

The Tribunal's decision has important implications for industry associations (such as IBC) and their members. The Tribunal explicitly made clear that "where an industry association purports to act on behalf of and to bind itself and, as a consequence, its members," the Tribunal's orders are as binding on the association's members as they are on the association itself. In this case, because State Farm had at least constructive knowledge of the dispute among IBC and UCDA and because it failed to object at the time the interim supply order was made, it is effectively compelled to continue to provide its insurance data to IBC and UCDA even though it is not a party to the proceedings among them and even though it apparently maintains a corporate policy of not supplying such data to third party commercial operations. Trade associations should take heed of the risks inherent in purporting to act on behalf of their members. Members should take heed as well, lest they be subject to court orders demanding more than they bargained for.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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