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.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Commissioner of Competition addressed innovation, enforcement and policy initiatives at the Competition Bureau in his keynote speech, "Strengthening Competition: Innovation, Collaboration and Transparency."
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