Originally published in Blakes Bulletin on
Competition Law, January, 2008
In an unprecedented decision released on January 29, 2008, the
Federal Court has thrown out subpoenas issued against Labatt
Brewing Company Limited and other beer industry participants on
the grounds that the disclosure by the Commissioner of
Competition to the Federal Court Judge who issued the orders
was "misleading, incomplete and incorrect".
Labatt challenged the orders in
Court on December 6, 2007 because the orders represented
substantial duplication with prior orders sought by the
Commissioner. The orders were the third round of such orders
made in the last three years in the Ontario beer industry.
While 15 such orders were made in November, only two companies
(Labatt and Moosehead) challenged the orders. Blakes
represented Labatt in the matter and argued that the
information filed to obtain the orders was misleading,
incomplete and incorrect. The Federal Court agreed.
This is the first time these
types of orders (called section 11 orders) have been struck
down in a merger case, although in recent years the business
community and Canadian Bar Association have increasingly raised
concerns about the escalating use and breadth of such orders.
The decision is significant because the Judge also ordered that
any further orders in this matter must be brought "on
notice" to the parties.
As to future orders in general,
the Court confirmed that it is not a "rubber stamp"
in issuing such orders and it retains discretion to make, not
make, set aside or amend such orders in order to prevent the
abuse of its process. Going forward, the Commissioner will have
to ensure that full disclosure is made to the Court in seeking
such orders and that such orders are not unreasonable. The
ruling also confirms that parties served with such orders may
return before the Judge to vary or set aside such orders where
they are improper. It remains to be seen whether the
Commissioner will now adopt the process of giving parties
advance notice of proceedings to seek such orders, or whether
it will work with parties in advance in order to target such
orders to the specific issues under investigation.
The decision comes on the heels
of the Federal Court of Appeal decision last week in respect of
the same merger. As we reported in our January 23, 2008
Bulletin on Competition Law: Canada's Merger Timing Decision
(Labatt) Upheld on Appeal - Historic Competition Law
Development, the Competition Tribunal ruled in March of
last year that the Commissioner could not prevent the merger of
Lakeport into Labatt. The Court of Appeal affirmed last week
that the Tribunal was correct to permit the merger. In the
future, the Bureau must complete its merger reviews within 42
days, unless closing would substantially impair the
Tribunal's ability to remedy the merger.
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