Canada: Substantial Disclosure Obligations For Production Orders: Federal Court Rebukes Commissioner

On January 28, 2008, at the request of Labatt Brewing Company Limited (Labatt), the Federal Court set aside its own order (of November 8, 2007) requiring Labatt to produce documents related to the Commissioner's ongoing investigation of the Labatt/Lakeport merger (the merger), which closed on March 29, 2007. The original order was obtained on an ex parte (without notice to Labatt) application by the Commissioner of Competition (the Commissioner) under Section 11 of the Competition Act1 (the Act). The Court did so on the grounds that the disclosure made to secure the order was misleading, inaccurate and incomplete and, had complete disclosure been provided, the November 8, 2007 order would not have been granted (at least not on the terms on which it was granted). This most recent decision is just the latest in a series of decisions against the Commissioner respecting her investigation into the merger2 and raises a number of interesting questions about how this may affect the Competition Bureau's approach to formal investigations going forward.


On January 31, 2007, Labatt agreed to acquire Lakeport and, in accordance with the Act, provided the Commissioner with voluminous information with respect to the competitive implications of the proposed transaction. On February 15, 2007, the Commissioner commenced a formal inquiry into the merger and, on February 22, 2007, obtained Federal Court orders against eleven different entities, including Labatt and Lakeport, to produce records and other information. A significant amount of information was then delivered to the Commissioner, including nearly 140,000 pages by Labatt alone. On November 6, 2007, the Commissioner requested, on an ex parte basis, further orders against fifteen respondents, including Labatt and Lakeport, eight of which had been subject to the earlier orders, seeking further information and/or documentation. As noted, these orders were granted by the Federal Court on November 8, 2007. Labatt then brought a motion asking the Court to set aside the November order against it and Lakeport.

Analysis And Decision

Because ex parte applications are made without notice to an opposing party (thus providing no opportunity to challenge the application), the party asking for the order has a duty to ensure that the Court is apprised of all of the relevant facts, including those adverse to its request. Thus, the Federal Court focused on the Commissioner's burden to inform the Court of any points of fact or law that may favour the other side. While this burden is not controversial, the Court - in its discussion of the type and range of information the Commissioner ought to have presented - has established relatively onerous obligations and has likely raised the bar above that anticipated, or adhered to, by the Bureau. Indeed, the Court applied the test used for parties seeking Mareva injunctions3. While the consequences of a successful Mareva injunction (freezing of assets) may be viewed as more severe than a production order, the principles underlying the application for a Mareva injunction, that of urgency and the need to surprise the intended targets, are relevant to certain investigations by the Competition Bureau. In the present case however, neither urgency nor the need for surprise applied, as the investigation had been ongoing for more than eight months and the transaction had closed.

The Federal Court ruled that on a number of levels, the Commissioner's application for the November, 2007 order was inadequate, inaccurate and/or misleading. First, the Commissioner failed to disclose representations made to the Court on a previous occasion that the extensive information sought in the orders issued by the Court in February 2007 "would be sufficient for the purposes of her inquiry." Second, the written submissions of Commissioner's counsel misled the Court by stating that "none of the records or information sought has been previously requested," when the Court identified, with Labatt's assistance, areas of overlap with the previous order and indeed with information already in the Commissioner's possession through other means. Finally, the Commissioner failed to inform the Court of the concerns previously communicated by Labatt about the nature and scope of the Commissioner's February 2007 demands and their implications for the November 2007 information request.

The Court leaned heavily on its analysis of the extent of overlap between the February (and November follow up) applications, signalling that by returning to the Court to seek production of additional records, a close examination would need to be made to ensure the information sought is necessary and relevant. The Court cited a number of examples of overlap, and then focused on the affidavit filed in support of the November application, which the Court concluded was properly read as describing the potential "inadvertent duplication" from the previous order as limited to one specific area only. Indeed, the Court even examined the potentially relevant information already in the Commissioner's possession from prior investigations into the Ontario beer market. Finally, the Court criticized the affidavit for not referencing the potential for overlap among the 10,000 pages of records and information provided by the merging parties pursuant to its statutory obligations upon notifying the Commissioner of the (then) proposed merger.

Possible Implications Of The Ruling

The Federal Court's decision and its imposition of a strong burden of disclosure when seeking, without notice, a production order, calls for greater scrutiny by the Bureau of materials used in support of requests for production orders and greater circumspection in whether to request, what to request and how often to request information. It may even encourage a reconsideration of the Bureau's policy to use ex parte applications to obtain production orders, even in circumstances where the need for surprise and urgency are not present. Clearly, in future, the evidence relied upon by the Commissioner in support of a production order will have to be prepared with a stronger emphasis on the identification of any possible overlaps between the information and records being sought and those that may already be in the Competition Bureau's possession, and where an overlap exists, a detailed identification of the overlap and an explanation as to why the overlap is necessary. The Federal Court decision also suggests that the Commissioner's evidence will also need to explain, in some detail, why additional information, beyond that already in the Bureau's possession, is necessary for the Commissioner to conduct her inquiry. Just how far the Bureau will need to go to examine its own records and prior examinations of industry sectors before requesting parties to produce information is unknown, but it seems clear that they will have to go farther than has been their practice. It is equally clear that parties subject to an order - armed with the Federal Court decision - will be emboldened to challenge production orders, particularly where production of information has, by any means, already been undertaken by those parties.


1 Section 11 of the Competition Act provides that the Commissioner may apply for an ex parte order requiring a person: i) to attend for examination on oath with respect to any matter relevant to the inquiry; ii) to produce specified records or things to the Commissioner; or iii) to make and deliver to the Commissioner a written return under oath setting out the information requested in the order.

2 See the January 2008 edition of The Competitor, describing the Federal Court of Appeal's dismissal of the appeal by the Commissioner of the Competition Tribunal's refusal to grant and injunctive order under s. 100 of the Act, and the April 2007 edition, describing the Competition Tribunal decision.

3 A Mareva injunction is a court order that freezes assets so that a defendant to an action cannot dissipate their assets from beyond the jurisdiction of a court so as to frustrate a judgment.

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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