Canada: Brewing Up A Storm: Canada’s Competition Bureau Loses – Twice

Last Updated: March 20 2008
Article by Mark C. Katz

January 2008 was not a great month for Canada’s Competition Bureau (the Bureau). It suffered two stinging setbacks in decisions issued by the Federal Court of Canada, both relating to the Bureau’s review of Labatt’s acquisition of another Canadian beer company, Lakeport Brewing. In the first decision, the Federal Court of Appeal (FCA) upheld a March 2007 ruling of the Competition Tribunal (the Tribunal) denying the Bureau’s application for an interim injunction prohibiting Labatt from acquiring Lakeport, pending completion of the Bureau’s review process. In a second decision, a judge of the Federal Court Trial Division set aside a production order obtained by the Bureau against Labatt and Lakeport, on the grounds that the Bureau had not provided adequate disclosure in its application materials.

The FCA’s interim injunction decision


Labatt announced its intention to acquire Lakeport on 1 February 2007. On 12 February 2007, Labatt filed a "long form" notification with the Bureau pursuant to the Competition Act’s pre-merger notification provisions. This triggered a 42-day statutory waiting period within which Labatt’s acquisition of Lakeport could not be completed.

Under Canada’s merger control regime, expiry of the statutory waiting period does not necessarily entail substantive clearance as well. Instead, the Bureau’s substantive review process runs on a separate and parallel track that is governed by different – and non-binding – timeframes, called "service standard periods". For example, the Bureau normally takes longer than the 42-day statutory waiting period to review transactions that raise significant competition issues. Indeed, Bureau guidelines state that such a transaction may take up to five months to review, although it could be even longer than that.

In this instance, the Bureau advised Labatt that it would not complete its review by the date on which the 42-day waiting period was set to expire (26 March 2007). The Bureau indicated that it had substantive concerns about the proposed transaction relating to the elimination of Lakeport as a lowpricing alternative to other brewers. Labatt responded that it intended to close the transaction shortly after the waiting period’s expiry, but that it was prepared to enter into a "holdseparate" arrangement that would delay integration of the businesses to allow the Bureau more time to complete its review. The Bureau declined to accept this proposal and applied to the Competition Tribunal for a temporary injunction under section 100 of the Competition Act.

The key issue before the Tribunal was whether allowing the transaction to proceed would impede the Tribunal’s ability to subsequently order relief in the event that the Bureau decided to proceed against the merger post-closing (the Bureau has the power to challenge a merger up to three years following closing). Mr Justice Phelan of the Tribunal held that the Bureau did not address this issue sufficiently in its evidence and thus had not met its burden on the application. In the result, Labatt was entitled to close its transaction without any limitations, which it did on 29 March 2007.

The appeal

The Bureau appealed the Tribunal’s decision to the FCA. It argued that Mr Justice Phelan had misinterpreted section 100 by imposing too high an evidentiary burden in order to obtain relief. Essentially, the Bureau claimed that the granting of an interim injunction under section 100 should be virtually automatic unless the merging parties can show that the Bureau’s application constitutes an abuse of process.

The FCA rejected the Bureau’s argument in a decision released on 22 January 2008, stating that "[we] do not agree that parliament intended the role of the Tribunal to be so limited". The FCA held that Mr Justice Phelan had formulated the applicable legal test correctly, and was reasonable in concluding that the Bureau had not satisfied this test. The FCA also elaborated on the types of evidence that would be relevant on a section 100 application to establish the need for an interim order – for example, an understanding of the nature of the potential lessening of competition allegedly caused by the merger; the kinds of remedies the Bureau might seek; and the potential effectiveness of these remedies with and without an interim order in place.


The FCA decision confirms that the threshold for relief under section 100 is higher than the Bureau would prefer, and indeed more onerous than many at the Canadian competition bar had thought. In theory, this represents an improvement in the relative bargaining position of merging parties vis á vis the Bureau. In practice, the impact of the decision should not be overstated, though:

  1. In most cases, the Bureau is able to complete its review in a timely fashion. (According to the Bureau, it completes 90% of its merger reviews within 10 days of receiving a completed notification filing.) Therefore, the issue in the Labatt case arises only in a handful of instances, at most.
  2. Labatt had its own reasons for pressing to close the Lakeport acquisition even in the absence of Bureau clearance. It had apparently lost out on a prior acquisition opportunity because of the time it took the Bureau to complete its review and was not inclined to repeat the experience. Those circumstances are unlikely to be duplicated.
  3. It will still be a rare acquiring party that is willing to close a transaction knowing that it faces the potential risk of a challenge within three years of closing and the prospect of forced divestitures within a short timeframe at fire-sale prices.
  4. Where international transactions are concerned, the Canadian part of the competition review is rarely a critical "gating" item, particularly if there are serious issues to be resolved. In those instances, the US and EU reviews usually extend well beyond the Bureau’s review, and

The FCA’s decision does not mean that section 100 is now defunct. The Bureau can still obtain a temporary injunction provided that it leads the necessary evidence, which it is now more likely to do since its onus of proof has been clarified. Indeed, less than a week after the FCA’s decision was released, the Bureau applied for a section 100 order in another merger involving scrap metal processors. Although much of the supporting materials were redacted, it is evident from what is on the public record that the Bureau took the FCA’s decision to heart and directly addressed the issue of why allowing the transaction to proceed would impair the effectiveness of the remedies it might subsequently ask the Tribunal to grant.

One possible result of the FCA decision is that the Bureau may now be more willing to entertain the notion of interim hold-separate agreements pending completion of its substantive review. The Bureau has previously stated that it would not normally agree to allow parties to close on the basis of an interim hold-separate agreement. However, this position may soften in light of what is now a tougher burden to obtain a section 100 injunction. As a possible sign of things to come, the Bureau eventually agreed to an interim hold-separate arrangement in the scrap metal merger referred to above, thus obviating the need to proceed with the section 100 application (although the acquiree was apparently in financial difficulty).

The section 11 decision

Harsh criticism of the Bureau

When Labatt pressed ahead with its acquisition of Lakeport on 29 March 2007, matters did not end there. The Bureau continued to review the transaction and, in November 2007, obtained a series of ex parte orders under section 11 of the Competition Act requiring Labatt, Lakeport and other industry participants to produce extensive documentation and other information for the Bureau’s investigation. Labatt then applied to set aside the orders granted against itself and Lakeport. On 28 January 2008, Madam Justice Mactavish of the Federal Court Trial Division upheld Labatt’s motion and set aside the orders, without prejudice to the Bureau’s right to bring a fresh application.

Strongly rebuking the Bureau, Madam Justice Mactavish ruled that it had failed in its obligation to make full and frank disclosure of all material facts in its ex parte applications for the section 11 orders. In particular, the Bureau had not adequately disclosed the extent to which it already possessed a "voluminous and profound" amount of information regarding the Canadian beer industry, including information secured as a result of previous orders obtained against Labatt and Lakeport. Using terms rarely heard in the genteel world of Canadian competition law, the judge characterised the Bureau’s application materials as "misleading", "inaccurate", "incomplete" and "disingenuous", and said that she would not have issued the section 11 orders had proper disclosure been made.

The Bureau subsequently tried to defend the propriety of its disclosure practices once Madam Justice Mactavish’s decision was made public, but the very strong language employed in the ruling caused the minister of industry to take the unusual step of publicly expressing his disappointment with the Bureau and his intention to investigate what had happened. On 15 February 2008, the minister announced that he had appointed a (so far unidentified) "third party reviewer" to lead an independent probe into the process for obtaining section 11 orders. The reviewer will have three months to report to the minister, including any recommendations for change.


An examination of the section 11 order process is welcome. Labatt is not the only party to have been treated unfairly by this process. Practitioners have long complained about the extraordinary costs that clients must incur in responding to these orders, which can require the production of massive amounts of documents and information going back many years. The burden is particularly onerous for non-parties, who are equally obliged to produce information even though they are not directly involved in the transaction.

For example, in a merger investigation in early 2007, the Bureau obtained 34 production orders against various third parties. The Bureau subsequently withdrew these orders, having reached an accommodation with the merging parties. In the meantime, however, the third parties subjected to the orders had expended significant time and resources in an effort to comply – all for nothing, in the end.

The biggest problem with the section 11 application process is its ex parte nature. No-one is disputing that the Bureau needs industry information to conduct its merger reviews. But section 11 orders are often unfocused and overly broad, largely because they are drafted by Bureau officers and government lawyers who are lacking in industry expertise.

It is also not apparent that most situations in which section 11 orders are sought are so urgent that applications without notice are required. That is why organisations such as the Canadian Bar Association have recommended that the Bureau be required to give prior notice of section 11 applications except where it can be demonstrated that this would impair the integrity of an investigation. Indeed, taking the concept a step further, it would be even more helpful to require the Bureau to consult with parties before proceeding to court for an order, unless that would somehow prejudice the investigation.

One possibility is that scrutiny of the section 11 process, at least in the merger context, will lead to a broader review of Canada’s merger control system. There are several interests that must be balanced here: the merging parties’ interest in timely and certain decision-making; the Bureau’s interest in obtaining relevant information; and the interest of the subjects of section 11 orders (whether the merging parties or third parties) in fairness and due process. It may require changes to Canada’s merger control system to reconcile all of these interests.

One idea might be to scrap the current dichotomy referred to above between the statutory notification waiting periods and the Bureau’s non-binding substantive review "service standard periods" in favour of a uniform system of first and second stage reviews with definitive triggering and end points. This could offer parties greater certainty as to timing but be structured so that the Bureau is also given a reasonable opportunity to conduct its reviews, particularly for complex cases. In that way, the Bureau could not use undue time pressures as justification for maintaining an ex parte process for obtaining section 11 orders. An added advantage is that a change of this nature would bring the Canadian system into closer conformity with that of most other jurisdictions.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Mark C. Katz
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions