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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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