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By Calvin S. Goldman, David Rosner, and Cassandra Brown, Blake, Cassels & Graydon LLP
The U.S. Supreme Court's recent decision in the Phoebe Putney case (104 ATRR 254) highlights a few important distinctions between the respective U.S. and Canadian doctrines employed to immunize allegedly anticompetitive transactions authorized by legislation.
There are a number of open questions in Canadian law about the scope of Canada's “regulated conduct doctrine” (RCD). Given that the RCD has been judicially considered mainly in the criminal cartel context, the Canadian Competition Bureau has publicly questioned whether the RCD is capable of displacing the application of Canadian competition law where the conduct that may be subject to Canadian competition law is civil, rather than criminal, in nature—such as in the merger context.
Where the Bureau determines that a merger is likely to prevent or lessen competition substantially, it can apply for an injunction from a specialized court (the Competition Tribunal) preventing the implementation of that merger. If merging parties defending against such an application raise the RCD (based on the existence of another law that permits or authorizes the merger in full or to some degree), the Bureau, in response, may point to the Supreme Court's decision in Phoebe Putney as providing some additional persuasive support for the argument that the RCD should be read narrowly, particularly in the merger context, so that Canadian competition laws continue to apply.
In our view, any such Bureau position would be unduly restrictive and would not give adequate consideration to both the unique development of the RCD under Canadian law as well as the important role of sectoral regulation in furthering Canadian industrial and economic policy goals. Sectoral regulators exercise powers and authorities granted or delegated to them by Parliament or the legislatures of Canadian provinces. They also have specific expertise in relation to their areas of statutory jurisdiction. The Competition Act, on the other hand, is a law of general application, and the Bureau does not usually have comparable sectoral expertise. The RCD, we believe, is capable of being applied more broadly in the merger review context than the Bureau has indicated. The scope of the RCD in this context has yet to be determined by a Canadian superior court.
While any implications of Phoebe Putney in Canada may be only of persuasive value, a few key characteristics of the case make it difficult to compare to many Canadian merger situations. Significantly, the transaction in Phoebe Putney was not subject to oversight or review by an independent regulatory body; in Phoebe Putney, the regulatory body that was delegated authority by state legislation was the acquiring party in the proposed transaction.
In Canada, merging parties may be subject to substantial industry regulation that involves mandatory review of their transaction by a regulatory authority other than the Competition Bureau. For example, in connection with Maple Group's acquisition of TMX Group (as well as Alpha Trading Systems and CDS Clearing and Depository Services) in the securities trading sector, the Ontario Securities Commission approved the transaction and issued orders that imposed enhanced and specific regulatory oversight including over fees and other operational requirements that “materially change[d] the regulatory environment sufficient to substantially mitigate the Bureau's competition concerns.”
As such, the Bureau issued a no action letter to the parties in respect of the transaction. The Bureau indicated that it did not plan to challenge the proposed transaction before Canada's specialized Competition Tribunal under the merger provisions of the Competition Act. While that decision reflected a conclusion of no substantial lessening of competition, the same regulatory principles, in our view, would apply to the application of the RCD.
In Canada, the RCD may be invoked in situations where there would be a conflict between Canada's federal competition law and either i) a provincial law; or ii) another federal law. In the latter case, the Bureau's position is that determining whether Canadian competition laws apply to conduct that is regulated by another federal statute requires the application of ordinary principles of statutory interpretation. As a U.S. state action case, it remains to be determined what effect, if any, the Supreme Court's Phoebe Putney decision might have on the evolving Canadian position in this area of law.
Calvin S. Goldman, a partner in the Toronto, Ontario, office of Blake, Cassels & Graydon LLP, is Co-Chair of the firm's Competition, Antitrust & Foreign Investment Group. From 1986 to 1990, he directed national antitrust enforcement as Director of Canada's Bureau of Competition Policy. Goldman has served on ATRR's Advisory Board for over two decades.
David Rosner and Cassandra Brown are associates in the Toronto, Ontario, office of Blake, Cassels & Graydon LLP. They concentrate their practice in the firm's Competition, Antitrust & Foreign Investment Group on foreign investment, merger control, cartelization, antitrust compliance, and abuse of dominance.
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