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Competition - Conspiracy. Jensen v. Samsung Electronics Co. Ltd. [conspiracy]
In Jensen v. Samsung Electronics Co. Ltd. (Fed CA, 2023) the Federal Court of Appeal considered 'conspiracy' under s.45 of the Competition Act - here in a class action context, specifically whether a 'reasonable cause of action' was pled for certification purposes [paras 54-69].
. Mohr v. National Hockey League [conspiracies]
In Mohr v. National Hockey League (Fed CA, 2022) the Federal Court of Appeal considers s.45 ['conspiracies'] and s.48 ['conspiracies in sport'] of the much-underused Competition Act:[2] In broad terms, section 45 of the Competition Act prohibits conspiracies, agreements or arrangements between competitors to fix or maintain prices, allocate markets or customers, or restrict markets for the production or supply of a product. If established, the anti-competitive effect of the agreement is presumed, giving rise to both criminal sanctions and civil remedies.
[3] Section 48 addresses conspiracies or arrangements in the context of professional sport. Again, in broad terms, section 48 prohibits agreements or arrangements which unreasonably limit the opportunities of a player to participate in professional sport, impose unreasonable terms on players, or unreasonably limit the ability of players to negotiate with and play with a team of their choice. The purpose of section 48 is to protect freedom of employment for players (John Barnes, The Law of Hockey (LexisNexis, 2010) at p. 322 [Barnes]). Like section 45, a breach of section 48 gives rise to criminal sanctions and civil remedies.
[4] There are two key differences between conspiracies under sections 45 and 48. If established, a conspiracy under section 45 is deemed anti-competitive. In contrast, under section 48, a court must take certain matters into account before determining that a conspiracy has been established. This includes the desirability of maintaining a balance among teams competing in the same league. In effect, section 48 exempts certain agreements or arrangements made in the context of professional sport from the general prohibition against anti-competitive agreements in section 45 of the Competition Act.
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The interpretation of section 48
[13] A statute is to be read in its entire context, in its grammatical and ordinary sense, harmonious with the scheme and object of the statute. Sometimes legislative history can shed light on the matter. When the words of a statute are unequivocal, the ordinary meaning plays a dominant role in the interpretative process (Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601 at para. 10; Orphan Well Association v. Grant Thornton Ltd., 2019 SCC 5, [2019] 1 S.C.R. 150 at para. 88).
[14] The Court’s task is to discern the meaning of the words used by Parliament when it chose to enact its policy preferences. There is no room for the Court to inject its own policy preferences into the analysis. In this case, it is not for this Court to say whether section 48 is or is not a good thing. Our task is just to discern what Parliament chose to enact (TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 S.C.R. 144).
[15] Section 48 cannot be read, consistent with these principles, to mean that the prohibitions against anti-competitive arrangements in subsection 48(1) apply to inter-league conspiracies as pleaded in the statement of claim. To properly understand the scope of subsection 48(1) we must look to plain text of subsection 48(3) which reads as follows:
"(3) This section applies, and section 45 does not apply, to agreements and arrangements and to provisions of agreements and arrangements between or among teams and clubs engaged in professional sport as members of the same league and between or among directors, officers or employees of those teams and clubs where the agreements, arrangements and provisions relate exclusively to matters described in subsection (1) or to the granting and operation of franchises in the league, and section 45 applies and this section does not apply to all other agreements, arrangements and provisions thereof between or among those teams, clubs and persons.""(3)"" Le présent article s’applique et l’article 45 ne s’applique pas aux accords et arrangements et aux dispositions des accords et arrangements conclus entre des équipes et clubs qui pratiquent le sport professionnel à titre de membres de la même ligue et entre les administrateurs, les dirigeants ou les employés de ces équipes et clubs, lorsque ces accords, arrangements et dispositions se rapportent exclusivement à des sujets visés au paragraphe (1) ou à l’octroi et l’exploitation de franchises dans la ligue; toutefois, c’est l’article 45 et non le présent article qui s’applique à tous les autres accords, arrangements et dispositions d’accords ou d’arrangements conclus entre ces équipes, clubs et personnes." [16] The phrase "“as members of the same league”" must be given its plain, ordinary and otherwise clear meaning. The subsection also refers to "“the granting and operation of franchises in the league …”". Coherence within the subsection is reinforced by understanding the phrase in its plain and ordinary sense. While there could be some discussion around the boundaries of what constitutes a "“league”", this point was not argued before us (Barnes at p. 322).
[17] Subsection 48(3) allocates agreements and provisions "“between or among teams and clubs…of the same league”" that "“relate exclusively to matters described in subsection [48](1)”" to "“appl[y]”" under section 48 only. Conversely, it allocates "“all other agreements, arrangements and provisions thereof between or among those teams, clubs and persons”" to section 45 only. Thus, subsection 48(3) evidences a clear parliamentary intention to avoid overlapping or conflicting applications of section 45 and 48. Every agreement or provisions must "“appl[y]”" under either section 45 or 48.
[18] Inter-league agreements are not "“between or among teams and clubs engaged in professional sport as members of the same league.”" Parliament clearly did not intend to apply two contradicting penal standards to inter-league conspiracies. But if inter-league agreements were caught by section 48, this is exactly what could happen. This demonstrates that Parliament did not intend to apply section 48 to inter-league agreements.
[19] Parliament was also consistent in the language and design of section 48. Paragraphs 48(2)(a) and (b) describe criteria to be considered in determining whether the prohibition against anti-competitive arrangements in subsection 48(1) has been violated. This includes, in paragraph 2(b) "“the desirability of maintaining a reasonable balance among the teams or clubs participating in the same league”" (emphasis added).
[20] Two points may be said about this. First, consistent with subsection (3), the focus of paragraph (2)(b) is on teams "“in the same league”". The second is that paragraph (2)(b) would be redundant, if not nonsensical, if the scope of subsection 48(3) were widened to include other leagues and umbrella organizations such as the respondent Hockey Canada, as argued by the appellant. The rule against tautological interpretations would be breached (Ruth Sullivan, Sullivan on the Construction of Statutes, 6th ed. (Markham: LexisNexis, 2014) at § 8.23 [Sullivan]).
[21] Other provisions in the Act support the conclusion that subsection 48(3) means what it says. Section 6 of the Competition Act addresses amateur sport. Subsection 6(1) states: "“This Act does not apply in respect of agreements or arrangements between or among teams, clubs and leagues pertaining to participation in amateur sport.”"
[22] By its terms, subsection 6(1) applies to both intra-league and inter-league agreements, whereas subsection 48(3) references only intra-league agreements. By the choice of words "“between or among”" teams, clubs and leagues in subsection 6(1), Parliament demonstrated an understanding of the distinction between intra-league and inter-league agreements. It chose in subsection 6(1) to reference both, and in subsection 48(3) to reference only intra-league agreements. The principle of implied exclusion or expressio unius est exclusio alterius is engaged: the legislature’s failure to mention something can be a ground for inferring it was deliberately excluded (Sullivan at § 8.89-8.91).
[23] To conclude, where the words are precise and unequivocal, as they are here, the ordinary meaning plays a dominant role in the interpretation. As I will explain, the arguments advanced by the appellant do not shake the conclusion that the conspiracy provisions of section 48, when given their ordinary meaning, are confined to intra-league agreements.
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The interpretation of section 45
[33] Section 45 applies where the anti-competitive agreement is between teams of different leagues or between umbrella organizations and teams or leagues. There is, however, an important caveat to the sweep of this provision. Section 45 is limited to agreements between competitors to fix prices or allocate markets relating to "“the production or supply”" of a product or a service—otherwise known as "“sell-side”" conspiracies.
[34] The plain meaning of production or supply leads to the conclusion that section 45 is limited to conspiracies relating to the provision, sale and distribution of products or services. It stands in contrast to purchase and acquire. While, as noted by the Federal Court, there may be circumstances in which section 45 could capture purchasers, that is not in issue before us (Reasons at para. 43). As the proposed amended statement of claim describes a conspiracy relating to the terms and conditions under which the leagues and teams purchased or acquired services of the players, the allegation under section 45 has no hope of success (see, e.g., proposed amended statement of claim at para. 2.7).
[35] This understanding of section 45 is confirmed by its legislative history. (Later in these reasons I will explain how legislative history informs the statutory interpretation exercise.)
[36] In March 2010, paragraph 45(1)(c) of the Competition Act was amended. The provision, prior to amendment, read:"Conspiracy "
"45(1) Every one who conspires, combines, agrees or arranges with another person "
"(a) to limit unduly the facilities for transporting, producing, manufacturing, supplying, storing or dealing in any product, "
"(b) to prevent, limit or lessen, unduly, the manufacture or production of a product or to enhance unreasonably the price thereof, "
"(c) to prevent or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, storage, rental, transportation or supply of a product, or in the price of insurance on persons or property, or "
"(d) to otherwise restrain or injure competition unduly, "
"is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years or to a fine not exceeding ten million dollars or to both. "
"Complot "
"45(1)"" Commet un acte criminel et encourt un emprisonnement maximal de cinq ans et une amende maximale de dix millions de dollars, ou l’une de ces peines, quiconque complote, se coalise ou conclut un accord ou arrangement avec une autre personne : "
"a) soit pour limiter, indûment, les facilités de transport, de production, de fabrication, de fourniture, d’emmagasinage ou de négoce d’un produit quelconque; "
"b) soit pour empêcher, limiter ou réduire, indûment, la fabrication ou production d’un produit ou pour en élever déraisonnablement le prix; "
"c) soit pour empêcher ou réduire, indûment, la concurrence dans la production, la fabrication, l’achat, le troc, la vente, l’entreposage, la location, le transport ou la fourniture d’un produit, ou dans le prix d’assurances sur les personnes ou les biens; "
"d) soit, de toute autre façon, pour restreindre, indûment, la concurrence ou lui causer un préjudice indu. "
[37] Section 45, post amendment, reads:
"Conspiracies, agreements or arrangements between competitors "
"45(1) Every person commits an offence who, with a competitor of that person with respect to a product, conspires, agrees or arranges "
"(a) to fix, maintain, increase or control the price for the supply of the product; "
"(b) to allocate sales, territories, customers or markets for the production or supply of the product; or "
"(c) to fix, maintain, control, prevent, lessen or eliminate the production or supply of the product. "
"… "
"Complot, accord ou arrangement entre concurrents "
"45(1)"" Commet une infraction quiconque, avec une personne qui est son concurrent à l’égard d’un produit, complote ou conclut un accord ou un arrangement : "
"a) soit pour fixer, maintenir, augmenter ou contrôler le prix de la fourniture du produit; "
"b) soit pour attribuer des ventes, des territoires, des clients ou des marchés pour la production ou la fourniture du produit; "
"c) soit pour fixer, maintenir, contrôler, empêcher, réduire ou éliminer la production ou la fourniture du produit. "
"Definitions "
"(8) The following definitions apply in this section. "
"competitor includes a person who it is reasonable to believe would be likely to compete with respect to a product in the absence of a conspiracy, agreement or arrangement to do anything referred to in paragraphs (1)(a) to (c). (concurrent) "
"price includes any discount, rebate, allowance, price concession or other advantage in relation to the supply of a product. (prix) "
"Définitions "
"(8)"" Les définitions qui suivent s’appliquent au présent article. "
"concurrent"" S’entend notamment de toute personne qui, en toute raison, ferait vraisemblablement concurrence à une autre personne à l’égard d’un produit en l’absence d’un complot, d’un accord ou d’un arrangement visant à faire l’une des choses prévues aux alinéas (1)a) à c). (competitor) "
"prix"" S’entend notamment de tout escompte, rabais, remise, concession de prix ou autre avantage relatif à la fourniture du produit. (price)" [38] Gone from the current version is the requirement that the agreement "“unduly”" affect competition. It is no longer necessary to establish that these agreements have anti-competitive effects. Agreement alone is now sufficient—the anti-competitive effect is presumed. Gone too is the word "“purchase”" from paragraph 45(1)(c), confining the scope of section 45 to supply or sell-side conspiracies. Lest there be any doubt, the words "“for the supply of the product”" were added to the new paragraph 45(1)(a) (price-fixing) and the words "“production or supply of the product”" to paragraphs 45(1)(b) and (c) offences (market and supply restrictions).
[39] Contemporaneous with the amendments to section 45, section 90.1 was added to provide civil recourse, at the instance of the Competition Bureau, for any arrangements or agreements which have anti-competitive effects. While section 90.1 is generic in scope, it could encompass buy-side conspiracies, such as those that are founded on the purchase and acquisition of goods and services.
[40] Section 45 has been considered by two courts: Dow Chemical Canada ULC v. NOVA Chemicals Corporation, 2018 ABQB 482, 17 Alta. L.R. (7th) 83 [Dow Chemical] and Latifi v. The TDL Group Corp., 2021 BCSC 2183, 2021 CarswellBC 3523 at paras. 72 and 73 [Latifi]. In both cases the courts also reached the conclusion that section 45 only prohibits arrangements between suppliers and not buy-side or purchaser agreements. . Dye & Durham Limited v. Ingarra
In Dye & Durham Limited v. Ingarra (Fed CA, 2024) the Federal Court of Appeal dismissed an appeal from a ruling that found no conflict of interest in counsel for class action plaintiffs, here in a motion "removing plaintiffs’ counsel as counsel of record".
Here the court contrasts s.45 ['Conspiracies, agreements or arrangements between competitors'] with s.79 ['Prohibition if abuse of dominant position'] of the Competition Act:Whether sections 45 and 79 of the Act are sufficiently related
[28] The Federal Court judge conducted a thorough and thoughtful analysis of sections 45 and 79 of the Act. From a competition law perspective, the analysis is unimpeachable. The appellants’ argument, however, and with which I agree, is that the Federal Court did not consider whether or not the two proceedings were, from a conflicts perspective, sufficiently related.
[29] The question of whether the retainers are sufficiently related is answered from an objective standpoint, taking into account the perspective of the reasonably informed client who may be troubled by their former lawyer now acting against them. The answer to the question of sufficient relationship also takes into account the primary purpose of the rule, which is to preserve public confidence in the integrity of the bar.
[30] An offence is committed under section 45 when a person conspires, agrees or arranges with a competitor to fix prices, allocate sales, territories, customers or markets or restrict output in respect of a product or service. Section 79, in contrast, prohibits businesses from abusing their dominant position. It requires proof that a business with substantial control of a class or segment of a business has engaged in an anti-competitive act or practice that has substantially lessened or prevented competition.
[31] Notwithstanding the key differences, rightly noted by the judge, there is a limited, but certain, underlying commonality to the provisions. Retainers under sections 45 and 79 may share many of the same facts which frame the legal advice offered. Each requires an understanding of a relevant market and of a relevant product. Each requires an understanding of existing business practices. In the case of abuse proceedings, these elements are central to the inquiry; in the section 45 inquiry, they are contextual. The close factual overlap between the provisions is recognized in the Act itself: section 45.1 provides that where an order has been sought against a person under section 79, no proceedings can be commenced under subsection 45(1) against that person "“on the basis of facts that are the same or substantially the same”".
[32] The mens rea for an offence under section 45 also illustrates the factual overlap between actions under sections 45 and 79. The Federal Court noted that the mens rea for section 45 offences "“is met when it is demonstrated that the competitors intentionally entered into the agreement”" (Federal Court decision at para. 84). While this is correct, the mens rea for a section 45 offence also includes an objective assessment of the conduct of the parties in relation to an intent to achieve one of the prohibited ends found in paragraphs 45(1)(a), (b), or (c) (Shah at para. 50). This portion of the inquiry focuses on contextual intention and market and business factors beyond the agreement itself.
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