Dockets: T-929-15
T-931-15
T-933-15
T-934-15
T-935-15
T-936-15
T-937-15
T-938-15
Citation: 2015 FC 990
|
Docket: T-929-15
|
|
BETWEEN:
|
|
COMMISSIONER OF
COMPETITION
|
|
Applicant
|
|
and
|
|
SASKATCHEWAN
TELECOMMUNICATIONS
|
|
Respondent
|
|
Docket: T-931-15
|
|
AND BETWEEN:
|
|
COMMISSIONER OF
COMPETITION
|
|
Applicant
|
|
and
|
|
TBAYTEL
|
|
Respondent
|
|
Docket: T-933-15
|
|
AND BETWEEN:
|
|
COMMISSIONER OF
COMPETITION
|
|
Applicant
|
|
and
|
|
ROGERS
COMMUNICATIONS INC.
|
|
Respondent
|
|
Docket: T-934-15
|
|
AND BETWEEN:
|
|
COMMISSIONER OF
COMPETITION
|
|
Applicant
|
|
and
|
|
VIDEOTRON LTD.
|
|
Respondent
|
|
Docket: T-935-15
|
|
AND BETWEEN:
|
|
COMMISSIONER OF
COMPETITION
|
|
Applicant
|
|
and
|
|
BRAGG
COMMUNICATIONS
|
|
Respondent
|
|
Docket: T-936-15
|
|
AND BETWEEN:
|
|
COMMISSIONER OF
COMPETITION
|
|
Applicant
|
|
and
|
|
TELUS
CORPORATION
|
|
Respondent
|
|
Docket: T-937-15
|
|
AND BETWEEN:
|
|
COMMISSIONER OF
COMPETITION
|
|
Applicant
|
|
and
|
|
MTS INC.
|
|
Respondent
|
|
Docket: T-938-15
|
|
AND BETWEEN:
|
|
COMMISSIONER OF
COMPETITION
|
|
Applicant
|
|
and
|
|
BELL MOBILITY
INC.
|
|
Respondent
|
REASONS
FOR ORDER
CRAMPTON CJ
[1]
These are the reasons for the Orders that I
issued in these proceedings on June 18, 2015. With certain exceptions, those
Orders reflect the relief sought by the Commissioner of Competition [the “Commissioner”]
in eight consolidated ex parte applications for the delivery of written
returns by the Respondents pursuant to paragraph 11(1)(c) of the Competition
Act, RSC, 1985, c C-34 [the “Act”].
[2]
The purpose of these reasons is to address five
issues raised during the hearing of the Commissioner’s applications. Those issues
are: (i) the period of time over which the written returns were sought by the
Commissioner [the “Relevant Period”]; (ii) the alleged inability of
certain of the Respondents to respond to some of the specifications in Schedule
1 to the draft Orders; (iii) the period of time within which the Commissioner
sought to compel the Respondents to respond to the draft Order; (iv) what
constitutes an excessive, disproportionate or unnecessary burden on respondents
to orders issued pursuant to section 11 of the Act; and (v) the Competition Bureau’s
Guidelines for the Production of Electronically Stored Information (the
“E-Production Guidelines”).
I.
Background
[3]
Pursuant to paragraph 11(1)(c) of the Act, the
Court may, on the ex parte application of the Commissioner, grant an
order requiring a person to make and deliver to the Commissioner, within a
period of time specified in the order, a written return under oath or solemn
affirmation showing in detail such information as is required by the order.
[4]
Before such an order may be granted, the Court
must be satisfied that an inquiry is being made under section 10 and that a
person has or is likely to have information that is relevant to an inquiry.
(See generally Canada (Commissioner of Competition) v Pearson Canada Inc.,
2014 FC 376, at paras 34-50 [“Pearson”].)
[5]
According to affidavits sworn by Ms. Shannon
Kack [the “Kack Affidavits”], a Competition Law Officer in the
Competition Bureau, the Commissioner commenced an inquiry in March 2014 under
subparagraph 10(1)(b)(ii) of the Act in respect of certain conduct by Apple
Inc. [“Apple”] and Apple Canada Inc. [“Apple Canada”] that is
reviewable under Part VIII of the Act.
[6]
More specifically, the Kack Affidavits explained
that the Commissioner’s inquiry is focusing on the inclusion and use of certain
contractual obligations in contracts between Apple Canada and the Respondents,
who resell its brand of handset devices, known as Apple iPhones [the “iPhones”].
[7]
The Kack Affidavits noted that the
above-mentioned contracts contain certain clauses that impose obligations on
the Respondents regarding the sale and marketing of iPhones to consumers [the “Contractual
Obligations”].
[8]
Ms. Kack also expressed her belief, based on the
investigation to date by the Commissioner, that the Contractual Obligations may
have or may be likely to have the effect of lessening or preventing competition
substantially in various ways. This includes foreclosing suppliers of competing
handset devices from a market, reducing choice and innovation, and/or
increasing the price Canadian consumers have paid, are paying or will pay for
handset devices and/or wireless devices.
[9]
Broadly speaking, the Commissioner seeks
information that relates to matters including the following:
A.
the markets in Canada in which Apple, Apple Canada
and the Respondents operate;
B.
the pricing of handset devices (particularly a
subset of handset devices known as Smartphones) and wireless service plans in
Canada; and
C.
the actual or likely effects of the conduct of
Apple and Apple Canada on competition in Canada.
[10]
Again broadly speaking, the foregoing categories
of information would appear to be relevant to the Commissioner’s inquiry.
[11]
In contrast to many applications made under
section 11, in which the Commissioner requests an order under paragraph 11(1)(b)
for the production of specified records as well as an order under paragraph
11(1)(c) requiring the making and delivery of written returns, the draft Orders
requested in the current proceedings seek only the latter type of information.
II.
The Relevant Period
[12]
Upon initially reviewing the draft Orders sought
by the Commissioner in these proceedings, I was concerned about the extent of
the Relevant Period defined in certain of those draft Orders. For example,
paragraph 2(c) of the draft Order addressed to Telus Corporation (“Telus”)
required Telus to produce written returns of information for the period from 1
January 2008 to the date of issuance of the Order, unless otherwise specified.
That is a very long period of time – much longer than the period covered by
most other orders issued under section 11. I was concerned that, for some of
the larger Respondents, a Relevant Period of this nature could result in the
draft Order being excessive, disproportionate or unnecessarily burdensome.
[13]
In the Kack Affidavits, Ms. Kack stated that
based on the Commissioner’s preliminary investigation, she believed that the
Contractual Obligations, or variants of some or all of them, have existed in
the agreements under which the Respondents resell iPhones to consumers since approximately
14 March 2008, when Rogers Communications Inc. or its subsidiaries
[collectively, “Rogers”] first began reselling iPhones to customers in
this country. Ms. Kack further stated that Rogers lost its exclusivity to sell
iPhones in the summer of 2009, when certain other Respondents or their
subsidiaries began to resell those handsets.
[14]
Given the foregoing, Ms. Kack stated that the
Commissioner sought information from Rogers and those Respondents covering the
period from 1 January, 2008 to the date of the issuance of the Orders, to
enable the Commissioner “to analyze the effect of
Rogers reselling the iPhone, including customer switching, and the beginning of
Apple’s penetration into the Canadian market.”
[15]
In my view, it is typically not excessive, disproportionate
or unnecessarily burdensome for the Commissioner to want relevant information
concerning conduct that is the subject of an inquiry, for the full period that
the conduct is believed to have occurred. That said, the Court will be vigilant
to ensure that the information the Commissioner seeks is both relevant and not
excessive, disproportionate or unnecessarily burdensome. This will be discussed
further below.
[16]
With respect to information pre-dating and/or
post-dating the period that is the focus of an inquiry, the Court observed the
following in Canada (Commissioner of Competition) v Indigo Books & Music
Inc, 2015 FC 526, at paragraph 39:
“[I]t is
understandable that the Commissioner might require information pertaining to a
reasonable period of time pre-dating and post-dating the period of time that is
the focus of the Inquiry. Such information typically will be relevant to the
Commissioner’s assessment of the business context in which the conduct that is
the subject of the Inquiry may have taken place and the extent to which, if at
all, that conduct prevented or lessened competition, or is likely to prevent or
lessen competition substantially, relative to the situation that would have
existed “but for” that conduct (Pearson, above, at paras 77-79).”
[17]
With the foregoing in mind, and given the nature
of the Commissioner’s inquiry, I was and remain satisfied that the Relevant
Period set forth in the various draft Orders sought by the Commissioner in
these proceedings would not result in any of those Orders being excessive,
disproportionate or unnecessarily burdensome. In my view, it is entirely
reasonable that the Commissioner would want to assess the information
contemplated by the Orders that I issued, over a period of time that begins a
few months prior to the time at which iPhones began to be sold in Canada, and
extends to the present. For greater certainty, I am satisfied that the
information being sought in each of the Orders issued in these proceedings is
all relevant.
III.
The alleged inability to respond to certain
specifications
[18]
In furtherance of the Commissioner’s duty of
full and frank disclosure, the Kack Affidavits addressed various concerns that
were raised by the Respondents in what has become known as the “pre-issuance dialogue” between them and the
Commissioner. For several of the Respondents, those concerns included that they
would not be able to respond to certain of the specifications in the draft
Orders.
[19]
To some extent, the Commissioner responded to
that concern by amending a prior version of draft Orders to remove or modify
certain specifications.
[20]
Nevertheless, a number of the Respondents
continued to express a concern about their inability to comply with particular
specifications that are included in the final Orders.
[21]
Where a respondent has reason to believe that it
“does not have information that is responsive to a
Specification in [the] Order because the information never existed or no longer
exists,” paragraph 3 of most of the orders that are issued by the Court
under section 11 of the Act (the “Template Order”] provides a mechanism
for the respondent to deal with its concern. That paragraph, which was included
in each of the Orders issued in these proceedings, enables a respondent to,
upon the request of the Commissioner, “make and deliver
a further written return of information explaining why the information or thing
[specified in the Order] never existed or no longer exists.” It is
expected that this will provide a complete answer to a respondent’s concern
regarding its inability to provide information, on the ground that the
information never existed or no longer exists.
[22]
Where a respondent’s concern regarding its
inability to provide certain information is not based on this ground, but
rather on the ground that it may be disproportionate, unnecessarily burdensome,
or excessively costly to provide that information, paragraph 3 of the Template
Order will not assist the respondent. In such cases, a different approach will
be required.
[23]
The Court encourages the Commissioner to discuss
such concerns with respondents, with a view to modifying the scope of draft
orders to ensure that they will not be excessive, disproportionate or
unnecessarily burdensome (Pearson, above, at paras 42 – 46 and 98).
[24]
However, where, following discussions with the
Commissioner, a respondent continues to have such concerns, the Court
encourages respondents to make those concerns known to the Commissioner, so
that they can be brought to the attention of the Court pursuant to the
Commissioner’s duty of full and frank disclosure (Pearson, above, at
paras 44-46 and 94-5).
[25]
In the current proceedings, some of the
Respondents continued to have such concerns, which were brought to my
attention. For example, Bell Mobility Inc. [“Bell Mobility”] expressed
concerns that “[i]n order to interpret and extrapolate
the limited raw data [available to Bell Mobility] into the form requested in
the specifications, Bell Mobility would need to expend significant resources
yet the accuracy and comprehensiveness of the resulting information would be
limited, not to mention significantly subjective due to the amount of
interpretation required on the part of Bell Mobility.”
[26]
Bell Mobility’s proposed solution to this
problem was to insert into several of the specifications in the draft Order the
words “to the extent that the information is reasonably
available.” However, the Commissioner was not prepared to agree to this
suggestion, which I considered to be reasonable.
[27]
Instead, and in response to my expressed
sympathy with the concerns raised by Bell Mobility and other Respondents, the
Commissioner proposed to include the following language in the draft Orders:
“The Commissioner
may waive the requirement for the Respondent to fully comply with a
Specification of this Order concerning the delivery of written returns of
information where the Commissioner is satisfied that the Respondent has made
all reasonable efforts to provide the information required by the Specification
and provides a written return of information setting out a sufficient factual
basis for the Commissioner to conclude that further production would be
excessive, disproportionate or unnecessarily burdensome.”
[28]
I was not satisfied with the Commissioner’s
proposed solution, in part because the Commissioner would continue to retain
the discretion to insist that the information be provided. This was of concern
to me, in part because of the Commissioner’s view of what constitutes an
excessive, disproportionate or unnecessarily burdensome request for
information. This will be further discussed below. I was also concerned that
the Commissioner’s proposed language might not be enforceable, at least in some
cases.
[29]
Accordingly, I indicated that I would not be
prepared to issue the draft Orders with the language proposed by the Commissioner.
Instead, I stated that I would be prepared to issue the Orders if they included
the following language:
“4. THIS COURT
FURTHER ORDERS that the Respondent shall not be required to provide any
information described in Schedule I to this Order where it certifies that it
has made all reasonable efforts to provide the information required by the
Specification and that additional efforts to provide the information would be
excessive, disproportionate or unnecessarily burdensome. Such certification shall
be accompanied by a statement that permits the Commissioner to assess the
Respondent’s position and, at the Commissioner’s discretion, to challenge that
position before this Court.”
[30]
The Commissioner agreed to include this
language, which appears in each of the Orders issued in these proceedings.
[31]
That language was intended to address the very
specific circumstances of this case. In the absence of similar circumstances in
subsequent applications that have been brought by the Commissioner under
section 11 of the Act, the Court has not sought to add such language to the Orders
that were ultimately issued in those proceedings.
IV.
The period to respond
[32]
The initial version of the draft Orders sent to
the Respondents required the written returns to be completed within 30 days of
the service of the Order. Several of the Respondents expressed a concern that
this period was too short, largely because of the substantial scope of the
specifications that were attached to the draft Orders. Some of the Respondents
also expressed the concern that it would be difficult to complete the written
returns within 30 days, because some or all of the persons most able to
assemble the information would be on their summer holidays.
[33]
In response to these concerns, the Commissioner
agreed to extend the response period for some of the larger Respondents to 75
days.
[34]
However, some of those Respondents continued to
maintain that they would require at least 90 days to provide the information
set forth in the Orders.
[35]
During the hearing of these applications, I
expressed sympathy with the Respondents’ position on this issue for the
following reasons: (i) the information that those Respondents would be required
to assemble would be very substantial; (ii) staff who would be required to
gather that information would be on holidays during the period covered by the
Order; and (iii) the Commissioner initiated his inquiry approximately 15 months
prior to filing the applications in these proceedings.
[36]
In response, counsel to the Commissioner stated
that there may be good reasons, related to the internal workings of the
inquiry, why the Commissioner might be reluctant to explain the basis for
insisting upon a shorter period than what is being requested by a respondent to
a draft order. Counsel added that the case team in these proceedings “made a judgment call not to do so.”
[37]
Counsel then submitted that the appropriate
manner in which to approach the assessment of the requested period for
production “is to look at whether or not [that period]
is an appropriate one.”
[38]
I agree. Based on my personal experience in
responding to orders issued under section 11 of the Act when I was a member of
the bar, a 90 day period within which to respond to the Orders appears to be
entirely appropriate and reasonable in this case, given the nature and extent
of the information described therein.
[39]
Counsel also observed that the Commissioner does
not have an effective way to test submissions of respondents regarding the time
required to assemble and submit information that is set forth in draft orders.
[40]
I disagree. That is one of the functions that
the Court is expected to perform. In assessing whether to exercise its
discretion to issue a draft order sought under section 11, one of the things
the Court will assess is whether the time period within which the information
set forth in that order must be produced to the Commissioner is reasonable. In
making this assessment, the Court will assess all of the relevant
circumstances, including the nature and extent of the information being
requested, and whether a holiday period will fall within the period for
production.
[41]
That said, the Court recognizes the desirability
of achieving greater certainty, predictability and certainty with respect to
the production periods set forth in orders sought under section 11. In a more
recent proceeding, I invited counsel to the Commissioner to make submissions on
this issue at some point in the future.
[42]
In the meantime, broadly speaking, and for
guidance purposes only, I am prepared to indicate that a period of 30 days
would not ordinarily be inappropriate for orders that fall towards the more
limited end of the spectrum, in terms of the nature and extent of information
being requested and the difficulty required to assemble the information. This
assumes that the production period does not fall within a holiday period and
that other extenuating circumstances do not exist.
[43]
Subject to the same proviso, periods of 60 and
90 days would ordinarily not be inappropriate for orders falling towards the
middle and more onerous parts of the spectrum, again in terms of the nature and
extent of information being requested and the difficulty required to assemble
the information. However, orders may contemplate a rolling production process
pursuant to which responses to certain specifications might be required
earlier.
[44]
Of course, there may well be cases, involving
much more extensive requests for information, in which a longer period may be
appropriate.
[45]
In assessing where a draft order falls on the
above-described spectrum, the Commissioner and counsel in the bar are
encouraged to have regard to other orders that have been issued by the Court in
recent years.
V.
What constitutes an excessive,
disproportionate or unnecessary burden
[46]
During the hearing of these applications,
counsel to the Commissioner took the position that a disproportionate burden is
one that is “undue.” In turn, counsel submitted
that an “undue” burden is one that extends
beyond “the particular burden to” a respondent
to an application under section 11, and has “a more
general public detriment.” Stated differently, counsel submitted that,
in assessing whether the burden associated with a draft order is likely to be “undue” the Court must look beyond the respondent, and
consider the broader public interest.
[47]
The word “unduly,”
used as part of the test for assessing the nature and extent of information set
forth in draft orders requested under section 11, appears to come from
paragraph 46 of Pearson, above, where I stated that the Court must be
satisfied that information sought by the Commissioner must not be “excessive, disproportionate or unduly burdensome.” At
paragraph 48 of that decision, I also quoted from SGL Canada Inc v Canada
(Director of Investigation and Research), [1998] FCJ No 1951, at para 11
(TD), where this Court observed: “Courts must, in the
exercise of [their] discretion, remain alert to the danger of unduly burdening
and complicating the law enforcement investigative process.” Those were
the only two references to the word “unduly” in Pearson,
above. At paragraphs 4, 42, 59, 68 and 98 of that decision, I phrased the test
in terms of whether the information being sought by the Commissioner is “excessive, disproportionate or unnecessarily
burdensome” (emphasis added).
[48]
I recognize that I also used the words “unduly burdensome” as part of this test in Indigo,
above, at paragraph 38. However, at paragraphs 24 and 57 of that case, I
instead used the words “unnecessarily burdensome.”
[49]
Going forward, I will endeavour to avoid using
the word “unduly” in describing the test, and to
use instead the words “excessive, disproportionate or
unnecessarily burdensome.” Among other things, this will hopefully
assist to avoid what happened in these proceedings, where counsel of the
Commission sought to interpret the word “undue”
by reference to jurisprudence that is not particularly helpful. This includes
the case law under the former conspiracy provisions that were set forth in
section 45 of the Act and its predecessors, as well as under certain provisions
of the Combines Investigation Act, RSC, 1970, c C-23 which required that
a merger, monopoly or conspiracy be demonstrated to operate “to the detriment or against the interest of the public.”
[50]
In any event, I categorically reject the
Commissioner’s position that, in assessing whether the nature and extent of the
information sought in a draft order is disproportionate or unduly burdensome,
the Court must look beyond the burden likely to be imposed on the respondent,
and assess whether there is a more general public detriment. In my view, the appropriate
focus in assessing whether the information being sought is likely to be
excessive, disproportionate or unnecessarily burdensome, is to balance two
things. These are (i) what the Commissioner reasonably requires to conduct the
inquiry in question, and (ii) the burden that a draft order would likely impose
upon the respondents. In some cases, the latter consideration will inform the
Court’s assessment of the former, namely, whether it is reasonable for the
Commissioner to require certain information, or certain information in a
particular format, notwithstanding that it may be relevant. In conducting this
balancing process, the Court will keep in mind whether the respondent is a
target of the Commissioner’s inquiry or is simply an unrelated third party, as
this may have a bearing on the Court’s assessment of whether the information
being sought is excessive, disproportionate or unnecessarily burdensome.
[51]
It bears underscoring that when a statutory
entity such as the Commissioner, who is part of the apparatus of the state,
seeks an intrusive order that may impose a significant cost or other burden on
individuals or businesses who are named as respondents in proceedings under
section 11, the Court will carefully balance the legitimate needs of that
entity against any bona fide concerns of the respondent(s) that what is
being sought may be excessive, disproportionate or unnecessarily burdensome.
[52]
Counsel to the Commissioner repeatedly submitted
that because the information being requested was relevant and went to the “core” of the Commissioner’s inquiry, it could not be
disproportionate in nature.
[53]
I disagree. Even if a particular type of
information is relevant, the extent of that information being requested may be
disproportionate, excessive or unnecessarily burdensome. For example, in these
proceedings, the Orders require the descriptions of the identity and value of
any promotions on any Smartphones, any monthly discounts relating to any type
of Smartphone and any Original Equipment Manufacturer (“OEM”) funded
sales incentives and marketing allowances paid to the Respondent, all over the
entire Relevant Period.
[54]
This type of information is
unquestionably relevant to the Commissioner’s inquiry. And if it is readily
available, it should be provided to the Commissioner. But if the efforts
required to provide all or virtually all of that information
would be excessive, disproportionate or unnecessarily burdensome, the
Respondents should not have to provide the full extent information. It should
only have to provide what the Court considers is reasonably required by the
Commissioner and what can be assembled by the Respondents through reasonable
efforts. If the parties cannot agree on what constitutes “reasonable efforts” or what would be “excessive, disproportionate or unnecessarily burdensome,” they
can return it to the Court. That is why I insisted on adding paragraph 4 to the
Orders issued in these proceedings.
[55]
In my view, in order to establish that a
particular type of reviewable conduct has substantially prevented or lessened
competition, or is likely to do so, it may not be necessary for the
Commissioner to have evidence with respect to every single promotion, discount
or OEM funded sales initiative and marketing allowance paid to a respondent
over the entire period covered by an inquiry. This is particularly so where, as
in the present case, that period extends over many years. The same is true
where the full amount of the information sought is not reasonably available to
the respondent, and would require a substantial burden to assemble.
[56]
In such cases, it is not immediately apparent to
me why a reliable, representative amount of such information would not be
sufficient to enable the Commissioner to demonstrate that a particular type of
reviewable conduct has had, or is likely to have, the anticompetitive effect
described in the Act. In my view, this would enable an appropriate balance to
be struck between, on the one hand, the Commissioner’s responsibility to
investigate and pursue enforcement proceedings under the Act in respect of
alleged anticompetitive conduct, and on the other hand, the Commissioner’s use
of intrusive powers to obtain the information required to determine whether
such proceedings are warranted.
VI.
The E-Production Guidelines
[57]
Paragraph 2(d) of the Orders issued in these
proceedings requires the Respondents to produce all written returns of
information in accordance with the Competition Bureau’s E-Production
Guidelines, which are attached at Schedule II to the Orders.
[58]
Pursuant to paragraph 2(h) of those Orders, a
duly authorized representative of the Respondents is required, before written
returns are produced pursuant thereto, to contact Ms. Kack to provide
particulars regarding how the Respondent will comply with the E-Production
Guidelines. That same paragraph also requires the Respondents to make
reasonable efforts to address any additional technical requirements the
Commissioner may have relating to its production in accordance with the
E-Production Guidelines.
[59]
It appears that this was the first case in which
provisions pertaining to the E-Production Guidelines were included in a draft Order
sought by the Commissioner. Those provisions have since been incorporated into
several subsequent orders that have been sought by the Commissioner and granted
by this Court.
[60]
In the hearing of these applications, and in
response to a question that I posed, counsel to the Commissioner stated that
none of the Respondents had raised an issue in respect of the E-Production
Guidelines. A similar representation was made in two subsequent hearings of
other applications brought by the Commissioner under section 11 of the Act.
[61]
Counsel also represented that the E-Production
Guidelines were the subject of public consultation between August and October
2014, and that such consultation included input from the Competition Law
Section of the Canadian Bar Association [“CBA”]. Counsel invited the
Court to infer from the fact that “not a lot of
comments [were] received following the consultation with the CBA,” that
the E-Production Guidelines are not contentious.
[62]
In the absence of any evidence that any of the respondents
to draft Orders that have included the above-described provisions have raised
issues regarding the E-Production Guidelines, the Court has not independently
raised such issues.
VII.
Conclusion
[63]
The purpose of these reasons was to address five
issues discussed above, so that the public could be aware of the Court’s
evolving approach to applications brought by the Commissioner under section 11
of the Act.
[64]
In the interests of fostering greater
transparency, certainty and predictability in respect of this area of the law,
the Court will continue to give reasons for orders issued pursuant to section
11 as and when appropriate.
"Paul S. Crampton"
Ottawa, Ontario
August 20, 2015
Email this Content