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1. UPDATES ON CANADA'S FOREIGN INVESTMENT AND COMPETITION REVIEWS

There have been two recent developments regarding the government's intentions to review Canada's foreign investment policies and competition laws.

The first is the newly released guidelines concerning the regulatory review of investments in Canada by foreign state-owned enterprises ("SOEs") under the Investment Canada Act (the "ICA") ("SOE Guidelines"), while the second involves the publication of a discussion paper by the federally-appointed Competition Policy Review Panel which is conducting a more general review of Canada's investment and competition policies.

The SOE Guidelines[1] released on December 7, 2007 do not create a new review process specifically for foreign SOEs, but provide greater guidance on the government's treatment of investments by foreign SOEs under the existing foreign investment review process. The SOE Guidelines apply to "an enterprise that is owned or controlled directly or indirectly by a foreign government" and enumerate additional factors for the Minister of Industry to consider in his or her review of whether an investment by a non-Canadian will be of "net benefit to Canada", including:

• The governance and commercial orientation of SOEs
  • the SOE's corporate governance (such as "whether the non-Canadian adheres to Canadian standards of corporate governance")
  • reporting structure
  • compliance with "Canadian laws and practices"
• The extent to which the non-Canadian is owned or controlled by a state
• Whether a Canadian business to be acquired by a non-Canadian that is an SOE will continue to have the ability to operate on a commercial basis.

These factors may have already been used implicitly by the Minister to evaluate investments by SOEs, but the new guidelines provide greater transparency regarding the factors to be considered by the Minister in his or her assessment. Furthermore, the SOE Guidelines also offer examples of the types of binding undertakings that SOEs may be required to provide. The government has yet to release the promised guidelines on national security.

Turning to the Competition Policy Review Panel (the "Panel"), it was created in July 2007 to conduct a more general review of Canada's competition and foreign investment legislation. On October 30, 2007, the Panel released a discussion paper[2] which examines potential changes to competition policy and investment policy and related amendments to the Competition Act and the Investment Canada Act, foreign investment by Canadians abroad, and Canada as a destination for investment. The Panel's mandate is not protectionist, and the Panel observes that "the goal for Canada should be to make this country the location of choice for the higher-value elements of these global value chains-whether led by Canadian firms or as part of others' supply chains."

With respect to foreign investment, the Panel will focus on potential amendments to the ICA and the specific foreign ownership restrictions applicable in certain sectors of the Canadian economy. The Panel notes that the ICA process has been criticized for a lack of transparency, and there have also been discussions of its fairness, particularly its lack of reciprocity where foreign firms may acquire Canadian businesses when the corresponding opposite transaction could not take place. As regards the Competition Act, the Panel will consider Canada's approach to conspiracies, efficiencies and market studies and the evolving role of the Competition Bureau in the context of globalization. The Panel will also consider the barriers that Canadian firms face in investing abroad, how the Canadian government could promote Canadian direct investment abroad, and how to make Canada a more attractive investment destination.

The Panel is due to publicly report on its findings in June 2008.

2. COMPETITION BUREAU REVISES AND IMPROVES IMMUNITY PROGRAM

On October 10, 2007, the Competition Bureau released a revised information bulletin outlining its Immunity Program, thus replacing its initial immunity bulletin issued in September 2000. The revised Immunity Program was complemented by a backgrounder explaining the changes, a revised Frequently Asked Questions (FAQs) and new immunity agreement templates.

The new bulletin simplifies the process and clarifies the prerequisites for a grant of immunity from criminal prosecution for competition-related offences under the Competition Act to those individuals or organizations that are the first to report an offence (or who can provide additional evidence to support charges during an ongoing investigation). The most prominent use of immunity to date has been in cases involving price fixing and market allocation cartel activity among competitors.

A significant procedural simplification is the move to a one-step grant of immunity in line with other major antitrust jurisdictions. The previous two-step process, which involved a provisional grant of immunity (PGI) with continued cooperation required from the applicant before the grant of final immunity, was out of step with other major antitrust jurisdictions. The new process involves a single grant of immunity which remains conditional upon full cooperation by the applicant. The new process reflects actual Bureau practice and is more easily understood by non-Canadian firms applying for immunity. More practical guidance is also generally provided in terms of the application process, for example, in terms of information expected from the applicant.

There are several substantive changes to the Program. A significant change is that disqualification from immunity is now based on whether an applicant took steps to coerce others to join the illegal activity. This "coercion test" replaces the old disqualifications based on whether a party was an "instigator" or "leader" or the "sole beneficiary" of the illegal activity. The requirement for "restitution" has also been dropped, as the Bureau now considers civil actions as the best means for victims of illegal activity to seek compensation. The new bulletin also clarifies the Bureau's confidentiality protections which it will extend to applicants, noting that the identity of an applicant will generally be protected but may be disclosed in certain circumstances, such as where necessary to obtain or maintain the validity of judicial authorizations including search warrants or production orders for documents.

The bulletin further confirms that, while the Bureau will not pursue a formal U.S.-style "penalty plus" approach (whereby an applicant who fails to disclose all of its illegal activities may be penalized more harshly for the undisclosed activities once they are uncovered), the Bureau will nevertheless adopt a strict approach if there is intentional non-disclosure of any competition offences by an applicant, including possibly revoking immunity and recommending increased penalties for the undisclosed offences.

The Bureau will also use the concept of "immunity plus", where an applicant who may not be the first to disclose information about Offence A, and therefore does not qualify for immunity for that offence, does disclose Offence B for which it receives immunity as well as the "plus" of an improved sentencing recommendation for Offence A. The bulletin also clarifies that revocation of immunity will generally only occur in the event of intentional non-cooperation by an applicant, and will allow a party to address any shortfalls in its conduct.

Finally, the Bureau is considering a formal leniency program as was proposed during the 2006 consultations for parties that do not qualify for immunity but who wish to cooperate early in an investigation.

In sum, the new Immunity Program provides practical clarifications and improvements that make the process more transparent and more reflective of immunity programs in other jurisdictions.

3. BUREAU'S NEW BULLETIN ON COMMUNICATION OF CONFIDENTIAL INFORMATION

In October 2007, the Competition Bureau released its new Information Bulletin on the Communication of Confidential Information Under the Competition Act.

The new bulletin replaces the previous 1995 version and provides practical direction and greater detail as to how the Bureau will treat confidential information which comes into its possession either voluntarily or as a result of its enforcement activities. The new bulletin also takes into account amendments to the legislation since 1995 affecting disclosure of confidential information, e.g., to the Minister of Transport or the Minister of Finance pursuant to reviews of transactions in their areas of responsibility (see sections 29.1 and 29.2 of the Act), and reflects increased enforcement cooperation among international competition authorities which may result in exchanges of information between agencies.

The Commissioner may receive confidential information from parties in a number of ways during investigations under the Competition Act: on a voluntary basis, as a result of the Commissioner's exercise of formal compulsory information-gathering powers (subpoenas, search warrants), as part of a merger review (pre-merger notification and/or a request for an advance ruling certificate), or as part of a request for a binding written opinion regarding the application of the Act.

The new bulletin reaffirms the general policy that the Bureau will minimize the extent to which confidential information might be communicated to other parties, and clearly indicates that any disclosure will only take place within the limited circumstances set out in the legislation. Furthermore, even in these circumstances, the Bureau will generally only exercise its discretion to communicate protected information when failure to do so would prevent or hinder an inquiry or other matter from being addressed or dealt with under the Act.

The general provisions regarding confidentiality remain unchanged. Section 10(3) of the Act continues to provide that a formal inquiry must be conducted in private and the new Bulletin states that, in practice, this protection is extended to pre-inquiry examinations as well. Section 29 continues to extend broad protection to practically all information obtained on a voluntary or compulsory basis[3] by prohibiting the communication of such information, except in four limited circumstances: (i) when the information is forwarded to a Canadian law enforcement agency; (ii) when the information is communicated for the purposes of administration or enforcement of the Act; (iii) when the information has otherwise been made public; and (iv) when the Bureau has been authorized to communicate the information by the person who provided it.

The first two exceptions, "to a Canadian law enforcement agency" and "for the purposes of the administration or enforcement" of the Act, typically raise the most questions as to how the Bureau will exercise its discretion to disclose. The new bulletin states that communication of information to Canadian law enforcement agencies will generally only occur where a matter is not within the mandate of the Bureau and requires transfer to another Canadian agency, or where the Bureau and another Canadian agency are cooperating in an investigation. In addition to this general exception, the Bulletin notes that sections 29.1 and 29.2 of the Act also provide specific exceptions to allow the Bureau to communicate confidential information to the Minister of Transport and the Minister of Finance for specific reviews by these agencies. However, communication to Canadian law enforcement agencies is rare, and even then the Bureau will only communicate information where it is satisfied that the receiving agency will respect the confidentiality of the information.

Communication "for the purposes of administration and enforcement of the Act" is a broader concept that may involve exchanges of information with a diverse group of entities for different purposes, including: market participants (customers, suppliers and competitors) to elicit further information, various experts hired by the Bureau (including economic, industry or legal experts), foreign law enforcement authorities in order to obtain their assistance or coordinate enforcement action, or courts as the basis for an order for compulsory formal investigative powers or to initiate enforcement proceedings under the Act.

The new Bulletin indicates a number of safeguard limitations to such exchanges: care is taken to minimize the exchange of confidential information to market participants; confidentiality of communications to foreign authorities will be ensured either through formal international cooperation agreements or, unless the Bureau is fully satisfied with the laws protecting confidentiality in the foreign country, through assurances from the foreign authority that the information will be kept confidential and that the use of such information be limited to the specific purposes for which it is provided; and, where necessary to protect against disclosure in formal proceedings before the courts or the Competition Tribunal, measures may include sealing orders, confidentiality orders, confidential schedules to public documents and in camera proceedings as long as these measures would not hinder the administration or enforcement of the Act.

As part of its policy of transparency, the new bulletin indicates that the Bureau will allow affected parties to review draft versions of its "technical backgrounders", which summarize the Bureau's analysis of a merger and are intended to provide useful information on how the Act is enforced in particular cases, in order to identify confidential information for removal.

The new bulletin also clarifies the Bureau's approach to confidentiality under the new Immunity Program. The Bureau will not disclose the identity of an applicant requesting immunity except in limited enumerated circumstances and will treat any information obtained from such person as confidential, and will not disclose it to a foreign law enforcement agency except with the consent of the applicant. Similarly, with respect to the "whistle-blower" provision of the Act (which extends protection to persons who notify the Bureau that another party has committed, or intends to commit a criminal offence under the Act), the new bulletin states that every effort will be made to protect the identity of a whistle-blower.

Finally, the new bulletin also highlights the Bureau's policy to resist attempts by third parties to gain access to confidential information in its possession, e.g., for a civil action for damages under section 36 or a private action before the Competition Tribunal. If served with a subpoena, the Bureau will inform the information provider and oppose subpoenas for the production of information if compliance with them would potentially interfere with an ongoing examination or inquiry, or otherwise adversely affect the administration or enforcement of the Act. If the opposition is unsuccessful, the Bureau will seek protective court orders to maintain confidentiality of the information in question.

4. COMPETITION GROUP 2007 YEAR IN REVIEW

Accolades and Accomplishments

Global Competition Review ranked Ogilvy Renault's competition practice as "highly recommended".

The Canadian guide Lexpert recognized our Competition Group co-chairs Denis Gascon and Dany Assaf as recommended leaders in competition law in Canada.

The Best Lawyers in Canada also recognized Denis Gascon.

Chambers Global Guide to the World's Leading Lawyers for Business, the Legal Media Group Guide to the World's Leading Competition and Antitrust Lawyers and PLC Cross-Border Handbook on Competition each recognized Denis Gascon and Dany Assaf as recommended lawyers in the field.

Competition Group Co-Chair Dany Assaf was featured on the cover of Lexpert magazine (October 2007). Click here to read "Canada's Competition Bureau: Untangling the Web."

Thierry Dorval received a Doctor of Laws degree from the University of Ottawa. He is one of a very few legal practitioners in Canada to hold an LLD.

Significant Mandates

Significant public mandates in 2007 include:

• Alcan: advising Alcan with respect to an unsolicited bid from Alcoa and the acquisition by Rio Tinto to form Rio Tinto Alcan, a leading aluminum and mining company
• Bourse de Montréal: advising Bourse de Montréal with respect to its proposed $1.2 billion combination with the TSX Group to form Canada's leading stock exchange
• Bowater: representing Bowater in its merger with Abitibi to form AbitibiBowater, which created the largest newsprint producer in the world
• Domtar: advising Domtar on its merger with Weyerhaeuser which created the largest manufacturer of uncoated freesheet paper in North America and the second largest in the world; representing Domtar in class action litigation alleging price fixing in the carbonless paper market
• Quebecor: representing Quebecor Media Inc. in its takeover bid for Osprey Media Income Fund to create a national leader in the community newspapers industry
• RONA: representing RONA in its acquisitions of Dick's Lumber and Noble Trade in the home improvement products industry
• Archer Daniels Midland: representing Archer Daniels Midland in class action litigation alleging price fixing in the high-fructose corn syrup market
• Four Seasons Hotel: representing the founder in the sale of this hotel chain
• Fuel surcharges: representing a client in proposed national class actions in Quebec, Ontario and British Columbia alleging a price-fixing conspiracy related to airline fuel surcharges
• Gasoline prices: representing a client in an ongoing investigation and class action in Quebec alleging a price-fixing conspiracy with respect to gasoline prices
• Porter Airlines: advising Porter Airlines in its competition litigation with Air Canada and Jazz Air LP
• SRAM/LCD: representing a client in alleged price fixing in respect of SRAM and LCD screens.

[1].    Guidelines - Investment by state-owned enterprises - Net benefit assessment at http://www.ic.gc.ca/epic/site/ica-lic.nsf/en/lk00064e.html.

[2].    Sharpening Canada's Competitive Edge at http://www.ic.gc.ca/epic/site/cprp-gepmc.nsf/en/h_00009e.html

[3].    As noted in the Bulletin, the Bureau may obtain information through the use of powers under the Criminal Code, e.g., warrants, production orders, wiretaps, and the communication of any information so obtained is governed by the Criminal Code and related regulations and policies.  

The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault LLP or any member of the firm on the points of law discussed.

© Ogilvy Renault LLP 2008 - All Rights Reserved

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Denis Gascon
Montréal
514.847.4435
dgascon@ogilvyrenault.com
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Richard A. Wagner
Ottawa
613.780.8632
rwagner@ogilvyrenault.com
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