Competition Tribunal Dismisses Commissioner's Bid to Delay Labatt Deal

On March 28, 2007, the Competition Tribunal dismissed an application by the Commissioner of the Competition Bureau to delay closing of the acquisition by Labatt Brewing Company Limited of Lakeport Brewing Income Fund. The decision is only the second ever under section 100 of The Competition Act. The last decision was in the Superior Propane acquisition of ICG Propane, in which the Tribunal also dismissed the Commissioner's application to delay closing of that deal.

The case arose when Labatt made a friendly takeover bid for Lakeport on February 22, 2007. Labatt indicated to the Bureau that as a public market transaction, time was of the essence and it would take up and pay for the units of Lakeport as soon as possible under the securities laws, unless there was an order in place issued by the Tribunal. However, the Bureau sought to have 5 months to review the transaction citing the complexity of the case, which was some three and a half months beyond the statutory time period of 42 days provided for in the Competition Act.

Labatt had offered to put all of the acquired business into a hold separate arrangement for a period of time (initially 30, but later 60 days), if needed, to allow the Commissioner to continue her review and preserve Lakeport as a separate entity, while permitting Lakeport unitholders to be paid for their units; however, this was rejected by the Commissioner who then commenced the application for an interim order to delay closing. After a two-day hearing in Ottawa before Mr. Justice Phelan, the Tribunal rejected the application stating that the Commissioner had not proved that the closing would substantially impair the Tribunal's ability to remedy the merger if in fact it was ultimately determined to substantially lessen competition. Moreover, the Commissioner having rejected a hold separate arrangement, the Tribunal was not willing to impose one in the case thereby allowing Labatt to close the transaction and fully take control over Lakeport. The transaction closed on March 29, 2007.

This decision means that the Commissioner will need to seriously consider offers from parties to close transactions into a hold separate and that there is a high expectation that the Bureau's review of even very complex transactions should be completed within 42 days.

Labatt Brewing Company Limited's general counsel and senior vice-president North America Zone, Susan Rabkin, assembled and lead the Labatt legal team and retained Blake, Cassels & Graydon LLP competition partners Neil Finkelstein and Brian Facey (who together also argued and won the Superior Propane merger case) to argue the case for Labatt at the Tribunal, along with a team which included partner Cathy Beagan Flood and associate Micah Wood. The Securities work for Labatt was performed by Blake, Cassels & Graydon LLP led by partner Craig Thorburn, and included David Shaw and Germán Morales.

Stikeman Elliott LLP's litigation partner Katherine Kay argued the case for Lakeport Brewing in the Tribunal, and competition partner Shawn Neylan led the Lakeport regulatory team, supported by Michael Kilby.

The Commissioner was represented by Bryan Finlay of WeirFoulds LLP supported by Marie-Andrée Vermette and Nikiforos Iatrou, and by William Miller and Robert Levine of the Department of Justice – Competition Law Division.