Federal Court of Appeal Dismisses Appeal in Canada (Commissioner of Competition v. Labatt Brewing Company)

On January 22, 2008, the Court of Appeal dismissed from the bench the appeal of the Commissioner of Competition from a decision of Justice Phelan sitting as Presiding Judicial Member of the Competition Tribunal dated March 28, 2007. The Tribunal had dismissed the Commissioner's application for an interim order forbidding Labatt from concluding its takeover bid for rival Lakeport Breweries on the scheduled closing date.

This is the first appellate case to consider section 100 of the Competition Act. Under Canada's competition law regime, parties can close deals without the consent of the Competition Bureau after a 42-day mandatory statutory waiting period has lapsed. However, section 100 of the Competition Act provides a mechanism for the Commissioner to seek an injunction to delay closing for an additional 30 days after the statutory waiting period.

In February 2007, Labatt announced its intention to acquire Lakeport. As the scheduled closing date, March 29, 2007, approached, the Commissioner brought an application for an injunction under section 100 of the Competition Act to delay the closing for a further 30 days because she required more time to complete her inquiry into the competitive effects of the merger. Labatt opposed the injunction. On March 28, 2007, the Tribunal dismissed the Commissioner's application. The deal closed the next day.

Although the appeal was moot because the deal had closed almost a year prior, the Court of Appeal exercised its discretion to hear it. The Court found that the point of law in issue was likely to recur and the time constraints associated with a decision to grant or deny an injunction under section 100 of the Competition Act rendered such decisions evasive of appellate review.

The Commissioner argued on appeal that Justice Phelan had reformulated section 100 in a way that would require the Commissioner to establish the particulars of the substantial lessening of competition it perceived, as well as the remedies that would be needed to eliminate a substantial lessening of competition. The Court of Appeal dismissed these arguments, concluding that Justice Phelan had not imposed such a condition. Rather, he had explained, correctly, that in determining whether the closing would substantially impair the Tribunal's ability to remedy the effect of the proposed transaction, the Tribunal must consider the effectiveness of the remedies that would remain available to it if the transaction were later found to, or be likely to, prevent or lessen competition.

The Court of Appeal found that the Commissioner's proposed interpretation of section 100 would make an interim order “virtually automatic in the case of a proposed transaction.” It also upheld the Tribunal's finding that the Commissioner had failed to establish that, without an interim order, the Tribunal's remedial powers would be substantially impaired absent an injunction.
The solicitors for the respondent Labatt Brewing Company were Neil Finkelstein, Brian Facey and Catherine Beagan Flood of Blake, Cassels & Graydon LLP and by Labatt in-house lawyers Susan Rabkin, Clare Smith and Karyn Sullivan.

The appellant, the Commissioner of Competition, was represented by a legal team that included John F. Rook, QC, of Bennett Jones LLP and John Syme and Robert Levine of the Department of Justice, Competition Law Division.