A-39-04
2004 FCA 339
Symbol Technologies Canada ULC (Appellant) (Respondent)
v.
Barcode Systems Inc. (Respondent) (Applicant)
Indexed as: Symbol Technologies Canada ULC v. Barcode Systems Inc. (F.C.A.)
Federal Court of Appeal, Richard C.J., Létourneau and Rothstein JJ.A.--Winnipeg, September 28; Ottawa, October 7, 2004.
Competition -- Appeal from Competition Tribunal decision granting respondent leave to make Competition Act, s. 75 application for order requiring appellant to accept respondent as customer against appellant -- Appellant, Canadian subsidiary of bar code equipment manufacturer, sells, distributes products in Canada -- Respondent taking over distribution in Western Canada in about 1994 -- Since 2003, appellant refusing to deal with respondent -- Respondent bringing leave application pursuant to Act, s. 103.1(1), alleging appellant engaged in restrictive trade practice of "refusal to deal" within meaning of Act, s. 75 -- Tribunal granting leave under Act, s. 103.1(7) -- Appellant arguing Tribunal erred in granting leave because not taking into account all elements of refusal to deal set out in Act, s. 75(1) -- As question of law not engaging particular expertise of Tribunal, correctness appropriate standard of review -- Test for granting leave in s. 103.1(7) application set out in National Capital News Canada v. Canada (Speaker of the House of Commons) applied: whether sufficient credible evidence of what is alleged to give rise to bona fide belief by Tribunal that applicant directly, substantially affected in its business by reviewable restrictive trade practice that could be subject of Tribunal order under Act, s. 75 or 77 -- That threshold for obtaining leave lower than balance of probabilities -- All elements of reviewable practice of refusal to deal, set out in Act, s. 75(1), need to be addressed by Tribunal on leave application in order for it to reach conclusion as to whether practice alleged could be subject to order -- Court resolving matter without remitting it to Tribunal -- Evidence that respondent substantially affected in its business -- Real controversy whether evidence refusal to deal likely to have adverse effect on competition in market (Act, s. 75(1)(e)) -- Leave application not appropriate occasion to interpret Act, s. 75(1)(e) for first time -- Benefit of any doubt working in favour of granting leave -- Sufficient evidence constituting reasonable grounds for believing refusal to deal could be subject to order under Act -- Appeal dismissed.
This was an appeal from a decision of the Competition Tribunal granting leave to the respondent to make an application against the appellant. The appellant is the Canadian subsidiary of Symbol Technologies Inc. (Symbol US), the largest single manufacturer of bar code equipment in the world. The appellant sells and distributes Symbol US products in Canada. In or about 1994, the respondent took over the appellant's distribution in Western Canada. Since May 1, 2003, the appellant refused to deal with the respondent. The respondent's application for leave to apply for an order under Competition Act subsection 75(1) requiring Symbol to accept Barcode as a customer before the Tribunal (brought pursuant to subsection 103.1(1) of the Act) alleged that Symbol was engaging in the reviewable restrictive trade practice of "refusal to deal" within the meaning of section 75 of the Act. Leave was granted and the present appeal ensued. The appellant argued that the Tribunal member who granted leave erred in law by refusing to take into account all of the elements of the reviewable practice of refusal to deal set out in subsection 75(1) and that the decision to grant leave should be quashed.
Held, the appeal should be dismissed.
Subsection 103.1(7) of the Act provides that to grant leave, the Tribunal must have reason to believe that the applicant is directly and substantially affected in its business by a reviewable restrictive trade practice that could be the subject of a Tribunal order under section 75 or 77 of the Act. The decision to grant leave is a discretionary one. However, the question at issue here whether the Tribunal is required to consider all the elements of the restrictive trade practice of refusal to deal was one of law. This question of statutory interpretation does not engage any particular expertise of the Tribunal. Thus, the standard of review was correctness.
The test for granting leave in an application under subsection 103.1(7) found in National Capital News Canada v. Canada (Speaker of the House of Commons) was adopted. The application must be supported by sufficient credible evidence to give rise to a bona fide belief by the Tribunal that the applicant may have been directly and substantially affected in its business by a reviewable practice, and that the practice in question could be subject to an order. This threshold is lower than proof on a balance of probabilities. That said, the elements of the reviewable trade practice of refusal to deal set out in subsection 75(1) must all be shown and addressed by the Tribunal before it may make an order, not only the merits of the application, but also on an application for leave under subsection 103.1(7). As long as each element is considered, even summarily, the Tribunal's decision to grant or refuse leave will be treated with deference.
Use of essentially the same words in subsection 103.1(7) and paragraph 75(1)(a) "that the applicant is directly and substantially affected in the applicants' business", while there are no such similar words in paragraphs 75(1)(b) to (e) in subsection 103.1(7), does not imply that the statutory elements in paragraphs 75(1)(b) to (e) need not be considered on a leave application. To determine the leave application, the Tribunal must consider whether the practice that is alleged could be subject to an order under subsection 75(1); and it cannot reach such a conclusion without considering all the elements of refusal to deal set out in that subsection. Also, the purpose of the Act is to maintain and encourage competition in Canada, and so at the leave stage, there must be some evidence by the applicant and some consideration by the Tribunal of the effect of the refusal to deal on competition in a market (paragraph 75(1)(e) of Act).
It was deemed appropriate for the Court to resolve the matter instead of remitting the matter to the Tribunal for redetermination as leave applications were intended to be dealt with summarily. There was evidence that the respondent was substantially affected in its business due to its inability to obtain the appellant's products. The only real controversy was whether there was evidence that the appellant's refusal to deal was likely to have an adverse effect on competition in a market. The relevant provision, paragraph 75(1)(e), has not been interpreted by the Tribunal or this Court, and a leave application was not considered the appropriate occasion to do so. Therefore, if there were facts in the respondent's affidavit that might meet the requirements of paragraph 75(1)(e), the benefit of any doubt was to work in favour of granting leave. Here, there was sufficient evidence to constitute reasonable grounds to believe that the appellant's alleged refusal to deal could be the subject of an order under subsection 75(1): the respondent had somewhat of a presence in the Western Canadian market, and its difficult financial situation could be likely to impede its ability to be an effective competitor in that market.
statutes and regulations judicially
considered
Competition Act, R.S.C., 1985, c. C-34, ss. 1 (as am. by R.S.C., 1985 (2nd Supp.), c. 19, s. 19), 1.1 (as enacted idem), 75 (as am. idem, s. 45; 2002, c. 16, s. 11.1), 77 (as am. by R.S.C., 1985 (2nd Supp.), c. 19, s. 45; S.C. 1999, c. 2, s. 23; 2002, c. 16, ss. 11.2, 11.3), 103.1 (as enacted idem, s. 12).
| Competition Tribunal Act, R.S.C., 1985 (2nd Supp.), c. 19, s. 13(1) (as am. by S.C. 2002, c. 8, s. 130), (2). |
cases judicially considered
applied:
National Capital News Canada v. Canada (Speaker of the House of Commons) (2002), 23 C.P.R. (4th) 77 (Comp. Trib.).
referred to:
Suresh v. Canada (Minister of Citizenship and Immigration), [2002] 1 S.C.R. 3; (2002), 208 D.L.R. (4th) 1; 37 Admin. L.R. (3d) 152; 90 C.R.R. (2d) 1; 18 Imm. L.R. (3d) 1; 281 N.R. 1.
APPEAL from a decision of the Competition Tribunal ([2004] C.C.T.D. No. 1 (Comp. Trib.) (QL)) granting leave to the respondent to make an application against the appellant. Appeal dismissed.
appearances:
Steven E. Field and David G. Hill for appellant (respondent).
Lindy J. R. Choy for respondent (applicant).
solicitors of record:
Hill Abra Dewar, Winnipeg, for appellant (respondent).
Thompson Dorfman Sweatman LLP, Winnipeg, for respondent (applicant).
The following are the reasons for judgment rendered in English by
Rothstein J.A.:
INTRODUCTION
[1]This is an appeal by Symbol Technologies Canada ULC (Symbol) from a decision of the Competition Tribunal [Barcode Systems Inc. v. Symbol Technologies Canada ULC, [2004] C.C.T.D. No. 1 (QL)] under subsection 103.1(7) [as enacted by S.C. 2002, c. 16, s. 12] of the Competition Act, R.S.C., 1985, c. C-34 [s. 1 (as am. by R.S.C., 1985 (2nd Supp.), c. 19, s. 19)] granting leave to the respondent Barcode Systems Inc. (Barcode) to make an application to the Tribunal against Symbol. In its leave application to the Tribunal, Barcode alleged that Symbol was engaging in the reviewable restrictive trade practice of "refusal to deal" within the meaning of section 75 [as am. idem, c. 19, s. 45; S.C. 2002, c. 16, s. 11.1] of the Act.
[2]Barcode's application before the Tribunal is for an order under subsection 75(1) of the Competition Act requiring Symbol to accept Barcode as a customer.
[3]In this appeal, Symbol says that the Tribunal member who granted leave erred in law by refusing to take into account statutory requirements and that the decision to grant leave should be quashed by this Court.
FACTS
[4]The facts are taken from the affidavit of David Sokolow, the President of Barcode. There has been no cross-examination on that affidavit. Symbol is the Canadian subsidiary of Symbol Technologies Inc. (Symbol US). Symbol US is the largest single manufacturer of bar code equipment in the world. Symbol sells and distributes Symbol US products in Canada. In or about 1994, Barcode took over Symbol's distribution in Western Canada.
[5]In or about January 2003, Symbol informed Barcode that it could no longer buy parts for Symbol products. In April 2003, Symbol informed Barcode that it would not accept purchase orders from Barcode. Barcode says that since May 1, 2003, Symbol has refused to deal with Barcode.
RELEVANT STATUTORY PROVISIONS
[6]Until 2002, only the Commissioner of Competition could bring an application before the Competition Tribunal in respect of reviewable restrictive trade practices described in Part VIII of the Competition Act, e.g. refusal to deal (section 75) and tied selling (section 77 [as am. by R.S.C., 1985 (2nd Supp.), c. 19, s. 45; S.C. 1999, c. 2, s. 23; 2002, c. 16, ss. 11.2, 11.3]). By amendments to the Competition Act, S.C. 2002, c. 16, ss. 11.1 to 11.3, private applicants were given the opportunity to bring applications to the Tribunal, subject to the Tribunal granting them leave to do so. Subsection 103.1(1) [as enacted idem, s. 12] of the Competition Act provides:
103.1 (1) Any person may apply to the Tribunal for leave to make an application under section 75 or 77. The application for leave must be accompanied by an affidavit setting out the facts in support of the person's application under section 75 or 77.
[7]The considerations the Tribunal is to take into account in determining a leave application are set out in subsection 103.1(7). To grant leave, the Tribunal must have reason to believe that the applicant is directly and substantially affected in its business by a reviewable restrictive trade practice that could be the subject of a Tribunal order under section 75 or 77 of the Competition Act. Subsection 103.1(7) provides:
103.1 . . . .
(7) The Tribunal may grant leave to make an application under section 75 or 77 if it has reason to believe that the applicant is directly and substantially affected in the applicants' business by any practice referred to in one of those sections that could be subject to an order under that section.
[8]The reviewable restrictive trade practice relied on by Barcode is refusal to deal. Subsection 75(1) provides:
75. (1) Where, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that
(a) a person is substantially affected in his business or is precluded from carrying on business due to his inability to obtain adequate supplies of a product anywhere in a market on usual trade terms,
(b) the person referred to in paragraph (a) is unable to obtain adequate supplies of the product because of insufficient competition among suppliers of the product in the market,
(c) the person referred to in paragraph (a) is willing and able to meet the usual trade terms of the supplier or suppliers of the product,
(d) the product is in ample supply, and
(e) the refusal to deal is having or is likely to have an adverse effect on competition in a market,
the Tribunal may order that one or more suppliers of the product in the market accept the person as a customer within a specified time on usual trade terms unless, within the specified time, in the case of an article, any customs duties on the article are removed, reduced or remitted and the effect of the removal, reduction or remission is to place the person on an equal footing with other persons who are able to obtain adequate supplies of the article in Canada.
THE ALLEGED ERROR OF LAW
[9]Symbol submits that the Competition Tribunal member who granted leave refused to take account of all the elements of the reviewable practice of refusal to deal set out in subsection 75(1) and therefore erred in law by not taking account of statutory requirements. Symbol's main argument is that the member refused to consider whether Symbol's alleged refusal to deal was likely to have an adverse effect on competition in a market as required by paragraph 75(1)(e).
[10]Indeed, in his reasons, the member specifically finds that on an application for leave, the Tribunal is not to have regard to whether the refusal to deal is likely to have an adverse effect on competition in a market. At paragraphs 8 and 10, the member states:
What the Tribunal must have reason to believe is that Barcode is directly and substantially affected in its business by Symbol's refusal to sell. The Tribunal is not required to have reason to believe that Symbol's refusal to deal has or is likely to have an adverse effect on competition in a market at this stage.
. . .
As I read the Act, adverse effect on competition in a market is a necessary element to the Tribunal finding a breach of section 75 and a necessary condition in order that the Tribunal make a remedial order under that section. It is not, however, part of the test for the Tribunal's granting leave or not.
STANDARD OF REVIEW
[11]Subsection 13(1) [as am. by S.C. 2002, c. 8, s. 130] of the Competition Tribunal Act, R.S.C., 1985, (2nd Supp.), c. 19, provides for a statutory right of appeal to the Federal Court of Appeal from any decision or order whether final, interlocutory or interim of the Competition Tribunal as if it were a judgment of the Federal Court. The unrestricted right of appeal (except in the case of appeals on questions of fact under subsection 13(2)) is an indication of a correctness standard of review.
[12]Whether to grant leave under subsection 103.1(7) is a discretionary decision of the Tribunal. However, the question at issue here is whether, in exercising its discretion, the Tribunal is required to consider all the elements of the restrictive trade practice of refusal to deal set out in subsection 75(1). That is a question of law, a straight question of statutory interpretation. It is the task of the Court to determine whether the Tribunal has exercised its discretionary power within the constraints imposed by Parliament. See Suresh v. Canada (Minister of Citizenship and Immigration), [2002] 1 S.C.R. 3, at paragraph 38.
[13]This question of statutory interpretation does not engage any particular expertise of the Tribunal. Economic and commercial considerations are not part of the analysis of whether, on a leave application, all the elements listed in subsection 75(1) must be considered. That expertise is not engaged on the question of statutory interpretation at issue here therefore points to the correctness standard.
[14]The basic purpose of the Competition Act as described in section 1.1 [as enacted by R.S.C., 1985 (2nd Supp.), c. 19, s. 19] is "to maintain and encourage competition in Canada" and the purpose of section 75 is in furtherance of that objective. When economic and commercial considerations are being considered, deference may be called for. But these considerations are not at issue in the present appeal.
[15]Weighing these pragmatic and functional considerations, I conclude that the standard of review in this appeal is correctness.
ANALYSIS
| The legal test in an application under subsection 103.1(7) |
[16]In National Capital News Canada v. Canada (Speaker of the House of Commons) (2002), 23 C.P.R. (4th) 77 (Comp. Trib.), Dawson J., in her capacity as a member of the Competition Tribunal, reviewed the test for the granting of leave under subsection 103.1(7). After citing authorities on the term "reasonable grounds to believe" she stated at paragraph 14 of her reasons:
Accordingly on the basis of the plain meaning of the wording used in s. 103.1(7) of the Act and the jurisprudence referred to above, I conclude that the appropriate standard under s. 103.1(7) is whether the leave application is supported by sufficient credible evidence to give rise to a bona fide belief that the applicant may have been directly and substantially affected in the applicant's business by a reviewable practice, and that the practice in question could be subject to an order.
I agree with Dawson J. and adopt her analysis and conclusion as to the test for granting leave under subsection 103.1(7).
[17]The threshold for an applicant obtaining leave is not a difficult one to meet. It need only provide sufficient credible evidence of what is alleged to give rise to a bona fide belief by the Tribunal. This is a lower standard of proof than proof on a balance of probabilities which will be the standard applicable to the decision on the merits.
[18]However, it is important not to conflate the low standard of proof on a leave application with what evidence must be before the Tribunal and what the Tribunal must consider on that application. For purposes of obtaining an order under subsection 75(1), a refusal to deal is not simply the refusal by a supplier to sell a product to a willing customer. The elements of the reviewable trade practice of refusal to deal that must be shown before the Tribunal may make an order are those set out in subsection 75(1). These elements are conjunctive and must all be addressed by the Tribunal, not only when it considers the merits of the application, but also on an application for leave under subsection 103.1(7). That is because, unless the Tribunal considers all the elements of the practice set out in subsection 75(1) on the leave application, it could not conclude, as required by paragraph 103.1(7), that there was reason to believe that an alleged practice could be subject to an order under subsection 75(1).
[19]The Tribunal may address each element summarily in keeping with the expeditious nature of the leave proceeding under section 103.1. As long as it is apparent that each element is considered, the Tribunal's discretionary decision to grant or refuse leave will be treated with deference by this Court. But the Tribunal's discretion to grant leave is not unfettered. The Tribunal must consider all the elements in subsection 75(1).
[20]The words of subsection 103.1(1) support this interpretation of the requirements of subsection 103.1(7). Subsection 103.1(1) requires that the application for leave be accompanied by an affidavit setting out the facts in support of the application under subsection 75(1). That affidavit must therefore contain the facts relevant to the elements of the reviewable trade practice of refusal to deal set out in subsection 75(1). It is that affidavit which the Tribunal will consider in determining a leave application under subsection 103.1(7). While the standard of proof on the leave application is lower than when the case is considered on its merits, nonetheless, the same considerations are relevant to both and must be taken into account at both stages.
[21]The respondent says that the words in subsection 103.1(7) "that the applicant is directly and substantially affected in the applicants' business" are essentially the words in paragraph 75(1)(a) and because there are no words similar to those in paragraphs 75(1)(b) to (e) in subsection 103.1(7), Parliament did not intend that each element in paragraphs 75(1)(b) to (e) need be taken into account on a leave application.
[22]I do not think that is correct. Because subsection 103.1(1) says that "any person may apply", it is theoretically possible for someone other than a person substantially and directly affected to bring a private application. However, Parliament clearly intended to limit private applications to persons who themselves are directly and substantially affected in their businesses by the alleged reviewable practice. I think that is the reason for the use of words in subsection 103.1(7) that are substantially similar to those in paragraph 75(1)(a). However, the use of these words does not imply that the statutory elements in paragraphs 75(1)(b) to (e) need not be considered on a leave application. That is because, on a leave application, the Tribunal must consider whether the practice that is alleged could be subject to an order under subsection 75(1); and it cannot reach that conclusion without considering all the elements of refusal to deal set out in that subsection.
[23]Counsel for Symbol argued that on a purposive interpretation, it should be clear that on a leave application, the Tribunal must have regard to all the statutory elements in subsection 75(1). I agree. The purpose of the Competition Act is to maintain and encourage competition in Canada. It is not to provide a statutory cause of action for the resolution of a dispute between a supplier and a customer that has no bearing on the maintenance or encouragement of competition. That is the obvious reason for paragraph 75(1)(e). The threshold at the leave stage is low, but there must be some evidence by the applicant and some consideration by the Tribunal of the effect of the refusal to deal on competition in a market.
| Application of the test for leave to the facts |
[24]Having determined the correct legal test on an application seeking leave to apply for an order under subsection 75(1), the question is whether this matter should be remitted to the Tribunal for redetermination or whether this Court should dispose of it. Barcode has pointed out that a leave application is intended to be a summary screening process. There is no right of cross-examination on the affidavit filed in support of the application for leave, there is no provision for the respondent to file affidavit evidence and the time limits in section 103.1 are short, consistent with leave applications being dealt with summarily. For these reasons, I think the appropriate course of action in this case would be for this Court to resolve the matter without further delay.
[25]Is there credible evidence to support a finding that there are reasonable grounds to believe that Symbol's refusal to supply Barcode could be subject to an order under subsection 75(1)? There is evidence that Barcode is substantially affected in its business due to its inability to obtain Symbol's products. Barcode's evidence is that it cannot obtain these products either directly from Symbol or from other Symbol distributors. Barcode says it is willing and able to meet Symbol's usual trade terms and that Symbol's products are in ample supply.
[26]The only real controversy is whether there is evidence that Symbol's refusal to deal is likely to have an adverse effect on competition in a market.
[27]On this point, paragraph 75(1)(e) has not been interpreted by the Tribunal or this Court and a leave application is not the appropriate occasion to do so. Therefore, if there are any facts in its affidavit that might meet the requirements of paragraph 75(1)(e), the benefit of any doubt should work in favour of granting leave in order not to finally preclude Barcode from its day before the Tribunal.
[28]The evidence of Barcode is that in or about 1994, it took over Symbol's distribution in Western Canada and that by 2002 its annual revenues were in excess of $20 million. Symbol US is the largest single manufacturer of bar code equipment in the world. Barcode's evidence is that if Symbol continues to refuse to supply, Barcode will be forced into receivership, and indeed, the Tribunal member found that on December 19, 2003, Barcode was petitioned into receivership.
[29]From Barcode's evidence, I think it may be inferred, for leave to apply purposes, that there are reasonable grounds to believe that Barcode had somewhat of a presence in the Western Canadian market for the supply and servicing of Symbol's products. Its difficult financial situation reflected by its receivership could be likely to impede its ability to be an effective competitor in that market, thereby having an adverse effect on competition in that market. The evidence may not be strong but I think it is sufficient to constitute reasonable grounds to believe that Symbol's alleged refusal to deal could be the subject of an order under subsection 75(1).
CONCLUSION
[30]For these reasons I would dismiss the appeal with costs.
Richard C.J.: I agree.
Létourneau J.A.: I agree.