Federal Court Sets Aside Production Order Obtained by the Commissioner of Competition against Labatt

On January 18, 2008 (public reasons released January 28), the Federal Court set aside production orders issued against Labatt Brewing Company under section 11 of the Competition Act.

Section 11 of the Competition Act allows the Commissioner of Competition to apply ex parte to a judge for an order compelling records that are relevant to the Commissioner's inquiry. On November 8, 2007, relying on ex parte submissions of the Commissioner, Justice Mactavish issued a section 11 production order against Labatt. In December, Labatt moved before Justice Mactavish to have the production order set aside on the basis that the information provided on the Commissioner's ex parte application was misleading, inaccurate and incomplete, such that the order never should have been made.

Justice Mactavish agreed that the information provided on the Commissioner's ex parte motion was “misleading, inaccurate and incomplete” and that she would not have granted the production order if the Commissioner had provided complete disclosure. Justice Mactavish set aside the production order without prejudice to the right of the Commissioner to bring a fresh application, this time on notice to Labatt.

The Court's reasons identify numerous areas of deficiency in the Commissioner's disclosure on the ex parte motion for the production order. One was the failure to disclose that the Commissioner had previously represented to the Federal Court (in the context of an earlier application for an injunction delaying the acquisition of Lakeport Breweries by Labatt) that the information obtained from previous section 11 orders issued against Labatt and others in February 2007 would suffice for purposes of the Commissioner's inquiry. Justice Mactavish found that had she known of this prior representation she would not have issued the order she did without “further explanation from the Commissioner as to why so much additional information and documentation was now required.” Justice Mactavish also found that the Commissioner had failed to disclose the extent of overlap between the information sought under the section 11 order and information already produced by Labatt and other brewers pursuant to prior section 11 orders and statutory requirements. In addition, Justice Mactavish found that the Commissioner breached the duty of full disclosure in failing to bring concerns previously raised by Labatt about the February production order to the attention of the Court.

The decision of Justice Mactavish confirms that the Court does not act as a “rubber stamp” automatically issuing section 11 orders on application of the Commissioner. Rather, a judge exercising independent judicial oversight over the extensive investigative powers granted to the Commissioner under the Competition Act has discretion to determine whether or not a production order is appropriate in the circumstances. That discretion must be exercised with the benefit of full disclosure.

Labatt was represented by Neil Finkelstein, Brian Facey, Catherine Beagan Flood and Ryder Gilliland of Blake, Cassels & Graydon LLP and by Labatt in-house lawyers Susan Rabkin, Clare Smith and Karyn Sullivan. The Commissioner was represented by John Syme, William Miller, Robert Levine and Roger Nassrallah, of the Department of Justice, Competition Law Division.