Antitrust Law Daily Wrap Up, ANTITRUST—Ca. Comp. Trib.: Canadian publishers’ consent agreement rescinded in ebook retail price dispute, (Jun 13, 2016)

By Greg Hammond, J.D.

A consent order between Canada’s Commissioner of Competition and four of Canada’s largest ebook publishers has been rescinded by the Competition Tribunal for failing to sufficiently identify the six elements of a claim for agreements or arrangements that prevent or lessen competition substantially and for failing to demonstrate that each of those elements were met. The Tribunal, however, denied an ebook retailer’s request for an order that would have prevented the Competition Bureau from seeking a new consent agreement (Rakuten Kobo Inc. v. The Commissioner of Competition, June 10, 2016, Per Curiam).

The consent agreement at issue was reached in 2014 and was intended to remove or amend clauses in distribution agreements with ebook retailers that restricted retail price competition. Rakuten Kobo Inc., an ebook retailer, sought an order rescinding the consent agreement that was reached between the Commissioner of Competition and ebook publishers Hachette Book Group, HarperCollins, Macmillan, and Simon & Schuster. In addition, Kobo sought to prevent the Commissioner from entering into a new consent agreement with any of those respondents on the basis of the same or similar allegations.

Substantive elements. The Tribunal first concluded that the Competition Bureau failed to identify each of the six substantive elements of a claim for agreements or arrangements that prevent or lessen competition substantially, under section 90.1 (1) of the Competition Act. In particular, the Tribunal determined that the agreement failed to discuss how each of the six elements were met, leaving the Tribunal without an understanding of the basic nature of the agreement.

Meeting the elements. Next, the Commissioner conceded in his written and oral submissions that the consent agreement does not contain either: (1) a statement to the effect that the Commissioner and the publishers agree that each of the six elements of subsection 90.1 (1) has been met; or (2) a statement that the Commissioner has concluded that each of those elements has been met, together with a statement by the publishers that they do not contest that conclusion.

Rescission. The Tribunal finally decided to exercise its jurisdiction to rescind the consent agreement, finding that the agreement "falls so short of sufficiently identifying the legal basis underpinning the [consent agreement] and sufficiently describing basic facts pertaining to the agreement alleged to contravene subsection 90.1(1), that it is fatally flawed." In addition, there was a second, independent reason to rescind the consent agreement, according to the Tribunal—the fact that the Commissioner and the three respondent publishers consented to the rescission of the consent agreement.

Nevertheless, the Tribunal denied Kobo’s request to prevent the Commissioner and publishers from attempting to negotiate another consent agreement. In particular, the Tribunal noted that such a result would be particularly unfair because the Commissioner and the publishers could not have known when they negotiated and filed the consent agreement that the agreement would be deficient for the grounds set forth in the Tribunal’s order.

"I welcome today’s decision by the Tribunal, which is an important step towards ensuring that Canadians can benefit from retail price competition for ebooks in Canada," commented John Pecman, Commissioner of Competition.

The case is No. CT-2014-002.

Companies: Hachette Book Group Canada Ltd.; Holtzbrinck Publishers, LLC; HarperCollins Canada Ltd.; Simon & Schuster Canada; CBS Canada Holdings Co.

Cases: Antitrust