Director of Investigation and Research, Competition Act v. Southam Inc. et al., (1997) 209 N.R. 20 (SCC)

• Judge: McLachlin, Iacobucci and Major, JJ.
• Court: Supreme Court (Canada)
• Case Date: March 20, 1997
• Jurisdiction: Canada (Federal)
• Citations: (1997), 209 N.R. 20 (SCC);[1997] CarswellNat 368;[1997] 1 SCR 748;AZ-97111037;1997 CanLII 385 (SCC);144 DLR (4th) 1;209 NR 20;71 CPR (3d) 417;50 Admin LR (2d) 199;EYB 1997-00386;JE 97-632;[1996] SCJ No 116 (QL);[1996] ACS no 116;69 ACWS (3d) 586

Competition Act v. Southam Inc. (1997), 209 N.R. 20 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Southam Inc., Lower Mainland Publishing Ltd., Rim Publishing Inc., Yellow Cedar Properties Ltd., North Shore Free Press Ltd., Specialty Publishers Inc., and Elty Publications Ltd. (appellants) v. The Director of Investigation and Research (respondent)

(24915)

Indexed As: Director of Investigation and Research, Competition Act v. Southam Inc. et al.

Supreme Court of Canada

Lamer, C.J.C., La Forest, L'Heureux-

Dubé, Sopinka, Gonthier, Cory,

McLachlin, Iacobucci and

Major, JJ.

March 20, 1997.

Summary:

Southam Inc. owned the only two daily newspapers in the Lower Mainland of British Columbia. Southam acquired two weekly community newspapers (one con­taining a "Homes" supplement) and the "Real Estate Weekly", a real estate adver­tising pub­li­cation. The Director of Investi­gation and Research applied under s. 92 of the Compe­tition Act for an order that Southam be required to, inter alia, divest itself of the "Real Estate Weekly" or the community newspaper containing the sup­plement. The "Real Estate Weekly" and the "Homes" sup­plement were the only effective competi­tors in the print real estate adver­tising mar­ket in the Lower Mainland. The Competition Tri­bunal ruled that Southam's control of both print real estate advertising publications was likely to lessen competition substantially. The Tribunal ordered Southam to sell, at its option, either the community newspaper or the "Real Estate Weekly" (remedy decision). Also at issue was whether Southam should be required to divest itself of the two com­munity news­papers. The first issue was whether the product offered by the daily and community newspapers (retail print adver­tising) were in the same product market. If that was estab­lished, the second issue was whether Southam's control of the community news­papers was likely to lessen or prevent com­petition substantially in the supply of print retail advertising services. The Compe­tition Tribunal ruled that the daily and com­munity newspapers were in competition, but not in the same product market, accordingly, there was no likelihood of a lessening or preven­tion of competition (merits decision). Southam appealed the "remedy decision" under s. 13 of the Competition Act. The Director appealed the "merits decision". The appeals were dealt with separately.

The Federal Court of Appeal, in a judg­ment reported 185 N.R. 291, dismissed Southam's "remedy decision" appeal. The Tribunal did not err in its decision on reme­dy. The court, in a judgment reported 185 N.R. 321, allowed the Director's "merits decision" appeal. The Tribunal erred in ignoring evidence of functional inter­changeability between the newspapers and in ignoring evidence of interindustry competi­tion. The court held that when this evidence was considered, it was clear that the daily and community newspapers were in the same product market. The court remitted the matter to a differently consti­tuted Tribunal to determine whether Southam's control of the community news­papers would lessen or pre­vent competition. Southam appealed both decisions.

The Supreme Court of Canada dismissed the "remedy decision" appeal, but allowed the "merits decision" appeal and restored the Tribunal's decision that acquisition of the community newspapers would not lessen or prevent competition contrary to the Compe­tition Act. The court held that the appro­priate standard of review of the Tribunal decision in this case was "reasonableness", not whether the decision was "correct" or "patently unreasonable".

Administrative Law - Topic 3221

Judicial review - General - Un­reasonableness of decision attacked - [See Trade Regulation - Topic 245 ].

Administrative Law - Topic 3221

Judicial review - General - Un­reasonableness of decision attacked - The Supreme Court of Canada stated that there existed a third standard of judicial review, falling somewhere in between whether a decision was "correct" or "patently un­reasonable" - That third standard was whether the decision was "unreasonable" - The court stated that "an unreasonable decision is one that, in the main, is not supported by any reasons that can stand up to a somewhat probing examination. ... The standard of reasonableness simpliciter is also closely akin to the standard that this court has said should be applied in reviewing findings of fact by trial judges. ... the standard of reasonableness simply instructs reviewing courts to accord con­siderable weight to the views of tribunals about matters with respect to which they have significant expertise." - Whether a decision was "unreasonable" was very close to the "clearly wrong" test familiar to Canadian judges - See paragraphs 56 to 62.

Administrative Law - Topic 3221.1

Judicial review - General - Unreasonable and patently unreasonable distinguished - The Supreme Court of Canada stated that there existed a third standard of judicial review, falling somewhere in between whether a decision was "correct" or "patently unreasonable" - That third standard was whether the decision was "unreasonable" - The court stated that "the difference between 'unreasonable' and 'patently unreasonable' lies in the im­mediacy or obviousness of the defect. If the defect is apparent on the face of the tribunal's reasons, then the tribunal's de­cision is patently unreasonable. But if it takes some significant searching or testing to find the defect, then the decision is unreasonable but not patently unreason­able." - See paragraph 57.

Administrative Law - Topic 9118

Boards and tribunals - Judicial review - Curial deference to decisions of tribunals - The Federal Court of Appeal stated that curial deference was not owed to the Competition Tribunal's decisions on ques­tions of law, such as whether merging companies were in the same product mar­ket - Curial deference was only afforded to specialized tribunals on matters falling squarely within their expertise - The court noted that the Tribunal was composed of judicial and lay members and that only judicial members could determine ques­tions of law - The court stated that "given this statutory imperative, it cannot be said that the problem at hand [definition of product market] falls squarely within the Tribunal's expertise. ... it follows that curial deference is not owed and that the standard of appellate review is correct­ness." - The Supreme Court of Canada held that the decision was one of mixed fact and law and the appropriate standard of review was "reasonableness" - The court stated that "appellate courts should be reluctant to venture into a re-exami­nation of the conclusions of the Tribunal on a question of mixed fact and law" - See paragraphs 56 to 62.

Administrative Law - Topic 9118

Boards and tribunals - Judicial review - Curial deference to decisions of tribunals - [See Trade Regulation - Topic 677 ].

Evidence - Topic 9

Definitions - Question of law - What constitutes - The Supreme Court of Canada stated that "questions of law are questions about what the correct legal test is; questions of fact are questions about what actually took place between the parties; and questions of mixed law and fact are questions about whether the facts satisfy the legal tests" - See paragraph 35.

Evidence - Topic 9

Definitions - Question of law - What constitutes - [See Trade Regulation - Topic 245 ].

Evidence - Topic 10

Definitions - Question of law and ques­tion of fact distinguished - [See first Evi­dence - Topic 9 and Trade Regulation - Topic 245 ].

Evidence - Topic 12

Definitions - Question of law and fact - What constitutes - [See first Evidence - Topic 9 and Trade Regulation - Topic 245 ].

Trade Regulation - Topic 245

Regulatory bodies - Competition tribunal - Decisions - Standard of review - The Competition Tribunal ruled that merging companies (newspapers) were not in the same product market - The Supreme Court of Canada held that the appropriate test was a question of law; whether the facts met that test was a question of mixed fact and law - Where the Tribunal applied the correct test and considered all relevant facts, if the Tribunal erred, it erred only in applying the law to the facts, which was a question of mixed fact and law - At least eight of the 12 Tribunal members were lay persons with expertise in "economics, industry, commerce or public affairs", pointing to curial deference to a decision falling squarely within the Tribunal's ex­pertise - The court noted that the Compe­tition Act's objectives were primarily eco­nomic - Conversely, judges were present on the Tribunal and there was an un­fettered right of appeal (i.e., reviewing court not limited to errors that were patently unreasonable) - The court stated that "what is dictated is a standard more deferential than correctness but less deferential than 'not patently unreason­able'" - The appropriate standard of review was whether the Tribunal's decision was "unreasonable" (i.e., decision not supported by any reasons that can stand up to a somewhat probing examination) - See paragraphs 54 to 62.

Trade Regulation - Topic 675

Competition - Mergers - Product market defined - Southam Inc., owner of the only two daily newspapers in the Lower Main­land of B.C., acquired two weekly com­munity newspapers - The Director applied under s. 92 of the Competition Act for an order that Southam divest itself of the community newspapers - The issues were whether the merging newspapers were in the same product market (retail print ad­vertising) and, if so, whether Southam's control of the community newspapers was likely to lessen or prevent competition - The Competition Tribunal ruled that the daily and community newspapers were in competition, but not in the same product market, accordingly, there was no likeli­hood of substantially lessening or prevent­ing competition - The Supreme Court of Canada held that the decision, one of mixed fact and law, fell squarely within the Tribunal's expertise and was not to be interfered with where it was not unreason­able - See paragraphs 63 to 81.

Trade Regulation - Topic 677

Competition - Mergers - Remedies - Divestiture order - Southam acquired two weekly community newspapers (one con­taining a "Homes" supplement) and the "Real Estate Weekly", a real estate adver­tising publication - The Director applied under s. 92 of the Competition Act for an order that Southam be required to divest itself of the "Real Estate Weekly" or the community newspaper containing the supplement - The two publications were the only effective competitors in the print real estate advertising market in the Lower Mainland - The Competition Tribunal ruled that Southam's control of both publi­cations was likely to lessen competition substantially - The Tribunal ordered Southam to sell either the community newspaper or the "Real Estate Weekly" - The Tribunal rejected Southam's alterna­tive of selling the "Homes" supplement as a "stand-alone" publication - The Supreme Court of Canada held that the Tribunal's decision on remedy was a mat­ter of mixed fact and law - Accordingly, the standard of review was reasonableness - The Tribunal's decision, not being un­reasonable, should not be interfered with - See paragraphs 82 to 90.

Cases Noticed:

Pezim v. British Columbia Securities Commission et al., [1994] 2 S.C.R. 557; 168 N.R. 321; 46 B.C.A.C. 1; 75 W.A.C. 1, refd to. [para. 30].

Pezim v. British Columbia (Superintendent of Brokers) - see Pezim v. British Columbia Securities Commission et al.

R. v. Nova Scotia Pharmaceutical Society et al. (No. 2), [1992] 2 S.C.R. 606; 139 N.R. 241; 114 N.S.R.(2d) 91; 313 A.P.R. 91, refd to. [para. 40].

Bell Canada v. Canadian Radio-Television and Telecommunications Commission, [1989] 1 S.C.R. 1722; 97 N.R. 15, refd to. [para. 46].

Chrysler Canada Ltd. v. Competition Tri­bunal (Can.) et al., [1992] 2 S.C.R. 394; 138 N.R. 321, refd to. [para. 49].

United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2 S.C.R. 316; 153 N.R. 81; 106 Nfld. & P.E.I.R. 140; 334 A.P.R. 140, refd to. [para. 50].

Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., [1979] 2 S.C.R. 227; 26 N.R. 341; 25 N.B.R.(2d) 237; 51 A.P.R. 237; 97 D.L.R.(3d) 417; 79 C.L.L.C. 14,209, refd to. [para. 55].

Canada (Attorney General) v. Public Ser­vice Alliance of Canada, [1993] 1 S.C.R. 941; 150 N.R. 161, refd to. [para. 57].

National Corn Growers' Association et al. v. Canadian Import Tribunal, [1990] 2 S.C.R. 1324; 114 N.R. 81; 74 D.L.R.(4th) 449; 45 Admin. L.R. 161, refd to. [para. 57].

Board of Education of Toronto v. Ontario Secondary School Teachers' Federation District 15 et al. (1997), 208 N.R. 245 (S.C.C.), refd to. [para. 57].

Stein Estate v. Ship Kathy K, [1976] 2 S.C.R. 802; 6 N.R. 359; 62 D.L.R.(3d) 1, refd to. [para. 59].

R. v. Mills (J.W.) & Son Ltd., [1968] 2 Ex. C.R. 275, refd to. [para. 71].

Director of Investigation and Research v. Air Canada (1989), 27 C.P.R.(3d) 476 (Comp. Trib.), refd to. [para. 83].

Statutes Noticed:

Competition Act, R.S.C. 1985, c. C-34, sect. 1.1 [para. 47]; sect. 92(1) [para. 11].

Competition Tribunal Act, R.S.C. 1985 (2nd Supp.), c. 19, sect. 3(2), sect. 3(3), sect. 4(1), sect. 10 [para. 12]; sect. 12, sect. 13 [para. 13].

Authors and Works Noticed:

Kerans, R.P., Standards of Review Employed by Appellate Courts (1994), pp. 103-108 [para. 37].

Counsel:

Neil Finkelstein, Glenn Leslie and Mark Katz, for the appellants;

Stanley Wong, André Brantz and J. Kevin Wright, for the respondent.

Solicitors of Record:

Blake, Cassels & Graydon, Toronto, Ontario, for the appellants;

Davis & Co., Vancouver, British Columbia, for the respondent.

This appeal was heard on November 25, 1996, before Lamer, C.J.C., La Forest, L'Heureux-Dubé, Sopinka, Gonthier, Cory, McLachlin, Iacobucci and Major, JJ., of the Supreme Court of Canada.

On March 20, 1997, Iacobucci, J., delivered the following judgment in both official languages for the Supreme Court of Canada.