2018 FC 64, 2018 FC 64

T-219-17 2018 FC 64 Rakuten Kobo Inc. ( Applicant ) v. The Commissioner of Competition, Hachette Book Group Canada Ltd., Hachette Book Group Inc., Hachette Digital, Inc., Holtzbrinck Publishers, LLC and Simon & Schuster Canada, a Division of CBS Canada Holdings Co. ( Respondents ) Indexed as: Rakuten Kobo Inc. v. Canada (Commissioner of Competition) Federal Court, Crampton C.J.—Toronto, October 23, 2017; Ottawa, February 1, 2018. Editor’s Note: Portions redacted by the Court are indicated by [***].

Competition — Application seeking various types of relief in relation to consent agreements (CAs) entered into by Commissioner of Competition (Commissioner) with other respondents (respondent publishers) and filed with Competition Tribunal — CAs addressing restrictions on price competition in sale of electronic books (e-books) in Canada resulting from respondent publishers change from wholesale distribution model to agency distribution model — Commissioner concluding that arrangements preventing or lessening competition in retail market for e-book — CAs prohibiting respondent publishers from restricting, limiting or impeding e-book retailer’s ability to set, alter or reduce retail price of any e-book — Applicant asserting financial harm if CAs implemented — Issues whether Commissioner acting without jurisdiction by entering into CAs to remedy: (1) conspiracy entered into in U.S. and previously resolved by U.S. courts and antitrust enforcers;(2) arrangement, within meaning of Competition Act, s. 90.1 , that never existed; (3) arrangement that was not existing or proposed at time CAs executed — Court herein exercising discretion to decline to consider application on its merits — Factors found in Strickland v.

Canada (Attorney General) weighing in favour of declining to hear application — Judicial review applications brought by third parties in respect of consent agreements only heard in exceptional cases — First jurisdictional issue raised by applicant true question of jurisdiction or vires, best dealt with by Tribunal — Other issues factual in nature — Court nevertheless proceeding to consider application on its merits — Commissioner having territorial jurisdiction under Act , s. 90.1 to enter into CAs — Act, s. 90.1 applying to all agreements, arrangements preventing or lessening competition in a market regardless of whether entered into within or outside Canada — S. 90.1(a),(

b) enabling Tribunal to make orders described therein against “any person — whether or not a party to the agreement or arrangement” — Fact that agreement contemplating substantial adverse impact on competition in Canada strong basis for “real and substantial connection” between agreement, Canada — Not necessary for actus reus element of legislative provision to occur wholly or partially in Canada in order for real, substantial connection to be found — Principle of international comity not offended herein — Not unreasonable for Commissioner to have limited his consideration of information provided by applicant — Commissioner entitled to rely on staff, senior management for

summary or synthesis of information provided by applicant — Commissioner not ignoring evidence — Reasonably open for Commissioner to conclude that arrangement remaining in force (i.e. existing) at time he entered into CAs — Respondent publishers’ settlement in U.S. not terminating arrangement in Canada — U.S. judgments not having impact on implementation of arrangement in Canada — Application dismissed.

This was an application seeking various types of relief in relation to three consent agreements (CAs) that the Commissioner of Competition entered into with the other respondents (the respondent publishers) and filed with the Competition Tribunal. The CAs addressed restrictions on price competition in the sale of electronic books (e-books) in Canada that the Commissioner asserted resulted from a change by the respondent publishers from a wholesale distribution model to an agency distribution model.

The recitals in each of the CAs stated that the Commissioner concluded that the arrangements included provisions restricting the ability of e-book retailers to discount the retail prices of e-books; and prevented or lessened competition in the retail market for e-books in Canada, within the meaning of

section 90.1 of the Act . The CAs prohibited the respondent publishers from restricting, limiting or impeding an e-book retailer’s ability to set, alter or reduce the retail price of any e-book for sale to consumers in Canada, or to offer price discounts or any other form of promotion to encourage consumers in Canada to purchase one or more e-books. The CAs also prohibited the respondent publishers from entering into an agreement with any e-book retailer that has one of those effects.

The applicant asserted that if the CAs were implemented, it would suffer significant financial harm, as its contractual relationships with the respondent publishers would be radically altered. In response, the Commissioner maintained that the applicant simply wished to avoid competing by cutting its retail prices. The Commissioner also submitted that the Court should decline to consider this application because the applicant had an adequate alternative remedy and forum under subsection 106(2) of the Act.

The main issues were whether the Commissioner acted without jurisdiction by entering into the CAs to remedy a conspiracy that was entered into in the U.S. and that was previously resolved by U.S. courts and antitrust enforcers; whether the Commissioner acted without jurisdiction by entering into the CAs to remedy “an arrangement”, within the meaning of

section 90.1 of the Act , that never existed; and whether the Commissioner acted without jurisdiction by entering into the CAs to remedy “an arrangement” that was not “existing or proposed” at the time the CAs were executed. Held , the application should be dismissed. The Court exercised its discretion to decline to consider the present application on its merits. In Strickland v. Canada (Attorney General) , the Supreme Court identified a number of considerations that are relevant to a court’s determination of whether to exercise its discretion to refuse to hear a judicial review application.

Factors that weighed in favour of declining to hear the present application included the purposes and policy considerations underpinning the legislative scheme in issue, the relative expertise of the alternative decision maker, the nature of the error alleged, and the costs associated with judicial review proceedings in this Court. Judicial review applications brought by third parties in respect of consent agreements filed with the Tribunal should only be heard in exceptional cases.

While the first of the three jurisdictional issues that have been raised by the applicant in this application may properly be characterized as a true question of jurisdiction or vires , this issue would be best dealt with by the Tribunal. The other two issues were largely factual in nature. Given the clear choice that Parliament made to place strict limits on the ability of third parties to challenge consent agreements in

subsection 106(2) of the Act, the Court should not exercise its discretion to review the Commissioner’s determinations in respect of suchissues. Nevertheless, in the event that the Court may be found to have erred in concluding that it would be inappropriate to exercise itsdiscretion, it proceeded to consider the applicant’s application on its merits. The Commissioner had the territorial jurisdiction under

section 90.1 to enter into the CAs. It can be inferred from the scheme of the Actas a whole that

section 90.1 applies to all agreements and arrangements that have, or are likely to have, the effect described in thatprovision, namely, a prevention or lessening of competition in a market. This is so regardless of whether they are entered into within oroutside Canada.

Section 90.1 includes explicit language in paragraphs 90.1(

a) and (

b) that enables the Tribunal to make the ordersdescribed therein against “any person ― whether or not a party to the agreement or arrangement”. Given the existence of such language,additional language extending the scope of

section 90.1 to third parties who give effect to an agreement or arrangement entered intooutside Canada was not necessary. In light of this conclusion, it was not necessary to assess whether there is a real and substantialconnection between the impugned arrangement and Canada. Still, in case it was wrong on the issue of jurisdiction, the Court proceededwith such an analysis. In the context of

section 90.1, a real and substantial connection between Canada and an arrangement or agreementthat is entered into outside this country will exist if “a constituent element [of

section 90.1] takes place” in this country. The fact that theagreement contemplated a substantial adverse impact on competition in Canada provided a strong basis for concluding that this is a “realand substantial connection” between the agreement and Canada. It is not necessary for the actus reus element of a legislative provision tooccur wholly or partially in Canada, in order for a real and substantial connection to be found to exist between this country and theactivity contemplated by the provision. The principle of international comity was not offended herein.

It would be a sad commentary ifCanadian laws such as the Act could not be applied so as to protect the domestic economy and its participants from anticompetitivearrangements or other activities engaged in abroad. On the issue of whether the Commissioner acted without jurisdiction by entering into the CAs to remedy “an arrangement”, within themeaning of

section 90.1 of the Act, that never existed, it was not unreasonable for the Commissioner to have limited his consideration ofthe information that had been provided by the applicant. It was not incumbent upon staff in the Competition Bureau to summarize theapplicant’s evidence in a manner similar to which they summarized the evidence that supported their conclusions and recommendationsto the Commissioner. The Commissioner was made aware of the essence of the applicant’s position. The Commissioner was entitled torely on staff and senior management in the Competition Bureau to review and provide him with a

summary or synthesis of the extensiveinformation that was provided by the applicant and other industry participants during the course of the Commissioner’s in-depth inquiryinto the arrangement and its alleged implementation in Canada. The Commissioner did not ignore the information that the applicantsubmitted contradicted the conclusions and recommendations made by the Competition Bureau. It was reasonably open to the Commissioner to conclude that the arrangement remained in force (i.e., that it was “existing”) at the timehe entered into the CAs with the respondent publishers.

The respondent publishers’ settlement with the U.S. Department of Justice andtheir consent to final U.S. judgments did not terminate the arrangement insofar as it applied to Canada. The applicant did not demonstratethat the U.S. judgments had any impact on the implementation of the arrangement in Canada. Indeed, the shift to the agency model thatoccurred in Canada appeared to suggest otherwise. It was open to the Commissioner to conclude that this shift was evidence of theimplementation of the arrangement in Canada. STATUTES AND REGULATIONS CITED Competition Act, R.S.C., 1985, c.

C-34, ss. 1.1, 9, 45, 46, 48(2), 76(1), 82, 83, 90.1, 105, 106. Competition Tribunal Act, R.S.C., 1985 (2nd Supp.), c. 19, s. 8(2). Divorce Act, R.S.C., 1985 (2nd Supp.), c. 3, s. 8(2). Federal Child Support Guidelines, SOR/97-175. Federal Courts Act, R.S.C., 1985, c. F-7, s. 18.1. Federal Courts Rules, SOR/98-106, r. 317.

Interpretation Act, R.S.C., 1985, c. I-21, s. 12. Municipal Government Act, R.S.A. 2000, c. M-26. TREATIES AND OTHER INSTRUMENTS CITED Agreement between the Government of Canada and the Government of the United States of America on the Application of PositiveComity Principles to the Enforcement of their Competition Laws (5 October 2014, online: <www.justice.gov> and<www.competitionbureau.gc.ca>). CASES CITED APPLIED: Kobo Inc. v. The Commissioner of Competition, 2014 Comp. Trib. 14, 2014 CACT 14 , affd 2015 FCA 149, leave to appeal toSCC refused, [2016] 1 S.C.R. xvi; Strickland v.

Canada (Attorney General), 2015 SCC 37 , 2015 S.C.C. 37, [2015] 2 S.C.R.713; 797175 Alberta Ltd. (Agent of) v. Calgary (City), 2017 ABQB 18, 49 Alta. L.R. (6th) 114; Real Estate Council of Alberta v.Henderson, 2007 ABCA 303, 80 Alta. L.R. (4th) 1; Alberta (Information and Privacy Commissioner) v. Alberta Teachers’Association, 2011 SCC 61, [2011] 3 S.C.R. 654; Edmonton (City) v. Edmonton East (Capilano) Shopping Centres Ltd., 2016 SCC 47,[2016] 2 S.C.R. 293; R. v. Hape, 2007 SCC 26, [2007] 2 S.C.R. 292; Libman v.

The Queen, (SCC), [1985] 2 S.C.R. 178,(1985), 21 D.L.R. (4th) 174; Lapointe Rosenstein Marchand Melançon LLP v. Cassels Brock & Blackwell LLP, 2016 SCC 30, [2016] 1S.C.R. 851; Tran v. Canada (Public Safety and Emergency Preparedness), 2017 SCC 50, [2017] 2 S.C.R. 289; Rizzo & Rizzo Shoes Ltd

(Re), (SCC), [1998] 1 S.C.R. 27, (1998), 154 D.L.R. (4th) 193. CONSIDERED: Rakuten Kobo Inc. v. Canada (Commissioner of Competition), 2017 FC 382, 24 Admin. L.R. (6th) 25; Canada (Commissioner ofCompetition) v. HarperCollins Publishers LLC, 2017 Comp. Trib. 10, [2017] C.C.T.D. No. 10 (QL); Canada (Director of Investigationand Research) v. Southam Inc., (SCC), [1997] 1 S.C.R. 748, (1997), 144 D.L.R. (4th) 1; Canada (Commissioner ofCompetition) v. Superior Propane Inc., 2001 FCA 104, [2001] 3 F.C. 185; Society of Composers, Authors and Music Publishers ofCanada v.

Canadian Assn. of Internet Providers, 2004 SCC 45, [2004] 2 S.C.R. 427; A.T. v. Globe24h.com, 2017 FC 114, [2017] 4F.C.R. 310; Moran v. Pyle National (Canada) Ltd., (SCC), [1975] 1 S.C.R. 393, (1973), 43 D.L.R. (3d) 239; MorguardInvestments Ltd. v. De Savoye, (SCC), [1990] 3 S.C.R. 1077, (1990), 76 D.L.R. (4th) 256; Spencer v. The Queen, (SCC), [1985] 2 S.C.R. 278, (1985), 21 D.L.R. (4th) 756; Gencor Ltd. v. Commission of the European Communities, Case T-102/96, [1999] E.C.R. II-00753; Intel Corporation Inc. v. European Commission, Case C-413/14 P (2017) (E.C.J.). REFERRED TO: Rakuten Kobo Inc. v.

Canada (Commissioner of Competition), 2016 Comp. Trib. 11, [2016] C.C.T.D. No. 11 (QL); Alberta (Education)v. Canadian Copyright Licensing Agency (Access Copyright), 2010 FCA 198, [2011] 3 F.C.R. 223, revd on other grounds 2012 SCC 37,[2012] 2 S.C.R. 345; Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2013 SCC 58, [2013] 3 S.C.R. 545; Airia Brands Inc.v. Air Canada, 2017 ONCA 792, 417 D.L.R. (4th) 467; Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190; Canada(Citizenship and Immigration) v. Khosa, 2009 SCC 12, [2009] 1 S.C.R. 339; Fairhurst v.

De Beers Canada Inc., 2012 BCCA 257, 351D.L.R. (4th) 168; VitaPharm Canada Ltd. v. F. Hoffman-La Roche Ltd., 2002 CarswellOnt 235, 20 C.P.C. (5th) 351, [2002] O.J. No. 298(QL) (Sup. Ct.); Bouchard v. Mitsubishi Motor Sales of Canada Inc., 2010 FC 56; Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012]1 S.C.R. 572; R. v. Stucky, 2009 ONCA 151, 303 D.L.R. (4th) 1; R. v. McIntosh, (SCC), [1995] 1 S.C.R. 686, (1995),95 C.C.C. (3d) 481; Shah v. LG Chem Ltd., 2015 ONSC 2628, 125 O.R. (3d) 773; R. v. BASF Aktiengesellschaft, 1999 CarswellNat 6381(F.C.T.D.); R. v.

Daicel Chemical Industries, Ltd., T-1686-00; Motorola Mobility LLC v. Au Optronics Corp., 775 F.3d 816 (7th Cir.2014); Lotes Co., Ltd. v. Hon Hai Precision Industry Co., Ltd., 753 F.3d 395 (2nd Cir. 2014); Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d845 (7th Cir. 2012); Attorney General of Canada v. Inuit Tapirisat et al., (SCC), [1980] 2 S.C.R. 735, (1980), 115D.L.R. (3d) 1; The Queen v. Harrison, (SCC), [1977] 1 S.C.R. 238, (1976), 66 D.L.R. (3d) 660. AUTHORS CITED Competition Bureau Canada. News Release.

Japanese company to plead guilty and pay US$130M fine for its participation in a bid-rigging scheme, Ottawa: July 20, 2016. Côté, Pierre-André. The

Interpretation of Legislation in Canada, 4th ed. Toronto: Carswell, 2011. United States Department of Justice and Federal Trade Commission, Antitrust Guidelines for International Enforcement Cooperation (13January 2017), online: <https://www.justice.gov>. appLICATION seeking various types of relief in relation to three consent agreements that the Commissioner of Competition entered intowith the other respondents and filed with the Competition Tribunal. Application dismissed. APPEARANCES Nikiforos Iatrou and Scott McGrath for applicant Rakuten Kobo Inc.

John Syme and Katherine Johnson for respondent the Commissioner of Competition. Linda M. Plumpton and James Gotowiec for respondents Hachette Book Group Canada Ltd., Hachette Book Group Inc., HachetteDigital, Inc. Randal T. Hughes and Emrys Davis for respondent Holtzbrinck Publishers, LLC. Peter Franklyn for respondent Simon & Schuster Canada, a Division of CBS Canada Holdings Co. SOLICITORS OF RECORD WeirFoulds LLP for applicant Rakuten Kobo Inc. Department of Justice Canada – Competition Bureau Legal Services, Gatineau, Quebec, for respondent Commissioner of Competition.

Torys LLP, Toronto, for respondents Hachette Book Group Canada Ltd., Hachette Book Group Inc., Hachette Digital, Inc. Bennett Jones LLP, Toronto, for respondent Holtzbrinck Publishers, LLC. Osler, Hoskin & Harcourt LLP and Goodmans LLP, Toronto, for respondent Simon & Schuster Canada, a Division of CBS CanadaHoldings Co. The following are the public reasons for judgment and judgment rendered in English by Crampton C.J.: I. Introduction

[ 1 ] In this application, Rakuten Kobo Inc. (Kobo) seeks various types of relief in relation to three consent agreements (CAs) that the Commissioner of Competition entered into with the other respondents identified in the style of cause above (the respondent Publishers) and filed with the Competition Tribunal in January 2017. Among other things, Kobo has requested a declaration that the CAs are unlawful and invalid, and an order quashing them. [ 2 ] In support of its application, Kobo asserts three jurisdictional grounds of review.

First, it submits that the Commissioner acted without jurisdiction by entering into the CAs to remedy a conspiracy that was entered into in the U.S., not in Canada, and that was resolved by U.S. courts and antitrust enforcers in 2012–2013. Second, Kobo asserts that the Commissioner acted without jurisdiction by entering into the CAs to remedy “an arrangement” that never existed. Third, Kobo maintains that, if such arrangement did once exist, it was no longer “existing or proposed,” as required by

section 90.1 of the Competition Act , R.S.C., 1985, c. C-34 (the Act), at the time the CAs were entered into. [ 3 ] The Commissioner opposes Kobo’s jurisdiction challenges and further submits that this Court should decline to consider this application because Kobo has an adequate alternative remedy under subsection 106(2) of the Act . That provision permits third parties who are directly affected by a consent agreement to apply to the Competition Tribunal (the Tribunal) to have one or more of the agreement’s terms rescinded or varied.

The Commissioner maintains that Kobo should not be permitted to use the Court’s judicial review process to defeat Parliament’s clear choice to create a limited right of review of consent agreements based on grounds that a third party may raise. [ 4 ] For the reasons that follow, this application will be denied. II. The Parties [ 5 ] Kobo is a retailer of electronic books (e-books).

It is based in Toronto, Ontario, and has agreements with authors, publishers, and distributors that grant it rights to sell e-books in Canada. [ 6 ] The Commissioner is a statutory authority who is responsible for the administration and enforcement of the Act . In carrying out those responsibilities, the Commissioner is supported by staff in the Competition Bureau. [ 7 ] The respondent Publishers are three of the five major publishers of general interest fiction and non-fiction e-books and hard copy books. III. The CAs [ 8 ] The Commissioner entered into separate, and virtually identical, CAs with each of (

i) Hachette Book Group Canada Ltd. and the two related Hachette affiliates identified above (collectively, Hachette), (ii) Holtzbrinck Publishers, LLC (doing business as Macmillan) (Macmillan), and (iii) Simon & Schuster Canada, a division of CBS Canada Holdings Co. (Simon & Schuster). [ 9 ] Broadly speaking, the CAs address restrictions on price competition in the sale of e-books in Canada that the Commissioner asserts resulted from a change by the respondent Publishers from a wholesale distribution model to an agency distribution model. [ 10 ] Pursuant to the wholesale model, the respondent Publishers set a suggested retail price for e-books, and were paid a pre- determined percentage (typically 50 percent) of that suggested price for each book sold, regardless of the price actually charged to the consumer by the retailer.

By contrast, under the agency model, retailers were appointed as the non-exclusive agent for the marketing and delivery of e-books on behalf of the publishers, who set the price at which the books must be sold. Retailers are then paid a commission (typically 30 percent) for each book sold. [ 11 ] The recitals in each of the CAs state that the Commissioner has concluded that the respondent Publisher in question implemented in Canada an arrangement that was entered into in the United States with at least one other competing publisher, relating to the sale of e- books in both of those countries (the Arrangement).

Those recitals also state that the Commissioner has concluded that the Arrangement includes provisions that restrict the ability of e-book retailers to discount the retail prices of e-books; and that the Arrangement prevents or lessens, or is likely to prevent or lessen, competition substantially in the retail market for e-books in Canada, within the meaning of

section 90.1 of the Act . [ 12 ] To address those alleged anticompetitive effects of the collective shift to agency agreements, the CAs prohibit the respondent Publishers from directly or indirectly restricting, limiting or impeding an e-book retailer’s ability to set, alter or reduce the retail price of any e-book for sale to consumers in Canada, or to offer price discounts or any other form of promotion to encourage consumers in Canada to purchase one or more e-books. The CAs also prohibit the respondent Publishers from entering into an agreement with any e- book retailer that has one of those effects.

These prohibitions apply for nine months, commencing no later than 120 days following the registration of the CAs. During the hearing of this application, the Commissioner described these prohibitions as being the “centrepiece” of the CAs, and as having been designed to “ignite the flames of competition” in the e-book market in Canada.

Kobo and other industry participants refer to these prohibitions as creating an “Agency Lite” model of distribution. [ 13 ] Certain other terms in the CAs prohibit the respondent Publishers from entering into agreements with e-book retailers relating to the sale of e-books to consumers in Canada that contain particular types of most-favoured nation clauses (Price MFN Clauses) for a period of three years from the date of the registration of the CA. [ 14 ] In addition, the CAs require the respondent Publishers to take steps to terminate, and not renew or extend, existing agreements with e-book retailers that restrict price discounting or contain a Price MFN Clause.

In lieu of such action, the CAs permit the respondent Publishers to take certain alternative steps to address the Commissioner’s concerns. [ 15 ] In March of 2017, I issued an order, on consent, staying the implementation of the CAs until the fifth business day following this Court’s determination of this application ( Rakuten Kobo Inc. v. Canada (Commissioner of Competition) , 2017 FC 382 , 24 Admin. L.R. (6th) 25 ( Kobo 2017 ), at paragraph 8 ).

[16] Kobo asserts that if the CAs are implemented, it will suffer significant financial harm, as its contractual relationships with therespondent Publishers will be radically altered. In response, the Commissioner maintains that Kobo simply wishes to avoid competing bycutting its retail prices. IV.

Background [17] The prohibitions in the CAs are essentially the same as the prohibitions that were contained in an earlier single consentagreement that the Commissioner entered into with the respondent Publishers and HarperCollins Canada Limited (HarperCollins) in2014 (the Initial CA), except that they are now of shorter duration.

Those prohibitions are also similar to prohibitions that were containedin final judgments that were issued in the United States in 2012. [18] The Initial CA was rescinded by the Tribunal after it was found to have been deficient in certain respects (Rakuten Kobo Inc. v.Canada (Commissioner of Competition), 2016 Comp. Trib. 11, [2016] C.C.T.D. No. 11 (QL)).

On their face, the CAs address thosedeficiencies. [19] The Tribunal’s rescission of the Initial CA was without prejudice to the ability of the Commissioner to enter into a new consentagreement with the publishers in question, based on conclusions he may reach regarding the elements of the reviewable conduct undersubsection 90.1(1) of the Act. [20] While HarperCollins was a party to the Initial CA, it apparently declined to enter into a revised consent agreement. As aconsequence, the Commissioner filed a contested application before the Tribunal against HarperCollins. HarperCollins then filed amotion for

summary dismissal of that application, on the basis of the first and third of the three jurisdictional grounds that Kobo hasraised in this application. [21] In Kobo 2017, above, I stayed the hearing of this application until the Tribunal had issued its decision on HarperCollins’ above-mentioned motion.

I did so after concluding that it was preferable for the Court to have the benefit of the Tribunal’s determinationsregarding the jurisdictional issues that have been raised in both proceedings before addressing those issues itself (Kobo 2017, above, atparagraph 39). [22] A short while later, in a decision written by Justice Gascon, the Tribunal dismissed HarperCollins’ motion, after concluding thatit was not plain and obvious that (

i) the Tribunal did not have jurisdiction to grant the relief sought by the Commissioner in respect of theArrangement; and (ii) the Arrangement is no longer “existing or proposed” (Canada (Commissioner of Competition) v. HarperCollinsPublishers LLC, 2017 Comp. Trib. 10, [2017] C.C.T.D. No. 10 (QL) (HarperCollins)). Subsequently, HarperCollins entered into aseparate consent agreement with the Commissioner and filed a notice of discontinuance in relation to its appeal of Justice Gascon’sdecision.

This separate consent agreement has not been challenged by Kobo in this application. [23] Whereas HarperCollins submitted that it is the Tribunal that lacks jurisdiction to grant the relief requested by the Commissionerin the contested application that he filed against HarperCollins, Kobo asserts that it is the Commissioner who lacks the jurisdiction toenter into the CAs. Nothing turns on this, as I consider that the Commissioner’s jurisdiction under

section 90.1 is co-extensive with theTribunal’s jurisdiction, such that if the Tribunal has no jurisdiction in respect of particular conduct, neither does the Commissioner (Kobo2017, above, at paragraph 41). [24] At the time the three CAs were filed with the Tribunal, the Commissioner also filed a fourth consent agreement that he hadentered into with Apple Inc. and Apple Canada Inc. (collectively, Apple).

That consent agreement has not been challenged by Kobo andtherefore will not be further discussed in these reasons for judgment. [25] Although Kobo succeeded in persuading the Tribunal to rescind the Initial CA, it was less successful in a prior referenceproceeding that concerned the scope of issues that may be raised by a third party who challenges a consent agreement under subsection106(2) of the Act (Kobo Inc. v. The Commissioner of Competition, 2014 Comp. Trib. 14, 2014 CACT 14 (Kobo 2014)).

Inparticular, the Tribunal found that it was not open to Kobo to attempt to establish, whether by factual evidence or otherwise, that one ormore of the substantive elements set forth in

section 90.1 of the Act are not met. This specifically included whether there is an agreementor arrangement―whether existing or proposed―between persons, two or more of whom are competitors. The Tribunal held that disputeswith respect to these and other substantive elements, such as whether an agreement is likely to prevent or lessen competitionsubstantially, are beyond the scope of subsection 106(2). That decision was upheld by the Federal Court of Appeal in Rakuten Kobo Inc.v.

Canada (Commissioner of Competition), 2015 FCA 149 (Kobo FCA), leave to appeal to SCC refused, 36554 (14 January 2016)[[2016] 1 S.C.R. xvi]. [26] Notwithstanding that the Tribunal rejected Kobo’s position regarding the scope of issues that may be raised by third parties inproceedings initiated under subsection 106(2) of the Act, the Tribunal observed that “it would be potentially open to a party to raise[issues] before the Federal Court on an application for judicial review brought pursuant to

section 18.1 of the Federal Courts Act, R.S.C.1985, c. F-7” (Kobo 2014, above, at paragraph 73 (citations omitted)). A similar observation was also made by the Federal Court ofAppeal (Kobo FCA, above, at paragraph 10). V. Relevant Legislation [27]

Section 105 of the Act provides for the entering into consent agreements and the registration of those agreements by theTribunal. It states: Consent agreement 105

(1) The Commissioner and a person in respect of whom the Commissioner has applied or may apply for an order under this Part,other than an interim order under

section 103.3, may sign a consent agreement. Terms of consent agreement

(2) The consent agreement shall be based on terms that could be the subject of an order of the Tribunal against that person. Registration

(3) The consent agreement may be filed with the Tribunal for immediate registration. Effect of registration

(4) Upon registration of the consent agreement, the proceedings, if any, are terminated, and the consent agreement has the same force and effect, and proceedings may be taken, as if it were an order of the Tribunal. [ 28 ] Pursuant to subsection 106(2) , third parties may apply to the Tribunal to vary or rescind a consent agreement. That provision states: 106 … Directly affected persons

(2) A person directly affected by a consent agreement, other than a party to that agreement, may apply to the Tribunal within 60 days after the registration of the agreement to have one or more of its terms rescinded or varied. The Tribunal may grant the application if it finds that the person has established that the terms could not be the subject of an order of the Tribunal. [ 29 ]

Section 90.1 gives the Tribunal the jurisdiction to issue two types of orders in respect of certain agreements or arrangements between competitors. That provision states: Order 90.1

(1) If, on application by the Commissioner, the Tribunal finds that an agreement or arrangement — whether existing or proposed — between persons two or more of whom are competitors prevents or lessens, or is likely to prevent or lessen, competition substantially in a market, the Tribunal may make an order (

a) prohibiting any person — whether or not a party to the agreement or arrangement — from doing anything under the agreement or arrangement; or (

b) requiring any person — whether or not a party to the agreement or arrangement — with the consent of that person and the Commissioner, to take any other action. VI. Preliminary Issue [ 30 ] The Commissioner submits that this Court should decline to consider this application because Kobo has an adequate alternative remedy and forum under subsection 106(2) of the Act .

The Commissioner maintains that Kobo should not be permitted to use the Court’s judicial review process to do an “end run” around the limited right of review of consent agreements that Parliament created for the Tribunal on applications brought by third parties in subsection 106(2) of the Act. [ 31 ] I agree. However, I do so primarily for reasons other than the adequacy of the remedies available to Kobo under that provision. [ 32 ] In Strickland v.

Canada (Attorney General) , 2015 SCC 37 , [2015] 2 S.C.R. 713 ( Strickland ), the Supreme Court of Canada recalibrated the framework applicable to a court’s determination of whether to exercise discretion to hear an application for judicial review.

That decision was issued shortly after the Federal Court of Appeal agreed with the Tribunal’s observation that judicial review would be potentially available to third parties such as Kobo who may seek to challenge a consent agreement filed by the Commissioner ( Kobo FCA , above). [ 33 ] The central issue in Strickland was whether the Federal Court erred in exercising its discretion to decline to hear an application for a declaration that the Federal Child Support Guidelines , SOR/97-175, are unlawful.

In reaching that conclusion, Justice Gleason (as she then was) emphasized the minor role played by this Court in issues under the Divorce Act , R.S.C., 1985 (2nd Supp.), c. 3, and the broader jurisdiction and expertise of the provincial superior courts in matters related to divorce and child support. [ 34 ] In its assessment of the issue, the Supreme Court identified a number of considerations that are relevant to a court’s determination of whether to exercise its discretion to refuse to hear a judicial review application. Those considerations are: i.

The purposes and policy considerations underpinning the legislative scheme in issue; ii. The nature of the other forum which could deal with the issue, including its remedial capacity; iii. The relative expertise of the alternative decision maker; iv. The nature of the error alleged; v. The existence of adequate and effective recourse in the forum in which litigation is already taking place; vi. Expeditiousness; vii. The convenience of the alternative remedy; viii. The economic use of judicial resources; and

ix. Cost. ( Strickland , above, at paragraph 42 .) [ 35 ] The Court emphasized that the categories of relevant factors are not limited, and that it is for the courts to identify and balance the relevant factors in the context of a particular case. Elaborating, the Court stated: …The court should consider not only the available alternative, but also the suitability and appropriateness of judicial review in the circumstances. In short, the question is not simply whether some other remedy is adequate, but also whether judicial review is appropriate.

Ultimately, this calls for a type of balance of convenience analysis. ( Strickland , above, at paragraph 43 .) [ 36 ] In the result, the Court relied upon considerations that were “appropriately concerned more with the unsuitability of judicial review in the Federal Court in this case than with the narrower question of whether a remedy comparable to that sought by the appellants is available elsewhere” ( Strickland , above, at paragraph 46 ).

In this regard, the Court found that the appellants’ judicial review proceedings in the Federal Court were “deeply inconsistent with fundamental parliamentary choices about where important family law issues will be determined” ( Strickland , above, at paragraph 51 ). [ 37 ] A similar result was reached in the subsequent case of 797175 Alberta Ltd. (Agent of) v. Calgary (City) , 2017 ABQB 18 , 49 Alta. L.R. (6th) 114 ( 797175 ). There, the issue was whether the Court should hear an application for judicial review of a decision of the Calgary Composite Assessment Review Board regarding a property assessment.

The parties were in agreement that the application concerned issues of fact and mixed fact and law which were not appealable under the relevant

section of the Municipal Government Act , R.S.A. 2000, c. M-26. In deciding to dismiss the application without assessing those issues, the Court held as follows [at paragraphs 35– 37]: There are strong policy reasons for the Court to not usurp the intention of the legislature by reviewing the factual merits of assessment board decisions.

Section 470 provides an important gate-keeping function by regulating access to the appeal process, partly for reasons of efficiency and judicial economy. The City and the Board emphasize this represents a real “flood-gates” concern because of: the number of assessment complaint hearings each year; the substantial volume of evidence and materials that are often filed in these hearings; an The following are the public reasons for judgment and judgment rendered in The following are the public reasons for judgment and judgment rendered in d, since tax-payers can challenge assessments for each and every year.

Having regard to the foregoing, the discretion of the Court should be exercised against the granting of judicial review where the questions raised are those of fact or mixed fact and law, except in extraordinary circumstances, which were not argued in this instance and are not before this Court.

In my view, the right to constitutionally protected review of administrative decision-making is discretionary and is not absolute and must be balanced against important legislative and policy considerations, as was set out in Strickland . [ 38 ] In reaching the foregoing conclusion, the Court was guided by the following comments of the Alberta Court of Appeal in Real Estate Council of Alberta v. Henderson , 2007 ABCA 303 , 80 Alta. L.R. (4th) 1 ( Henderson ) [at paragraph 26]: … Judicial review should not generally be used as an end run around statutory restrictions on appeal rights.

Thus, we would be disinclined to grant judicial review even if it appeared to us that the conclusion reached by the hearing panel was wrong if its decision was made in the course of a process that had been conducted according to law. Otherwise, an application for judicial review could be used to do indirectly what cannot be directly done — obtain an appeal not intended by the Legislature. [ 39 ] In my view, the reasoning adopted in Strickland , 797175 and Henderson leads to a similar result in the case at bar.

Stated differently, an assessment of the factors that were identified and given particular emphasis in those cases leads to the conclusion that I should exercise my discretion to decline to consider the present application on its merits. [ 40 ] Based on the particular circumstances surrounding this application, the most relevant of the factors identified in Strickland are the first three in the list set forth at paragraph 34 above. However, I will briefly assess all of the factors in that list below. The parties did not identify additional factors that warrant consideration.

In my view, one such factor could be said to be the Commissioner’s broad discretion to settle matters by way of consent agreements ( Kobo 2014 , above, at paragraphs 3, 32 and 95). I consider that this factor can be taken into account in an assessment of the purpose and objectives underpinning sections 105 and 106 of the Act . i. The purposes and policy considerations underpinning the legislative scheme in issue [ 41 ] This factor was exhaustively canvassed in Kobo 2014 , above, at paragraphs 35–79.

For the present purposes, the most relevant information is set forth in the following passages [at paragraphs 50, 51, 70, 71, 74, 75 and 76]: It is common ground between the parties that the “mischief” which Parliament sought to address in 2002 in establishing the consent agreement process that is now enshrined in sections 105 and 106 included the significant cost, delay and uncertainty associated with the former consent order process.

Those problems arose primarily because that process “created too many incentives, too many ways for third parties to get involved and to lengthen the process …” (Kobo’s oral submissions, Transcript, at pp. 101-2, and 166). It is not disputed that these problems deterred businesses from participating in the consent order process, led to a practice of negotiating “undertakings” with the Commissioner that may not have been enforceable, and gave rise to a widespread consensus that the consent order process was “broken and needed to be fixed.” …

In my view, it is very clear from the legislative history, including Mr. von Finckenstein’s testimony, that Parliament did not intend toconfer upon the Tribunal the jurisdiction to hear and adjudicate upon factual disputes with respect to the basis for the conclusionsreached by the Commissioner regarding either the substantive elements of reviewable trade practices, or the defences and exceptions setforth in the Act in respect of those trade practices.

As Kobo recognizes, the 2002 amendments to sections 105 and 106 were designed to, among other things, streamline the settlementprocess and make it faster and more predictable (Rona Inc. v. Commissioner of Competition, 2005 Comp. Trib. 18, at para 77). … The effect of the two amendments proposed by Mr. von Finckenstein, and accepted by the Committee, was to remove the ability of theCommissioner to include in consent agreements terms that could not be imposed by the Tribunal, and to add a very limited ability forthird parties to apply to the Tribunal to have one or more terms of the agreement rescinded or varied.

The Tribunal’s jurisdiction undersubsection 106(2) to grant the application was confined to circumstances where the applicant “has established that the terms could not bethe subject of an order of the Tribunal.” The best evidence of what was meant by the latter language is Mr. von Finckenstein’s testimony, as it was he who proposed thatlanguage, and indeed the initially proposed text of sections 105 and 106, when Bill C-23 was introduced at First Reading.

In my view, it is clear from that testimony of Mr. von Finckenstein that the words “has established that the terms could not be the subjectof an order of the Tribunal” were intended to mean “has established that the terms of the consent agreement are not within the scope ofthe type of order(

s) that the Tribunal is permitted to issue in respect of the reviewable trade practice in question.” In other words, whenParliament enacted Mr. von Finckenstein’s proposals word for word after hearing his very specific testimony, it appears to have simplyintended that terms which are not within the purview of one or more specific types of orders in respect of a particular reviewable tradepractice can not be the subject of an order of Tribunal, within the meaning of subsection 106(2). In my view, the legislative record doesnot support the more expansive

interpretation of that provision that has been advanced by Kobo. [Emphasis in original.] [42] In

summary, the purposes and policy considerations underpinning the consent agreement scheme that is now included in sections105 and 106 of the Act were to “streamline the settlement process and make it faster and more predictable.” This was achieved byeliminating the Tribunal’s prior ability to hear and adjudicate upon factual disputes raised by third parties such as those that are at theroot of the second and third “jurisdictional” challenges that have been raised by Kobo in the present application. Parliament ultimatelydecided to confine the rights of third parties to solely raising issues with respect to whether the terms of a consent agreement “are notwithin the scope of the type of order(

s) that the Tribunal is permitted to issue in respect of the reviewable trade practice in question”[emphasis in original]. [43] In my view, the foregoing purposes and policy considerations weigh strongly in favour of declining to hear the presentapplication. ii.

The nature of the other forum which could deal with the issue, including its remedial capacity [44] The Tribunal is a specialized administrative body that has been recognized as being “especially well suited to the task ofoverseeing a complex statutory scheme whose objectives are peculiarly economic” (Canada (Director of Investigation and Research) v.Southam Inc., (SCC), [1997] 1 S.C.R. 748, at paragraph 49; Canada (Commissioner of Competition) v.

SuperiorPropane Inc., 2001 FCA 104, (Superior Propane), at paragraph 57 [at paragraph 77 of [2001] 3 F.C. 185]). [45] Pursuant to subsection 8(2) of the Competition Tribunal Act, R.S.C., 1985 (2nd Supp.), c. 19, the Tribunal “has, with respect tothe attendance, swearing and examination of witnesses, the production and inspection of documents, the enforcement of its orders andother matters necessary or proper for the due exercise of its jurisdiction, all such powers, rights and privileges as are vested in a superiorcourt of record.” [46] The Tribunal also has the remedial capacity under subsection 106(2) of the Act to rescind or vary consent agreements.

However,as Kobo emphasized during the hearing of this application, the Tribunal may not do so based on grounds such as the second and third“jurisdictional challenges” that it is now raising. Although Kobo and the Commissioner interpret my decision in Kobo 2014 as alsoprecluding Kobo from advancing the first jurisdictional issue that it has raised in the present application, I disagree. In my view, the issueof whether anticompetitive agreements entered into outside Canada are within the purview of

section 90.1 is an issue that raises aquestion with respect to whether the consent agreement is “something [that] the Tribunal couldn’t have done,” or that is “outside thepurview of the Tribunal” (Kobo 2014, above, at paragraph 77). Accordingly, this is an issue that could legitimately be raised before theTribunal by a third party under subsection 106(2) of the Act.

However, Kobo failed to do so in respect of either the Initial CA or the CAs. [47] Nevertheless, given that Kobo is precluded by the terms of subsection 106(2), as interpreted in Kobo 2014 and Kobo FCA,above, from raising before the Tribunal the other two “jurisdictional” issues that it has raised in this application, I consider that this factorweighs in favour of hearing this application on its merits. iii.

The relative expertise of the alternative decision maker [48] Kobo submits that because the judges of this Court who are also members of the Tribunal tend to be assigned to hear mattersbrought before this Court that involve issues under the Act, this factor should be considered to be neutral.

Although that may be true atthe present time, it has not always been so, and it may not be so in the future. [49] Judges of this Court who are also members of the Tribunal “can be expected to have a level of expertise or experience in this areaof the law over and above that acquired by a judge in the ordinary course of judicial work” (Superior Propane, above, at paragraph 56 [atparagraph 76 of 2001 FCA 104 , [2001] 3 F.C. 185]). This is in part because, when sitting as a judicial member of the Tribunal,they have the assistance of lay members.

[ 50 ] Given the foregoing, I consider that this factor weighs in favour of declining to hear the present application. iv. The nature of the error alleged [ 51 ] The three grounds upon which Kobo has based the present application have each been characterized as being “jurisdictional” challenges. However, as further discussed in

Part VIII of these reasons below, I consider that only the first of those challenges raises a true question of jurisdiction. As noted above, that question concerns the issue of whether anticompetitive agreements entered into outside Canada fall within the purview of

section 90.1 of the Act . The other two “jurisdictional” challenges that Kobo has raised are rooted largely in factual disputes about (

i) whether the shift from the wholesale model of e-book distribution to the agency model of distribution in Canada occurred as result of the implementation of the U.S. Arrangement that is described in the recitals of the CAs, and (ii) whether the Arrangement was “existing or proposed” at the time the CAs were executed and filed with the Tribunal. [ 52 ] In my view, the fact that one of the issues that Kobo has raised is a true jurisdictional issue ordinarily should weigh in favour of this Court exercising its jurisdiction to hear the present application.

However, given my view that this issue may also be raised before the Tribunal, I consider that this factor weighs in favour of not granting discretion to hear the present application ( Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association , 2011 SCC 61 , [2011] 3 S.C.R. 654 ( Alberta Teachers ), at paragraphs 24–25 ; Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright) , 2010 FCA 198 , [2011] 3 F.C.R. 223 ( Access Copyright ), at paragraph 70 , rev’d on other grounds 2012 SCC 37 , [2012] 2 S.C.R. 345, at paragraphs 10–11 and 59–60 ).

This is particularly so given that this issue has been the subject of active debate for many years, both here and abroad, such that it could benefit from the Tribunal’s recognized expertise. [ 53 ] The fact that the other two “jurisdictional” challenges that Kobo has raised are rooted largely in factual disputes also weighs in favour of not exercising my discretion to hear the present application. v.

The existence of adequate and effective recourse in the forum in which litigation is already taking place [ 54 ] As I have noted previously, the first and third of the three issues that Kobo has raised in this application have been litigated before the Tribunal in HarperCollins , above. However, the CAs are not being challenged in that proceeding, or in any other proceeding of which I am aware. Accordingly, this factor weighs in favour of exercising my discretion to hear the present application on its merits. vi.

Expeditiousness [ 55 ] In my view, this factor has no independent relevance in the present context because Kobo’s inability to raise two of the three “jurisdictional” challenges that it is advancing in this application has already been considered and weighed above. There is no separate issue as to whether the relief that Kobo is seeking could be more expeditiously obtained in this forum, relative to another forum. The fact that judicial review proceedings may be more expeditious than a subsection 106(2) proceeding before the Tribunal is considered separately below. vii.

The convenience of the alternative remedy [ 56 ] Kobo submits that this factor weighs in favour of exercising my jurisdiction to hear its application, because it is unlikely to succeed in raising these issues before the Tribunal, and the Commissioner has stated that he will oppose any attempt that Kobo may make to raise those issues in that forum. I agree.

However, given that I have already weighed in Kobo’s favour its inability to raise before the Tribunal two of the three “jurisdictional” issues that it is advancing in this application, this factor does not merit any significant additional weighting in my assessment. viii. The economic use of judicial resources [ 57 ] The nature of judicial review proceedings is such that they can often be determined more expeditiously, and with fewer judicial resources, than proceedings before the Tribunal, which frequently involve two judicial members.

In any event, given that judicial review proceedings in this Court are heard by a single judge, whereas a proceeding under subsection 106(2) of the Act would require a panel of three members of the Tribunal, I consider that this factor weighs in favour of hearing this application on its merits. ix.

Cost [ 58 ] As noted in Kobo 2014 , above, at paragraph 50, the “mischief” that Parliament sought to address when it established the current consent agreement framework in sections 105 and 106 of the Act included the significant cost that was associated with the former consent order process. (See quote reproduced at paragraph 41 above.) As also noted in Kobo 2014 , above, at paragraph 42: “[i]f one or more of the Commissioner’s conclusions with respect to the elements of the relevant restrictive trade practice were subject to dispute under subsection 106(2) , this would open up a potentially far broader range of complex issues in the average proceeding under that provision than was ever in dispute under the former consent order process.” The same would be true if those same types of issues were subject to dispute in judicial review proceedings before this Court, as Kobo now requests.

Stated differently, the public and private costs associated with judicial review proceedings in this Court would be potentially very significant, including for private parties who enter into settlements with the Commissioner, by way of consent agreements. [ 59 ] Accordingly, I consider that this factor weighs in favour of declining to hear the present application. x.

Summary [ 60 ] In

summary, the factors that weigh in favour of declining to hear the present application are: (

i) the purposes and policy considerations underpinning the consent agreement scheme that is set forth in the Act , (ii) the expertise of the Tribunal, relative to that of the Court, (iii) the nature of the errors that the Commissioner is alleged to have made, and (iv) the public and private costs that would likely be associated with permitting third parties to seek judicial review of conclusions reached by the Commissioner with respect to either the substantive elements of reviewable trade practices, or the defences and exceptions set forth in the Act in respect of those trade

practices. [ 61 ] By comparison, the factors that weigh in favour of hearing this application on its merits are (

i) the nature of the other forum which could deal with the issue, including its remedial capacity, (ii) the existence of adequate and effective recourse in the forum in which litigation is already taking place, and (iii) the economic use of judicial resources. [ 62 ] To avoid double counting, the factors that do not merit any additional weight in the particular circumstances of this case are the convenience of the alternative remedy and expeditiousness. [ 63 ] Balancing the various considerations discussed above, I consider that it would not be appropriate for me to exercise my discretion to hear Kobo’s application on the merits.

This is particularly so given that the contrary conclusion would be “deeply inconsistent with fundamental parliamentary choices” about the scope of third party rights with respect to consent agreements filed by the Commissioner with the Tribunal ( Strickland , above, at paragraph 51 ; see also 797175 , above, at paragraphs 35–37, and Henderson , above, at paragraph 26 ). [ 64 ] Based on the foregoing assessment, I consider that judicial review applications brought by third parties in respect of consent agreements filed with the Tribunal should only be heard in exceptional cases.

Although it is always difficult to identify such cases in advance, they would include those where the grounds for review concern (

i) constitutional issues, (ii) issues that are of central importance to the legal system as a whole and outside the Tribunal’s specialized area of expertise (such as alleged bias or bad faith on the part of the Commissioner), (iii) true questions of jurisdiction or vires , or (iv) issues relating to the jurisdictional lines between the Commissioner (or the Tribunal) and another specialized tribunal.

I note that these grounds are so important that they are reviewable by courts on a “correctness” standard, when decisions in respect of them are made by administrative tribunals or other decision makers ( Edmonton (City) v.

Edmonton East (Capilano) Shopping Centres Ltd. , 2016 SCC 47 , [2016] 2 S.C.R. 293 ( Edmonton East ), at paragraph 24 ). [ 65 ] For the reasons I have provided, while the first of the three jurisdictional issues that have been raised by Kobo in this application may properly be characterized as a true question of jurisdiction or vires , I consider that this issue would be best dealt with by the Tribunal ( Alberta Teachers , above; Access Copyright , above). [ 66 ] Turning to the other two issues that Kobo has raised, while Kobo characterizes them as “jurisdiction”, they are largely factual in nature.

Given the clear choice that Parliament made to place strict limits on the ability of third parties to challenge consent agreements in subsection 106(2) of the Act , I consider that the Court should not exercise its discretion to review the Commissioner’s determinations in respect of such issues.

Indeed, absent exceptional circumstances, the same logic would apply in respect of questions of mixed fact and law. [ 67 ] Nevertheless, in the event that I may be found to have erred in concluding that it would be inappropriate to exercise my discretion to hear Kobo’s application on its merits, I will proceed to consider those merits below, rather than exposing the Commissioner and the respondent Publishers to the possibility of having to deal with these issues at an uncertain point in the future.

Given that I have now heard that application, and I am very familiar with the specific issues that Kobo has raised, I consider that dealing with those issues below would also be in the interests of judicial economy. I am also mindful that the Commissioner and the respondent Publishers have been attempting to resolve these matters since the Initial CA was filed in early 2014, and that Kobo has so far succeeded in forestalling those efforts, which have been designed to provide the Canadian public with more competitive prices for e-books. VII.

Issues [ 68 ] The remaining issues raised by Kobo in this application are as follows: i. Did the Commissioner act without jurisdiction by entering into the CAs to remedy a conspiracy that was entered into in the U.S. and that was previously resolved by U.S. courts and antitrust enforcers? ii. Did the Commissioner act without jurisdiction by entering into the CAs to remedy “an arrangement”, within the meaning of

section 90.1 of the Act , that never existed? iii. Did the Commissioner act without jurisdiction by entering into the CAs to remedy “an arrangement” that was not “existing or proposed” at the time the CAs were executed? [ 69 ] In its notice of application and written submissions, Kobo also appeared to raise a fourth issue, when it alleged that the Commissioner had erroneously concluded that the CAs would remedy the competition concerns identified by the Commissioner.

However, during the hearing of this application, Kobo confirmed that it was not advancing this allegation as a further ground for seeking judicial review. VIII. Standard of Review [ 70 ] As I have discussed, notwithstanding Kobo’s characterization of the three issues that it has raised in this application as being issues of “jurisdiction”, I consider that only the first of those issues truly is so. [ 71 ] The Commissioner characterizes that first issue as a question of statutory

interpretation, which attracts a reasonableness standard of review ( Alberta Teachers , above, at paragraphs 34 and 39; Edmonton East , above, at paragraphs 22 and 26). [ 72 ] However, the issue of whether an enforcement authority or an adjudicative body in Canada is able to deal here with conduct that occurs outside this country has long been considered to be a question of jurisdiction (namely, “subject matter” or “substantive” jurisdiction). [ 73 ] As the Supreme Court of Canada noted in R. v. Hape , 2007 SCC 26 , [2007] 2 S.C.R. 292 ( Hape ), at paragraph 57 : “Broadly

speaking, jurisdiction refers to a state’s power to exercise authority over individuals, conduct and events, and to discharge publicfunctions that affect them” (emphasis added). At paragraph 59 of its decision, the Court observed that “[t]he primary basis forjurisdiction is territoriality” (quoting Libman v.

The Queen, (SCC), [1985] 2 S.C.R. 178 (Libman), at page 183(emphasis added)). [74] In Libman, above, La Forest J. reviewed the historical approach of Canadian courts to criminal matters and concluded that “astime went on the courts began to interpret their territorial jurisdiction more liberally”, including “when the impact of a crime was felt inCanada” (at page 206 (emphasis added)).

Later in his decision, he observed that “Canadian courts (like those in England and othercountries for that matter) frequently took jurisdiction over transnational offences that occurred partly in Canada where they felt thiscountry had a legitimate interest in doing so” (at page 209 (emphasis added)).

Ultimately, he concluded that “all that is necessary to makean offence subject to the jurisdiction of our courts is that a significant portion of the activities constituting that offence took place inCanada .… it is sufficient that there be a ‘real and substantial link’ between an offence and this country” (at pages 212–213 (emphasisadded)). [75] Likewise, in Society of Composers, Authors and Music Publishers of Canada v.

Canadian Assn. of Internet Providers, 2004 SCC45, [2004] 2 S.C.R. 427 (SOCAN), at paragraph 63, the Supreme Court observed: “Generally speaking, this Court has recognized, as asufficient ‘connection’ for taking jurisdiction, situations where Canada is the country of transmission … or the country of reception”(citations omitted, emphasis added [italics in original]). [76] Similarly, in Lapointe Rosenstein Marchand Melançon LLP v.

Cassels Brock & Blackwell LLP, 2016 SCC 30, [2016] 1 S.C.R.851 (Lapointe), at paragraph 25, the Supreme Court observed: “Before a court can assume jurisdiction over a claim, a ‘real andsubstantial connection’ must be shown between the circumstances giving rise to the claim and the jurisdiction where the claim isbrought” (citations omitted, emphasis added). A similar observation was made by the Court in Sun-Rype Products Ltd. v. Archer DanielsMidland Company, 2013 SCC 58, [2013] 3 S.C.R. 545 (Sun-Rype), at paragraph 45 (see also, Airia Brands Inc. v.

Air Canada, 2017ONCA 792, 417 D.L.R. (4th) 467, at paragraph 52.) [77] I recognize that the Supreme Court of Canada has repeatedly observed that true questions of jurisdiction or vires are rare(Edmonton East, above, at paragraph 26; Alberta Teachers, above, at paragraphs 33–34). However, I consider this to be one of those raresituations.

Indeed, if the ability of an agent of the state such as the Commissioner to address conduct occurring outside Canada’s bordersthat is considered to have effects within those borders is not an issue of true jurisdiction, it is difficult to conceive of what wouldconstitute such an issue. As counsel to the Commissioner observed, in making a different point, this issue concerns “the fundamentaljurisdiction or reach of the Competition Act”. [78] As a true question of jurisdiction or vires, the issue of the territorial reach of

section 90.1 is subject to review on a standard ofcorrectness (Alberta Teachers, above, at paragraph 30; Edmonton East, above, at paragraph 24). [79] Turning to the second and third issues that Kobo has raised in this application, as I have discussed, although they have beencharacterized as being “jurisdictional”, they are at their root largely factual in nature. They are not true questions of jurisdiction or vires.Kobo does not take issue with the Commissioner’s

interpretation of the word “arrangement” or with the words “existing or proposed” insection 90.1 of the Act. Rather, Kobo takes issue with the Commissioner’s factual conclusions and his alleged failure to consider certaininformation that it had provided to the Competition Bureau, in reaching those conclusions. [80] As issues that are largely questions of fact, the second and third issues that have been raised by Kobo are reviewable on astandard of reasonableness (Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, at paragraphs 53–54). This is so even ifthose issues may also be said to involve an element of statutory

interpretation (Alberta Teachers, above, at paragraphs 33–34 and 39;Edmonton East, above, at paragraphs 22–26), and even if it is alleged that an administrative decision maker erred by reaching its decisionwithout regard to the material before it (Canada (Citizenship and Immigration) v. Khosa, 2009 SCC 12, [2009] 1 S.C.R. 339, atparagraphs 45–46). IX. Assessment A. Did the Commissioner act without jurisdiction by entering into the CAs to remedy a conspiracy that was entered into in the U.S. andthat was previously resolved by U.S. courts and antitrust enforcers?

(1) The parties’ submissions [81] Kobo submits that the Commissioner acted outside his jurisdiction by entering into the CAs to remedy an arrangement that theCAs state was entered into in the U.S. and that he acknowledges was entered into there. [82] Kobo maintains that the Commissioner’s jurisdiction is limited to what has been set forth in the Act, and that the words of section90.1 do not provide him with any jurisdiction in respect of agreements or arrangements that are entered into outside Canada. [83] Kobo further asserts that the presumption against the extraterritorial application of federal legislation such as the Act may onlybe rebutted by express wording or necessary implication, both of which are absent and cannot be inferred (SOCAN, above, at paragraph54).

In this regard, Kobo submits that the language employed in sections 46 and 83 of the Act indicates that when Parliament intends aprovision to apply extraterritorially, it uses express language. In Kobo’s view, the absence of similar express language from

section 90.1implies that Parliament did not intend that provision to be applied to arrangements entered into outside Canada. [84] Kobo also states that the “real and substantial connection” test has no application in the present context, because it only applieswhen it is unclear whether Parliament intended a statute to apply extraterritorially or when it is unclear whether the facts fall within theterritorial ambit of a statute. Kobo maintains that neither of these pre-conditions apply, because it is clear that Parliament did not intendsection 90.1 to apply extraterritorially, and that the Commissioner has acknowledged that the impugned Arrangement was entered intooutside Canada.

[85] Finally, Kobo maintains that records of legislative debates indicate that Parliament was aware, well before it enacted section90.1, that the “civil” provisions of the Act did not provide extraterritorial jurisdiction. [86] I will pause to address this latter point now, as it can be dispensed with relatively quickly. In brief, the records to which Koborefers are not particularly helpful in the present context. This is because they concern international enforcement cooperation and thedifficulties that can arise in relation to obtaining evidence abroad when instruments such as a mutual legal assistance treaty do not extendto civil matters. Those records make no mention of

section 90.1 or any other particular provision of the Act. (In fact, they pre-date itsaddition to the Act by several years.) Accordingly, I will not further address this particular submission. [87] In response, the Commissioner submits that interpreting

section 90.1 in the manner suggested by Kobo would not be consistentwith the scheme of the Act and would lead to an absurdity or an outcome that is at odds with the Act. In such circumstances, theCommissioner maintains that the implied exclusion rule of statutory

interpretation that Kobo appeared to be relying on when makinginferences based on the wording in sections 46 and 83 of the Act has no application. [88] In addition, the Commissioner states that the fact that the impugned arrangement was formed in the U.S. does not, by itself,imply that the Commissioner applied

section 90.1 in an extraterritorial manner. The Commissioner submits that while the arrangementwas formed beyond Canadian borders, it specifically contemplated, was implemented, and had an impact on competition in Canada. TheCommissioner notes that the Act has regularly been applied in these and similar circumstances in the past. [89] Moreover, the Commissioner asserts that even if the application of

section 90.1 may be said to have been extraterritorial in thepresent circumstances, the presumption against the extraterritorial application of the Act is rebutted by necessary implication. Thatnecessary implication can be found in the practical reality that commercial dealings and antitrust markets do not respect nationalboundaries. In addition, the Commissioner submits that, insofar as the territorial issue is concerned,

section 90.1 is no different from themerger and other provisions of the Act that have long been applied to economic actors and conduct which has its origins beyondCanada’s borders, but which contemplates, has been implemented, and has had an impact on Canada.

(2) Analysis (

a) Framework [90] The issue that Kobo has raised regarding the Commissioner’s jurisdiction over arrangements formed outside Canada isessentially the same as the issue that was raised in HarperCollins, above, with respect to the Tribunal’s jurisdiction over sucharrangements. Given that the Commissioner’s jurisdiction under

section 90.1 is co-extensive with the Tribunal’s jurisdiction in relation toagreements and arrangements contemplated by that provision, I consider that Justice Gascon’s thorough analysis in that case provides ahelpful point of departure for the present purposes. This is so notwithstanding that the focus of Justice Gascon’s analysis was not uponthe correct

interpretation of

section 90.1. Rather, it was upon whether it was plain and obvious that

section 90.1 does not provide theTribunal with any jurisdiction in respect of foreign arrangements or agreements. [91] At the outset of his analysis of this issue, Justice Gascon noted that it is important to distinguish between the territorial and theextraterritorial subject-matter jurisdiction that may be conferred by a statute (HarperCollins, above, at paragraphs 68–70). [92] Unless implicitly or explicitly provided otherwise in a statute, territorial jurisdiction is presumed to exist in respect of “persons,property, juridical acts and events within the territorial boundaries of” the relevant legislative body’s jurisdiction (Pierre-André Côté, TheInterpretation of Legislation in Canada, 4th ed. (Toronto: Carswell, 2013) (Côté), at page 212). [93] For example, pursuant to the objective territorial principle, a state may claim jurisdiction over conduct that commences or occursoutside its borders in two general types of situations.

The first is where the conduct is completed within those borders. The second iswhere a constituent element of a statutory provision directed towards the conduct takes place within those borders. In each of thosesituations, the state may legitimately claim territorial jurisdiction because of the existence of a “sufficiently strong link” connecting theconduct in question to the state (Hape, above, at paragraph 59). [94] Notwithstanding the foregoing, a federal statute may implicitly or explicitly indicate that its territorial reach is narrower than, orextends beyond, the national borders.

Where a statute is ambiguous in this regard, the courts have applied what is known as the “real andsubstantial connection” test (Libman, above, at pages 212–213; SOCAN, above, at paragraphs 58–60; A.T. v. Globe24h.com, 2017 FC114, [2017] 4 F.C.R. 310 (Globe24h), at paragraph 50). Generally speaking, it is only where no such connection exists that a statute maybe said to have extraterritorial effect: … In

summary then, and at the risk of oversimplifying, a statute of a given State will be said to have an extraterritorial effect if itgoverns persons, property, juridical acts or facts which do not have a ‘real and important link’ with that State. (Côté, above, at page 216.) [95] The “real and substantial connection” test was developed in Libman, above, at page 213, after the Supreme Court observed that“[t]his country has a legitimate interest in prosecuting persons for activities that take place abroad but have an unlawful consequencehere” (at page 209). [96] This followed the Supreme Court’s recognition in Moran v.

Pyle National (Canada) Ltd., (SCC), [1975] 1S.C.R. 393, at page 409, that a state also has an “important interest … in injuries suffered by persons within its territory.” In theintervening years, it has been increasingly recognized that courts in Canada may have jurisdiction over tort actions brought by personsalleging that they have suffered harm in this country as a result of foreign anticompetitive agreements amongst defendants who have thensold their products in Canada, either directly or through their subsidiaries (Sun-Rype, above, at paragraph 46; Fairhurst v.

De BeersCanada Inc., 2012 BCCA 257, 351 D.L.R. (4th) 168 (Fairhurst), at paragraphs 32 and 43–45; VitaPharm Canada Ltd. v. F. Hoffman-LaRoche Ltd., 2002 CarswellOnt 235, [2002] O.J. No. 298 (QL) (Sup. Ct.) (VitaPharm), at paragraphs 58–62 and 96–97; Bouchard v.Mitsubishi Motor Sales of Canada Inc., 2010 FC 56 (Bouchard), at paragraphs 69–70). Whether such jurisdiction exists will depend on

the particular framework that has been developed in tort law for recognizing the existence of a “real and substantial connection” betweenthe litigation and the forum (Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572 (Van Breda), at paragraphs 80–90). [97] When it is determined that a statute implicitly or explicitly confers territorial jurisdiction upon a court, tribunal or regulatoryauthority, or where such jurisdiction is found to exist as a result of the application of the “real and substantial connection” test, it is notnecessary to consider the presumption against extraterritorial effect.

Stated differently, where an application of the real and substantialconnection test establishes that a statute applies to persons or conduct outside Canada, there is no violation of the presumption againstextraterritoriality (R. v. Stucky, 2009 ONCA 151, 303 D.L.R. (4th) 1 (Stucky), at paragraphs 27 and 32). This is because jurisdictionexists as a result of a real and substantial connection with the territory of Canada. [98] Based on the foregoing, and contrary to what is contended by Kobo, there are three principal steps to be followed in determiningwhether

section 90.1 of the Act confers jurisdiction in respect of agreements and arrangements that are made outside Canada: i. Assess whether

section 90.1 explicitly or implicitly provides the Commissioner with jurisdiction in respect of arrangements enteredinto outside Canada. ii. If not, assess whether there is a “real and substantial connection” between the impugned agreement and Canada. iii. If not, assess whether the presumption against the extraterritorial application of

section 90.1 can be rebutted. (

b) Does

section 90.1 explicitly or implicitly provide the Commissioner with jurisdiction in respect of arrangements entered into outsideCanada? [99] The wording of

section 90.1 simply refers to “an agreement or arrangement―whether existing or proposed―between personstwo or more of whom are competitors”. In contrast to certain other provisions of the Act (e.g., sections 1.1, 9, 45(5), 46(1), 76(1), 82 and83(1)), there is no reference to “Canada”. Likewise, there is no mention of the

section not applying in respect of persons or certain thingsdone outside Canada, as there is in subsection 48(2). Accordingly, it is readily apparent that

section 90.1 does not explicitly provide theCommissioner with jurisdiction in respect of an arrangement entered into outside Canada. [100] Therefore, it is necessary to consider whether

section 90.1 implicitly contemplates agreements or arrangements entered intooutside Canada. [101] Unfortunately, it appears that there are no potentially helpful Parliamentary debates that shed light on this issue (HarperCollins,above, at paragraphs 115 and 117). (

i) The purposes of the Act [102]

Section 12 of the

Interpretation Act, R.S.C., 1985, c. I-21 (the

Interpretation Act) states: “Every enactment is deemed remedial,and shall be given such fair, large and liberal construction and

interpretation as best ensures the attainment of its objects.” [103] The objects, or purposes, of the Competition Act are set forth in

section 1.1, which states: Purpose of Act 1.1 The purpose of this Act is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of theCanadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing therole of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity toparticipate in the Canadian economy and in order to provide consumers with competitive prices and product choices. [104] In my view, interpreting the words “agreement or arrangement” in

section 90.1 in a large and liberal manner, so as to contemplateany agreements or arrangements that undermine the purposes of the Act (whether entered into inside or outside Canada), would bestensure the attainment of those purposes. [105] The purposes set forth in

section 1.1 are also of assistance in applying the modern principle of statutory

interpretation that “thewords of

an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of theAct, the object of the Act, and the intention of Parliament” (Tran v. Canada (Public Safety and Emergency Preparedness), 2017 SCC 50,[2017] 2 S.C.R. 289 (Tran), at paragraph 23; Rizzo & Rizzo Shoes Ltd. (Re), (SCC), [1998] 1 S.C.R. 27 (Rizzo), atparagraph 21). [106] More specifically, interpreting the words “agreement or arrangement” in the manner that I have described above would yield aresult that is more harmonious with the scheme of the Act contemplated by

section 1.1, than interpreting them to exclude agreements orarrangements entered into outside Canada. This is because the former

interpretation would permit the Commissioner to seek remediesunder

section 90.1 in respect of foreign anticompetitive agreements and arrangements that undermine one or more of the objectives setforth in

section 1.1, whereas the latter

interpretation would preclude the Commissioner from doing so. To the extent that this latterinterpretation would expose Canadian businesses and consumers to paying higher prices for a potentially broad range of inputs and finalproducts than would otherwise be the case, it would undermine and frustrate an important purpose of the Act. [107] Such an

interpretation would also produce an absurd result that is to be avoided (R. v. McIntosh, (SCC), [1995]1 S.C.R. 686, at paragraph 36; Tran, above, at paragraph 31; Rizzo, above, at paragraph 27). To the extent that such anticompetitiveeffects can also seriously undermine the attainment of the other purposes enunciated in

section 1.1, the frustration of the Act’s purposesand the related absurdity to be avoided is even greater (Stucky, above, at paragraphs 37 and 48). These problems are further compoundedwhen it is considered that, under the

interpretation advanced by Kobo, parties wishing to enter into agreements or arrangements that arecontemplated by

section 90.1 would be able to avoid the operation of that provision by simply drivin

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