The Commissioner of Competition (Applicant) v. Pearson Canada Inc. v. Penguin Canada Books Inc., 2014 FC 376

T-411-14 2014 FC 376 IN THE MATTER OF the Competition Act, R.S.C. 1985, c. C-34 , as amended; AND IN THE MATTER OF an inquiry under

section 10 of the Competition Act relating to certain alleged anti-competitive conduct in the markets for e-books in Canada; AND IN THE MATTER OF an ex parte application by the Commissioner of Competition for an Order requiring Pearson Canada Inc. and Penguin Canada Books Inc. to produce records pursuant to paragraph 11(1) (

b) of the Competition Act and to make and deliver written returns of information pursuant to paragraph 11(1)(

c) of the Competition Act. BETWEEN: The Commissioner of Competition (Applicant) v. Pearson Canada Inc. and Penguin Canada Books Inc. ( Respondents ) Indexed as: Canada (Commissioner of Competition) v. Pearson Canada Inc. Federal Court, Crampton C.J.—Ottawa, February 26 and April 23, 2014.

Competition — Ex parte application by Commissioner of Competition for order requiring respondents to produce records pursuant to Competition Act (Act), s. 11(1) (b), make and deliver written returns pursuant to Act, s. 11(1) (c) — Respondents publishers and distributors of books — Commissioner commencing inquiry under Act, s. 10(1) (b)(ii), on basis Commissioner had reason to believe grounds existed for making order with respect to certain alleged anti-competitive conduct to restrict price competition — Issues: Court’s role on applications under s. 11(1) ; scope of information sought by Commissioner; relevance of arguments going to substantive merits of Commissioner’s inquiry; role of respondents in such applications — Application under Act, ss. 11(1)(b),(c), for production of records and written returns simply requiring Court to be satisfied of two things, namely, inquiry in fact made under s. 10 , person likely having information relevant to inquiry — Commissioner’s obligations rooted in (

i) duty of full, frank disclosure on ex parte application, (ii) Court’s duty to satisfy self information relevant, not excessive, disproportionate or unnecessarily burdensome — As statutory authority responsible for administration, enforcement of Competition Act, Commissioner benefiting from presumption actions taken pursuant to Act bona fide, in public interest — In present proceedings, respondents not displacing presumption inquiry described in Commissioner’s affidavit bona fide inquiry — Regarding scope of information sought by Commissioner, respondents indeed incurred significant time, expense in responding to prior information requests from Commissioner — However, time, expense alone not providing sufficient justification for Court to decline to exercise discretion to issue revised draft order — To warrant exercise of such discretion, Court having to be satisfied past burden incurred by respondents, together with additional time, expense associated with responding to order excessive, disproportionate or unnecessarily burdensom e — Such not case here — Commissioner’s requests not unreasonable — Concerning substantive merits of Commissioner’s inquiry, absent evidence of bad faith or other exceptional circumstances, Court should refrain from making determinations at fact-finding stage, essentially reaching final conclusions regarding substantive merits of inquiry — As to role of respondents, given Parliament deliberately decided s. 11 applications should proceed on ex parte basis, Court should not be expected to routinely grant respondents leave to make written or oral submissions — Application allowed.

This is an ex parte application by the Commissioner of Competition for an order requiring the respondents to produce records pursuant to paragraph 11(1) (

b) of the Competition Act and to make and deliver written returns of information pursuant to paragraph 11(1)(

c) of the Act. The respondents are publishers and distributors of books, in print and electronic form. In July 2012, the Commissioner commenced an inquiry under subparagraph 10(1) ( b )(ii) of the Act on the basis that he had reason to believe that grounds exist for the making of an order under

Part VIII of the Act with respect to certain alleged anti-competitive conduct to restrict e-book retail price competition in Canada. According to the initial affidavit filed by the Commissioner, that inquiry has been directed towards conduct described in sections 76 (price maintenance), 79 (abuse of dominant position) and 90.1 (restrictive agreements among competitors). The respondents took the position in this case that they did not participate in the alleged horizontal agreement among e-book publishers into which the Commissioner is inquiring under

section 90.1 of the Act . The issues were the following: (

i) the Court’s role on applications under subsection 11(1) , particularly with respect to the exercise of its discretion and what is expected from the Commissioner; (ii) the scope of information sought by the Commissioner; (iii) the relevance of arguments going to the substantive merits of the Commissioner’s inquiry; and (iv) the role of respondents in such applications. Held , the application should be allowed. An application under paragraphs 11(1) (

b) and (

c) of the Act for the production of written returns and documents simply requires the Court to be satisfied of two things, namely, that an inquiry is being made under

section 10 and that a person is likely to have information that is relevant to the inquiry. The Commissioner’s evidentiary obligations on an application under

section 11 are not rooted in his reasons to believe that those grounds exist, but rather in (

i) the duty of full and frank disclosure that exists on an ex parte application; and (ii) the Court’s duty to satisfy itself that the information being sought by the Commissioner is relevant to the inquiry in question, and is not excessive, disproportionate or unnecessarily burdensome.

As a statutory authority responsible for the administration and enforcement of the Act, the Commissioner benefits from a presumptionthat actions taken pursuant to the Act are bona fide and in the public interest. Accordingly, in the absence of evidence of bad faith orother evidence that the Commissioner’s inquiry is not a bona fide inquiry, it will be presumed to be so. However, given that

section 11 applications proceed on an ex parte basis, there is a “heavy burden on the Commissioner to make full andfrank disclosure” of all of the relevant circumstances surrounding the application. This burden, which can also be expressed as an utmostduty of good faith, is not focused on circumstances supporting the Commissioner’s application, but rather on two other things. The firstis ensuring that the Court is informed of any points of fact or law which favour the other side. The second is ensuring that the Court isable to detect and redress abuses of its own processes.

The respondents in this case did not displace the presumption that the inquiry described in the Commissioner’s affidavit is a bona fideone. The information provided in the Commissioner’s initial affidavit provided sufficient disclosure to issue the order. Regarding the scope of the information sought by the Commissioner, although the respondents had already incurred significant time andexpense in responding to the various prior information requests from the Commissioner, this alone did not provide a sufficientjustification for the Court to decline to exercise its discretion to issue the revised draft order.

To warrant the exercise of such discretion inthe respondents’ favour for this reason, the Court would have to be satisfied that the past burden incurred by the respondents, togetherwith the additional time and expense that will be associated with responding to the order, will be excessive, disproportionate orunnecessarily burdensome. However, such was not the case. The Commissioner’s information requests were not unreasonable.

Concerning the substantive merits of the Commissioner’s inquiry, the respondents vigorously asserted that as a result of the consentagreement filed with the Tribunal, the Commissioner could no longer have any plausible basis for any ongoing concern that conductengaged in by them could lessen competition substantially, as contemplated by

section 90.1 of the Act. However, the Judge was notsatisfied that it was as axiomatic as the respondents suggested that the consent agreement precluded or negated any possibility of anagreement described by

section 90.1. A

section 11 application is not the appropriate forum for the Court to make final determinationsregarding issues related to theories of competitive effects, defences, exemptions or the factual likelihood that an inquiry may disclose theexistence of information demonstrating the existence of conduct described in

section 90.1 or another provision in

Part VIII of the Act.Absent evidence of bad faith or the existence of other exceptional circumstances, the Court should refrain from making determinations atthis fact-finding stage which essentially reach final conclusions regarding the substantive merits of an inquiry. Finally, as to the role of the respondents, pursuant to the express terms of

section 11, applications are to be made on an ex parte basisAccordingly, parties other than the Commissioner have no right to participate in the hearing, file evidence or cross-examine on theCommissioner’s affidavit. However, the Court may in certain circumstances require that notice be given to the party or parties named inthe order being sought by the Commissioner, to provide an opportunity for the party or parties to seek leave to make written or oralsubmissions. The Court may provide a similar opportunity where the parties in question are aware of and attend the hearing. Given thatParliament can be taken to have deliberately decided that

section 11 applications should ordinarily proceed on an ex parte basis, it shouldnot be expected that requests for leave to make written or oral submissions will be routinely granted by the Court. The more appropriatemanner in which a respondent’s concerns regarding the scope or potentially duplicative nature of the draft order should be brought to theCourt’s attention is through the Commissioner, pursuant to the Commissioner’s duty of full and frank disclosure. STATUTES AND REGULATIONS CITED Competition Act, R.S.C., 1985, c.

C-34, ss. 10, 11, 15(1)(a)(ii), 45–62 (Part VI), 63–74 (Part VII), 74.01–74.18 (Part VII.1), 75–107(Part VIII), 75(1), 76, 79, 90.1, 103.1(7), 108–124 (Part IX), 114(1),(2). Federal Courts Rules, SOR/98-106, r. 399(2)(a). Sherman Act, 15 U.S.C. § 1 (2012). trEatIEs AND OTHER instruments citED Agreement on the European Economic Area, OJ L 1/94, Art. 53(1). Treaty on the Functioning of the European Union, OJ C 326/47, Art. 101(1). CASES CITED distinguished: Symbol Technologies Canada ULC v. Barcode Systems Inc., 2004 FCA 339, [2005] 1 F.C.R. 254. considered: Canada (Commissioner of Competition) v.

Air Canada, (FC), [2001] 1 F.C. 219, (2000), 8 C.P.R. (4th) 372 (T.D.);Canada (Commissioner of Competition) v. Labatt Brewing Company Limited, 2008 FC 59, 323 F.T.R. 115; United States of America v.Friedland, [1996] O.J. No. 4399 (Gen. Div.) (QL); SGL Canada Inc. v. Canada (Director of Investigation and Research), [1998] F.C.J.No. 1951 (T.D.) (QL). referred to: Canadian Pacific Ltd. v. Canada (Competition Act, Director of Investigation and Research), 61 C.P.R. (3d) 137 (Ont.Gen. Div.); Canada (National Revenue) v. RBC Life Insurance Company, 2013 FCA 50, [2013] 3 C.T.C. 126; Hryniak v.

Mauldin, 2014SCC 7, [2014] 1 S.C.R. 87; Canada (Competition Act, Director of Investigation and Research) v. Bank of Montreal (1996), 68 C.P.R.(3d) 527 (Comp. Trib.); Canada (Competition Act, Director of Investigation and Research) v. Superior Propane Inc. (1998), 1998

24 (CT), 85 C.P.R. (3d) 194 (Comp. Trib.); Rona Inc. v. Commissioner of Competition, 2005 Comp. Trib. 26, online:<http://www.ct-tc.gc.ca/CMFiles/CT-2003-007_0101_38PIG-8202007-9053.pdf>; Industrial Milk Producers Assn. v. British Columbia(Milk Board), (FC), [1989] 1 F.C. 463, (1988), 47 D.L.R. (4th) 710 (T.D.); North of Smokey Fishermen’s Assn. v.Canada (Attorney General), 2003 FCT 33, 229 F.T.R. 1; Frelighsburg (Municipalité) c. Entreprises Sibeca Inc., 40M.P.L.R. (3d) 157 (Que. C.A.); Ruby v.

Canada (Solicitor General), 2002 SCC 75, [2002] 4 S.C.R. 3; Thomson Newspapers Ltd. v.Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), (SCC), [1990] 1 S.C.R.425, (1990), 67 D.L.R. (4th) 161; CP Containers (Bermuda) Ltd. (Re), 1995 CarswellNat 2899, 64 C.P.R. (3d) 384 (Comp. Trib.); Irvinev. Canada (Restrictive Trade Practices Commission), (SCC), [1987] 1 S.C.R. 181, (1987), 41 D.L.R. (4th) 429;Celanese Canada Inc. v. Murray Demolition Corp., 2006 SCC 36, [2006] 2 S.C.R. 189; Commissioner of Competition v.

Toshiba ofCanada Limited, 2010 ONSC 659 100 O.R. (3d) 535; Raimondo v. Canada (Competition Act, Director of Investigation andResearch), 61 C.P.R. (3d) 142 (Ont. Gen. Div.); R. v. S.A.B., 2001 ABCA 235, 96 Alta. L.R. (3d) 31. Ex parte APPLICATION by the Commissioner of Competition for an order requiring the respondents to produce documents pursuant toparagraph 11(1)(

b) of the Competition Act and to make and deliver written returns pursuant to paragraph 11(1)(

c) of the Competition Act.Application allowed. APPEARANCES Parul Shah and Jonathan Chaplan for applicant. Catherine Beagan Flood, Navin Joneja and David Rosner for respondents. SOLICITORS OF RECORD Deputy Attorney General of Canada for applicant. Blake, Cassels & Graydon LLP, Toronto, for respondents. The following are the reasons for order rendered in English by [1] Crampton C.J.: These are the reasons for the order that I issued in this proceeding on March 3, 2014. In that order, I granted theex parte application by the Commissioner of Competition [Commissioner] for the production of records and the delivery of writtenreturns by the respondents pursuant to paragraphs 11(1)(

b) and 11(1)(

c) of the Competition Act, R.S.C., 1985, c. C-34 (the Act),respectively. [2] The purpose of these reasons is to clarify (

i) the Court’s role on applications under subsection 11(1), particularly with respect tothe exercise of its discretion and what is expected from the Commissioner; (ii) the scope of information sought by the Commissioner;and (iii) the relevance of arguments going to the substantive merits of the Commissioner’s inquiry. [3] In addition, these reasons will also clarify the role of respondents in such applications. [4] For the reasons set out below, the focus of the Court’s attention in applications made under

section 11 is not on whether theCommissioner has disclosed sufficient information to satisfy the Court that the Commissioner’s inquiry is a bona fide one and that thereis reason to believe that grounds exist for the making of an order under a specific

section in

Part VIII of the Act, or under

Part VIIIgenerally. Instead, in the typical proceedings initiated under

section 11, the Court’s focus will be on satisfying itself that (

i) an inquiry isin fact being made; (ii) the Commissioner has provided full and frank disclosure; (iii) the information or records described in the orderbeing sought are relevant to the inquiry in question; and (iv) the scope of such information or records is not excessive, disproportionateor unnecessarily burdensome. [5] That being said, as a practical matter, it may be difficult for the Court to satisfy itself that a respondent has or is likely to haveinformation that is relevant to the Commissioner’s inquiry, as required by subsection 11(1), without some contextual evidence of thisnature.

In the present application, the Commissioner amply satisfied the Court in this regard. [6] Insofar as the substantive merits of the Commissioner’s inquiry are concerned, hearings on ex parte applications under

section 11are not the appropriate forum in which definitive determinations should be made with respect to such issues. [7] As to the role of respondents, it should not be expected that requests for leave to make written or oral submissions will beroutinely granted by the Court. Generally speaking, the more appropriate manner in which a respondent’s concerns regarding the scopeor duplicative nature of the draft order should be brought to the Court’s attention is through the Commissioner, pursuant to theCommissioner’s duty of full and frank disclosure.

It would then remain open to the respondent to bring a motion to deal with issues thatsubsequently arise, in the usual manner. I. Background [8] According to the evidence filed by the Commissioner, the respondents Pearson Canada Inc. (Pearson Canada) and PenguinCanada Books Inc. (Penguin Canada) appear to be related to each other and to Penguin Group (USA), Inc.

Pearson plc (Pearson) appearsto be the parent company of each of those entities. [9] Pearson Canada and Penguin Canada are publishers and distributors of books, in print and electronic form. [10] In April 2012, the United States of America (U.S.A.), acting under the direction of the Attorney General of the United States,initiated a civil action (the complaint) against Apple Inc. (Apple) and five of the six largest publishers of general interest fiction and non-fiction books in the United States.

Those publishers (publisher defendants) included Penguin (USA), Inc., The Penguin Group, a divisionof Pearson (collectively, Penguin U.S.), Hachette Book Group, Inc. (Hachette), HarperCollins Publishers L.L.C. (HarperCollins),

Verlagsgruppe Georg von Holtzbrinck GmbH and Holtzbrinck Publishers, LLC (collectively, Holtzbrinck), doing business as Macmillan (collectively, Macmillan), and Simon & Schuster, Inc. (Simon & Schuster). [ 11 ] According to the complaint filed by the U.S.A., beginning no later than 2009, the publisher defendants, together with Apple, conspired to limit competition in the sale of general interest fiction and non-fiction electronic books (e-books), in particular with respect to the wholesale prices of such e-books, contrary to

section 1 of the Sherman Act , 15 U.S.C. § 1 (2012). A central aspect of that alleged conspiracy involved replacing the wholesale model of retail distribution with an agency model that gave the publisher defendants the power to raise retail e-book prices themselves. At the distribution level, this shift to an agency model began with Apple, with whom the publisher defendants each signed e-book distribution agreements over a period of three days, in January 2010.

Over the following four months, it was alleged that each publisher defendant transformed its business relationships with all of the major e-book retailers in the United States by replacing their prior wholesale model with an agency model and imposing flat prohibitions against discounting and other forms of price competition on all Apple e-book retailers. [ 12 ] Among other things, the complaint also described the alleged roles of the chief executive officers (CEOs) of the defendant publishers in the alleged conspiracy, including the roles of Mr.

John Makinson, CEO of the Penguin Group, who was repeatedly referenced in the complaint, and Mr. David Shanks, CEO of Penguin (USA), Inc. [ 13 ] In due course, that complaint led to the issuance of a final judgment (final judgment) in May 2013 against Penguin U.S.

The terms of that judgment include various provisions directed towards restrictive agreements entered into between Penguin U.S. and retailers, prohibitions on entering into similar agreements for a fixed period of time, a prohibition on retaliatory conduct against other e- book publishers or e-book retailers (as defined in the judgment), and prohibitions on certain types of horizontal conduct with other e- book publishers (including other publisher defendants, all as defined in the judgment).

The restrictive distribution agreements in question included agreements limiting e-book retailers’ ability to set, alter or reduce the retail price of any e-book, or to offer price discounts or any other form of promotion to consumers, and agreements that contained certain types of most-favoured-nation (MFN) clauses. [ 14 ] In April 2013, the European Commission (Commission) issued a communication (Market Test Notice) in which it described its preliminary assessment of allegations of similar conduct against certain subsidiaries of Pearson and other publishers in relation to the sale of e-books in the European Economic Area (EEA).

The Market Test Notice also described various commitments that had been offered by those subsidiaries of Pearson to address the concerns identified by the Commission.

Notwithstanding those commitments, those subsidiaries specifically did not agree with the Commission’s assessment. [ 15 ] On July 1, 2013, Bertelsmann SE & Co., KGaA and Pearson combined parts of their respective publishing businesses in a joint venture known as Penguin Random House. [ 16 ] Among other things, the Commission’s investigation led to the issuance of a Commission decision on July 25, 2013 against Penguin Random House Limited and certain of its affiliates.

That decision included a description of the alleged participation by those entities, their principal rivals and Apple in the implementation of a common global plan within the EEA.

In addition, it described the Commission’s preliminary view that those entities had participated in a concerted practice that was likely to have an appreciable effect on trade between EEA Member States, within the meaning of Article 101(1) of the Treaty on the Functioning of the European Union , OJ C 326/47 and Article 53(1) of the Agreement on the European Economic Area , OJ L 1/94. [ 17 ] After reiterating that the Penguin entities in question did not agree with its preliminary assessment, the Commission accepted various commitments that had been offered by those entities to address its concerns.

Those commitments included the termination of restrictive distribution agreements (referred to as “agency agreements”) with retailers in the EEA, particularly agreements that (

a) restrict, limit or impede an e-book retailer’s ability to set, alter or reduce retail prices of e-books, or to offer any other form of promotion; or (

b) contain certain types of MFN clauses. They also included undertakings to refrain from restricting an e-book retailer’s pricing discretion, as described above, for a period of two years, and to refrain from entering into agreements with e-book retailers containing certain types of MFN clauses, for a period of five years. [ 18 ] In July 2012, the Commissioner commenced an inquiry under subparagraph 10(1) ( b )(ii) of the Act on the basis that he had reason to believe that grounds exist for the making of an order under

Part VIII of the Act with respect to certain alleged anti-competitive conduct to restrict e-book retail price competition in the markets for e-books in Canada.

According to the initial affidavit filed by the Commissioner in these proceedings, that inquiry has been directed from the outset towards conduct described in sections 76 (price maintenance), 79 (abuse of dominant position) and 90.1 (restrictive agreements among competitors). [ 19 ] On February 7, 2014, a consent agreement (consent agreement) between the Commissioner and Hachette, certain of its affiliates, Macmillan, HarperCollins Canada Limited and Simon & Schuster Canada, a division of CBS Canada Holdings Co. (collectively, the “settling publishers”), was filed with the Competition Tribunal (Tribunal). [ 20 ] Neither the respondents nor any of their affiliates were a party to the consent agreement.

They take the position that they did not participate in the alleged horizontal agreement among e-book publishers into which the Commissioner is inquiring under

section 90.1 of the Act . [ 21 ] A press release issued by the Competition Bureau (Bureau) on the day the consent agreement was filed states, among other things, that the Bureau’s investigation into the e-book industry in Canada continues. II. Relevant Legislation [ 22 ] What follows is a brief

summary of the legislation that is relevant to this application. The full text of the provisions referred to below is set forth in Appendix 1 to these reasons. [ 23 ] Pursuant to subparagraph 10(1) ( b )(ii) of the Act , the Commissioner may cause an inquiry to be made into all such matters as the Commissioner considers necessary to inquire into with the view of determining the facts, whenever the Commissioner has reason to believe that grounds exist for the making of an order under

Part VII.1 or

Part VIII of the Act.

Part VII.1 deals with deceptive marketing

practices and is not relevant to this application.

Part VIII deals with civilly reviewable trade practices, such as refusals to supply, price maintenance, exclusive dealing, tied selling, market restriction, abuse of dominant position and mergers. [ 24 ] Once on inquiry, the formal investigative powers set forth in the Act may be exercised by the Commissioner, subject to judicial oversight. Those powers include the power to obtain, pursuant to paragraph 11(1) ( b ), an order for the production of “a record, a copy of a record certified by affidavit to be a true copy, or any other thing, specified in the order”.

They also include the power to obtain, pursuant to paragraph 11(1) ( c ), an order for the making and delivery of “a written return under oath or solemn affirmation showing in detail such information as is by the order required.” The Court may issue such orders upon being satisfied by information on oath or solemn affirmation that (

i) an inquiry is being made; and (ii) that the respondent has or is likely to have information that is relevant to the inquiry. [ 25 ] Pursuant to subsection 76(1) of the Act , the Tribunal may issue certain types of remedial orders where it finds that certain types of persons, including a person who is engaged in the business of producing or supplying a product, have directly or indirectly engaged in one of two types of price maintenance.

The first of those is agreeing, threatening, promising or likewise influencing upward, or discouraging the reduction of, the price at which the person’s customer offers to supply or advertises a product within Canada. The second is refusing to supply a product or otherwise discriminating against any person or class of persons engaged in business in Canada because of the low pricing policy of that other person or class of persons.

However, subsection 76(4) provides that no order may be made if the person and the customer in question are among other things, “principal and agent or mandator and mandatary.” [ 26 ] Pursuant to

section 79 of the Act , the Tribunal may prohibit a person or persons from engaging in a practice of anti-competitive acts where it finds that (

a) the person or persons in question substantially or completely control, throughout Canada or any area thereof, a class or species of business; (

b) that person or those persons have engaged in or are engaging in the anti-competitive practice in question; and (

c) the practice has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market. [ 27 ] Pursuant to subsection 90.1(1) of the Act , the Tribunal may issue certain types of remedial orders where it 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”. III. The Draft Order and its Schedules [ 28 ] The draft order submitted by the Commissioner on this application was virtually identical in all material respects to the orders recently issued by this Court pursuant to

section 11 of the Act . That form of order has evolved into essentially a template and reflects comments provided by the Court to the Commissioner in prior hearings under

section 11. The Court recognizes that this form of order may well continue to evolve and may not be appropriate in every case. The respondents did not raise any concerns with respect to the text in the main body of the draft order. [ 29 ] Schedules I and II to the draft order described the records to be produced pursuant to paragraph 11(1)(

b) of the Act and the written returns of information to be produced pursuant to paragraph 11(1)( c ), respectively. By comparison with other such schedules that this Court has seen, those schedules each had a relatively modest number of specifications and, at least to some extent, reflected input previously provided by the respondents to the Commissioner. [ 30 ] Broadly speaking, the records and written returns of information sought by the Commissioner concerned the following: (

i) communications among e-book publishers relating to the sale, pricing or supply of e-books in Canada; (ii) negotiations of agreements between e-book publishers and e-book retailers relating to the sale, pricing or supply of e-books in Canada; (iii) the business and strategic considerations or justifications for agreements that limit an e-book retailer’s ability to set, alter or reduce the retail price of e-books sold to consumers in Canada; (iv) the procedures, policies, strategies or analyses relating to the pricing of e-books in Canada; (

v) the relationship between e-books and print books in Canada; and (vi) the respondents’ revenues from the sale or supply of e-books in Canada. [ 31 ] The principal concerns raised by the respondents with respect to Schedules I and II are discussed in

Part IV.b of these reasons below. IV. Analysis A. The Court’s role and what is expected from the Commissioner [ 32 ] The initial affidavit filed by the Commissioner in support of this application stated the following with respect to the inquiry that is being conducted in this matter: (

i) It was commenced under subparagraph 10(1) ( b )(ii) of the Act based on the Commissioner’s reason to believe that grounds exist for the making of an order under

Part VIII of the Act with respect to certain alleged anti-competitive conduct to restrict e-book retail price competition in the markets for e-books in Canada; (ii) It concerns, but is not limited to, the settling publishers and the respondents; (iii) Based on the Commissioner’s preliminary investigation and information the Bureau has gathered to date, the Commissioner has and continues to have reason to believe that, among other things:

(

a) The respondents entered into an agreement or arrangement with certain of their competitors to restrict e-book retail pricecompetition; (

b) Further to this agreement or arrangement, the respondents have engaged in conduct to restrict e-book retail price competition inCanada by, among other things, limiting or impeding the ability of e-book retailers to set, alter or reduce the retail price of e-books soldto consumers; (

c) The respondents have engaged in this conduct since approximately 2011, and continue to do so; (

d) By engaging in the above-mentioned conduct, the respondents have prevented or lessened, and are preventing or lessening,competition substantially in the markets for e-books in Canada. [33] That affidavit also stated that the Commissioner is investigating the alleged anti-competitive conduct under sections 76 and 79 ofthe Act. [34] During the hearing of this application the respondents submitted that the Commissioner is required to disclose, in the affidavitfiled in support of an application under

section 11, his reasons to believe that grounds exist for the making of an order, in respect of eachof the elements of each

section of the Act that are within the purview of the inquiry in question. While appearing to acknowledge that theCommissioner had broadly disclosed his reasons to believe with respect to

section 90.1, they maintained that he had an obligation toprovide at least some evidence with respect to each of the elements of

section 90.1, yet failed to do so. In this regard, they relied onSymbol Technologies Canada ULC v. Barcode Systems Inc., 2004 FCA 339, [2005] 2 F.C.R. 254 (Symbol Technologies). With respect tosections 76 and 79, they went further and alleged that the Commissioner failed to disclose any reason to believe that grounds exist for themaking of an order. Instead, they asserted that the Commissioner simply made a bare statement that he “is also investigating the allegedanti-competitive conduct under sections 76 and 79 of the Act”. Relying on this Court’s decisions in Canada (Commissioner ofCompetition) v.

Air Canada, (FC), [2001] 1 F.C. 219 (T.D.) (Air Canada), they maintained that this was insufficient.They added that, prior to seeing this reference in the Commissioner’s initial affidavit, they had been unaware that the Commissioner’sinquiry extended to those sections of the Act. [35] I disagree with the substance of the respondents’ submissions regarding the Commissioner’s disclosure requirements. [36] To begin, in my view, Symbol Technologies is distinguishable.

That case involved an appeal by a private party (SymbolTechnologies Canada ULC (Symbol)) from a decision of the Tribunal granting leave to another private party (Barcode Systems Inc.) tomake an application to the Tribunal against Symbol under the refusal to supply provisions of the Act. The applicable test for leave, as setforth in subsection 103.1(7) of the Act, is whether the Tribunal has reason to believe that the applicant is directly and substantiallyaffected in its business by the practice of refusal to supply, as defined in subsection 75(1) of that Act.

The Federal Court of Appeal ruledthat “unless the Tribunal considers all the elements of the practice set out in subsection 75(1) on the leave application, it could notconclude, as required by paragraph 103.1(7), that there was reason to believe that an alleged practice could be subject to an order undersubsection 75(1)” (Symbol Technologies, above, at paragraph 18). [37] The present application concerns something very different, namely, an application under paragraphs 11(1)(

b) and (

c) of the Actfor the production of written returns and documents. The test for the Court on such an application simply requires the Court to besatisfied of two things, namely, that an inquiry is being made under

section 10 and that a person is likely to have information that isrelevant to the inquiry. In contrast to the situation in Symbol Technologies, there is no requirement in

section 11 for the Court to considerwhether there is reason to believe, or reasonable grounds to believe, that grounds exist for the making of an order under

Part VII.1 or PartVIII of the Act (Air Canada, above, at paragraph 20; Canadian Pacific Ltd. v. Canada (Competition Act, Director of Investigation andResearch), 61 C.P.R. (3d) 137 (Ont. Gen. Div.), at paragraph 8). That function was given by Parliament to theCommissioner, pursuant to subparagraph 10(1)(b)(ii) of the Act. This is an important difference from the test that must be satisfied toobtain a search warrant under subparagraph 15(1)(a)(ii) of the Act. Under that provision, it is the Court which must be satisfied byinformation on oath or solemn affirmation that there are reasonable grounds to believe that grounds exist for the making of an orderunder

Part VII.1 or

Part VIII of the Act. [38] In further support of their position that the Commissioner is required to provide, in the affidavit filed in support of a request foran order under

section 11, some explanation of why there is reason to believe that the grounds referred to in subparagraph 10(1)(b)(ii)exist, the respondents relied upon the following statement of Justice Reed, in Air Canada, above, at paragraph 31:

Section 11 provides that a judge may, not shall, issue an order. Residual discretion exists. Also, I cannot conclude that

section 11authorizes the issuing of an order to produce information if the Commissioner were acting on a “whim”. I cannot envisage a courtgranting a

section 11 order on the basis of a bald assertion by the Commissioner that an inquiry has been commenced. It seems to me thatany judge would require more than that. He or she is likely to require some description of the nature of the alleged conduct that is thesubject of the inquiry, the basis of the Commissioner’s decision to commence an inquiry and his reason for believing that conduct towhich the inquiry is addressed has occurred. Also, the judge must be satisfied that the person against whom the order is sought is likelyto have relevant information.

This does not mean that the Court second guesses the Commissioner’s decision that he has reasons tobelieve that the conduct that is the subject of the inquiry in question occurred, but it does allow the Court to refuse to grant an order whenthere is insufficient evidence to support a conclusion that a bona fide inquiry has been commenced. [Emphasis in original.] [39] I agree with Justice Reed’s statement that the presence of the word “may” in

section 11 reflects Parliament’s intention that theCourt should, and does, retain the residual discretion to refuse to grant an order requested under that

section of the Act, even where thetwo conditions set forth in

section 11 have been met. To reiterate, these two conditions are that the Commissioner has been satisfied byinformation on oath or solemn affirmation that an inquiry is being made under

section 10 and that a respondent is likely to haveinformation that is relevant to the inquiry. As noted by Justice Mactavish in Canada (Commissioner of Competition) v. Labatt BrewingCompany Limited, 2008 FC 59, 323 F.T.R. 115 (Labatt), at paragraph 50,

section 11 does not mandate that the Court act as a mere“rubber stamp” once those two conditions have been satisfied (see also Canada (National Revenue) v. RBC Life Insurance Company,2013 FCA 50, [2013] 3 C.T.C. 126 (RBC), at paragraphs 19–38).

[40] I also share Justice Reed’s view that it would be difficult to envisage a court granting an order under

section 11 on the basis ofbald assertions with respect to the two conditions set forth in that provision, or if it appeared that the Commissioner were acting on a“whim”. As Justice Mactavish elaborated, to properly exercise its discretion and its independent judicial oversight role with respect tothe extensive investigative powers granted to the Commissioner under

section 11, the Court must be fully apprised of the relevantcircumstances surrounding the Commissioner’s application (Labatt, above, at paragraphs 50–51). [41] However, I do not share Justice Reed’s view that the Commissioner is required to provide sufficient evidence that a bona fideinquiry has been commenced. Stated alternatively, I do not accept the respondents’ position that the Commissioner is required to providesome evidence to explain why there is reason to believe that the grounds set forth in subparagraph 10(1)(b)(ii) exist. I am not aware ofany other authority that would support this view.

That being said, as a practical matter, it may be difficult for the Court to satisfy itselfthat a respondent has or is likely to have information that is relevant to the Commissioner’s inquiry, as required by subsection 11(1),without some contextual evidence of this nature. In the present application, the Commissioner amply satisfied the Court in this regard. [42] In my view, the Commissioner’s evidentiary obligations on an application under

section 11 are not rooted in his reasons tobelieve that those grounds exist, but rather in (

i) the duty of full and frank disclosure that exists on an ex parte application; and (ii) theCourt’s duty to satisfy itself that the information being sought by the Commissioner is relevant to the inquiry in question, and is notexcessive, disproportionate or unnecessarily burdensome (Hryniak v.

Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at paragraph 32; RBC,above, at paragraphs 21–23). [43] It is now well established that, as a statutory authority responsible for the administration and enforcement of the Act, theCommissioner benefits from a presumption that actions taken pursuant to the Act are bona fide and in the public interest (Canada(Competition Act, Director of Investigation and Research) v. Bank of Montreal (1996), 68 C.P.R. (3d) 527 (Comp. Trib.), at paragraph32; Canada (Competition Act, Director of Investigation and Research) v. Superior Propane Inc. (1998), (CT), 85 C.P.R.(3d) 194 (Comp.

Trib.), at paragraph 19; Rona Inc. v. Commissioner of Competition, 2005 Comp. Trib. 26, at paragraph 17; see alsoIndustrial Milk Producers Assn. v. British Columbia (Milk Board), (FC), [1989] 1 F.C. 463 (T.D.), at page 476; Northof Smokey Fishermen’s Assn. v. Canada (Attorney General), 2003 FCT 33, 229 F.T.R. 1, at paragraph 24; Frelighsburg (Municipalité) c.Entreprises Sibeca Inc., 40 M.P.L.R. (3d) 157 (Que. C.A.), at paragraphs 59–61).

Accordingly, in the absence ofevidence of bad faith or other evidence that the Commissioner’s inquiry is not a bona fide inquiry, it will be presumed to be so. [44] However, given that

section 11 applications proceed on an ex parte basis, there is a “heavy burden on the Commissioner to makefull and frank disclosure” of all of the relevant circumstances surrounding the application (Labatt, above, at paragraph 22; RBC, above, atparagraphs 26–36). This burden, which can also be expressed as an “utmost duty of good faith”, is not focused on circumstancessupporting the Commissioner’s application, but rather on two other things. The first is ensuring that the Court is informed of “any pointsof fact or law known to it which favour the other side” (United States of America v. Friedland, [1996] O.J.

No. 4399 (Gen. Div.) (QL), atparagraph 27); Labatt, above, at paragraphs 25–26; Ruby v. Canada (Solicitor General), 2002 SCC 75, [2002] 4 S.C.R. 3, at paragraph27). The second is ensuring that the Court is able to detect and redress abuses of its own processes (RBC, above, at paragraphs 31–36). [45] For example, the Commissioner cannot, through non-disclosure or misinformation, mislead the Court as to the potentialrelevance of the information for the inquiry in question.

Likewise, the Commissioner is obliged to disclose the general nature and extentof any information already obtained from the respondent in the course of the inquiry and in the investigation leading up to the inquiry. Ifthe respondent has provided significant information to the Commissioner in other contexts, such as a recent merger review, theCommissioner should also provide a general description of that information, together with an explanation of how that information differsfrom the information being sought in the

section 11 application. [46] These examples also describe information that should be disclosed by the Commissioner to satisfy the Court that the informationbeing sought in the application is relevant to the inquiry in question, and is not excessive, disproportionate or unduly burdensome. [47] Notwithstanding the foregoing, the Court recognizes that

section 11 applications are made at the investigatory stage, before anapplication for an order under one of the substantive provisions of

Part VII.1 or

Part VIII has been made.

The reason to “cause an inquiryto be made” under subsection 10(1) is with a “view of determining the facts.” For this reason, the Commissioner ordinarily will be givena certain degree of latitude with respect to minor or non-material misstatements, other errors or omissions, particularly if the applicationhas been made on an emergency basis, or otherwise with little time for preparation (Labatt, above, at paragraph 28; Friedland, above, atparagraph 31). [48] A certain degree of latitude will also ordinarily be warranted in recognition of the fact that the Commissioner may well needadditional information to better understand the nature of the conduct that is the subject of the inquiry, whether it raises issues underadditional sections of the Act, and the market(

s) in which there is reason to believe the conduct is or may be taking place. Stateddifferently: “Courts must, in the exercise of [their] discretion, remain alert to the danger of unduly burdening and complicating the lawenforcement investigative process. Where that process is in embryonic form engaged in the gathering of the raw material for furtherconsideration, the inclination of the Courts is away from intervention” (SGL Canada Inc. v. Canada (Director of Investigation andResearch), [1998] F.C.J.

No. 1951 (T.D.) (QL), at paragraph 11). [49] In recognition of this, and the fact that subparagraph 10(1)(b)(ii) refers to the existence of grounds for making an order under PartVII.1 or VIII of the Act, it is not strictly necessary that the Commissioner identify any specific

section of the Act in his affidavit information in respect of sections of the Act that are not identified in that affidavit. However, the Court will be vigilant to ensure that theCommissioner is not embarking on a “fishing expedition” (Thomson, above, at pages 613–614). [50] In my view, the foregoing principles simply clarify and apply to

section 11 applications the existing jurisprudence, includingLabatt, above, as it has developed subsequent to Air Canada. These principles apply to the typical case, and leave ample room for theCourt to deal with exceptional circumstances and the particular facts of each case.

(1) The Commissioner’s application in these proceedings [ 51 ] In the present proceedings, the respondents did not raise a question as to the bona fides of the Commissioner’s inquiry, other than with respect to the substantive issues discussed in

Part IV.C of these reasons below. Accordingly, the presumption that the inquiry described in the Commissioner’s affidavit is a bona fide one was not displaced. [ 52 ] In issuing my order dated March 3, 2014, I was, and remain, persuaded that the other information provided in the Commissioner’s initial affidavit, which is described at paragraphs 32 and 33 above, provided sufficient disclosure of the relevant circumstances surrounding the application to enable me to satisfy myself (

i) that the respondents have or are likely to have the information identified in that order; and (ii) that it was appropriate for me to exercise my discretion to issue the order. [ 53 ] Given the concerns that were identified by the respondents with respect to the sufficiency of the disclosure provided in the Commissioner’s initial affidavit, and given my observation during the proceedings that those concerns could have easily been addressed by providing additional information in an amended affidavit, the Commissioner submitted a revised affidavit shortly after the hearing on this application. [ 54 ] In that revised affidavit, additional information was added, to reflect the following: (

i) The Commissioner has reason to believe that the respondents continue to engage in conduct to restrict e-book retail price competition, in particular by entering into and continuing to have distribution agreements with e-book retailers that, among other things, limit or impede the ability of e-book retailers to set, alter or reduce the retail price of e-books sold to consumers. (ii) In certain circumstances, these distribution agreements also contain clauses whereby the retail price at which one e-book retailer sells an e-book to consumers depends on the retail price at which another e-book retailer sells the same e-book to consumers. (iii) The consent agreement does not resolve the Commissioner’s concerns regarding the respondents’ alleged conduct and the effects of the conduct in the markets for e-books in Canada, because the Commissioner has reason to believe that the respondents continue to have the above-described types of agreements with e-book retailers in Canada that will not be affected by the consent agreement, and that will therefore continue to restrict e-book retail price competition in the markets for e-books in Canada. [ 55 ] In addition, the Commissioner added new material to specifically address each of the elements of sections 76 and 79 of the Act . [ 56 ] For the reasons that I have given above with the benefit of an opportunity to reflect more fully on the matter, it was unnecessary for the Commissioner to provide this additional information in an amended affidavit. [ 57 ] For greater certainty, at the time I issued my order dated March 3, 2014, I was, and remain, persuaded that the information in the initial affidavit, described at paragraphs 32–33 above, was sufficient to satisfy me that it was appropriate to exercise my discretion to issue that order.

That order had been amended over a number of drafts to address certain other issues that are addressed in

Part IV.B. of these reasons below. This information was reinforced by additional information provided in the initial affidavit, and in the appendices thereto, with respect to the foreign investigations into similar conduct in the United States and Europe. It was not necessary for the Commissioner to address each of the elements of

section 90.1 , 76 or 79 , or to further explain the precise manner in which the respondents were believed to have limited the ability of e-book retailers to set, alter or reduce the retail price of e-books sold to consumers in Canada since 2011.

It was also not necessary for the Commissioner to further explain why the conduct being inquired into will not be affected by the consent agreement that was entered into with the settling publishers. [ 58 ] I would simply add in passing that, based on the factual information provided in the initial affidavit, it should have been readily apparent to the respondents that the conduct therein might well raise legitimate issues under sections 76 and 79 of the Act .

During the hearing of this application, counsel to the Commissioner represented that this factual information regarding the basis for the Commissioner’s inquiry had previously been communicated to the respondents. This was not disputed by the respondents.

In any event, the respondents do not appear to have been prejudiced by the lack of more explicit disclosure with respect to the basis for the Commissioner’s inquiry under sections 76 and 79 . [ 59 ] Therefore, there does not appear to be a sound basis for me to exercise my discretion to depart from the general rule, discussed at paragraphs 47–49 above, that the Commissioner should be given the latitude to conduct his inquiry under

Part VIII of the Act, whether it be with respect to the

section of the Act that has been the focus of the inquiry, other sections that have been identified, or even sections that have not been identified. Of course, this is all subject to various parameters that have been discussed above, namely, that he provide full and frank disclosure to the Court, that the Court be satisfied that the information described in the order being sought is relevant to the Commissioner’s inquiry, and that the Court be satisfied that such information is not excessive, disproportionate or unnecessarily burdensome. B.

The scope of information sought by the Commissioner [ 60 ] Prior to the hearing on this application, the Commissioner and counsel to the respondents had several written exchanges. Among other things, the respondents expressed concerns regarding the burdensome and potentially duplicative nature of the draft order that the Commissioner had shared with them. To a large degree, those concerns related to the extensive information already provided to the Commissioner over the course of 2012 and 2013 in connection with both the Penguin Random House joint venture and the U.S. investigation mentioned in

Part I of these reasons, above. In communicating their concerns, the respondents noted this Court’s prior admonition that the Commissioner should disclose such concerns to the Court and provide a

summary of potentially overlapping information previously obtained from them ( Labatt , above, at paragraphs 77, 78, 88–91 and 95–97). [ 61 ] At the respondents’ request, and perhaps having regard to that admonition, the Commissioner disclosed both the correspondence that predated the filing of this application and the subsequent correspondence that was filed prior to the hearing. [ 62 ] In their correspondence, the respondents stated, among other things, that they had already provided the Bureau with the

following: (

i) Copies of their existing agency agreements for the sale of e-books; (ii) Information about their largest e-book customers in Canada (filed as part of the notification to the Commissioner that was filed under

Part IX of the Act , in respect of the Penguin Random House joint venture); (iii) Extensive information in response to an informal request for information made in connection with that joint venture; (iv) Copies of more than 20 000 documents produced in response to a formal supplementary request for information made in connection with the joint venture (which apparently led the respondents to collect more than 300 000 documents, before eventually determining that only 20 000 were responsive to the request); (

v) Copies of approximately 290 000 documents that were submitted to the Antitrust Division of the United States Department of Justice (DOJ) in connection with the joint venture. [ 63 ] The respondents further noted that they had incurred more than $750 000 in professional fees (before applicable taxes) in responding to the Commissioner’s prior requests for information. [ 64 ] In response to the respondents’ request that the draft order be amended to eliminate requests for information that had previously been provided, the Commissioner added paragraph 12 to the draft that was initially submitted to the Court.

That paragraph states that the respondents need not produce information that was provided to the Commissioner in respect of the Penguin Random House joint venture pursuant to subsections 114(1) (initial notification filing) and 114(2) (formal supplementary information request) of the Act . [ 65 ] Paragraph 12 of the draft order complements paragraph 11, which provides that where a respondent previously produced a record to the Commissioner, that respondent is not required to produce a copy of the record, provided that the respondent: (1) identifies the previously produced record or thing to the Commissioner’s satisfaction; (2) makes and delivers a written return in which it agrees and confirms certain things; and (3) receives confirmation from the Commissioner that such records or things need not be produced.

In addition, paragraph 11 states that where an affiliate of the respondents, as identified in

Schedule 1 to the order, previously produced a record or thing to the Commissioner, the respondents are not required to produce an additional copy of the record, provided that the respondents comply with the three conditions above. [ 66 ] I am satisfied that, taken together, paragraphs 12 and 11 appropriately address the respondents’ concerns regarding the potentially duplicate nature of the order. [ 67 ] With respect to the respondents’ submissions concerning the information previously provided in connection with the Commissioner’s current inquiry, the Penguin Random House joint venture and the U.S.

DOJ’s investigation of essentially the same conduct that is the subject of the Commissioner’s inquiry, I find the Commissioner’s general position to be prima facie reasonable. In brief, the Commissioner states that such information is insufficient to determine the facts with respect to the current inquiry.

Based on the description of that information above, the different purposes for which much of that information was provided, and the fact that the bulk of that information was provided to a regulatory authority in another country in relation to a different investigation, it is not obvious to me that it should suffice for the purposes of the Commissioner’s inquiry into alleged conduct in Canada under sections 90.1 , 76 and 79 of the Act . [ 68 ] I recognize that the respondents have already incurred significant time and expense in responding to the various prior information requests from the Commissioner described above.

However, this alone does not provide a sufficient justification for the Court to decline to exercise its discretion to issue the revised draft order ( Labatt , above, at paragraph 92).

To warrant the exercise of such discretion in the respondents’ favour for this reason, the Court would have to be satisfied that the past burden incurred by the respondents, together with the additional time and expense that will be associated with responding to the order that I have issued, will be excessive, disproportionate or unnecessarily burdensome. [ 69 ] In their correspondence to the Commissioner dated February 25, 2014, the respondents acknowledged that the revised draft order had satisfactorily addressed a number of the concerns that they had previously expressed.

However, they maintained that other concerns remained unaddressed. Those concerns, together with the substantive issues discussed in the next

section below, were the focus of their oral submissions in the hearing before me the following day. The remaining concerns of the respondents can be summarized as follows. [ 70 ] To begin, they maintained that the revised draft order should be restricted to trade e-books, and should not extend to educational e-books. They based this position on their understanding that the inquiry does not relate to the latter type of e-books, and on the fact that Pearson Canada has published only educational books since it transferred its trade book business to Penguin Canada, in July 2013.

They added that the definition of the broader category of all trade books should be limited to general interest fiction and non-fiction books, as was done in the U.S. complaint discussed in

Part I of these reasons above. [ 71 ] While the Commissioner confined many of the specifications in the revised draft order to trade books (as defined therein), certain other specifications were not so confined. These included the “data” specifications set forth in specifications 11, 12 and 13 of

Schedule II. Specification 11 relates to all books, including print and audio books, while specification 12 relates to all e-books. Specification 13 then requests much of the same information as described in specification 12, for each print book and audio book within the scope of specification 11. [ 72 ] After I expressed some sympathy during the hearing of this application with the respondents’ position in relation to specification 13, the Commissioner confined that specification to trade print books and trade audio books.

In addition, the Commissioner narrowed the definition of those types of books in the final order. [ 73 ] In my view, the Commissioner’s refusal to confine the final draft order, including the specifications mentioned above, to trade e- books is not unreasonable. I accept the Commissioner’s explanation that the information and records being requested under the final

draft order with respect to print, audio and educational books may well be relevant to, and assist in, the assessment of the competitive effects of the alleged anti-competitive conduct in relation to trade e-books.

For example, if the analysis of all of this information revealed that the prices of print and audio books, including educational books, did not increase to the same degree as the prices of trade e-books in the period following the implementation of the conduct under inquiry, that could assist the Commissioner to establish that such conduct has substantially lessened competition, or is likely to do so. [ 74 ] I also accept the Commissioner’s position that even though Pearson Canada transferred its trade book business to Penguin Canada in July 2013, it may have information relevant to the inquiry, including information of the type described in the above- mentioned specifications, for several reasons.

These include the fact that it was engaged in the distribution and sale of trade books (including e-books) prior to that transfer, it has entered into agreements with e-book retailers for the distribution and sale of e-books, it continues to be engaged in the book publishing business generally, and it is an affiliate of Penguin Canada.

If Pearson Canada no longer has certain categories of information because they have been transferred to Penguin Canada, it simply has to explain that fact in accordance with the terms of the final order. [ 75 ] This reasoning also applies with respect to the respondents’ submission that the relevant period should not include any periods after July 1, 2013, the date upon which (

i) Pearson Canada contributed its trade book assets to Penguin Canada; and (ii) Penguin Canada was contributed to the Penguin Random House joint venture. I acknowledge the respondents’ assertion that the senior officers of the joint venture are different than those of the respondents, and that Random House Canada has never been subject to any inquiry with respect to an alleged agreement for the sale of e-books.

However, I do not accept their position that the documents and records of the joint venture could not be relevant to the Commissioner’s inquiry, and that having to provide documents after July 1, 2013 from the joint venture would be disproportionately burdensome on Penguin. [ 76 ] In addition, the respondents submitted that the “relevant period,” as defined in the order, should not include any periods prior to 2010, because (

i) Penguin Canada and its predecessor did not sell any e-books to retailers prior to 2010; (ii) e-book readers were not sold in Canada until very late in 2009, and even then likely not in any material volumes until much later; and (iii) the Commissioner’s affidavit only claims to have “reason to believe that Penguin has engaged in this conduct since approximately 2011”. [ 77 ] In my view, it is not unreasonable for the Commissioner to seek information dating back to September 2009.

According to the complaint filed by the U.S.A., that is approximately when the initial discussions took place between and among Apple and the U.S. publisher defendants, including Penguin U.S. I am satisfied that it is relevant for the Commissioner to see copies of the communications, records and other information described in the final order dating back to that period.

Among other things, this will assist the Commissioner to understand the business context in which the alleged conduct in Canada occurred, its underlying rationale, the extent to which that conduct changed relative to prior conduct and the impact that the conduct had, relative to the state of affairs immediately prior to that conduct, i.e., in the fall of 2009 and over the course of 2010. [ 78 ] The respondents further submitted that the relevant period described in the order should not include any periods after May 17, 2013, the date of the U.S. final judgment.

In this regard, they asserted that, pursuant to that final judgment, Penguin Canada and its predecessor have been legally prohibited from entering into or enforcing any agreement or arrangement with any other e-book publisher relating to prices or conditions of sale for e-books since that date. [ 79 ] In my view, the fact that a respondent or an affiliate of a respondent to an application made under

section 11 may have entered into a resolution in another jurisdiction with respect to conduct that is similar to conduct that is the subject of an inquiry under the Act does not axiomatically imply that documents and records post-dating such resolution cannot be relevant to the Commissioner’s inquiry.

To fully understand the nature and impact of the conduct in question, it will often be necessary to compare a respondent’s behaviour and policies during the period in which conduct contrary to the Act is believed to have occurred, with the respondent’s behaviour and policies during a reasonable period of time both before and after that period. [ 80 ] Finally, the respondents took the position that specification 11 of the order should not require information with respect to all books that they offered for sale during the relevant period, but rather should be confined to books that they actually sold.

In support of this position, they stated that, in any given month, there are thousands of older books that Penguin Canada maintains for sale but does not actually sell. They added that it is not possible, or would be disproportionately burdensome to have to try to identify, books that were not sold in a given month.

In addition, they stated that information in respect of books that were not sold during the relevant period cannot have any relevance to competition in Canada or the Commissioner’s inquiry. [ 81 ] After I expressed some sympathy with the respondents’ position on this point during the hearing of this application, the Commissioner revised specification 11 to exclude those print and audio books that were not sold at any point during the relevant period.

In my view, this was a reasonable and sufficient response, particularly given that the focus of the respondents’ oral submissions in respect of this matter appeared to be upon older print and audio books. Given that the focus of the Commissioner’s inquiry is upon e- books, information and records with respect to those books, including e-books that were not actually sold during the relevant period, may very well be relevant to the inquiry.

Indeed, it is not immediately apparent why information and records with respect to quantities of the relevant products sold and not sold during the relevant period of an inquiry would not be relevant to the inquiry. C.

Issues concerning the substantive merits [ 82 ] In their correspondence to the Commissioner and during the oral hearing on this application, the respondents vigorously asserted that as a result of the consent agreement filed with the Tribunal, the Commissioner can no longer have any plausible basis for any ongoing concern that conduct engaged in by them could lessen competition substantially, as contemplated by

section 90.1 of the Act . [ 83 ] In support of their position, the respondents noted that each of the other major book publishers in Canada are parties to the consent agreement. They added that a term in the consent agreement states that where that agreement imposes an obligation on a respondent party to the agreement to engage in or to refrain from engaging in certain conduct, that obligation shall apply to any joint venture or other business arrangement established by that respondent and any of Penguin (USA), Inc., Pearson Canada or Penguin Canada, or their subsidiaries, successors and assigns. Accordingly, they asserted that the consent agreement expressly, and as a matter of

fact, negates or precludes the possibility of an agreement described by

section 90.1 of the Act, because neither Pearson Canada norPenguin Canada can be party to an agreement with any competitor with a sufficient market presence to be able to agree to behave in amanner that prevents or lessens competition substantially. They maintain that this position is reinforced by the press release issued by theBureau in respect of the consent agreement.

Among other things, that press release states that the Bureau “expects that competitionamong retailers will increase, resulting in lower prices for e-books”, as a consequence of the consent agreement. [84] Based on the foregoing, the respondents submitted that the Commissioner cannot have “reason to believe” that grounds exist forthe making of an order under

Part VII.1 or

Part VIII of the Act, within the meaning of subparagraph 10(1)(b)(ii), and that therefore theCourt should exercise its discretion to decline to issue the order sought by the Commissioner. They made a similar submission based ontheir assertion that the U.S. final judgment is (

i) binding upon the Penguin Random House joint venture, of which Penguin Canada formsa part; and (ii) prohibits Penguin Canada from entering into or enforcing any agreement or arrangement with any other e-book publisherto raise, stabilize, fix, set or coordinate the retail price or wholesale price of any e-book, or to fix, set or coordinate any term or conditionrelating to the sale of e-books since May 17, 2013.

They added that the fact that the Penguin Random House joint venture was ultimatelycleared by the Commissioner reinforces their position that the Commissioner cannot have “reason to believe” that the grounds describedabove exist. [85] In response, the Commissioner maintained that the respondents entered into one or more agreements contrary to

section 90.1 andthat pursuant to that or those agreement(s), they switched from their prior wholesale agreements with retailers to agency agreements thathave and will continue to impose anti-competitive restrictions on retailers. The Commissioner also noted that the term in the consentagreement which imposes obligations on the settling publishers with respect to Penguin Canada and Pearson Canada pertains to futurejoint ventures or other business arrangements between the respondents and any of the settling publishers.

The Commissioner submittedthat, notwithstanding this provision, the respondents can continue to engage in unilateral discussions with e-book retailers while stillacting further to the anti-competitive agreement that the Commissioner alleges was entered between the respondents and the settlingpublishers. In response to questioning during the hearing of this application, the Commissioner stated that there is nothing in the consentagreement that prohibits the settling publishers from being a party to the agreement that is the subject of the inquiry being conductedpursuant to

section 90.1, or that requires the settling publishers to withdraw from any such agreement. [86] By their plain and explicit terms, each of the obligations imposed on the settling publishers under

Part II of the consentagreement pertains to agreements or arrangements between a settling publisher and an e-book retailer, or to retaliatory conduct by theformer towards the latter.

In contrast to the U.S. final judgment, there does not appear to be any provision in the consent agreement thatexpressly prohibits a publisher from entering into or enforcing an agreement or other arrangement with another publisher to fix, set orcoordinate the retail or wholesale price of any e-book, or to fix, set or coordinate any term or condition relating to the sale of e-books. [87] Accordingly, I am not satisfied that it is as axiomatic as the respondents suggest that the consent agreement precludes or negatesany possibility of an agreement described by

section 90.1. The same applies with even greater force to the fact that the Penguin RandomHouse joint venture was cleared, as that arrangement only involved the parties to the joint venture, whereas the agreement that is thesubject of the inquiry under

section 90.1 includes other leading participants in the publishing business in Canada. [88] I am also not satisfied that it is unlikely that the Commissioner’s inquiry could discover information to demonstrate, as a matterof fact, the existence of an agreement described by

section 90.1, to which one or both of the respondents are a party. I note that therespondents did not lead any evidence on either of these points. [89] More fundamentally, a

section 11 application is not the appropriate forum for the Court to make final determinations regardingissues related to theories of competitive effects, defences, exemptions or the factual likelihood that an inquiry may disclose the existenceof information demonstrating the existence of conduct described in

section 90.1 or another provision in

Part VIII of the Act (Air Canada,above, at paragraph 21; CP Containers (Bermuda) Ltd. (Re), 1995 CarswellNat 2899, 64 C.P.R. (3d) 384 (Comp. Trib.), at paragraph 6). [90] A

section 11 application is made during the investigatory phase of the administration and enforcement of the Act by theCommissioner. The purpose of such investigations is to determine whether there is sufficient evidence to warrant an application to theTribunal (in the case of inquiries under

Part VII.1 or

Part VIII of the Act) or a referral to the Director of Public Prosecutions (in the caseof an inquiry under

Part VI or

Part VII). Absent evidence of bad faith or the existence of other exceptional circumstances, which I havedifficulty identifying at this point in time, the Court should refrain from making determinations at this fact finding stage whichessentially reach final conclusions regarding the substantive merits of an inquiry (Irvine v.

Canada (Restrictive Trade PracticesCommission), (SCC), [1987] 1 S.C.R. 181, at page 235). [91] This applies equally to the respondents’ position with respect to subsection 76(4) of the Act, which provides, among other things,that no order may be made under subsection 76(2) where the respondent supplier and the customer are principal and agent. D. The role of respondents [92] Pursuant to the express terms of

section 11, applications are to be made on an ex parte basis. Accordingly, parties other than theCommissioner have no right to participate in the hearing, file evidence or cross-examine on the Commissioner’s affidavit (CelaneseCanada Inc. v. Murray Demolition Corp., 2006 SCC 36, [2006] 2 S.C.R. 189, at paragraph 36; Commissioner of Competition v. Toshibaof Canada Limited, 2010 ONSC 659 100 O.R. (3d) 535, at paragraphs 34–36; Raimondo v. Canada (Competition Act, Directorof Investigation and Research), 61 C.P.R. (3d) 142 (Ont. Gen.

Div.), at paragraphs 12 and 15). [93] However, the Court may in certain circumstances require that notice be given to the party or parties named in the order beingsought by the Commissioner, to provide an opportunity for the party or parties to seek leave to make written or oral submissions. TheCourt may provide a similar opportunity where, as in this application, the parties in question are aware of and attend the hearing. [94] Given that Parliament can be taken to have deliberately decided that

section 11 applications should ordinarily proceed on an exparte basis, it should not be expected that requests for leave to make written or oral submissions will be routinely granted by the Court(R. v. S.A.B., 2001 ABCA 235, 96 Alta. L.R. (3d) 31, at paragraph 61). The more appropriate manner in which a respondent’s concernsregarding the scope or potentially duplicative nature of the draft order should be brought to the Court’s attention is through the

Commissioner, pursuant to the Commissioner’s duty of full and frank disclosure ( Labatt , above, at paragraphs 100–107). [ 95 ] In this regard, the Court generally will want to know whether one or more drafts of the order that is being sought have been discussed with representatives of the party or parties named in the order. Where such dialogue has taken place, the Court should be provided with a sense of the nature of any concerns that have been expressed by the party or parties in question, the basis for those concerns and whether the draft order was modified to reflect any of those concerns.

In the current application, this was achieved by including the respondents’ prior correspondence with the Commissioner in the appendices to the initial affidavit that was filed on behalf of the Commissioner.

The Commissioner’s written submissions then explained how, if at all, the respondents’ concerns were addressed in subsequent drafts of the order. [ 96 ] Once the order has been issued by the Court, it would remain open to the respondent to bring a motion to deal with issues that subsequently arise, in the usual manner. [ 97 ] Parties considering seeking leave to make written or oral submissions to the Court should be aware that if their request is granted, it may be more difficult for them to subsequently demonstrate that the Court should set aside or vary its order “by reason of a matter that arose or was discovered subsequent to the making of the order” as stipulated by paragraph 399(2) (

a) of the Federal Courts Rules , SOR/98-106. V. Conclusion [ 98 ] For the reasons given above, the focus of the Court’s attention in applications made under

section 11 generally is not on whether the Commissioner has disclosed sufficient information to satisfy the Court that the Commissioner’s inquiry is a bona fide one and that there is reason to believe that grounds exist for the making of an order under a specific

section in

Part VIII of the Act, or under

Part VIII generally. Instead, in the typical proceedings initiated under

section 11, the Court’s focus will be on satisfying itself that (

i) an inquiry is in fact being made; (ii) the Commissioner has provided full and frank disclosure; (iii) the information or records described in the order being sought are relevant to the inquiry in question; and (iv) the scope of such information or records is not excessive, disproportionate or unnecessarily burdensome. In the present proceeding, having regard to the information filed by the Commissioner and the changes that were made to various drafts of the order that I ultimately signed, I had no difficulty satisfying myself of those things. [ 99 ] With respect to the substantive competition issues raised by the respondents, hearings on ex parte applications under

section 11 are not the appropriate forum in which definitive determinations should be made with respect to such issues. [ 100 ] As to the role of respondents, it should not be expected that requests for leave to make written or oral submissions will be routinely granted by the Court. Generally speaking, the more appropriate manner in which a respondent’s concerns regarding the scope or potentially duplicative nature of a draft order being sought in an application under

section 11 should be brought to the Court’s attention is through the Commissioner, pursuant to the Commissioner’s duty of full and frank disclosure. APPENDIX 1 Relevant Provisions of the Competition Act Inquiry by Commissioner 10.

(1) The Commissioner shall (

a) on application made under

section 9, (

b) whenever the Commissioner has reason to believe that (

i) a person has contravened an order made pursuant to

section 32, 33 or 34, or

Part VII.1 or

Part VIII, (ii) grounds exist for the making of an order under

Part VII.1 or

Part VIII, or (iii) an offence under

Part VI or VII has been or is about to be committed, or (

c) whenever directed by the Minister to inquire whether any of the circumstances described in subparagraphs ( b )(

i) to (iii) exists, cause an inquiry to be made into all such matters as the Commissioner considers necessary to inquire into with the view of determining the facts. Information on inquiry

(2) The Commissioner shall, on the written request of any person whose conduct is being inquired into under this Act or any person who applies for an inquiry under

section 9 , inform that person or cause that person to be informed as to the progress of the inquiry. Inquiries to be in private

(3) All inquiries under this

section shall be conducted in private.

Order for oral examination, production or written return 11.

(1) If, on the ex parte application of the Commissioner or his or her authorized representative, a judge of a superior or county court is satisfied by information on oath or solemn affirmation that an inquiry is being made under

section 10 and that a person has or is likely to have information that is relevant to the inquiry, the judge may order the person to (

a) attend as specified in the order and be examined on oath or solemn affirmation by the Commissioner or the authorized representative of the Commissioner on any matter that is relevant to the inquiry before a person, in this

section and sections 12 to 14 referred to as a “presiding officerˮ, designated in the ord

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