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Federal Court Of Appeal Confirms Scope Of Competition Act Conspiracy Provisions – Antitrust, EU Competition


On August 17, 2022, the Federal Court of Appeal (the
FCA“) dismissed the appeal by Kobe Mohr in Mohr
v. National Hockey League
. In summary, the FCA found that the
decision reached by the Federal Court was correct in its
conclusion, and that neither s. 48(1) nor s. 45(1) of the
Competition Act (the “Act“)
apply to the conduct at issue.

Background

As discussed in more detail in a prior blog post, Mohr brought a class action in the
Federal Court in 2021 against the National Hockey League, American
Hockey League Inc., Echl Inc., the Canadian Hockey League, the
Quebec Major Junior Hockey League Inc., the Ontario Hockey League,
the Western Canada Hockey League and Hockey Canada alleging a
conspiracy contrary to s. 45(1) and s. 48(1) of the Act. In
summary, Mohr alleged that the respondents conspired to (i) impose
unreasonable terms and conditions upon all major junior hockey
players that signed a standard player agreement, including, for
example, the imposition of “nominal wages”, and (ii)
limit the opportunities of hockey players to play in Canadian major
junior and professional hockey.

Section 45(1) of the Act prohibits conspiracies, agreements or
arrangements between competitors to fix, maintain, increase or
control the price for the supply of a product; to allocate sales,
territories, customers or markets for the production or supply of a
product; or to fix, maintain, control, prevent, lessen or eliminate
the production or supply of a product. If established, the
anti-competitive effect of the agreement is presumed, giving rise
to both criminal sanctions and private enforcement, including
through class actions. Section 48(1) prohibits agreements or
arrangements which unreasonably limit the opportunities of a player
to participate in professional sport; impose unreasonable terms on
players; or unreasonably limit the ability of players to negotiate
with and play with a team of their choice in a professional
league.

As discussed in our previous blog post, in the decision below, the Federal
Court granted a preliminary motion to strike out the claim on the
basis that, among other things:

  • 45(1) did not apply to the alleged conduct because the
    defendants were not “competitors” for the product or
    service at issue and, further, s. 45 does not apply to agreements
    among competing buyers for the purchase of a product or
    service (as s. 45 is restricted to agreements among competing
    suppliers); and

  • 48(1) did not apply to the alleged inter-league conspiracy
    because the provisions apply only to agreements between teams and
    clubs within the same league.

Appeal Decision

The FCA agreed with the court below and found that: (i) the
prohibition on anti-competitive arrangements in s. 48(1) is limited
to arrangements or agreements between clubs or teams in the same
league, and (ii) s. 45(1) is restricted to agreements or
arrangements with respect to the supply or sale of products.

Interpretation of Section 48

More specifically, the FCA held that, consistent with the rules
of statutory interpretation, the Act must be read in its entire
context, in its grammatical and ordinary sense, harmonious with the
scheme and object of the statute. The FCA further noted that s.
48(1) of the Act must be read in conjunction with s. 48(3). Section
48(3) states that s. 48(1), and not s. 45, applies
to “agreements and arrangements and to provisions of
agreements and arrangements between or among teams and
clubs engaged in professional sport as members of the same
league
.” and that s. 45, and not s.
48(1), applies to “. all other agreements, arrangements and
provisions thereof between or among those teams, clubs and
persons
” [emphasis added].

In this regard, the FCA held that s. 48(3) clearly allocates
agreements between s. 48(1) and s. 45(1) to avoid overlapping or
conflicting applications of these sections. As per s. 48(3), only
agreements and provisions “between or among teams and clubs.of
the same league” that relate exclusively to matters described
in s. 48(1) fall within the scope of s. 48, and “all other
agreements, arrangements and provisions thereof between or among
those teams, clubs and persons” fall within the scope of s.
45. The FCA also noted that Parliament’s intention of having s.
48(1) apply only to teams and clubs of the same league is
also made clear when considering other sections of the Act.

As the alleged conduct involved an agreement among teams/clubs
from different leagues, the FCA held that the alleged
conduct was not subject to s. 48(1) of the Act.

Interpretation of Section 45

The FCA also found that the alleged conduct was not subject to
s. 45 of the Act. In this regard, the FCA held that the plain
meaning of “production or supply” in s. 45 leads to the
conclusion that s. 45 is limited to conspiracies relating to the
provision, sale and distribution of products or services,
and does not include conspiracies with respect to purchase or
acquisition
of products or services. The FCA highlighted that
there was clearly an intention for s. 45 to apply only to
supply-side conspiracies, based on, among other things, the removal
of the word “purchase” from s. 45, and the addition of
the words “or the supply of the product” added to s.
45(1) as part of the 2010 amendments to the Act. The FCA also
highlights that s. 90.1 was added to the Act in 2010, which
provides civil recourse for certain agreements between competitors.
Notably, s. 90.1 does not distinguish between supply-side and
buy-side conspiracies.

As the alleged conduct involved the purchase or
acquisition
of players services by the leagues in question,
the FCA held that, as a buy-side agreement, these agreements were
not properly considered under s. 45 of the Act.

Impact of Recent Amendments to the Competition
Act

As discussed above, Mohr’s claim under s. 45 was struck
because both the Federal Court and the FCA found that s. 45 does
not apply to agreements among competing buyers for the purchase of
a product or service. However, as noted in a prior blog post, s. 45 of the Act was recently
amended to include a prohibition against so-called (i)
“wage-fixing” agreements that “fix, maintain,
decrease or control salaries, wages or terms and conditions of
employment” and (ii) “no-poach” agreements to
“not solicit or hire employees” between unaffiliated
employers – beginning on June 23, 2023, when the provision comes
into effect. This change is intended to align Canada’s approach
to these types of agreements with the highly controversial approach
adopted by the United States Department of Justice.

These extension of s. 45 to include “wage-fixing” and
“no-poach” agreements could be relevant to future class
actions that allege the existence of such “buy-side”
agreements, such as an agreement requiring the imposition of
“nominal wages”, as was alleged by Mohr.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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