Jan 24, 2015

Categories versus Rebuttable Presumptions: Tervita Corp. v. Canada (Commissioner of Competition), 2015 SCC 3

Tervita Corp. v. Canada (Commissioner of Competition), 2015 SCC 3 (CanLII)

Tervita Corp. v. Canada (Commissioner of Competition), 2015 SCC 3 is a long, complex and important decision on competition law. It also contains a spirited disagreement between Rothstein and Abella JJ. on the appropriate standard of review of determinations of law made by the Competition Tribunal.

Oddly enough, I think both of them are right: Rothstein J. that this was an appropriate case for the courts to require the Tribunal to give correct answers to legal questions; and Abella J. that the gloss introduced by her colleague is likely to cause difficulties in future cases. The underlying cause of these difficulties, however, is the current state of the law and paradoxically Rothstein J.’s approach may offer the best way out.

The case concerned sections 92 and 96 of the Competition Act, in particular their application to a merger of companies owning secure landfills in British Columbia. Section 92 prohibits mergers that would lessen or prevent competition; this case involved prevention, because the acquired company had not yet begun to operate its landfill but would have at some point in the future. An acquisition by T, an incumbent, would have had the effect of preventing this. Section 96 provides a defence to the prohibition where the efficiency gains from the merger would outweigh its anti-competitive effects.

The Competition Tribunal is a slightly unusual creature. Its membership is drawn in part from the judiciary and only judicial members are entitled to address questions of law (Competition Tribunal Act, ss. 3 and 12). Moreover, a decision it makes is appealable to the Federal Court of Appeal “as if it were a judgment of the Federal Court” (ibid., s. 13(1)). Rothstein J. acknowledged the ordinary presumption that interpretations by an administrative decision-maker of its home statute are entitled to deference. Indeed, it is significant that, for the first time since Dunsmuir the Court expressly applied the Dunsmuir framework to a statutory appeal. Nonetheless, the presumption was rebutted in this case:

The appeal provision in the Competition Tribunal Act evidences a clear Parliamentary intention that decisions of the Tribunal be reviewed on a less than deferential standard, supporting the view that questions of law should be reviewed for correctness and questions of fact and mixed law and fact for reasonableness. The presumption that questions of law arising under the home statute should be reviewed for reasonableness is rebutted here (at para. 39).

Abella J. disagreed. She would have applied the presumption of deference and, accordingly, a reasonableness standard. To do otherwise, in her view, would undermine settled expectations: “judges and lawyers engaging in judicial review proceedings came to believe, rightly and reasonably, that the jurisprudence of this Court had developed into a presumption that regardless of the presence or absence of either a right of appeal or a privative clause — that is notwithstanding legislative wording — when a tribunal is interpreting its home statute, reasonableness applies” (at para. 170). Rebutting the presumption in this case would “chip away” at the “precedential certainty” the Court had developed (ibid), because it would represent “an inexplicable variation from our jurisprudence that is certain to engender the very ‘standard of review’ confusion that inspired this Court to try to weave the strands together in the first place” (at para. 171):

While the statutory language granting the right of appeal in this case may be different from the language in Pezim, McLean and Smith, it is not sufficiently different to undermine the established principle of deference to tribunal expertise in the interpretation of the tribunal’s own statute. Using such language to trump the deference owed to tribunal expertise, elevates the factor of statutory language to a preeminent and determinative status we have long denied it. I see nothing, in other words, that warrants departing from what the legal profession has come to see as our governing template for reviewing the decisions of specialized expert tribunals on a reasonableness standard (at para. 179).

How can they both be right? Abella J. is correct that Tervita will inject uncertainty into the law. Although the Competition Act is the only piece of Canadian legislation that contains a provision requiring the appellate court to treat an administrative decision as if it emanated from an inferior court (and Tervita will thus be much easier to limit to its special facts than Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, [2012] 2 SCR 283 (see here and here)), it relies implicitly on a general principle that statutory language may rebut the presumption of reasonableness. There is at least one other plausible example — important questions of law certified by the Federal Court to the Federal Court of Appeal — and counsel can be expected to rely on statutory language arguments in subsequent cases.

But Rothstein J. is surely right that there is a strong case for correctness review of the Competition Tribunal’s determinations of law, because of the unusual statutory language (and also because of its unusual structure). If the presumption of reasonableness could not be rebutted here, when could it be rebutted?

And this gets us to the heart of the problem. The post-Dunsmuir framework recognizes that there are certain categories to which correctness and reasonableness apply: but the categories are not self-applying, such that in hard cases (or maybe even all cases), courts must rely on substantive factors (such as expertise, nature of the question or statutory language) to determine which category applies.

Then the presumption of reasonableness review was tacked onto the categorical approach without any explanation of how it might be rebutted, or its relationship to the categorical approach. Does correctness review apply whenever a case falls into a correctness category, or only when the presumption has been rebutted, so that ‘rebutting the presumption’ is simply shorthand for the conclusion that a case falls into a correctness category based on a consideration of substantive factors? Or does an applicant have two bites of the cherry: one to get into a correctness category and another to rebut the presumption of reasonableness, presumably relying on substantive factors on both occasions? Whatever the answer is, the importance of substantive factors is obvious. Rothstein J.’s approach in Tervita supports this view by giving vital weight to unusual statutory language.

Where to next? Abella J. makes an intriguing suggestion (at para. 171) that the lines between reasonableness and correctness may soon be “completely erased”. That is, rather than spending time arguing about correctness and reasonableness, it may be time to double down on Dunsmuir and adopt across-the-board reasonableness review. This would not amount to an abdication of the judicial review function, because in some instances the range of reasonable outcomes might permit only one reasonable answer. A provision such as s. 13(1) might suggest that there can only be one reasonable answer to certain questions resolved by the Competition Tribunal. Substantive factors would still be important, but would operate only to determine the “range” of reasonable outcomes, thereby eliminating the confusion caused by the relationship between the rebuttable presumption and the categorical approach. I will come back to this possibility in a forthcoming paper.

Briefly, on the merits, and with the large caveat that my substantive expertise is limited, all turned on s. 96 and efficiencies. The Tribunal was not able to quantify the “deadweight loss” correctly, but rather than counting it as 0 calculated it as 10%. Rothstein J. held that this was inappropriate, akin to “sacrific[ing] the objectivity of its analysis” (at para. 138) by inviting “speculation into the analysis” (at para. 139). I prefer the Federal Court of Appeal’s approach. Mainville J.A. acknowledged that not all effects could be quantified with exactitude but that as long as the Tribunal was careful to lay out its assumptions, its findings should not be disturbed:

When precise quantification is not reasonably possible for a given element, a rough estimate is to be preferred to a subjective judgement call. When neither a precise quantification nor a rough estimate is reasonably possible for a given element, then of course there will be a certain degree of discretion in attributing weight to any remaining qualitative gain in efficiency or effect, but this discretion must be curtailed and limited by the principles of reasonableness. In other words, any weight given to the remaining unquantifiable qualitative effects must be reasonable, i.e.,it must be supported by the evidence, and the reasoning behind the Tribunal’s weighting must be clearly articulated or otherwise discernable (2013 FCA 28, at para. 148).

This seems unanswerable to me. Isn’t setting the figure at 0 is as much a subjective judgement call as setting it at 10%? Moreover, Rothstein J. was happy to allow speculation in the context of the s. 92 analysis, which requires assessing future behaviour of market actors and potential new entrants. What matters, Rothstein J. explained, is whether the merger would be likely to reduce competition, “keeping in mind that the further into the future the Tribunal looks the more difficult it will be to meet this test” (at para. 75). There was “sufficient…evidence upon which the Tribunal could find a substantial prevention of competition as a result of the merger” (at para. 82). I accept that the text of s. 92 makes such an analysis unavoidable and that the same cannot be said of s. 96. But Rothstein J.’s problem seemed to be with the very legitimacy of the s. 96 exercise undertaken by the Tribunal, which nonetheless bore some resemblance to its s. 92 counterpart.

Indeed, Rothstein J. himself arrived at his conclusion with some reluctance, noting in a postscript his concern that “this case does not appear to me to reflect the policy considerations that Parliament likely had in mind in creating an exception to the general ban on anti-competitive mergers”, though this did not dissuade him that the defence was available under “the statute as currently drafted” (at para. 167). I ultimately prefer the approach set out by Karakatansis J. in dissent:


[W]here the expert evidence does not fully provide a quantification of the anti-competitive effects, I do not agree with my colleague that the evidence has no probative value whatsoever and must be ignored. Relevant evidence is generally admissible, and the failure to lead the best evidence available goes to weight, not admissibility. Clearly, the evidence will have less probative value without an estimate or quantification. No doubt it would be more difficult for an undetermined anti-competitive effect to outweigh any significant efficiency gains. However, it does not become irrelevant or inadmissible. The statutory language does not require such a result. Nor does the purpose or context of the legislation (at para. 194).