The Alberta Court of Appeal issued a decision on
June 14, 2013, in a private action for damages under section 36 of
the Competition
Act, reversing the trial court's decision that Husky and
ExxonMobil, co-owners of certain oil and gas properties near
Rainbow Lake, Alberta, had illegally conspired to lessen
competition for purchases of fluid hauling services, contrary to
section 45 of the Act. In 321665
Alberta Ltd. v ExxonMobil Canada Ltd., the trial
judge had held that Husky and ExxonMobil's decision to
single-source their acquisition of fluid hauling services at
Rainbow Lake unduly lessened competition and violated section 45 of
the pre-2009
Act. The Act has
since been
amended and the Crown no longer has to prove the impugned
agreement led to or was likely to lead to an undue lessening of
competition. To read more about the Alberta Court of Queen's
Bench decision, please see our earlier blog post
here. While Husky and ExxonMobil appealed the trial judge's order
to pay some $6 million in damages, including $1 million in punitive
damages, the plaintiff cross-appealed the judge's decision not
to award additional damages and costs pursuant to section 36 of the
Act. Section 36 provides a statutory cause of action to
any person who has suffered loss or damage arising from the breach
of any of the criminal provisions in Part VI of the
Act. Deciding on the merits, the Court of Appeal held the trial judge
made a reversible error by finding Husky and ExxonMobil's
agreement to single-source their fluid hauling services had unduly
lessened competition. The Court of Appeal held that the agreement
between Husky and ExxonMobil was not a conspiracy and it had not
unduly lessened competition. The Court found the trial judge focused too much on the
consequences of the agreement, and overlooked the fact that the
plaintiff had also had the opportunity to become the sole service
provider for Husky and ExxonMobil. In fact, once the decision had
been made to single-source for their fluid hauling needs, Husky and
ExxonMobil provided both the plaintiff and the ultimate supplier
with a "fair and equal" opportunity to be chosen as the
exclusive supplier. The Court of Appeal disagreed that the co-owners of certain
properties were obliged to continue their previous practice of
dividing up their fluid hauling needs. Single-sourcing was a
legitimate business decision by the co-owners that would increase
Husky and ExxonMobil's efficiencies and reduce unnecessary
costs in the highly competitive oil and gas field even though not
all affected properties were jointly-owned. At both the Court of Queen's Bench and the Court of Appeal,
Husky and ExxonMobil argued a finding of conspiracy was precluded
because their co-ownership of oil and gas facilities and assets in
the Rainbow Lake region constituted a single economic entity.
Although the Court of Appeal did not consider the structure of
Husky and ExxonMobil's ownership over their joint assets
decisive on the issue of whether the two companies acted as one, it
did consider the role co-ownership plays in the oil and gas
field. In particular, the Court acknowledged that co-owners of any
assets must be able to agree as to how to properly manage their
operations. As the appointed operator, Husky had a responsibility
to consult with ExxonMobil in carrying out joint operations. As
part of the consultation process, Husky and ExxonMobil legitimately
decided to adopt a more strategic approach by drawing on both
companies' expertise and experiences. The Court of Appeal
ultimately held the Memorandum of Agreement between Husky and
ExxonMobil intended the companies to remain legally separate
entities, and the trial judge had correctly proceeded on this
basis. Since the Court of Appeal concluded the agreement was
competitive, it was not contrary to the Act, even though
the agreement applied to separately owned and operated
properties. 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.
ARTICLE
3 July 2013
Alberta Court Of Appeal Grants Appeal In Buyer-Side Cartel Action
The Alberta Court of Appeal issued a decision on June 14, 2013, in a private action for damages under section 36 of the Competition Act, reversing the trial court’s decision that Husky and ExxonMobil, had illegally conspired to lessen competition for purchases of fluid hauling services, contrary to section 45 of the Act.