On June 6, 2005, the Competition Tribunal released the public version of its reasons in the case of Rona Inc. v. The Commissioner of Competition in which it rescinded a consent agreement between home improvement products retailer, RONA Inc., and the Commissioner requiring the sale by RONA of a Réno-Dépôt store in the Sherbrooke region of Québec.

The consent agreement was registered with the Tribunal on September 4, 2003 further to the April 2003 acquisition by RONA of the competing Réno-Dépôt chain of home improvement stores.  Upon registration, the agreement acquired the same force and effect as if it were an order of the Tribunal.

RONA applied to the Tribunal on January 10, 2005 to have the consent agreement set aside.  RONA was the first party to apply to the Tribunal on a contested basis to vary or rescind a consent agreement since the Competition Act was amended in 2002 to allow the Commissioner and private parties to resolve competition matters by consent agreement without prior approval of the Tribunal.

In granting RONA's application, the Tribunal concluded that proof of the imminent arrival of Home Depot in the local Sherbrooke market for "big-box" home improvement stores (including public announcements, hiring advertisements and interviews with representatives of Home Depot) was a change of circumstances that "fully answered the Commissioner's concerns as to the substantial lessening of competition" resulting from RONA's acquisition of the Réno-Dépôt stores and warranted setting aside the consent agreement pursuant to Section 106 of the Competition Act.

The Tribunal accepted RONA's argument that it had signed the consent agreement because it had been unable to convince the Commissioner in 2003 of the imminent arrival of Home Depot in the Sherbrooke market.  The Tribunal commented that "the fact that we now have the proof and the certainty as to the opening of the Home Depot [store] clearly represents a change of circumstances".

The Tribunal also relied on the testimony of the Commissioner's chief witness to the effect that, had it been established that Home Depot would enter the Sherbrooke market when the consent agreement was signed, the Commissioner would not have sought the divestiture of the Réno-Dépôt store in dispute.  The Tribunal also found that RONA would not have entered the consent agreement if it had proof at that time of Home Depot's intent to enter the market.

While the Commissioner argued that RONA had abused its rights under the consent agreement and caused delays in the divestiture process with a view to ultimately applying to have the consent agreement rescinded, these arguments were dismissed by the Tribunal.  On the contrary, the Tribunal found that the Commissioner had turned a blind eye to Home Depot's evolving plans to open a store in Sherbrooke and that "it was principally the divestiture [of the Réno-Dépôt store] that interested the Commissioner".  Importantly, the Tribunal found that the consent agreement process was intended to be flexible and adaptable to changing circumstances in an evolving marketplace.

The reasons of the Competition Tribunal, in French, are available at http://www.ct-tc.gc.ca/francais/CaseDetails.asp?x=68&CaseID=180#335. The English version of the Tribunal's decision is expected to be released shortly.

For further information, contact Marc-André Boutin, (514.841.6527), Joseph Jarjour, (514.841.6545) or Louis-Martin O'Neill (514.841.6547) in Montréal, or George Addy (416.863.5588), John Bodrug (416.863.5576), Mark Katz (416.863.5578) or Charles Tingley (416.367.7446) in Toronto.

Davies Ward Phillips & Vineberg LLP, with over 225 lawyers, practices nationally and internationally from offices in Toronto, Montréal, New York  and Paris, and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and overseas clients.

The information and comments contained herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstances.  For particular applications of the law to specific situations, the reader should seek professional advice.