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.
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.
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.
If you have questions, you can reach out to any member of Fasken’s Competition, Marketing & Foreign Investment group. Our group has significant experience advising clients on all aspects of Canadian competition law.
The information and guidance provided in this blog post does not constitute legal advice and should not be relied on as such. If legal advice is required, please contact a member Fasken’s Competition, Marketing & Foreign Investment group.