Atlantic Sugar Refineries Co. Ltd. et al. v. Attorney General of Canada

Atlantic Sugar Refineries Co. Ltd. et al. v. Attorney General of Canada
Collection
Supreme Court Judgments
Date
1980-07-18
Report
[1980] 2 SCR 644
Judges
Martland, Ronald; Ritchie, Roland Almon; Pigeon, Louis-Philippe; Dickson, Robert George Brian; Beetz, Jean; Estey, Willard Zebedee; McIntyre, William Rogers
On appeal from
Quebec
Subjects
Criminal law
Decision Content
Supreme Court of Canada
Atlantic Sugar Refineries Co. Ltd. et al. v. Attorney General of Canada, [1980] 2 S.C.R. 644
Date: 1980-07-18
Atlantic Sugar Refineries Co. Ltd., Redpath Industries Limited, St. Lawrence Sugar Limited and S.L.S.R. Holdings Limited Appellants;
and
The Attorney General of Canada Respondent.
1979: December 10, 11 and 12; 1980: July 18.
Present: Martland, Ritchie, Pigeon, Dickson, Beetz, Estey and McIntyre JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC
Criminal law—Combines—Conspiracy to prevent or lessen competition unduly—Market shares maintained—Tacit agreement or “conscious parallelism”—Burden of proof—Mens rea—Combines Investigation Act, R.S.C 1970, c. C-23, ss. 32(1)(b), 32(1)(c)—Criminal Code, ss. 605(1)(a), 618(2)(a).
The three appellants were charged by a bill of indictment containing two counts, both relating to the period January 1, 1960, to May 31, 1973. In count 1 the charge was that the appellants conspired to enhance unreasonably the price of sugar in eastern Canada, and in count 2 the appellants were charged with conspiracy to prevent or lessen, unduly, competition in the production, transportation, sale and supply of sugar in eastern Canada, contrary to s. 32(1)(c) of the Combines Investigation Act.
The evidence indicated that each of the appellants operated sugar refineries in which imported sugar was refined for marketing in the region extending from the Atlantic Ocean to the western boundary of Ontario. During World War II, the marketing of sugar was regulated by the Wartime Prices and Trade Board and the appellants, then the only sugar refiners in business, were allotted shares of the market in eastern Canada. When the controls ended in 1949 the appellants had the following shares of the market: Atlantic, 35.6 per cent, Redpath, 42.7 per cent and St. Lawrence, 21.7 per cent. This proportional participation in the market continued without interruption until 1958 when Redpath set about to increase its market share by reducing its prices, and its share of the market rose from 42.8 per cent in 1957 to 46.6 per cent in 1958. As a result of this price-cutting program the appellant Redpath suffered a severe financial drain and was taken over by Tate & Lyle Limited. Thereafter, the price-cutting policy was discontinued and each of the accused settled down to a policy of maintaining their traditional market shares.
At trial the appellants were found not guilty on both counts. The Court of Appeal for Quebec dismissed the appeal of the Crown with respect to count 1 but found all the appellants guilty on count 2. The accused appealed as of right under Cr. C. s. 618(2)(a).
Held (Estey J. dissenting): The appeals should be allowed, the convictions set aside and the acquittals restored.
Per Martland, Ritchie, Pigeon, Dickson, Beetz and McIntyre JJ.: On the facts before him, the trial judge found no evidence of communication between the accused on the subject of price. He was of the opinion that while identical price lists might give rise to an inference of an arrangement to fix price, such inference is unwarranted where it is shown that conformity of prices was not arrived at as a result of collusion. He concluded that since the Combines Investigation Act does not prohibit a member of an industry from taking into account and following his competitor’s price changes, be they up or down, it follows that he is not prohibited from taking into account and following the system upon which these price changes are made. The trial judge rightly held, on the evidence, that the uniform prices were the result of independent decisions, which he called “conscious parallelism” and do not amount to conspiracy.
With respect to the maintenance of the market shares, the trial judge, on the evidence, found that it was the result of a tacit agreement between the accused but that it had not been shown that the agreement was arrived at with the intention of unduly preventing or lessening the competition. He also said that he was not able to infer from the totality of the evidence on this point that market shares were maintained for the purpose of stifling competition. He found evidence of actual competition. None of the refiners was obliged to compete more strongly than it felt desirable in its own interest. Each refiner was entitled to decide not to seek to increase its market share as long as this was not done by collusion. In the present case, the “tacit agreement” which the trial judge found was obviously to lessen competition. Whether this was a criminal offence depends exclusively on whether competition was thus intended to be lessened “unduly”, i.e., on whether the agreement was intended to lessen competition improperly, inordinately, excessively, oppressively or to have the effect of virtually relieving the conspirators from the influence of free competition. The trial judge came to the conclusion that the Crown had failed to prove an agreement to lessen competition unduly and there is no sound basis in the reasons for judgment in the Court of Appeal for concluding otherwise.
While the offence charged is truly criminal in nature and therefore requires mens rea, this does not mean that, assuming the “tacit agreement” was illegal, the accused, or rather their officials who are their directing minds, had to be conscious of its illegality. If it had been intended to lessen competition “unduly” it would have been no defence that the accused mistakenly thought that the intended lessening of competition would not be “undue”. It is always for the Court to decide on the facts whether an agreement to lessen competition means that competition is to be lessened “unduly” and the views of the accused on that are irrelevant. Finally, while the trial judge was in error in referring to the rule in Hodge’s case with respect to circumstantial evidence, his conclusion was not based on this view of the law and this error was, here, of no consequence.
Per Estey J., dissenting: The Court was faced with two opposing explanations of the strange sight of the three accused sharing virtually all the eastern Canada sugar market in constant proportions for eleven years and thereafter sharing ninety per cent of the market in the same proportion for another fourteen years. The theory of the Crown is that there existed a market sharing agreement which was maintained by the accused for many years despite changing circumstances and the fact that any one of the accused could readily through various means have obtained a greater share of the market, and that the agreement had the effect of lessening competition. The theory of the defence is that the only way to increase sales of an homogeneous product in an oligopoly is to reduce prices, the result of which is either a depletion of supplies and depressed earnings by the firm lowering its prices or a price war. Since the results in either case are disastrous, the only alternative is for each member of the oligopoly to seek to maintain its traditional market share.
The trial judge described the onus upon the Crown as follows: a) that the accused entered into an agreement; b) that the object of the agreement was to lessen competition; c) that the intended lessening of competition was undue. The third element, when read with other comments in the trial judgment, reveals an error in law and opens up the avenue of appeal to the Court of Appeal by way of s. 605(1)(a) of the Criminal Code, as it imposes a greater burden of proof than that imposed by the law. The appellants contended, however, that in any event they could not be convicted under s. 32(1)(c) on the basis of a “tacit agreement”, for there were no communications between the parties as a result of which an expectation was aroused in each that the others would act in a certain way. That argument carries by implication the notion that s. 32 somehow imports the doctrines of the law of contracts into the criminal law. That view cannot be sustained. The section refers to “conspires, combines or agrees or arranges”. The agreement clearly need not be enforceable for axiomatically it is not. The parties to the transaction must be deemed to know that it is unenforceable as being illegal. They have by their conduct indeed foresaken the ordinary recourse to the civil law. Therefore the agreement may be proven, in the sense of being made capable of discernment by the finder of fact from all the surrounding facts and circumstances, including the conduct of the parties. Conspiracy, like all other crimes, may be established by inference from the conduct of the parties. The trial judge has expressly found a tacit agreement to limit market shares. He went on to find that in the circumstances an agreement to lessen competition would be undue. The onus on the Crown had been met, and the defence of conscious parellelism, which might be a valid element in the legal position of an accused under s. 32 in some commercial circumstances, is not opened in a case, as here, where the tribunal is not concerned with a market shared by a wide range of suppliers but with a market shared by three suppliers. The tacit agreement as found was to maintain the proportion of the sugar trade historically enjoyed by each of the accused. This relationship necessarily involved the curbing of free competition where it would upset this balance of trade shares. It matters not that these reins on free competition are imposed for good motives on the part of the accused. The tacit agreement axiomatically entails a restraint on competition and that restraint produced a lessening which the trial judge has found in all the circumstances of this case to be undue. Finally, the trial judge erred in law in directing himself to the effect that proof of intent made by circumstancial evidence must meet the test in Hodge’s case, such formula having been rejected by the Court as an inexorable rule of law in Canada. That error is, of course, against the interest of the respondent and not the appellant. [R. v. Armco Ltd. and others (1976), 13 O.R. (2d) 32; Howard Smith Paper Mills Ltd. et al. v. The Queen, [1957] S.C.R. 403; Aetna Insurance Co. and others v. The Queen, [1978] 1 S.C.R. 731; R. v. Cooper, [1978] 1 S.C.R. 860; Hodge’s case (1838), 2 Lewin 227, 168 E.R. 1136, referred to.]
APPEALS from a judgment of the Court of Appeal for Quebec[1], allowing the appeal by the Crown from the decision of the Superior Court[2] acquitting the accused. Appeals allowed, Estey J. dissenting.
L. Yves Fortier, Q.C., and Pierre Hébert, for the appellant Atlantic Sugar Refineries Co. Ltd.
Colin Irving and Peter Martin, for the appellant Redpath Industries Ltd.
J.J. Robinette, Q.C., and Yves Bériault, for the appellant St. Lawrence Sugar Limited.
Bruno Pateras, Q.C., and Arnold Fradkin, for the respondent.
The judgment of Martland, Ritchie, Pigeon, Dickson, Beetz and McIntyre JJ. was delivered by
PIGEON J.—The appellants were charged by indictment on two counts for offences under the Combines Investigation Act, R.S.C. 1970, c. C-23, ss. 32(1)(b) and 32(1)(c) respectively between January 1, 1960 and May 31, 1973, as follows:
1. Conspiracy “to enhance unreasonably the price of” sugar;
2. Conspiracy “to prevent or lessen, unduly, competition in the production … or supply of” sugar.
After a protracted trial, the accused were acquitted on both counts by Mackay J. (1976, 26 C.P.R. (2d) 14). On appeal by the Attorney General of Canada the acquittal was affirmed on the first count but reversed on the second count and a verdict of guilty was entered on that count (1978, 3 B.L.R. 221, 41 C.C.C. (2d) 209). The appeal by the accused to this Court was taken as of a right under Cr. C s. 618(2)(a).
On the facts before him Mackay J. found no evidence of communication between the accused on the subject of price (at p. 96). Dealing with the allegation of price fixing as an element of the alleged conspiracy to prevent or lessen competition, he said (at p. 97):
In an oligopolistic situation where the product is homogeneous—as in sugar—the price of the product must inevitably be the same, for if one member priced his product higher than the others he would have no sales. If he posted a lower price he would soon be inundated with buyers, would realize his price was too low, perhaps unprofitable, and raise it. Thus by natural osmosis the price of an homogeneous product tends to reach the same level. But the process might be costly and is certainly inefficient. There are two ways to avoid it. Firstly, by the members of the industry conspiring to fix prices, which is illegal, or by the members of the industry making a conscious effort to parallel the prices of the leader.
After referring to the judgment of Lerner J. in R. v. Armco Ltd. and others[3], Mackay J. said (at p. 98):
With great respect, I am of opinion that while identical price lists might give rise to an inference of an arrangement to fix prices, such inference is unwarranted where it is shown that conformity of prices was not arrived at as a result of collusion.
Then, after quoting from several witnesses, he held against any inference of a price fixing arrangement, concluding his remarks on that point as follows (at pp. 100-101):
Since the Act does not prohibit a member of an industry from taking into account and following his competitors’ price changes, be they up or down, it follows that he is not prohibited from taking into account and following the system upon which these price changes are made. Moreover, although all Canadian refiners had identical price lists, there were, as Miller said, exceptions when the actual sales prices varies as a result of customers’ discounts, not including discounts for prompt payment.
Mr. T. Moorse, former Vice President of Neilson’s Lowneys testified:
“A. … That price list is for anybody and everybody. And if we were a big buyer, like any other big buyers, we would feel entitled to certain extra consideration for the volume.
Q. Mm-hmm. Discounts of some sort?
A. Yes.
Q. When you approached two or more of the refineries in the way you have just described. What sort of results did you get in the way of price levels? Did they vary or were they identical or what?
A. They varied. Of course they varied, because—they weren’t certainly all the same, because first of all I was dealing with different people”.
Testimony of the officers of other industrial sugar users, such as Loeb Ltd., Coca-Cola Ltd., Rowntree-MacIntosh, Fry-Cadbury and General Foods, was to the effect that the refiners’ quotes invariably differed appreciably.
Then dealing with the allegation of a market sharing agreement Mackay J. said (at pp. 101-103):
In virtue of Wartime Controls, quotas for the production of refined sugar in Eastern Canada had been allotted to the accused in the following proportions (ex. P-1-A):
Atlantic
35.5%
Redpath
43.0%
St. Lawrence
21.5%
Their shares of the refined sugar market until controls ended in 1949 were (ex. P-1-A):
Atlantic
35.6%
Redpath
42.7%
St. Lawrence
21.7%
During the next decade, the market shares varied slightly. But in 1958, Redpath having just opened its Toronto refinery and being anxious to increase sales and recoup some of the heavy expenses involved, surrepti- tiously began to cut prices in the Toronto area. Atlantic felt the loss of sales in that area and so began to cut its prices there, although this represented a serious expense, due to the absorption by Atlantic of the unsubsidized portion of the freight from the refinery in St. John to the nearest basing point which was now Toronto instead of Montreal as it had been before the new refinery was constructed. The price war spread to include St. Lawrence. There were two results—First: Redpath increased its market share at the expense of the others from 42.8% in 1957 to 46.6% in 1958. Second: it lost the price war against its two well-funded opponents, and having sustained serious financial losses it was ripe for a take-over by Tate and Lyle.
Thereafter, each of the accused settled down to a policy of maintaining their traditional market shares. Although each stressed that this was the result of an independent decision, one would be ingenuous not to be aware that there was and continues to be a tacit agreement to this effect.
But with respect, I do not think the competitive stratagems suggested by the Crown, apart from increasing discounts, that is price cutting, would have any effect on individual market shares. And the unhappy results of price cutting still remain fresh in the corporate memories …
On the evidence, I find that the maintenance of traditional market shares—which were adjusted but in the same proportion when Cartier came on steam—was the result of a tacit agreement between the accused. But in my opinion, it has not been shown that this agreement was arrived at with the intention of unduly preventing or lessening competiton. The reason for maintaining traditional market shares was to avoid a price war which would have resulted had the accused taken the only method of increasing them by price cutting through extensive discounts. Nor am I able to infer from the totality of the evidence on this point, including overt acts, that market shares were maintained for the purpose of stifling competition. On the contrary, Cartier was launched in 1964 and none of its initial difficulties were due to the maintenance of market shares. West‑cane was launched successfully in 1969. Austin attempted to launch Austin Sugar Refineries Limited in the Cornwall area with Government support in 1971 (ex. D-11 A and B). That this project was never realized was in no way due to the maintenance of market shares by the accused.
In passing, it is interesting to read in the prospectus for this last project that (ex. D-11-A):
“The purchase of raw sugar on the International markets for refining and the development of sales for refined sugar products, present no formidable obstacles in a market in which Robin Austin & Co. Ltd. has operated successfully for over twenty years”.
Therefore, after considering all the evidence, both of the prosecution and the defence, and the arguments of counsel, I have come to the conclusion that the prosecution has not satisfied me beyond a reasonable doubt that the accused, as charged in the second count of the indictment, unlawfully conspired, combined, agreed or arranged together and with one another and with certain named co-conspirators to prevent or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, transportation or supply of raw or refined sugar. And as such it is my duty to give the accused the benefit of the doubt and to find them not guilty of that offence.
With respect I must point out that the reasons for judgment in the Court of Appeal fail to show on what basis competition should be held to have been agreed to be lessened “unduly”. Mayrand J.A., with whom Owen J.A. concurred, dealt with the case on a misconception of the evidence as to market shares saying (at p. 237):
[TRANSLATION] Following this costly commercial experience, the three refineries gave up their price war and simply divided the market as it was at that time. This division corresponded almost exactly to the following territorial division: Atlantic controlled the three maritime provinces, while Redpath had sole control of the Ontario market and divided the Quebec market with St. Lawrence (at first St. Lawrence Sugar Refineries Ltd., which was succeeded by S.L.S.R. Holdings Ltd., and is now Sucronel Ltd.). In 1973, these three respondents by themselves controlled some 74.09 per cent of the entire Canadian market.
Counsel for the Crown at the hearing in this Court admitted that there was no evidence of a territorial market division between the accused. His submission was that the “tacit agreement” for the maintenance of traditional market shares which was found by Mackay J. was undue in law. His contention was that an agreement to restrict competition so as not to alter relative market shares was the equivalent of an agreement not to compete at all, that it was totally destructive to competition and therefore undue in law. As to this I might point out immediately that the trial judge did find evidence which he accepted of actual competition and would refer to the passage quoted from his judgment at pp. 100-101 of the report. I fail to see how it can be said that the “tacit agreement” found by the trial judge meant the elimination of competition when it is a fact that competition did subsist and that it did subsist, not in violation of the “tacit agreement”, but as an integral part of the course of conduct from which the “tacit agreement” was inferred. To support his submission that the “tacit agreement” meant the practical destruction of competition not just a lessening which would not be unlawful unless found undue, counsel for the Crown referred to a memorandum dated September 16, 1966, which was prepared by the President of the Company then known as Canada and Dominion Sugar, now known as Redpath Industries Ltd., the largest concern in the field and the acknowledged price leader. This memo starts with a sales analysis for the first eight months of 1966 and the comment on those figures reads:
C & D share of market for period Jan./March was too high, therefore competitors started increased price cutting (in any of its forms). In fact our desire to hold our share of the market plus meet the Cartier situation must have hurt the others before the end of December 31st, 1965. The increased cutting of prices had a definite, compounding effect on our sales, i.e.
Jan.
34.34%
)
Feb.
32.88%
)
Mar.
32.14%
)
Apr.
31.13%
)
A general declining trend
May
28.73%
)
Jun.
28.52%
)
Jul.
28.88%
)
Aug.
27.67%
) What we failed to do was to start meeting cuts to stop the declining trend around July/August. We, in fact, did the opposite. We withdrew all cuts in order to restore price stability. This was reasonable attitude or position to take but in retrospect, we should have been the last to withdraw cuts, not the first, to flatten out the declining trend.
Then, after a statement of possible courses of action, there is the following comment:
If prices are equal, i.e. no price cutting, C & D will obtain gradually more than its share of the market because we are in a better position from a product and service view point to satisfy customer needs. Competitive reaction will be price cutting and unless this price cutting is limited in nature (time and volume) C & D will begin to lose out. It is at this point that timing is critical. Any price cutting by C & D to restore its share can prompt additional price cutting by competitors if they have failed to realize that their share of the market has been restored.
Ability to price cut. Because of the structure of the raw sugar market in recent months, a relatively high margin, profitable differentials on bulk/liquid, 5 and 10 lb. bags, all refiners are in a position to price cut without too much hesitation. Many price cuts have been directed towards those items. Large sophisticated buyers who keep a close watch on refining margin are aware that the real margin has increased substantially because refiners are not paying full forward premiums for future raw sugar deliveries. These buyers are demanding price cuts.
On page 8 of a memo to members of the Management Committee also dated September 1966 and entitled: “The Next Five Years’ Objectives and Strategy”, the conclusion is:
From the foregoing policy an explicit strategy arises which impinges on all our sugar operations. This is that we will look for extra profit in the immediate future from improving the efficiency of our operations and from concentrating on the more profitable products rather than from taking more margin or increasing volume above our historical market share. As our marketing operation gains in sophistication, we will from time to time review the appropriateness of this strategy.
Those statements substantiate the trial judge’s finding of a “tacit agreement” to maintain “historical market shares”. From that angle, the second passage quoted is specially important. When reaching the decision to start price cutting again so as to “restore” its market share, Redpath took it for granted that its competitors would not resort to additional price cutting so long as their own shares of the market would remain intact. It was also realized that time had to be allowed for the competitors to become aware of Redpath’s course of action. Thus, the meaning of the “tacit agreement” becomes clear: Redpath felt sure that its competitors would not resort to “increased price cutting” if their “historical market shares” were restored. On the other hand it did realize from the results of this course of action that if it renounced any form of price competition, it would not maintain its own “historical market share”. It therefore decided to make some price cutting again but to restrict this form of competition so as not to do more than restore its “historical market share”, feeling confident that its competitors, provided the timing was careful, would realize what was being done and would also be satisfied to keep their “historical market share”.
Counsel for St. Lawrence Sugar Ltd. has contended that such a “tacit agreement”, being merely the conscious adoption of a uniform course of action without any communication, assent or promise, did not amount to a conspiracy. He pointed out that there was no illegality in the independent adoption of such a policy of limited competition. A conspiracy requires agreement. Is a finding of a “tacit agreement “sufficient? It must be accepted that a conspiracy may be effected in any way and may be established by inference. In dealing with the refiners’ uniform prices, the trial judge felt that they raised an inference of collusion. However he accepted (at p. 98) that this was a result of independent decisions called “conscious parallelism” which is not illegal. The evidence was clear, however, that not only were its competitors immediately aware of Redpath’s list price the moment a new price was posted in its lobby, they also in time were able to discover Redpath’s pricing formula by a process of deduction from available data. Yet the trial judge held, correctly I think, that this did not constitute a conspiracy to maintain uniform prices according to Redpath’s formula but merely “conscious parallelism”. Could this not be just as accurately called “parallelism by tacit agreement”?
The basis for an inference of “tacit agreement” was in a way stronger for the uniform list price than for the maintenance of market shares. There was a feature which could be considered as the making of an offer, that is the publication of a list price which meant that it was immediately made known to the competitors by the brokers. Hence, I find that the trial judge quite properly on that point put the burden on the defence to disprove the evidence of collusion.
The situation was different in respect of the adoption by Redpath of a maintenance of traditional market share sales policy. There is no evidence that this policy was in any way made known to its competitors. Furthermore, it was not like the list price a perfectly defined policy. The method by which it was to be in force, the selective price cuts to big buyers, was left to the judgment of those who were to implement that policy. There is no suggestion that the extent of the price cutting was to be made known to the competitors. On the contrary the evidence is that, when there was competitive bidding, the quotations submitted dif- fered appreciably. On the other hand, just as the competitors would in time become aware of Red-path’s pricing formula, they would inevitably become aware of its marketing policy and Red-path’s president was conscious of this when adopting it.
When, as expected, the competitors did adopt a similar policy, did this mean that an agreement had been reached? In order to make an agreement by tacit acceptance of an offer there must not only be a course of conduct from which acceptance may be inferred, there must also be communication of this offer. In the case of the list price, this was apparent and did cast a burden on the defence. But there was no such communication of the marketing policy. In those circumstances, did the “tacit agreement” resulting from the expected adoption of a similar policy by the competitors amount to a conspiracy? I have great difficulty in agreeing that it did because the author of Redpath’s marketing policy was conscious that its competitors would inevitably after some time become aware of it in a general way and also expected them to adopt a similar policy which would also become apparent.
It appears to me that the Crown’s contention implies (and this is apparent from what the trial judge says at p. 101) that, in the situation of the sugar industry in Eastern Canada, each of the refiners was obliged to endeavour to increase its market share at the expense of the others, otherwise it was agreeing to lessen competition unduly. In my view, the trial judge was correct in rejecting this submission. None of the refiners was obliged to compete more strongly than it felt desirable in its own interest. Each refiner was entitled to decide not to seek to increase its market share as long as this was not done by collusion and, in my view, the trial judge was right in coming to the conclusion that what he called the “tacit agreement” to maintain market shares was not an agreement to lessen competition unduly.
As I have already indicated, I cannot agree with the submission that this “tacit agreement” to maintain market shares involved the elimination of competition. On the contrary, as we have just seen, the evidence is clear that it involved only a lessening of competition. When it discontinued the financially disastrous price cutting whereby it had increased its share of the market, Redpath realized that without any price cutting it was not only losing the excess but failing to maintain its former market share. The decision to strive for stability on the basis of maintaining “historical market share” was therefore not a decision to forego all price competition. On the contrary, it meant that some price concessions would be made to the big buyers but that this would be adjusted so as to maintain the “historical market share” as close as possible without any increase or diminution. That this involved a lessening of competition is apparent. However, it is equally clear that it did not involve a suppression of competition. The question is whether it meant that competition was intended to be “unduly” lessened.
Section 32(1)(c) of the Combines Investigation Act reads:
32. (1) Every one who conspires, combines, agrees or arranges with another person …
(c) to prevent, or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, storage, rental, transportation or supply of an article, or in the price of insurance upon persons or property, or
…
is guilty of an indictable offence and is liable to imprisonment for two years.
I see no need to review the authorities on the meaning of “unduly” in this enactment. Together with the leading case of Howard Smith Paper Mills Ltd. et al. v. The Queen[4], they have recently been exhausively examined by Ritchie J. when writing the majority opinion in Aetna Insurance Co. and others v. The Queen[5]. At page 748 he quoted as an accurate assessment of the meaning of “unduly” the trial judge’s conclusion of this point as follows:
This review of the various statements on the meaning of “unduly” as it relates to the offence of lessening competition brings me to these conclusions. An agreement to prevent or lessen competition alone is not an offence. What is criminal is an agreement that is intended to lessen competition improperly, inordinately, excessively, oppressively or one intended to have the effect of virtually relieving the conspirators from the influence of free competition. There is no requirement for the Crown to prove the existence of a monopoly and it is a question of fact as to whether the agreement reaches the point of intending to lessen competition unduly and therefore becomes a criminal conspiracy.
I find it abundantly clear that, applying this test to the facts found by the trial judge, it is impossible to say that he erred in law when coming to the conclusion that the Crown had failed to prove an agreement to lessen competition unduly. I am unable to find in the reasons for judgment in the Court of Appeal any sound basis for concluding otherwise and, as I have already indicated, I am unable to find any valid reason for so concluding on the facts relied on by counsel for the Crown.
I must note, however, that it has correctly been pointed out that, in view of the decision of this Court in R. v. Cooper[6], Mackay J. was in error in his statement, when dealing with the law, (at p. 23) that “the law concerning circumstantial evidence must be applied and the rule in Hodge’s case followed”. In fairness to the trial judge, I will note that his judgment is dated December 19, 1975 and the decision of the Ontario Court of Appeal which quashed Cooper’s conviction by application of the rule in Hodge’s case and was later reversed in this Court, had been rendered March 24, 1975 (7 O.R. (2d) 429). This would not, of course, save the trial judge’s conclusion if it was actually based on this view of the law which must now be held erroneous. I am however satisfied that the trial judge’s conclusion on the point presently being considered was in no way reached by the application of that rule in this case. In considering whether he ought to make the inference of a “tacit agreement” to maintain market shares, he did not put the question whether this was the only possible conclusion consistent with the proven facts, he just said (at p. 102):
Although each stressed that this was the result of an independent decision, one would be ingenuous not to be aware that there was and continues to be a tacit agreement to this effect.
I must also point out that while, as was stressed in Aetna, the offence lies in the agreement made with the intention to lessen competition unduly, not in the actual result of the agreement, no such distinction has to be made when, as here, the only evidence of the agreement is found in the course of conduct from which it is inferred. In the present case, the “tacit agreement” which the trial judge found was obviously to lessen competition as it was in fact lessened in the manner above described. Whether this was a criminal offence depends exclusively on whether competition was thus lessened “unduly”. While the offence charged is truly criminal in nature and therefore requires mens rea, this does not mean that, assuming the “tacit agreement” was illegal, the accused, or rather their officials who are their directing minds, had to be conscious of its illegality. If it had been intended to lessen competition “unduly” it would have been no defence that the accused mistakenly thought that the intended lessening of competition would not be “undue”. It is always for the Court to decide on the facts whether an agreement to lessen competition means that competition is to be lessened “unduly” and the views of the accused on that are irrelevant.
I would allow the appeals, set aside the convictions entered by the Court of Appeal and restore the acquittals.
The following are the reasons delivered by
ESTEY J. (dissenting)—This appeal from a conviction entered by the Court of Appeal of Quebec after an acquittal by the Superior Court raises a number of issues of importance, the examination of which requires a consideration at the outset of the principal facts, and the law applied to those facts in each of the Courts below.
The three appellants were charged by a bill of indictment containing two counts, both relating to the period January 1, 1960 to May 31, 1973. In count 1 the charge is that the appellants conspired to enhance unreasonably the price of sugar in eastern Canada (that is to say, in the provinces of Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland); and in count 2 the appellants are charged with conspiracy to prevent or lessen unduly competition in the production, transportation, sale and supply of sugar in eastern Canada, contrary to s. 32(1)(c) of the Combines Investigation Act, R.S.C. 1970, c. C‑23.
The evidence indicates that each of the appellants operated sugar refineries in which imported sugar was refined for marketing in the region extending from the Atlantic to the western boundary of Ontario. During World War II, the marketing of sugar was regulated by the Wartime Prices and Trade Board, a federal agency, and the appellants, then the only sugar refiners in business were allotted shares of the market in eastern Canada by that agency. When the controls ended in 1949 the appellants had the following shares of the market: Atlantic
35.6 per cent with refinery at St. John, N.B.
Redpath
42.7 per cent with refineries at Chatham, Ont. and Montreal
St. Lawrence
21.7 per cent with refinery at Montreal
This proportional participation in the market continued without interruption until 1958 when Redpath (formerly known as Canada and Dominion Sugar Company Limited) set about to increase its market share by reducing its prices, and its share of the eastern Canada market rose from 42.8 per cent in 1957 to 46.6 per cent in 1958. As a result of this price-cutting program the appellant Red-path suffered a severe financial drain and was taken over by Tate & Lyle Limited, “the world’s largest integrated sugar company”, as the trial judge described it.
At trial the appellants were found not guilty on both counts. The Court of Appeal of Quebec dismissed the appeal of the Crown with respect to count 1 but found all the appellants guilty on count 2 with which we are now solely concerned and which reads as follows:
2. THAT at Montreal, district of Montreal, Province of Quebec, and in divers places throughout Canada, between January 1st, 1960, and May 31st, 1973, both inclusive, ATLANTIC SUGAR REFINERIES CO. LIMITED, REDPATH INDUSTRIES LIMITED (formerly known as Canada and Dominion Sugar Company Limited, ST. LAWRENCE SUGAR LIMITED, and S.L.S.R. HOLDINGS LIMITED (formerly known as St. Lawrence Sugar Refineries Limited), did unlawfully conspire, combine, agree or arrange together and with one another and with Czarnikow (Canada) Limited, Czarnikow-Rionda Company of New York City, State of New York, U.S.A., Czarnikow Limited of London, England, Hodgson (East India) Ltd., Man-sugar Ltd., M. Golodetz & Co. of New York City, State of New York, U.S.A., Indian Sugar Mills Association of India and South African Sugar Association of South Africa, M. Golodetz of London, England, State Trading Corporation of India and other persons unknown or with some of them or with one of them, to prevent or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, transportation or supply of an article or commodity that may be the subject of trade or commerce, to wit: sugar, raw or refined, in divers places throughout the provinces of Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and did thereby commit an indictable offence contrary to Section 32(1)(c) of the Combines Investigation Act, R.S.C. 1970, Chapter C-23.
The appeal by the Crown to the Court of Appeal was made pursuant to s. 605 (1)(a) of the Criminal Code. The appellan