Canada’s Competition Tribunal has outlined its reasons for its March 17 decision that granted Kobo’s request to suspend the implementation of Canadian Competition Bureau’s consent agreement with four multinational publishers on e-book pricing until the e-book retailer’s case can be heard.
The agreement signed by Hachette Book Group Canada, HarperCollins Canada, Simon & Schuster Canada, and Macmillan Canada, was announced in February and followed what the competition bureau said was an 18-month investigation that suggested that the publishers had “engaged in conduct that resulted in reduced competition for e-books in Canada.” As part of that agreement, however, none of the publishers conceded they had been involved in any wrongdoing.
That point was key in Kobo’s case to the tribunal, according to the summary written by Justice Donald J. Rennie’s, the chairperson of the tribunal. Kobo’s lawyers argued that the fact that the Competition Bureau commissioner has not made allegations or proven the existence of an anti-competitive agreement or arrangement between the consenting publishers leads to the question: “Can the Tribunal make an order prohibiting a person from doing anything under a putative 90.1 agreement where it has not identified any terms of such an agreement or is not satisfied that such an agreement exists or is proposed?”
The tribunal also accepted Kobo’s point that its business would suffer “irreparable harm” if the stay was not granted. Lawyers for Kobo argued that only e-book retailers such as Kobo, not the consenting publishers, would suffer financial losses as a result of the consent agreement going into effect (which was due to happen the day after the tribunal issued the stay.) Transforming agency pricing agreements into “Agency Lite” agreements, which would lift pricing restrictions while still entitling publishers to revenues of 70% of the retail price they set, would mean that Kobo alone would bear the cost of any discount the company chose to offer, they said.
Kobo also argued that its losses could be forecast based on its experience in the U.S. market following the implementation of similar settlement agreements there.
Rennie noted that “without the stay, there would be very little incentive for Kobo to continue its application, since even if Kobo were ultimately successful in its application, without staying the Consent Agreement, the damage will be done, the market will have shifted, and there would be no way for it to recoup its losses.”
He concluded: “In my view, the balance of convenience favours granting the stay. While maintaining the status quo might have the effect of depriving consumers of lower e-book prices in the short term, not granting the stay will certainly have a profound impact on the usefulness of Kobo’s application. In the event that Kobo is successful in its application and the Tribunal finds that the Consent Agreement ought to be rescinded or varied, Kobo would have already suffered loss and there would be no way to wind back the clock.”
Justice Rennie also added that he thought that "the best way to balance the competing public interests at stake here is to grant this stay and move Kobo’s application along as expeditiously as possible."