Not that the Competition Bureau, the country's competition watchdog, is looking to crack down on competition lawyers. It has inadvertently trained some of its most high-profile opponents-three former directors of investigation and research (Messrs. Goldman, Addy and Hunter), as the commissioner of competition was then known-are currently active in private practice, and a fourth (Howard Wetston, Q.C., at the Ontario Securities Commission) is reportedly being wooed to re-enter it.
Criminal prosecutions for offences such as price-fixing and conspiracy continue, international cartel investigations are mounting, and civil class-action suits are keeping competition litigators in British Columbia, Ontario and Quebec busy. But the biggest growth has been on the civil side, in merger-related work.
"Ten years ago, I could count on my fingers the number of lawyers practising in this area," says John Rook, Q.C., until recently a competition litigator at Osler, Hoskin & Harcourt LLP, but now with Bennett Jones LLP in Toronto. Today, he might need to use his toes as well-unless he wants to count all the dabblers. The competition section of the CBA has approximately 1,300 members. But, when you get to the top-tier work, very few lawyers and even fewer firms really have the wherewithal to step up to the plate.
On the west coast, there is Russell Lusk, Q.C., at Borden Ladner Gervais LLP, involved in a variety of prominent cartel defences, merger reviews and class-action suits, including the high-profile vitamins case. Stanley Wong at Davis & Company splits his time between the firm's Vancouver and Toronto offices. In Alberta, there are Jo'Anne Strekaf and Barry Zalmanowitz at Bennett Jones and Fraser Milner Casgrain LLP, respectively. Both Strekaf and Zalmanowitz were involved in various aspects of the massive Superior Propane litigation with the Competition Bureau before the Federal Court of Appeal (FCA) moved the work to Toronto.
However, it is in Toronto that the game is played most often and most intensely. It's on Bay Street that you will find Lawson Hunter, Q.C., at Stikeman Elliott (director from 1981 to 1985) and now Air Canada's captive knight errant. Prodigal son Cal Goldman, Q.C., (director from 1986 to 1989) recently returned to Blake, Cassels & Graydon LLP from Davies Ward Phillips & Vineberg LLP, as has competition litigator Neil Finkelstein. Another former director (1993 to 1996), George Addy, is part of the Osler, Hoskin & Harcourt competition team, which includes veteran J. Timothy Kennish and, until recently, John Rook.
At McMillan Binch, there is the group headed by J. William Rowley, Q.C., now aggressively marketing its international competition expertise and touting the recently recruited D. Martin Low, Q.C., formerly senior general counsel at the Competition Bureau. Randall Hughes at Fraser Milner Casgrain in Toronto works with a smaller team than the groups including Messrs. Goldman, Addy and Hunter, but manages to snag a good piece of the high-profile work. "Hughes is good," says Hunter, who was with the Ottawa office of Fraser Milner (then Fraser & Beatty) after his term as director before joining Stikemans in 1993. "I should have taken him with me."
The real story on the street in Toronto, however, is to what extent the recent movement of some serious legal talent has affected the competitive position of the top firms. John Rook left Oslers to join Bennett Jones. Messrs. Goldman and Finkelstein left Davies Ward to return to Blakes. Paul Crampton at Davies Ward is now on secondment to the OECD in Paris. Kent Thomson left Torys to join Davies Ward. There has also been a brisk trade in less senior practitioners. Brian Facey and Dany Assaf left Davies Ward to join Ogilvy Renault, while David Fruitman left Blakes to join Davies Ward.
There is no question that the major firms regard competition work as an important practice area. Indeed, for some firms a top-ranked competition law capability is seen as one of the three critical points of entry to the firm for top-tier M&A work, the other two points being top-ranked M&A practitioners, obviously, and a first-rate corporate tax practice. It is essential to recognize how high many of the firms believe the stakes to be. Only then do the verbal fisticuffs being exchanged on the street make sense.
The practice is unabashedly Toronto-centric and it doesn't take much prompting for the knives to come out, sotto voce and off the record of course. According to pundits, if a firm doesn't have players in Toronto, it doesn't count. "McCarthy Tétrault doesn't have much in Toronto," is how competitors put it, even though in Montreal, the firm has Yves Bériault, characterized by several of his Toronto peers as "one of the finest competition lawyers in the country." Says Lawson Hunter, "Yves Bériault is very, very good. In Montreal, he's clearly cream of the crop." Qualifies another lawyer, "Yeah, but he's in Montreal."
This attitude does not particularly bother Bériault. "We don't view being in Montreal as a disadvantage," but he adds, "we are not just in Montreal. We are a national practice in a national firm, and we have been able to create a significant profile in Montreal."
"One has to keep in mind," one competitor retorted "that people like Lawson Hunter actually practise in three cities: Toronto, Ottawa, Montreal. It's the nature of the practice."
Their practice area, say competition lawyers, is "hot." According to James Musgrove at Lang Michener, it is because of the big national and international mergers that the practice of competition law has finally come of age. "The stakes are huge," says Finkelstein, and they are getting bigger. The 80-plus competition regimes that have sprung up around the world over the last 10 years mean that every proposed merger with a Canadian component must be vetted by a competition lawyer. As corporate consolidation continues unabated in Canadian and international markets, competition for the top competition lawyers is as fierce as competition for the M&A work itself.
Bennett Jones just snagged John Rook-generally considered one of the leading competition litigators-from Oslers. The acquisition is a continuation of the firm's aggressive growth strategy in the Toronto market. Jo'Anne Strekaf, the firm's home-grown competition star, is in Calgary and regardless of her reputation, that just doesn't help Bennett Jones in Toronto. A number of Oslers' competitors, however, are of the view that strategically Rook's move has more impact on Oslers, and is of more benefit to firms like Fraser Milner, McMillan Binch or Blakes, than of benefit to Bennett Jones.
Rook's former partners are philosophical. Reflecting on the competition bar a few days before Rook announced his departure, Kennish, unknowingly prescient, said: "There's a limited quantity of people who have the expertise, and that's now increasingly in demand. You will find people enticed to take positions at places where they don't have those [competition] resources."
Rook's move is just the latest installment in a big league game of musical chairs. While the legal profession generally is now accustomed to high levels of mobility, lateral recruitment within the competition bar is remarkable because of the still small number of top practitioners and the marquee value of the names jumping ship. Much like horse racing, it is the sport of kings.
In 1990, Davies Ward Phillips & Vineberg (then Davies, Ward & Beck) entered the competition law market in earnest by recruiting Cal Goldman from the bureau. During the 1990s the firm built what was one of the strongest competition groups in Canada. By 2000, the roster included Goldman, Neil Finkelstein, Paul Crampton and John Bodrug.
However, the abrupt return of Finkelstein to Blakes in early 2001 (he had spent 16 years with the firm prior to crossing to Davies in 1998), was followed by Goldman's decision to also rejoin Blakes, as of January 2002, where he had been a partner prior to his appointment as director of the bureau. Then, shortly after Goldman's announcement, Crampton accepted a secondment to the OECD in Paris. Crampton's move had been openly in the works for some time, predating the departures of Messrs. Finkelstein and Goldman, and was supported by the firm. However, the timing, as noted by Bodrug, ended up being "unfortunate." Subsequent to Finkelstein's departure, but before Goldman's announcement, Davies recruited Kent Thomson, a senior litigator with significant competition experience, from Torys.
For the moment, the spotlight is on Blakes and Davies. "It certainly is not helpful to lose a star like Goldman," notes Tim Kennish at Oslers. "The question is, what sort of team is Cal going to put together? Because he's sort of inherited what's there," says Lawson Hunter at Stikemans. What's there includes well-known competition lawyers Jack Quinn and Robert Kwinter. One lawyer argues that while the impact on Davies has been immediate, it will take time before the addition of Finkelstein and Goldman materially strengthens Blakes. Another argues that the reshuffling of the deck, particularly at Blakes and Davies, will create opportunities for firms such as Fraser Milner, Lang Michener or McMillan Binch.
"Davies may not be able to sustain its position because it has been seriously affected," says Bill Rowley. It's a question of "backup." Not everyone agrees. John Rook cautions against underestimating Davies. "They still have considerable capability." Randall Hughes at Fraser Milner agrees. "Davies still has a lot of solid competition lawyers, both on the merger and on the litigation side," he says, pointing to Bodrug and Thomson. John Bodrug at Davies, of course, takes strong exception. "We've got 12 people in our narrowly defined competition group in the Toronto office...you are not going to find a group that's bigger than ours."
There are, of course, both "outside" and "inside" accounts of what impact the reshuffling of legal talent has had. According to one insider, the depth of talent at Davies is such that "the real story is that no firm in the country could have lost the services of two leading practitioners like Goldman and Crampton and continue to have one of the top practice groups in Canada." By way of example, of the four merger filings with the Competition Tribunal since mid-December 2001 (after Goldman's announcement that he was joining Blakes), Davies is acting on three.
But the arguments as to competitive advantage are not confined to "depth of talent." Hughes articulates the point best. "The departure of someone like Cal detracts from the marquee value of the firm.... Not to say that Davies or another firm that may lose its marquee player wouldn't still be capable of doing high-end work for the client-they would be-what they lose, though, is the marquee value." Some argue that the impact is likely to be the greatest respecting coveted international work. Says Rowley, "When a [U.S. or international law] firm who is a regular user of Davies has its next deal, the partner in that firm who is going to send that deal to somebody in Canada to get Canadian regulatory clearance, that partner will say, 'Well, I used to use Cal, or I used to use Paul Crampton. Do I still go to Davies? Am I satisfied that a referral there will be handled in a way that my client will say they have the credentials?'"
Many firms believe the big name-or, more specifically, a big name attached to a former commissioner of competition-is crucial to getting the attention of cross-border clients. "It's not a question of quality," is how Stanley Wong characterizes the success of the top players at the bar such as the former commissioners Hunter and Goldman. "It's a question of marketing success." But it is a card that has to be played carefully. As John Bodrug points out: "The objective in most of these cases is to keep the regulatory review as low-key as possible...it's often the case that you don't want to go in attracting attention to your file by having a former commissioner front and centre."
Having a former commissioner on board "plays very well in the U.S.," says John Clifford at McMillan Binch. "You need those [Competition Bureau] credentials to be retained by the biggest firms in the U.S.," agrees Rowley. "We've admired how Lawson Hunter and Cal Goldman built their practices on their former director status." They weren't the only ones-Oslers recruited ex-commissioner George Addy for the same reason. Addy buys into the idea too. "The foreign and even domestic clients like to know... who used to run the place that I now want to go to. That frankly sets you apart from the others."
As there aren't that many ex-commissioners around, Bill Rowley at McMillan Binch "worked hard to wiggle" Martin Low, the bureau's senior general counsel, out of government and into his group. "Clients want to know that you can knock on doors, the doors will open for you, and you know what doors to knock on," says Clifford. "The reality is Cal hasn't been inside those doors for 15 years"-Lawson Hunter even longer. "Martin's the latest thing out on the street, and there's new people inside."
One former commissioner not attached to a law firm is Howard Wetston, now with the OSC. Speculation is rampant that Davies is going after Wetston. Bodrug is noncommittal: "We always have an open mind to anyone who might be available at any given time." Bodrug, like his counterparts at Oslers, is philosophical about the recent departures. "We had an incredible pool of talent all in one location," he says. "It's not surprising we were a target for recruiters."
It wasn't always like this. Competition practices at the major firms generally first developed as providers of value-added services to existing clients. This was particularly the case with firms boasting strong transactional practices, such as Torys. Jay Holsten, head of the Torys competition group, explains that "Because we have always had a strong transactional practice, in-house clients generated great work for the competition lawyers." As a result, Torys didn't market those capabilities externally.
Oslers and Stikemans, both strong transactional firms, had initially followed the same model. But they started pursuing stand-alone competition work in the early 1990s, aggressively positioning themselves as the "go to" firms for complex competition issues. McMillan Binch did the same, perhaps even more aggressively. Explains Rowley, "Our homegrown M&A deal flow is not as great as Oslers, Stikemans or Blakes. And so we have to be more noticeable internationally if we are to get the kind of 'better than our size' work that allows us to perform at the top of the antitrust game in Canada, the United States and the rest of the world."
Goldman followed a similar model when building up the competition practice at Davies. "We grew that practice by making it known to counsel in the U.S. and partly in Canada." By making it known that the firm was "happy" to do just the Canadian competition aspect of deals, national and international (especially the latter), Goldman created one of the highest-profile competition practices in the country. "The competition bar in the U.S. referred the competition aspects of large and mid-sized mergers to our practice...without forwarding the work to their usual Canadian corporate counsel."
The result was that many domestic and international clients started splitting off the competition aspects of corporate transactions to perceived leaders in the field, much to the chagrin of the law firms doing the balance of the transaction. Prior to Lawson Hunter joining, Stikeman Elliott represented Air Canada on corporate matters, but the firm did not do the competition work on either of the two Gemini reservation system files-both pivotal developments in competition law. More recently, when Rogers Communications bid for Vidéotron in Quebec, Torys did the corporate work, but the competition work went to James Musgrove at Lang Michener.
Occasionally, splitting off the competition work creates odd working relationships. CanWest has traditionally been a Torys client. In the CanWest/Hollinger deal, because Torys was representing Hollinger, CanWest's corporate work went to Oslers. Despite the clear competition capabilities of the firm, Oslers shared the CanWest competition work with Stikemans-"Lawson has a general kind of retainer with CanWest to provide competition advice," explains Kennish-even though Stikemans was already doing all the competition work for Hollinger. Says Kennish: "It was an unusual situation."
"This sort of thing worries firms," says one competition lawyer. "They see it as a chink in their armour." And they recognize that losing the competition work may be just the beginning, particularly if they lose it to a firm with strong corporate capabilities. It is thus no surprise that a litigation boutique like Kelly Affleck Greene, with two highly regarded competition practitioners-Donald Affleck, Q.C., and Donald Houston-comes up roses. "We get a lot of referral work from the big firms," notes Affleck.
While the stand-alone model hasn't completely replaced the in-house support model-at the major firms, most competition lawyers still spend a third to half of their time servicing existing clients-it is increasingly important. And the external clients that are most important are headquartered overseas.
Hunter's move from Fraser Milner to Stikemans was predicated on the quality of international work he believed he would be able to attract at the new firm. "Canada is not the centre of the universe. I saw the competition practice as moving towards a more international focus," he says. "I saw the practice at Stikemans as more international than that of any other Canadian firm." Whatever the marketing utility of their bureau experience, the success of Hunter and Goldman has much to do with their early understanding of the international nature of competition law. And the most recent important development can be summed up in one word: convergence.
Globalization and the abolishment of trade barriers are leading to the convergence of international competition jurisdictions. "Because of the absence of barriers, it is more and more important for antitrust authorities to work together," says Yves Bériault. "More and more business practices are international, and so, if you violate Canadian competition law, chances are you're violating U.S. competition law." Competition lawyers perforce become international lawyers. "You cannot look at Canadian competition law in an isolated way-you must work with European and U.S. counsel."
Tim Kennish elaborates. "Merger transactions cross international boundaries. Each of these jurisdictions is now under some pressure to determine whether the rules that they've established for merger review, both in process and substance, are different for a good reason or just gratuitously different." And Canadians, says Goldman, are right in the middle of this convergence process. Konrad von Finckenstein, Q.C., the current competition commissioner, is involved in this process as well, acting as the interim chair of the newly created International Competition Network. Explains Goldman, "We come from a trading nation, which relies on exports and trade liberalizations. It is important to Canadians to ensure there's as much market access on a fair and non-discriminatory basis as possible. Canadians have to look to the world. It's not good enough to play in the Canadian sandbox-it's too small."
The sandbox to the south is bigger, and, as the importance of international work isn't limited to competition practices, some Canadian firms have been establishing or acquiring New York offices. But their utility to competition work is much debated. "I don't think simply having a New York office will answer the challenge," says Goldman. "A more important factor is to be well-known in the New York, Washington and Chicago triangle for quality and service. That does not necessitate a New York office." In fact, he believes a New York office "could cut both ways.... Some New York firms may view it as competing" with their local offices and, for that reason, send the important cross-border work elsewhere.
Oslers has had a New York office for more than a decade. Says Kennish, "Our New York office is a representative office, in the sense that we just practise Canadian law. The office is influential in developing work relations and work opportunities for the firm generally. As a consequence, we might get retained on competition matters. The best example of that is the Seagram retainers we have had over the years that grew out of the relationship between one of our New York partners and the Simpson Thacher firm, which represented Seagram."
The U.S. market is a major source of lucrative work, but it's not the only one. "Borders are being eliminated all over the world," says Bériault. "There have been many transactions on a world-wide basis." Mergers aren't just north-south deals. Competition lawyers are just as likely to have to deal with "a Swiss company merging with a German company, both of which have subsidiaries in Canada. Or conversely, a Canadian company with a French company or a Swiss company." Alcan Aluminium's merger with the Swiss Alusuisse Lonza Group and France's Pechiney SA is illustrative: it required competition lawyers from 35 law firms (including McMillan Binch for Alcan and Oslers for Alusuisse), to make filings in 16 jurisdictions, at a total cost of some US$10 million.
Working for the multinationals ratchets up the already high competition stakes. The fees for relatively routine competition law approvals are hefty and when a deal is contested, the average cost to a company fighting the bureau may exceed $5 million. In turn, it costs the bureau (i.e., the taxpayer) about $1 million to proceed with a case before the tribunal. If the dispute goes to the Federal Court of Appeal-and then back to the tribunal, and then back to the FCA and beyond, as has happened with Southam and may be happening with Superior Propane-the cost to both the company and the taxpayer mounts.
It's a competition lawyer's primary job (not to mention bread and butter) to, as Zalmanowitz puts it, "persuade the Competition Bureau that this is not a transaction they should challenge." Says Finkelstein, "Many people won't close the deal if they know the commissioner is going to challenge it. It's just too expensive." If a company believes its deal is worth the costly and time-consuming litigation process, losing is not an option. Says Finkelstein, "It's absolutely critical to the client that we win."
Only about 10 of the four hundred to five hundred merger notification filings each year receive serious attention, and thus far, only five of all proposed mergers have been litigated. According to those who've got them, having former Competition Bureau insiders on side helps peaceably address most competition issues to the bureau's satisfaction. Says Low, "You know what issues will be of real concern to the bureau and which will be peripheral." And you learn what proposals "will just make them mad."
Unfortunately, although the framework of the Act is "predictable," the bureau is "not always" consistent, admits Hughes. Finkelstein is more forceful: "By and large, clients are surprised at the way the Competition Act is administered." He brings up the case of his client Superior Propane in which, according to Finkelstein, "The commissioner disavowed his own guidelines"-twice-"so he would not lose.... That sort of waffling back and forth does not give the business community confidence that the Act is being administered by the commissioner of competition in a way that's not arbitrary."
Martin Low, who spent six years litigating on behalf of the commissioner, defends his former employer, noting that in cartel prosecutions, "The bureau has won an enormous number of cases, particularly in the last five years, against corporations that were well enough represented and well enough endowed with resources to mount a defence if they had one. It's been stunningly successful." Its record is recognized internationally "as an agency to be taken seriously." But many of the criminal cases, points out Jay Holsten at Torys, have been guilty pleas-to wit, all of the cases relating to the international vitamin cartels.
The commissioner has had spotty success in the civil arena. "The competition commissioner has brought five merger cases and lost four of them," says Finkelstein. "That track record has to tell you something about how the commissioner picks his cases."
However he picks them, once he does, he inevitably slows them down. Time is of the essence in all mergers, and hammering out competition issues before the tribunal or in the courts consumes much too much of this resource. Superior Propane spent four years litigating the bureau (it followed Finkelstein from Davies to Blakes). Stanley Wong for the commissioner, and Finkelstein for Southam, spent most of the 1990s sorting out Southam's acquisition of community papers in British Columbia.
As of April 2002, it looks like Superior Propane finally won. But they thought so before-the company has already had one Competition Tribunal decision in its favour since it bought IDG from Petro-Canada in 1990. Superior used the Act's efficiency provisions to argue that the efficiencies created by the merger outweighed the anti-competitive effects. The tribunal agreed, handing down a decision Zalmanowitz (who represented Petro-Canada in the early part of the litigation) called "a very pure economic decision" and "an intellectually honest approach." The bureau took that to the FCA, which sent the matter back to the tribunal for reconsideration, suggesting the tribunal's interpretation was rigidly economic. The FCA advised the tribunal to exercise its power to consider other factors. The FCA decision was controversial, with commentators stating it was based on "shaky economic reasoning" and "questionable economic analysis," and wondering if the economic evidence weighed by the tribunal was simply "beyond the judges' ken." Competition lawyers wondered whether Superior would spell the end of the efficiencies defence.
It didn't. In its second decision, the tribunal, while softening its overall stance, upheld the efficiency defence. "The tribunal basically said if we used the test the commissioner applied, it would eviscerate the whole [efficiency] section," explains Finkelstein. "With this decision, the efficiency defence will work in some cases and not in others." In Superior's case, the tribunal found "looking at the evidence, efficiencies outweigh the anti-competitive effects." Effectively, the decision turned on the specific evidence in the case, not on a point of law. Superior and Finkelstein are celebrating, but is it really over? "The commissioner can appeal," admits Finkelstein. "But his chances of success are extremely, extremely remote."
The friction between the bureau and business (and its lawyers) isn't limited to litigation. When the commissioner exercises his rights under Section 11, the resulting requests for information are, occasionally, "excessive." Says former commissioner Addy, "I think it's time to revisit whether the commissioner should have all these powers, or at the very least whether they should be obtainable on an ex parte basis."
Low recalls one criminal search and seizure Section 11 order: "If we had complied fully with the letter of Section 11 on a worldwide basis, we would have had to produce something like three thousand bankers' boxes of documents." They made an agreement with the bureau to limit the production to Canada. As it was, "We received in this office on Friday morning 150 boxes, and the papers had to be reviewed, processed, stamped and shipped by Monday night." However long it may take the bureau to proceed on a complaint, when it makes its requests, the bureau is frequently, says Rowley, "short-fused."
With public and government pressure mounting on the bureau and the commissioner, "There's a trend towards more adversarial practice," notes Bodrug. But it doesn't have to be that way. Says Hunter, "Even on the bank mergers, we didn't end up getting mountains of subpoenas. We co-operated with them and got it done in a relatively painless way." Hunter's attitude towards the bureau is surprisingly laid-back, considering his marquee competition client is Air Canada, the favourite anti-competition whipping boy of the bureau.
The Section 11 demands and foreign jurisdiction filing requirements require bodies. "In our representation of Royal Bank of Canada in its proposed merger with Bank of Montreal, we had, at one stage, 31 fee earners responding to the needs of the Competition Bureau to get information," says Rowley. In today's competition practice, size matters. The competition capabilities at the top firms have grown from one or two lawyers-frequently litigators who did a little competition work as part of a more general litigation practice-to actual practice teams, reaching, depending on how one counts, into the teens and twenties.
"To be a top-tier practice, you have to have numbers," asserts Goldman. "You can't do it with two or three lawyers-you become tied up with one file and can't do other work." The perceived importance of bodies to throw at a client-the "critical mass," as Bodrug puts it-leads to some creative accounting. A number of the firms, including Oslers and Stikemans, claim to have the largest competition practice-in terms of available bodies-around. Says Hunter, "We have the largest group by far now.... We are 22 or 23 full-time competition lawyers, with 14 or 15 who do nothing but competition."
Hunter's competitors beg to differ. Says one lawyer, "I respect his skills as a lawyer, but I don't think Lawson Hunter can count. How did they get to that count?" Hunter shoots back, "The people in our group, their dominant area of practice is competition. You look at a lot of firms, they run around and say, who's in competition? And they get half the firm-most of those people are dabbling. They're not spending much time in the area."
Rivalry within the competition bar is intense. "Competition lawyers can't be opposed to competition," quips Bériault. Competition lawyers-like their clients-pull no punches. If their practices aren't exactly predatory, they're certainly aggressive, even ruthless. They're aware of each other's strengths and quick to capitalize on perceived weaknesses.
Although Holsten admits that Torys is not as well-known for its competition practice as, say, Oslers, "We're in the same league as Oslers-we just don't have a former commissioner on the team." And as for that particular asset, he says, "I was surprised to see Chambers [Global Guide To The World's Leading Lawyers 2001] did not mention George Addy by name, just said that Oslers acquired a former director of the bureau." Ouch! Addy is unconcerned, favourably comparing the breadth of the practice to the star billing of Hunter and Goldman at Stikemans and Blakes. "They're good firms, I'm just saying I think we're better."
Gol