THE COMPETITION TRIBUNAL
Reference: Commissioner of Competition v. Enbridge Services Inc., 2001
Comp.Trib. 09
File no.: CT2001008
Registry document no.: 0008a
IN THE MATTER OF an application by the Commissioner of Competition for a
consent order
pursuant to sections 79 and 105 of the Competition Act, R.S.C.
1985, c. C-34, as amended;
AND IN
THE MATTER OF certain practices of anti-competitive
acts by Enbridge Services Inc.
within certain markets in the province of Ontario;
AND IN
THE MATTER OF an abuse of dominant position
in the supply of conventional or
power vented natural gas fuelled water heaters not used for commercial
purposes and related
services within certain markets in the province of
Ontario.
B E T W E E N :
The Commissioner of Competition
(applicant)
and
Enbridge Services Inc.
(respondent)
Date of hearing: 20020220
Member: McKeown J. (Chairman), Lawrence P. Schwartz and
Gerry Solursh
Date of order: 20020220
Order signed by: McKeown J.
CONSENT ORDER
[l] FURTHER TO the application of the Commissioner of Competition (the
“Commissioner”) pursuant to sections 79 and 105 of the Competition Act (the
“Act”) R.S.C. 1985, c. C-34, as amended, for
a Consent Order prohibiting Enbridge Services Inc. (“ESI”) (the “Respondent”)
from engaging in certain anti-competitive acts and from an order to redress the
anti-competitive situation created by these acts;
[2] AND UPON READING the Notice of Application dated
December 17,2001, the Statement of Grounds and Material Facts, the Consent
Order Impact Statement, the Draft Consent Order and the Consent of the parties,
filed herein;
[3] AND ON CONSIDERING THAT the Commissioner and the Respondent have
reached an agreement which is reflected
in the Draft Consent Order;
[4] AND ON CONSIDERING THAT the
Commissioner is satisfied that, on the basis of the considerations outlined in
the Consent Order Impact Statement, the remedies provided herein, if ordered, will be sufficient to eliminate the substantial lessening
or prevention of competition in the supply of conventional or
power vented natural gas fbelled water heaters not used for commercial purposes
(“water heaters”) and related services caused by the practice of anti-
competitive acts, by the Respondent;
[5] AND IT BEING UNDERSTOOD by the parties that the
Commissioner has alleged certain material facts, and that, though the
Respondent does not accept all of the facts alleged by the Commissioner, the
Respondent does not contest the Statement of Grounds and Material Facts or the
Consent Order Impact Statement for the purposes of this application or in any
proceeding initiated by the Commissioner relating to this Consent Order,
including an application to vary or rescind this Order under section 106 of the
Act;
[6] AND ON THE HEARING of counsel for the parties in
respect of this Application;
THE TRIBUNAL ORDERS THAT:
[7] For the purposes hereof:
(a) the term “water heaters” means conventional or power vented natural
gas fuelled water heaters not used for commercial purposes;
(b) the term “effective date” means the effective date of the issuance
of the Consent Order;
(c) the term “existing customers” refers to customers renting water
heaters from ESI prior to the implementation by ESI of the terms of this Consent
Order; and
(d) the term “new customers” refers to customers for whom ESI has installed new water heaters for
rental purposes after the implementation by ESI of the
terms of this Consent Order.
For greater certainty, a customer ceases to be an existing customer and
becomes a new customer for purposes hereof if ESI replaces the existing
customer’s rental water heater after the effective date with a new water heater
and the customer signs a new rental water heater contract with ESI meeting the
terms and conditions of this Consent Order.
[8] Unless otherwise specified, the terms hereof shall apply to existing
customers and new customers.
[9] The following apply with respect to the disconnection and return of
ESI rental water heaters:
(a) ESI shall not prevent others from disconnecting ESI rental water heaters
or, if such water heaters are otherwise disconnected, from returning such water
heaters;
(b) ESI shall designate sites for the return of ESI rental program water
heaters by others and these sites will include all ESI district Heating,
Ventilation, Air Conditioning (hereinafter “WAC”) offices and the office
locations of ESI’s independently operated WAC franchisees (the “Return
Locations”), with returns permitted at a minimum for the hours between 8 a.m.
and 6 p.m. Monday through Saturday. Schedule “A” contains
a list of
the current Return Locations. ESI may change the Return
Locations from time to time in the ordinary course of operating its business
and may designate additional Return Locations, whether operated by ESI or on
ESI’s behalf by other parties;
(c) where a customer notifies ESI that he/she intends to return an ESI rental
water heater, and there is a Return Location within 20 miles (32 kilometres) of
the customer’s address then ESI will permit the customer to elect to either:
(i)
have a qualified, licenced third party disconnect the water heater and then
return the water heater or have the water heater returned (at customer’s
expense) to a Return Location during its normal hours of operation; or
(ii) request ESI to disconnect and pick-up or pick-up the water heater
from the customer’s address, in which case ESI subject to subparagraph
9(e)(iii), may charge a disconnection and pick-up charge not to exceed $75.00. ESI may also offer the customer the option of keeping the water heater, in
which case disposal will be the customer’s responsibility. However, the
customer is not required to accept this alternative;
(d) where a customer notifies ESI that he/she intends to return an ESI rental
water heater, and there is not a Return Location within 20 miles (32 kilometres) of the customer’s address then ESI will permit the customer to elect either to:
(i) have a qualified, licenced third party disconnect the water heater and
then return the water heater or have the water heater returned (at customer’s
expense) to a Return Location during its normal hours of operation; or
(ii) request ESI to disconnect and pick-up or
pick-up the water heater in which case ESI will not assess any disconnection and/or pick-up charge.
In any such case (i.e. where the nearest Return Location is more than 20
miles (32 kilometres) from the customer’s address) ESI may also offer the
customer the option of keeping the water heater, in which case disposal
will be the customer’s responsibility. However, if the customer is unwilling to
accept this alternative, ESI must pick-up the water heater (as provided for in subparagraph 9(d)(ii));
(e) where ESI is requested by a water heater rental program customer to disconnect and pick-up or pick-up an ESI rental program water heater:
(i) ESI shall perform such service within two (2) weeks
following receipt of such request;
(ii) ESI shall not assess water heater rental program
customers additional rental charges after the charge for the month during which
pick-up took place; and
(iii) if the pick-up is not conducted within two (2) weeks of the customer request, any $75.00 disconnection and pick-up or
pick-up charge otherwise contemplated pursuant to subparagraph 9(c)(ii) and M e
r rental charges shall not be imposed,
(f) failure to comply with the time period set out in subparagraph
9(e)(i) shall constitute an immediate breach of this Consent Order subject to
ESI providing the Commissioner with adequate written explanation for the
failure to comply;
(g) subject to subparagraph 9(c)(ii) hereof, if a customer or another third
party returns a disconnected water heater, ESI shall not assess pick-up,
administration or other such charges to water heater rental program customers of ESI to disconnect or return water heaters.
Rental
Water Heater Exit Charges, Fees and Penalties
[l0] The following apply with respect to rental water heater exit charges, fees
and penalties:
(a) subject to paragraph 1 O(b), ESI shall
allow existing customers to cease renting water heaters from ESI without
paying any rental exit or cancellation charges, fees, or penalties
(collectively “exit charges”), including but not limited to any installation
cost recovery or administration charges;
(b) in the case of existing customers who rent water heaters from ESI which
were installed prior to the effective date, ESI may apply commercially
reasonable and non-discriminatory exit charges until each such water heater is five (5) years old;
(c) ESI shall allow existing customers covered by paragraph 1 O(b) to exit
their water heater rental contract upon notification to ESI with no exit
charges applying thereto after such water heater becomes five (5) years old;
(d) ESI contracts with new customers may include an initial rental period of a
maximum of five (5) years during which commercially
reasonable and non-discriminatory exit charges may apply;
(e) the terms of any contracts entered into in accordance with paragraph 10(d)
hereof shall allow, following the completion of the initial five (5) year
period or less, such customers to exit their water heater rental contract upon
notification to ESI, with no exit charges applying thereto;
(f) exit charges (whether for existing or new customers) are not to exceed
$125.00 for any water heater during year one, and are to be
reduced by $10.00 after each year from the date of installation
of the water heater;
(g) during the period while any existing customer is subject to exit charges as provided for in paragraph lO(b), ESI may not
increase the water heater rental charge for such customer other than through
percentage increases (if any) reflecting inflation over the period since the last
rental rate adjustment; and
(h) ESI contracts entered into in accordance with paragraph 1 O(d) with new customers shall contain pre-stated rental rates for the initial five (5) year or less contract period during which exit charges may apply. Such rate(s) shall be expressed as a single rate for the entire period or as different rates each to be effective during specified periods of time, or may be based on anexpressly stated escalation formula to reflect inflation.
Buy-Out
Price Schedule
[11] The following apply with respect to the Buy-Out Price Schedule:
(a)
ESI water heater rental contracts entered into
with new customers shall include a fixed Buy-Out Price Schedule (“Schedule”)
for the rented heaters. A model
Schedule respecting new customers is attached hereto and marked as Schedule “B” and shall form an integral part of the Consent
Order;
(b)
ESI shall provide existing customers with a
Schedule for their rented water heaters. A model Schedule respecting existing customers is attached hereto and marked
as Schedule “C” and shall form an integral part of the Consent Order. The
Buy-Out Price for existing customers will be based on ESI’s current retail
prices at the time the Schedule is produced and adjusted to eliminate the
impact of inflation since the time of installation; and
(c)
ESI shall not offer different rental rates or
rental water heater Buy-Out Prices to new and existing customers that are
renting water heaters of a similar model and age, except to the extent that
such differences reflect legitimate differences in the cost of providing
service to different groups of customers, based on such factors as location and
water conditions.
Other
Water Heater Terms, Conditions and Operations
[12] The following apply with respect to other water heater terms,
conditions and operations:
(a) ESI shall not enter into or withdraw from any arrangement,
agreements or transaction in regards to water heaters or make any changes to
their operations that would be contrary or inconsistent with the intended purpose
of this Order, namely, to eliminate
anti-competitive behaviour for the ultimate purpose of promoting and protecting
competition in the markets affected;
(b) without limiting the generality of paragraph 12(a), ESI’s other terms,
conditions and operations with respect to the rental of water heaters will not
erect undue barriers to entry and to competition in the market for water
heaters; and
(c) without limiting the generality of paragraphs 12(a) and 12(b), ESI’s rental water heater terms, conditions and operations
relating to:
(i) the assessment and recovery of damage to returned water heaters; and
(ii) the limitation of ESI’s liability with respect to the disconnection or the return of rental
water heaters by others; shall not create the above mentioned effects.
Commissioner’s
Approval
[13] The following apply with respect to the Commissioner’s approval:
(a) this Consent Order evidences the Commissioner’s acceptance of the terms
and conditions applicable to contracts with new and existing customers, all as modified to give effect to the terms of this
Consent Order. A copy of those terms and
conditions are attached as Schedule “D” and form an integral part of the Consent Order. Any subsequent material
changes to such terms and conditions, to the extent such terms and conditions
materially affect the matters addressed by this Consent Order, shall be
submitted to the Commissioner for approval in advance of their implementation.
The Commissioner shal(resp0nd definitively within thirty (30) days following
the submission by ESI to the Commissioner of any such revised contractual terms
and conditions proposed for the ESI water heater rental program;
(b) without limiting the generality of the foregoing, ESI shall submit to the
Commissioner for approval the terms and conditions relating to the items
referred to in paragraphs 9 and 10 hereof; and
(c) where the Commissioner’s approval is sought pursuant to this Consent Order
and such approval is not granted or if a decision of the Commissioner is
unreasonably delayed or withheld, ESI may apply to the Competition Tribunal for
directions.
[14] The following apply with respect to
implementation:
(a) within forty-five (45) days of the effective date, ESI shall amend the terms and conditions applying to existing customers to
comply with the Consent Order;
(b) within forty-five (45) days of the effective date, ESI shall amend the
terms and conditions offered to new customers to comply with the Consent Order;
and
(c) within forty-five (45) days of the effective date, ESI shall modify its
activities and operations to comply with this Consent Order.
Notification
[15] The following apply with respect to notification:
(a) subject to paragraph 15(d), within forty-five (45) days following the
effective date, ESI shall notify in writing all existing customers
concerning the terms of the Consent Order, the terms of which
notification shall be subject to consultation and joint agreement between ESI and the Commissioner;
(b) notification for paragraph 15(a) will be by way of bill inserts and press
releases the terms of which shall be subject to consultation and joint
agreement between ESI and the Commissioner;
(c) ESI may amend the rental water heater terms and conditions for existing
customers to implement or which are consistent with the provisions of the Draft
Consent Order before the effective date;
(d) any amendments referred to in paragraph 15(c) shall immediately be
notified to these customers before they are implemented. Notification will be
by way of bill inserts and press releases the terms of which shall be subject to consultation and joint agreement between ESI and
the Commissioner. The notification shall include an explanation of the reasons
for these changes. Further notification shall be given as is required to give full effect to paragraphs 15(a) and 15(b);
(e) within forty-five (45) days
following the effective date, ESI shall notify in writing all of
ESI’s affiliates, directors, managers, owners, officers, shareholders, agents
and employees and to any of its subsidiaries, assignees and their agents and
employees in writing of the terms of the Consent Order. The terms of such
notification shall be subject to consultation and joint agreement between ESI
and the Commissioner. In addition, a copy of the Consent
Order shall be provided or made reasonably accessible to such persons. In
addition, ESI shall direct such persons to operate and manage the business in
accordance with the terms of the Consent Order; and
(f) within sixty (60) days following the effective date, ESI shall provide to
the Commissioner a certification by the president of ESI that such
notifications and copies required in paragraphs 15(a), 15(b), 15(d), and 15(e) have been sent.
Application
[16] The Consent Order applies as follows:
(a)
ESI shall adhere to all the provisions of the Act and
in particular to strictly avoid any act that may be anti-competitive by the
recreation of any undue barriers to entry with respect to the ESI water heater
rental program as outlined in the aforementioned paragraph 12;
(b) the Consent Order shall bind ESI, as well as, each and every of the
present and future affiliates, directors,
owners, officers, shareholders, agents and employees and to any of its
successors, subsidiaries, assignees and their agents, employees or other person
acting for or on behalf of ESI with respect to any matter referred to in this Consent Order;
(c) without limiting the generality of the foregoing, the Consent Order
governs any subsequent purchaser, owner or operator of ESI’s water heater
rental business, whether through purchase or restructuring or a joint venture
partner with ESI; and
(d) any contract transferring ownership of ESI or any part thereof in relation
to water heaters shall contain a specific written clause indicating the
acceptance by such purchaser or joint venture partner of the terms of the
Consent Order.
Communications
[17] While all parties will be consulted on the contents and dissemination of
any communications with the media, such as press
releases or to the public, the Commissioner shall retain the final decision on
his communications. The Parties agree to review the confidentiality
restrictions contained in any previous correspondence or discussions with a
view to removing restrictions that are no longer appropriate.
Other Matters
[18] The following apply with respect to other matters:
(a) nothing in this Consent Order shall be construed as acceptance
by the Commissioner of the terms and conditions in the
agreements between ESI and its customers existing prior to the effective date
and the legal enforceability of such terms and conditions;
(b) ESI understands that the Commissioner has alleged certain material facts
concerning ESI’s water heater rental program. It is understood that ESI does
not necessarily agree with all of the facts so alleged. However, ESI will not
contest the Statement of Grounds and Material Facts or the Consent Order Impact
Statement for the purposes of this application and any proceeding initiated by
the Commissioner relating to this Consent Order, including an application to
vary or rescind this Consent Order;
(c) the parties shall be bound by the terms of this Consent Order for a period
of ten (10) years following the effective date;
(d) for the purpose of determining or securing compliance with the Consent
Order, subject to legally recognized privilege, and upon written request on
reasonable notice to ESI, ESI shall provide the Commissioner with:
(i) information relating to the ESI water heater rental program in the
possession or under the control of ESI. A signature, under oath, by a senior officer of ESI confirming that all
available information, in respect of the above, has been provided to the Commissioner; andor
(ii) upon five (5) days written notice to ESI and
without restraint or interference from it, sufficient opportunity to interview
directors, officers, managers or employees of ESI concerning ESI’s water heater
rental program. Such directors, officers, managers or employees may have
counsel present at these interviews;
(e) within three (3) months following the written request in paragraph 18(d)
to ESI, the Commissioner shall notify ESI in writing of any objections the Commissioner may have with regard
to any information in relation to paragraph 18(d);
(f) ESI agrees to the issuance of a final Consent Order by the
Competition Tribunal, on usual terms, covering the matters agreed to herein;
(g) the Competition Tribunal shall retain jurisdiction for the purpose of any
application by the Commissioner or ESI to rescind or vary any of the provisions
of this Consent Order in the event of a change of circumstances or otherwise;
and
(h) in the event of a dispute as to the interpretation or
application of this Consent Order, including any decision by the Commissioner
pursuant to the Consent Order or breach of this
Consent Order by ESI, the Commissioner or ESI shall be at liberty to apply to
the Competition Tribunal for a further Order.
Notice to the Parties
[19] The following shall apply with respect to notice to the parties:
(a) notices, reports or other communications required or permitted pursuant to
any of the terms of this Order shall be in writing and shall be considered to
be given if dispatched by personal delivery, registered mail or facsimile
transmission to the parties at the address or facsimile number below:
(b) if to the Commissioner:
The Commissioner of Competition
Competition Bureau
Place du Portage, Phase I
50 Victoria Street, 2lSt Floor
Hull, Quebec K1A OC9
Facsimile: (819) 953-5013
(c) if to the respondent:
Enbridge Services Inc.
500 Consumers Road
North York, Ontario M2J 1P8
Attention: David M. Purdy
Facsimile: (416) 753-7336
Aird & Berlis LLP
Suite 1800, Box 754
181 Bay Street
Toronto, Ontario M5J 2T9
Attention: William G. VanderBurgh
Facsimile: (4 16) 863- 15 15
DATED at Toronto,
Ontario, this 20’ day of February, 2002
SIGNED on behalf of the Tribunal by the presiding judicial member.
(s) W.P. McKeown
[20] SCHEDULE “A”
RETURN LOCATIONS
Enbridae Services - Water Heater Return Locations
| Barrie District 11 Warehouse 730 |
165 Ferris Lane |
|
Richmond Hill West |
United Thermo Group 20 Staffern Dr. #I Concord, ON L4K 227 |
| Richmond Hill East District 10 Warehouse 728 |
64 Industrial
Road Richmond Hill, ON L4C 2Y1 |
| Durham West District 06 Warehouse 720 |
513 Westney Rd. S Ajax, ON LIS 6W8 |
| Durham East District 07 |
Perry Mechanical 285 Bloor St. W. Oshawa, ON LIH 7L1 |
| Kawarthas District 08 Warehouse 724 |
1 Consumers Place P.O. Box 658 Peterborough, ON K9J 628 |
| Ottawa West District 16 Warehouse 740 |
90 Bill Leathem Drive Nepean, ON K2G 6J2 |
| Ottawa North District 18 Warehouse 744 |
Valley 115 Woodcrest Drive Pembroke, ON K8A 6Y6 |
| Ottawa East District 17 |
Climec Residential Inc. 645 Belfast Pd. #6 Ottawa,ON KIG 4V3 |
| Commercial Mass Market District 80 |
6 Leswyn Rd. North York, ON M6A 1K2 |
| Metro East District 05 Warehouse 718 |
50 Munham Gate Scarborough, ON MIP 284 |
| Metro Northwest District 01 Warehouse 710 |
89 Carlingview Drive Toronto, ON M9W 5E4 |
| Metro South Central District 03 |
Blue Flame Heating 37 Dufflaw Rd. North York, ON M6A 2W2 |
| Metro South West District 02 |
Martin Air 75 lngram Dr. North York, ON M6M 2L7 |
| Mississauga South District 13 Warehouse 734 |
950 Bumhamthorpe Rd. W. Mississauga, ON L5C 3B4 |
| Mississauga North District 14 |
JRL HVAC INC 278 Rutherford Rd. S. Brampton, ON L6W 3K7 |
| Niagara District 20 Warehouse 748 |
3401 Schmon Pkwy. P.O. Box 1051 Thorold, ON L2V 5V8 |
| Grimsby District 04 Warehouse 758 |
189 South Service Rd. Grimsby, ON L3M 4H6 |
| Hamilton District 24 |
Greenal Heating & AC 67 Frid Street Unit 16 Hamilton, ON L8P 4M3 |
| Halton District 21 |
Select Energy 4361 Harvester Rd. #27 Burlington, ON L7M 6M4 |
| Caledon District 15 |
Bramton Sheet Metal 180 HWY #7 West Bldg. 6. North Hall Brampton, ON L6V 1Al |
| Kitchener District 22 |
Columbia Mechanical 35 Durward Place Waterloo, ON N2L 4E5 |
| London District 23 |
Complete Htg. & Clg. Ltd. 11 12 Brydges St. London, ON N5W 286 |
| Enbridge Business Services |
Stannair Conditioning Inc. 2645 Skymark Avenue Mississauga, ON L4W 4H2 |
[21] SCHEDULE “B”
BUY-OUT PRICES [New Customers]
Use this table to find the buy-out price if you decide to purchase your
rental water heater from Enbridge Home Services.
Simply find the column matching the size and type of your rental water
heater and the age of your tank. The age of tank is determined based on
the installation date shown on the installer’s sticker on your water heater.
The type of
tank is indicated by the installer’s
initial at the top of the applicable column.
Prices shown do not include
taxes. Applicable taxes will be added to the prices shown.
|
WATER HEATER TYPE AND SIZE
|
|||||
| AGE OF WATER HEATER (Years) |
CV 40 (Conventional 40 Gallon) |
CV 50 (Conventional 50 Gallon) |
CV 60 (Conventional 60 Gallon) |
PV 50 or DV 50 (Power vented or Direct vented 50 gallon) |
PV 75 (Power vented 75 gallon) |
| 21-1 Year (Starting Price) |
$514 | $547 | $566 | $891 | $1,158 |
| 1-2 | 493 | 524 | 543 | 854 | 1,110 |
| 2-3 | 469 | 499 | 517 | 814 | 1,057 |
| 3-4 | 445 | 473 | 490 | 771 | 1,001 |
| 4-5 | 418 | 445 | 461 | 725 | 942 |
| 5-6 | 391 | 415 | 430 | 677 | 880 |
| 6-7 | 361 | 384 | 398 | 626 | 813 |
| 7-8 | 330 | 351 | 363 | 572 | 743 |
| 8-9 | 297 | 315 | 327 | 514 | 668 |
| 9-10 | 262 | 278 | 288 | 453 | 589 |
| 10-11 | 224 | 239 | 247 | 389 | 505 |
| 11-12 | 185 | 197 | 204 | 321 | 416 |
| 12-13 | 143 | 152 | 158 | 248 | 322 |
| 13-14 | 99 | 105 | 109 | 171 | 223 |
| 14-15 | 52 | 55 | 57 | 90 | 117 |
| over 15 years | 25 | 25 | 25 | 25 | 25 |
Starting Price
The price for water heaters less than one year old is equal to the
Enbridge Home Services retail sale price for a comparable, installed water
heater. This includes an amount to reflect our typical installation charge.
Age Discount
The buy-out prices shown are determined by amortizing the Starting Price
over the expected useful life of the water heater.’
Remember:
When you purchase your Enbridge Home Services water heater, our rental arrangement ends. You will be u