Indexed as: Canada (Director of Investigation and Research, Competition Act) v. Southam Inc. Southam Inc., Lower Mainland Publishing Ltd., RIM Publishing Inc., Yellow Cedar Properties Ltd., North Shore Free Press Ltd., Specialty Publishers Inc., and Elty Publications Ltd., appellants; v. Director of Investigation and Research, respondent. [1997] 1 S.C.R. 748 [1996] S.C.J. No. 116 File No.: 24915. Supreme Court of Canada Heard: November 25, 1996. Oral judgment on remedy: November 25, 1996. Reserved judgment on merits: March 20, 1997. Present: Lamer C.J. and La Forest, L'Heureux-Dubйй, Sopinka, Gonthier, Cory, McLachlin, Iacobucci and Major JJ. ON APPEAL FROM THE FEDERAL COURT OF APPEAL

[QL Ed. note: The appeal against remedy was dismissed on November 25, 1996. The appeal on the merits was reserved at that time and was allowed on March 20, 1997.]

Administrative law —— Statutory appeals —— Tribunal composed of economic, commercial and legal experts —— Tribunal's decision not protected by privative clause —— Standard of appellate review —— Competition Act, R.S.C., 1985, c. C-34, s. 92(1) —— Competition Tribunal Act, R.S.C., 1985, c. 19 (2nd Supp.), ss. 12, 13.

Competition law —— Remedy —— Tribunal investigating substantial lessening of competition —— Tribunal ordering divestment of one business at owner's option —— Whether remedial order should be set aside —— Competition Act, R.S.C., 1985, c. C-34, s. 92(1) —— Competition Tribunal Act, R.S.C., 1985, c. 19 (2nd Supp.), ss. 12, 13.

Vancouver's two daily newspapers (owned by Southam Inc.) were less successful, when compared with daily newspapers in other regions of Canada, relative to the many smaller community newspapers circulating in their distribution area. The community newspapers differed from the dailies in that they served a smaller area, were distributed free of charge, and were printed from one to three times a week. In 1989, Southam Inc. began to acquire community and specialized newspapers in the area, and one year later had obtained a controlling interest in 13 community newspapers (including the two strongest ones, the North Shore News and the Vancouver Courier), a real estate advertising publication, three distribution services and two printing concerns. Southam Inc. also established a local supplement to one of its dailies but eventually discontinued it.

The respondent applied for an order requiring Southam to divest itself of the North Shore News, the Vancouver Courier, and the Real Estate Weekly, alleging that the concentration of these properties in the hands of one publisher was likely to lessen competition substantially in the retail print advertising and real estate print advertising markets in the Lower Mainland. The Competition Tribunal found a substantial lessening in competition in the real estate print advertising market in the North Shore. It ordered Southam to divest itself, at its option, of either the North Shore News or the Real Estate Weekly. It rejected Southam's proposal that it sell the real estate section of the North Shore News. The Director of Investigation and Research appealed the Tribunal's decision on the merits and Southam appealed the Tribunal's decision on the remedy. The Federal Court of Appeal allowed the first appeal and dismissed the second.

This appeal raises two issues. The first is whether the Federal Court of Appeal erred in concluding that it owed no deference to the Tribunal's finding about the dimensions of the relevant market and in subsequently substituting for that finding one of its own. The second is whether the Federal Court of Appeal erred in refusing to set aside the Tribunal's remedial order.

Held: The appeal on the merits should be allowed; the appeal on the remedy should be dismissed.

Merits

The standard of review is a function of many factors and may fall between correctness, at the more exacting end of the spectrum, and patently unreasonable, at the more deferential end. In the absence of a privative clause, the reviewing court may review decisions taken by the tribunal even within its own jurisdiction. Accordingly, the task for the reviewing court in a statutory appeal is more akin to appellate review than to judicial review. Nevertheless, the reviewing court must look to several factors to determine what limits it should observe in exercising its statutorily mandated appellate function. Among the factors to be considered are the nature of the problem before the tribunal, the applicable law properly interpreted in the light of its purpose and the area of the tribunal's expertise.

The problem before the Tribunal in this case was a problem of mixed law and fact. Questions of law are questions about what the correct legal test is; questions of fact are questions about what actually took place between the parties; and questions of mixed law and fact are questions about whether the facts satisfy the legal tests. The distinction between questions of law and questions of mixed law and fact will sometimes be difficult to make. In theoretical terms, the rule is that as the level of generality of the challenged proposition approaches complete particularity, the matter approaches unqualified application of law and draws away from the forging of new law, and hence draws nigh to being an unqualified question of mixed law and fact.

The Tribunal did not fail to consider relevant items of evidence and so did not err in law by failing to consider them. To suggest that it erred in law by failing to accord adequate weight to certain factors is inimical to the very notion of a balancing test, which is a kind of legal rule whose application should be subtle and flexible, but not mechanical. As a matter of law, the Tribunal should consider each factor, but the according of weight to the factors should be left, at least initially, to the Tribunal. The Tribunal forged no new legal principle and so any error it might have made can only have been one of mixed law and fact. This suggests that some measure of deference accordingly is owed to the Tribunal's decision. Appellate courts should be reluctant to venture into a re-examination of the conclusions of the Tribunal on questions of mixed law and fact.

The absence of a privative clause counsels a less deferential posture for appellate courts than would be appropriate if a privative clause were present. The Tribunal, however, has been recognized as being especially well-suited to overseeing a complex statutory scheme whose objectives are peculiarly economic. Because an appellate court is likely to encounter difficulties in understanding the economic and commercial ramifications of the Tribunal's decisions and consequently to be less able to secure the fulfilment of the purpose of the Competition Act, the purpose of the Act is better served by appellate deference to the Tribunal's decisions.

Expertise, which in this case overlaps with the purpose of the statute that the Tribunal administers, is the most important of the factors that a court must consider in settling on a standard of review. The Tribunal's expertise lies in economics and in commerce, and these are matters concerning which the members of the Tribunal are likely to be far more knowledgeable than the typical judge will be. The particular dispute in this case is one that falls squarely within the area of the Tribunal's expertise.

A standard more deferential than correctness but less deferential than "not patently unreasonable" is required. Because several considerations, including particularly the expertise of the Tribunal, counsel deference while others suggest a more exacting form of review, the proper standard of review falls somewhere between the ends of the spectrum.

The need for a third standard of review is especially clear in cases, like this one, in which appeal from a tribunal's decision lies by statutory right. The presence of the statutory right of appeal obviates the need to find a jurisdictional error. Because the standard of patent unreasonableness is principally a test for determining whether a tribunal has exceeded its jurisdiction, it will rarely be the appropriate standard of review in statutory appeals. However, because tribunals typically enjoy some expertise and deal with problems of a difficult and intricate nature, a standard more deferential than correctness is needed. This third standard should be whether the decision of the Tribunal is unreasonable. This test is to be distinguished from the most deferential standard of review, which requires courts to consider whether a tribunal's decision is patently unreasonable. An unreasonable decision is one that, in the main, is not supported by any reasons that can stand up to a somewhat probing examination. The difference between "unreasonable" and "patently unreasonable" lies in the immediacy or obviousness of the defect. If the defect is apparent on the face of the tribunal's reasons, then the tribunal's decision is patently unreasonable. But if it takes some significant searching or testing to find the defect, then the decision is unreasonable but not patently unreasonable.

The "clearly wrong" test is close to the standard of reasonableness simpliciter. Many things are wrong that are not unreasonable, but when "clearly" is added to "wrong", the meaning is brought much nearer to that of "unreasonable". Consequently, the clearly wrong test represents a striking out from the correctness test in the direction of deference. But the clearly wrong test does not go so far as the standard of patent unreasonableness. The clearly wrong test, because of its familiarity to Canadian judges, may serve as a guide in applying the standard of reasonableness simpliciter.

In the final result, the standard of reasonableness simply instructs reviewing courts to accord considerable weight to the views of tribunals about matters with respect to which they have significant expertise. While it is convenient to put the matter in terms of a standard of review, at bottom the issue is the weight that should be accorded to expert opinions.

The Tribunal did not act unreasonably when it decided that Southam's daily newspapers and community newspapers are in different product markets.

That the Tribunal discounted evidence of functional interchangeability between the dailies and the community newspapers was reasonable on the facts and was not without foundation or logical coherence. It is reasonable, if only reasonable, to suppose that advertisers are sufficiently discerning about the media they employ that they are unlikely to respond to changes in the relative prices of the two kinds of newspapers by taking their business from the one to the other.

The Tribunal also discounted evidence that Southam regarded the community newspapers as competitors for its dailies. This discounting is perhaps unusual given that Southam's expert identified this competition with community newspapers as the source of the dailies' difficulties. The Tribunal's findings, however, were not unreasonable and they did not need to be correct. Judicial restraint is needed if a cohesive, rational and sensible system of judicial review is to be fashioned.

Remedy

Because the Competition Act addresses the problem of substantial lessening of competition, the appropriate remedy is to restore competition to the point at which it can no longer be said to be substantially less than it was before the merger. The test that the Tribunal has applied in consent cases should be applied in all cases.

The Tribunal's choice of remedy is a matter of mixed law and fact and the standard of review is one of reasonableness.

Southam's proposed remedy of selling the real estate section of the North Shore News fails because it would not likely be effective in eliminating the substantial lessening of competition. This decision was not unreasonable and should be allowed to stand. The remedy chosen by the Tribunal is not punitive, because the Tribunal found that it was the only effective remedy. If the choice is between a remedy that goes farther than is strictly necessary to restore competition to an acceptable level and a remedy that does not go far enough even to reach the acceptable level, then surely the former option must be preferred. The Tribunal did not wrongly require the appellants to demonstrate the effectiveness of their proposed remedy; the person who asserts should prove.

Cases Cited

Considered: Pezim v. British Columbia (Superintendent of Brokers), [1994] 2 S.C.R. 557; referred to: R. v. Nova Scotia Pharmaceutical Society, [1992] 2 S.C.R. 606; Bell Canada v. Canada (Canadian Radio-Television and Telecommunications Commission), [1989] 1 S.C.R. 1722; Chrysler Canada Ltd. v. Canada (Competition Tribunal), [1992] 2 S.C.R. 394; United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2 S.C.R. 316; Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., [1979] 2 S.C.R. 227; Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941; National Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324; Toronto (City) Board of Education v. O.S.S.T.F., District 15, [1997] 1 S.C.R. 487; Stein v. "Kathy K" (The Ship), [1976] 2 S.C.R. 802; The Queen v. J. W. Mills & Son Ltd., [1968] 2 Ex. C.R. 275; Canada (Director of Investigation & Research) v. Air Canada (1989), 27 C.P.R. (3d) 476.

Statutes and Regulations Cited

Competition Act, R.S.C., 1985, c. C-34, ss. 1.1 [ad. R.S.C., 1985, c. 19 (2nd Supp.), s. 19], 92(1) [rep. & sub. R.S.C., 1985, c. 19 (2nd Supp.), s. 45].Competition Tribunal Act, R.S.C., 1985, c. 19 (2nd Supp.), ss. 3(2), (3), 4(1), 8(1), 10(1), (2), 12(1), (2), 13(1), (2).

Authors Cited

Kerans, R. P. Standards of Review Employed by Appellate Courts. Edmonton: Juriliber, 1994.

APPEAL from a judgment of the Federal Court of Appeal allowing an appeal on the merits [1995] 3 F.C. 557, (1995), 127 D.L.R. (4th) 263, 185 N.R. 321, 63 C.P.R. (3d) 1, 21 B.L.R. (2d) 1, from a judgment of the Competition Tribunal (1992), 43 C.P.R. (3d) 161, with additional reasons (1993), 48 C.P.R. (3d) 224, and from a judgment of the Federal Court of Appeal (1995), 127 D.L.R. (4th) 329, 185 N.R. 291, 63 C.P.R. (3d) 67, 21 B.L.R. (2d) 68, dismissing an appeal as to remedy from a judgment of the Competition Tribunal (1992), 47 C.P.R. (3d) 240. Appeal on the merits allowed; appeal on the remedy dismissed.

Neil Finkelstein, Glenn Leslie and Mark Katz, for the appellants.Stanley Wong, Andrйй Brantz and J. Kevin Wright, for the respondent.

	Solicitors for the appellants:	Blake, Cassels & Graydon,
	Toronto.
	Solicitors for the respondent:	Davis & Company, Vancouver.

The judgment of the Court was delivered by

1 IACOBUCCI J.:—— The principal question raised by this appeal is whether a decision of the Competition Tribunal (the "Tribunal") is entitled to curial deference. Following the approach outlined by this Court in its recent jurisprudence, I conclude that the particular decision of the Tribunal here at issue is entitled to deference.

1. Facts

2 Two daily newspapers serve the region in and around Vancouver. They are the Vancouver Sun and the Vancouver Province. The appellant Southam Inc., through its subsidiary Pacific Press Limited, owns both.

3 In addition to the two dailies, many smaller community newspapers circulate in the Lower Mainland of British Columbia. These community newspapers differ from the daily newspapers in a few respects: they serve smaller regions, they are distributed free of charge to all households in the regions they serve, and they are published only once, twice, or at most three times weekly. Community newspapers have been more successful in the Lower Mainland than in any other comparable region of Canada. Daily newspapers, by contrast, have been less successful in Vancouver than in other major Canadian cities.

4 In 1986, Southam consulted Dr. Christine Urban, an American expert, about the problems its Vancouver dailies were facing. Dr. Urban identified Vancouver's strong community newspapers as the cause of the dailies' malaise. She advised Southam to act to stem the growing power of the community newspapers.

5 In September, 1986, Southam introduced a flyer delivery service to the Lower Mainland. Known as Flyer Force, the new service offered delivery of flyers to even the households that did not receive a Southam newspaper. In 1988, several community newspapers, whose business included the delivery of flyers, joined to form a group whose geographic reach would rival Flyer Force's. This group was initially called the MetroVan Group. Later in 1988, the MetroVan Group expanded and changed its name to MetroGroup.

6 In September, 1988, Southam began to publish the North Shore Extra. This was a bi-weekly publication whose editorial focus was on the North Shore district of the Lower Mainland. The Extra was inserted as a supplement into copies of the Vancouver Sun bound for households in the North Shore. Additionally, the Extra was delivered to North Shore households that did not receive the Sun.

7 In January, 1989, Southam began to acquire community and specialized newspapers in the Lower Mainland. By May, 1990, the company had acquired a controlling interest in 13 community newspapers, a real estate advertising publication, three distribution services, and two printing concerns. Among its acquisitions were the Lower Mainland's two strongest community newspapers, the North Shore News and the Vancouver Courier, as well as the Real Estate Weekly.

8 In April, 1990, Southam discontinued the North Shore Extra.

9 On November 20, 1990, the respondent, the Director of Investigation and Research, applied for an order requiring Southam to divest itself of the North Shore News, the Vancouver Courier, and the Real Estate Weekly. The Director's reason for taking this step was that Southam's acquisition of these publications was likely to lessen competition substantially in the retail print advertising and real estate print advertising markets in the Lower Mainland.

10 In early 1991, Southam shut down Flyer Force.

2. Relevant Statutory Provisions

11 Section 92 of the Competition Act, R.S.C., 1985, c. C-34 addresses the problem of mergers that are likely to lessen competition substantially:

 

92. (1) Where, on application by the Director, the Tribunal finds that a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially

(a)		in a trade, industry or profession,
(b)		among the sources from which a trade, industry or profession obtains a product,
(c)		among the outlets through which a trade, industry or profession disposes of a product, or
(d)		otherwise than as described in paragraphs (a) to (c),

the Tribunal may, subject to sections 94 to 96,

(e)

in the case of a completed merger, order any party to the merger or any other person

(i)		to dissolve the merger in such manner as the Tribunal directs,
(ii)		to dispose of assets or shares designated by the Tribunal in such manner as the Tribunal directs, or
(iii)		in addition to or in lieu of the action referred to in subparagraph (i) or (ii), with the consent of the person against whom the order is directed and the Director, to take any other action, . . .

12 Various sections of the Competition Tribunal Act, R.S.C., 1985, c. 19 (2nd Supp.), create and provide for the constitution of the Tribunal:

3. . . .

(2) The Tribunal shall consist of