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Commercial Transactional Law: No Anti-Competition Act Violation Found in Oil-Gas Venture

oilwellNo Competition Act Violation Found in Oil-Gas Venture

Well, it is time to indulge discussion of another area of practice interest:  commercial business transactions.  Let us start with the oil and gas industry, industries which are certainly continuing to hold the public’s attention in an era punctuated by both a drive toward renewable sources of energy, as well as development of new sources of preexisting fossil fuels.

In June 2013, the Supreme Court of Canada refused leave to appeal the Alberta Court of Appeal’s decision upholding, under certain, controlled circumstances, legitimate oil and gas ventures.  The case in question is captioned, 321665 Alberta Ltd. v. Husky Oil Operations Ltd. (2013 ABCA 221), where the Alberta Court of Appeal found no anti-competitive action breaching the federal Competition Act.

The origins of the case date all the way back to the mid-1990s, when Husky and Exxon-Mobil convened to jointly discuss methods to reduce costs — and to operate more efficiently.  In particular, the two operations discussed the use of a “single source fuel hauler” to service each company’s close-proximity Northern Alberta facilities.  The companies jointly considered two different fuel haulers, choosing one recipient for the contract award.

The unsuccessful company, a small trucking operation, and the Plaintiff/Appellant in this case, alleged the suffering of significant financial hardship, rising to the level of a violation of Section 45 of the Competition Act, i.e., the “undue lessening of competition.”  The Plaintiff was successful before the trial court, with the latter finding a Competition Act Violation, and awarding damages to the Plaintiff.

On appeal, this decision was overturned.  See http://www.canlii.org/en/ab/abca/doc/2013/2013abca221/2013abca221.html.  The Alberta Court of Appeal specifically ruled that both trucking companies — the one receiving the contract and the Plaintiff, were provided a “fair opportunity” to compete for the contract.  Further, the Defendants, Exxon-Mobil and Husky were merely attempting to discover improved methods for operational management, reduce costs, and increase business efficiency.

In other words, the Court of Appeal found that the Exxon-Mobil/Husky  joint venture was never intended to deter competition among fuel suppliers. Rather, it was intended for a “legitimate business purpose.”  Accordingly, the Court of Appeal ruled that oil and gas companies should not be prevented from entering into joint ventures intended for the streamlining of operations.

Onward ….

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