Canada Post delivers rivals body blow – Key mail, Spring Canada feud: ‘Exclusive privilege’ for international mail delivery at issue
Richard Thornton, a Mississauga, Ont., business owner, is in the fight of life against Canada Post Corp. He and other operators in the $100-million international mail delivery market are in danger of being shut down by the Crown corporation after nearly two decades in business. It's a battle, now before the courts, that has cost Mr. Thornton some big-time customers and forced him to issue pink slips.
"They are trying to isolate certain parts of the industry, and then once they are successful, depending how far this litigation goes … then they will start to proceed against others," he said.
Canada Post has two court rulings in its pocket giving the Crown corporation the power to put Mr. Thornton's Key Mail International out of business after 17 years. Mr. Thornton is pinning his hopes now with the justices of the Supreme Court of Canada, to which his lawyers have sought leave to appeal.
Mr. Thornton said he believes this is a new, aggressive effort on Canada Post's to use loopholes in the law to shut down its rivals. Key Mail, along with his Ontario rival Spring Canada, he said, is at the top of Canada Post's hit list.
Other Canada Post targets range from letter shops to Canada's biggest printers — Quebecor World, St. Joseph and Transcontinental — which are engaged, in one way or another, in the business of handling mail destined for outside Canadian borders.
The international mail delivery industry works as follows: Large organizations — such as banks, universities or even federal departments — employ a firm to handle the distribution of its foreign-bound mail. The firm, such as Key Mail, has the mail shipped to another country where it gets the appropriate stamps from that jurisdiction's post office.
Key Mail attracts such large-scale bulk customers by offering competitive rates and top-end customer service.
Should Canada Post succeed in its bid to quash Key Mail and Spring Canada, "these customers — and ultimately the Canadian public — will be forced to deal only with Canada Post after over 20 years of enjoying an open and competitive marketplace," Mr. Thornton says in an affidavit filed with the Supreme Court of Canada.
Until recently, Canada Post acknowledged it faced stiff competition in the international mail market. The corporation's 1992-93 annual report states: "Some outbound mail business lost to crossborder mailers over time has been regained in many market segments — government, finance, education and others."
In fact, from 1992 to 1996, Canada Post was part of a consortium that owned an equity stake in a Dutch company, GD Net BV, which in turn owned Spring Canada.
"Canada Post didn't do a whole lot at the beginning," says Lou Laforet, president of Spring Canada, and involved in the international mail sector since the mid-1980s. "All of a sudden, the early 1990s, Canada Post took notice. They started up an international mail division and hired away some of our employees."
Competition has ensued well into this decade without a whiff of complaint or allegations of illegal activity — that is, until, Canada Post went to court to exercise its so-called "exclusive privilege" as granted under the Canada Post Corporation Act.
Canada Post lawyers persuaded judges with the Ontario Superior and Ontario Court of Appeal that the French version of the Act is clear in granting the Crown corporation the exclusive right to "collect" and "transmit" all letter mail, including mail bound for foreign countries. Meanwhile, the English version of the Act was deemed ambiguous.
"Establishing a monopoly over international letters, rather than domestic, is completely out of stop with Canada Post's longstanding behaviour in the marketplace, and with the practice among other Western countries," says Key Mail's legal brief with the Supreme Court. "It also calls into question whether an entire industry that has arranged its affairs in reliance on the narrower interpretation accepted by all — demonstrably including Canada Post — should be criminalized based on one possible reading of the French text of the statue."
Francois Legault, a spokesman for Canada Post, said the international mailers are costing taxpayers — who own the Crown corporation — up to $80-million in annual revenue. He said the Crown company has tried to resolve the matter diplomatically over the past number of years, but with no success.
"And now you do have two court decisions that say international mail is part of Canada Post's exclusive privilege," Mr. Legault said.
(Meanwhile, Mr. Thornton says efforts to open talks with Canada Post on a potential joint venture have gone ignored.)
Mr. Thornton and Mr. Laforet also allege Canada Post has used the court rulings to intimidate their customers, warning them to cease ties with Key Mail and Spring Canada — or else their domestic service may be disrupted. They say this has prompted some of their customers to back out,
Mr. Legault says the charge of customer harassment is "absolutely false" and without merit. "We have been informing them, making them aware of the situation."
The Canadian International Mail Association has written to the Minister responsible for Canada Post, John McCallum, to intervene. The argument is that Canada is headed in the wrong direction if these court rulings stand, as other countries — most notably Britain and Japan — break up monopoly powers and strip away their national post offices' exclusivity.
"The companies under attack from Canada Post are more than prepared to continue competing against a much larger entity like Canada Post and, in fact, welcome such competition that is in the best interests of the Canadian consumer," the group says in its letter.
A spokesman for Mr. McCallum, David Hurl, said the minister had only recently received the group's letter. He needs to review its contends before responding to the association "in due course."
Spring Website:
Canada Post v Key Mail Decision
On Friday, September 2, the Ontario Court of Appeal rendered its decision in the matter of Canada Post v. Key Mail Canada Inc. and Key Mail International Inc. The court determined that section 14 of the Canada Post Corporation Act governs each of the activities of “collecting”, “transmitting” or “delivering” letters within Canada, but no hearing or trial has yet been held concerning the application of this determination to Spring’s business.
On September 23, 2005, Key Mail commenced proceedings seeking to appeal this decision to the Supreme Court of Canada. Because of the importance of the issue, Spring has joined in this process in support of Key Mail.
While the Court of Appeal’s decision was not against Spring Canada, we participated as Interveners in this matter. Spring is disappointed that the Court of Appeal’s decision failed to take into account the many years of service we have operated in Canada without any concerns ever being raised by Canada Post as we worked hard to build our business. However, the Court of Appeal did hold that Canada Post’s historical acceptance and support of the competitive marketplace may be relevant in any hearing or trial with respect to Spring’s business that may occur in the future.
We anticipate that Canada Post will be communicating this decision in the very near future and providing its own interpretation regarding your ability to make use of the services of Spring Canada. Let me be clear: Spring Canada’s top priority has and continues to be to ensure the highest quality of service in a cost-effective and ethical manner, in full and fair competition with Canada Post. We are confident that the appeal process before the Supreme Court of Canada will set these issues to rest.
Spring Canada prides itself on the important relationships we have built with our customers throughout our many years of service. We look forward to building upon these strong relationships and thank you for your continued loyalty to Spring Canada.
If you have any questions, please do not hesitate to contact me directly at [email protected].
Sincerely,
Lou Laforet
President
Spring Canada
