Nothing sweet about sales of grey-market candy, Appeal Court rules
Mars chocolate bars are on display in a Montreal store on Friday, June 21, 2013 in Montreal. (THE CANADIAN PRESS / Ryan Remiorz)
Colin Perkel, The Canadian Press
Published Wednesday, March 14, 2018 3:11PM EDT
TORONTO -- An attempt at sugar coating the sale of grey market Mars bars and M&M's in Canada has fallen flat with Ontario's top court, which sided with the Canadian maker of the candy in a decision slamming an upstart confectioner's conduct.
The ruling in favour of Mars Canada this week also upheld a lower court judge's hefty costs award against Aizic Ebert and his two Toronto companies for "brazenly" breaching earlier settlements of the dispute.
"Their efforts to undermine the agreements were dishonourable and deserving of censure," the Appeal Court said in its ruling, noting, however, that the state of Canadian law around grey marketing remains unsettled.
The case arose more than a decade ago when Mars Canada, which also makes and sells Snickers and Milky Way candy bars among other treats, discovered Ebert was buying genuine Mars products in the United States through his company Bemco Cash and Carry, and selling them at a discount in this country.
Mars Canada, based in Bolton, Ont., took its complaint to Federal Court, but the two sides settled when Bemco agreed it would not import or sell the U.S.-made products in Canada. As part of the deal, Bemco also identified its supplier as GPAE Trading Corporation, also owned and controlled by Ebert, which agreed to a Mars Canada demand to cease its activities.
However, Mars Canada discovered in 2010 that foreign products bearing its trademarks were again being sold in Canada, this time through another company, but in concert with Bemco and GPAE, court documents show. Mars Canada sued.
Ebert argued the earlier agreements were invalid because they amounted to restraint of trade but Superior Court Justice Frederick Myers granted summary judgment in favour of Mars Canada in November 2016. Myers found Bemco and GPAE had breached the earlier deals by continuing to import and sell grey market Mars products.
The judge also rejected Ebert's restraint-of-trade argument, finding the agreements were reasonable for both the parties and public, and that Mars Canada was entitled to enforce its registered trademarks. Myers also found the imported products breached Canadian labelling and packaging laws by, for example, not having any French.
While the judge referred the question of damages to another hearing, he did grant Mars Canada $225,000 in legal costs for what he deemed the brazen breach of the earlier settlements and for Ebert's attempts to "avoid accountability" for the misconduct.
Ebert and his companies appealed. Among other things, they argued the earlier settlement agreements were unreasonable, and that Myers did not hear direct evidence that Mars Canada had suffered damages and should not have ordered a further hearing on those losses.
The Court of Appeal rejected the arguments, saying Mars Canada had an obvious interest in defending its trademark rights, and it did sustain actual damages given that its sales were cannibalized by the grey market products.
Myers did reject Mars Canada's claim for punitive damages.
"There is enough grey in grey marketing law and the lack of federal government enforcement of labelling and packaging laws to prevent the characterization of the defendants' conduct as sufficiently egregious to attract further condemnation from the court," Myers wrote.
The higher court also awarded Mars Canada another $20,000 to cover its appeal costs.