Written by Anthony Baldanza, Leslie Milton and Antonio DiDomenico. Anthony Baldanza is a Partner of and Chair of the Antitrust/Competition & Marketing Group of Fasken Martineau DuMoulin LLP, resident in the firm’s Toronto office. Leslie Milton is a partner of the firm, and Antonio DiDomenico is an associate.
Updated Merger Enforcement Guidelines
In the wake of the issuance in 2010 of updated US Merger Enforcement Guidelines, and after conducting an extensive consultation process, in October 2011 the Canadian Competition Bureau (the Bureau) published updated Canadian Merger Enforcement Guidelines1 (the 2011 MEGs) that replace the pre-existing Canadian Merger Enforcement Guidelines2 that were published in 2004 (the 2004 MEGs). The Bureau’s stated objective in updating the 2004 MEGs was not to do a full rewrite, but to “address certain discrete areas where the  MEGs do not fully reflect current Bureau practice and current economic and legal thinking.”3
The following are among the most noteworthy changes:
- The 2011 MEGs provide additional guidance as to how the Bureau assesses transactions in which minority interests or interlocking directorates are at issue and when they result in a “merger” for purposes of the substantive merger review jurisdiction under the Competition Act 4 (the Act).
- While the 2011 MEGs state that examination of the competitive effects of a merger generally involves defining the relevant markets and assessing the competitive effects of the merger in those markets, the guidelines also state that “Market definition is not necessarily the initial step, or a required step,…” and that the Bureau may instead rely on other methods of assessing the likely competitive effects of a merger including “various economic tools.”5
- The 2011 MEGs have replaced the two-year time frame for effective entry (to constrain the exercise of market power arising from a merger) with a requirement that entry occur “quickly enough to deter or counteract any material price increase owing to the merger.“6
- The 2011 MEGs provide additional and useful guidance on how the Bureau assesses the unilateral and coordinated effects of a merger, on countervailing market power and monopsony issues, and on how the Bureau assesses vertical and conglomerate mergers.
- The 2011 MEGs now incorporate the Bureau’s guidance in relation to the efficiencies defense, superseding the 2009 Bureau bulletin on “Efficiencies in Merger Review.”7
Competition Bureau Releases Merger Remedies Study Summary
In August 2011, the Bureau issued a bulletin respecting the results of its study of the effectiveness of remedies obtained under the merger provisions of the Act during the period 1995 to 2005.8 The results of the study will be used to update the Bureau’s Information Bulletin on Merger Remedies in Canada, Competition Bureau (22 September, 2006)9, including the consent agreement outline template.
Competition Bureau Updates Guidance on Merger Review “No Action” Letters
Effective September 1, 2011, the Bureau changed its practice with respect to no- action letters (NALs).10 Whereas prior to that date, NALs referred to the insufficiency of grounds to challenge a merger, NALs now state only that the Commissione of Competition (the Commissioner) does not at that time intend to make an application under the merger provisions in respect of the transaction.
New Filing Thresholds
Pre-merger notification under the Act is required where both sizeof- parties and size-of-transaction thresholds are exceeded. The sizeof- parties threshold is exceeded where the parties, including their respective affiliates, together have assets in Canada or gross revenues from sales in, from or into Canada that exceed C$400 million. The size-of-transaction threshold varies with the type of transaction involved (e.g., acquisition of assets, acquisition of shares, amalgamation, etc.), but generally includes a monetary threshold in terms of the gross book value of assets in Canada or the value of annual gross revenues from sales in or from Canada generated from those assets. The size-of-transaction threshold effective February 1, 2012 is C$XX million (up from C$73 million during most of 2011).11 [NTD: The announcement is expected to be made by month’s end.]
Proposed Merger Register
On October 6, 2011, the Bureau announced that it would establish a merger register, being a list of all closed merger reviews, updated on a monthly basis.12
Updated Merger Review Process Guidelines
In January 2012, the Bureau issued updated Merger Review Process Guidelines13 that replace its 2009 guidelines and that reflect the considerable experience the Bureau has gained with respect to the two-stage merger review process since its introduction in September 2009. The updated guidelines provide increased guidance on the supplementary information request process, including pre and postissuance dialogue and custodians, sample instructions and the use of timing agreements.
CCS Corporation and Complete Environmental Inc.
In January 2011, the Commissioner brought an application challenging the acquisition by CCS Corporation of Complete Environmental Inc. CCS Corporation operates a landfill that accepts hazardous waste produced at oil and gas fields. Complete Environmental Inc. has a permit to operate such a landfill. A noteworthy aspect of the challenge is that the transaction was not notifiable and is being challenged post-closing. Also, unusually, the Commissioner is seeking dissolution amongst possible remedies.14
Competition Bureau Seeks to Block Joint Venture Between Air Canada and United Continental
In June 2011, the Commissioner filed an application with the Competition Tribunal (the Tribunal) to prohibit a proposed joint venture between Air Canada and United Continental. The Commissioner asserted that the joint venture would monopolize ten Canada/US routes and substantially reduce competition on nine additional routes, leading to increased prices and reduced consumer choice. The Commissioner asserted that the proposed joint venture would allow the parties to jointly set prices, capacity and schedules, and would result in significantly higher prices. The Commissioner also challenged three existing coordination agreements between Air Canada and United Continental. These agreements allow the two airlines to coordinate key aspects of competition including joint pricing and scheduling as well as revenue-sharing.15
Competition Bureau Clears Canadian Tire’s Acquisition of the Forzani Group
This transaction involved the purchase of a national sporting goods retailer by a mass merchandiser with significant sales in sporting equipment. In analyzing the transaction, the Bureau considered various possible product markets (the retail sale of sporting equipment; the retail sale of certain sporting equipment categories such as hockey equipment; and the retail sale of specific sporting equipment products such as hockey skates) and analyzed the potential competitive effects of the transaction from quantitative and qualitative perspectives on the basis of each of the potential markets. Because the Bureau’s review did not find significant competitive effects in any of the candidate markets, consistent with the approach articulated in the 2011 MEGs, it determined that it was not necessary to define the relevant product markets.
As a large proportion of the parties’ respective retail outlets were located in close proximity to one another, one approach taken by the Bureau to assess the competitive effects of the transaction was to assess whether the nature of competition between the parties was such that, following the transaction, market power could be exercised in local geographic markets. In particular, the Bureau considered the extent to which the parties, prior to the transaction, determined prices or product offerings in response to local competition with one another and with other retailers, and whether Canadian Tire, postmerger, would have the ability to increase prices or reduce product offerings in local markets or across one or more broader geographic areas.
With respect to the possible product markets, the Bureau engaged in a competitive effects analysis to determine whether prices or product offerings varied in local markets rather than on a broader geographic scale. Econometric results indicated that neither party adjusted its prices or product offerings in local markets in response to the presence of the other party. (This finding is to be contrasted with the finding in Staples-Office Depot where the presence of three office superstores in a variety of markets showed lower prices than where there were only two.)
The Bureau also concluded that the presence of competing retailers was likely to constrain the merged entity’s ability to exercise market power in each of the candidate product markets across all relevant geographic areas.16
Competition Bureau Approves Divestitures in Novartis Acquisition of Alcon
In March 2011, the Bureau announced its approval of the divestiture of certain assets and associated licenses related to the sale in Canada of ophthalmic products belonging to Novartis.17 The transaction is part of a remedy required to address competition concerns resulting from Novartis’s acquisition of control of Alcon in August 2010.
Competition Bureau Clears Merger of XM Canada and Sirius Canada
In February 2011, the Bureau announced that it would not challenge the proposed acquisition of Sirius Canada by Canadian Satellite Radio Holdings (CSRH.)18 CSRH is the parent of Canadian Satellite Radio Inc., which provides satellite digital audio radio services in Canada under the trade name XM Canada. Like CSRH, Sirius Canada provides satellite digital audio radio services. The parties’ respective US counterparts merged in July 2008; however, the Canadian entities remained independent and continued to operate separately under their respective broadcasting licenses.
Competition Bureau Clears Acquisition of CTV Globemedia Inc. by BCE Inc.
In February 2011, the Bureau announced19 that it did not then intend to challenge the proposed acquisition of CTV Globemedia by BCE Inc., but that it would continue to monitor the parties and regulatory developments to assess whether it should apply to the Tribunal within the one-year statute of limitations period following closing. BCE Inc. provides telecommunications services, Internet access and television distribution services. CTV Globemedia is active in broadcasting and publishing. The Bureau observed the growing trend toward vertical integration in the broadcasting industry. Its focus in that regard has been on the ability of vertically integrated firms to foreclose competing broadcasting distribution undertakings from accessing programming and the exchange of competitively sensitive information of broadcasters and broadcast distribution undertakings. However, the Bureau noted that the issues are being considered in the context of an industry that is innovating and within a regulatory framework that is evolving. Importantly, the Bureau observed that the Canadian radio-television and telecommunications commission was separately examining the transaction and had initiated hearings into vertical integration in the broadcasting industry.
Abuse of Dominance and Other Reviewable Practices
Toronto Real Estate Board
In May, 2011, the Commissioner filed an application for an order from the Tribunal under Section 79 of the Act (abuse of dominance) prohibiting the Toronto Real Estate Board (TREB) from enacting or enforcing rules that prevent or discriminate against TREB members that wish to use TREB’s multiple listing service (MLS) system to offer services over the Internet.20 The Commissioner alleges that the TREB substantially or completely controls the supply of residential real estate brokerage services in the Greater Toronto Area by reason of its ability to control access to and use of the TREB’s MLS system, that TREB rules restricting the ability of brokers to provide customer access to certain MLS data online through, for example, virtual online websites, are discriminatory, preclude innovative brokerage business models and constitute a practice of anticompetitive acts, and that the practice has limited or prevented competition substantially. TREB has responded that, among other things, it is exercising its copyright in the MLS system. The case is currently scheduled to be heard by the Tribunal in September – October 2012.
Air Canada and United/Continental
In Commissioner of Competition v. Air Canada and United/ Continental (discussed above) the Commissioner is seeking a remedy for the first time under the civil competitor collaboration provision of the Act in respect of existing alliance and marketing agreements between the respondents in conjunction with her request for an order under the merger provision prohibiting a proposed joint venture between the respondents.21
The Visa/MasterCard price maintenance application filed by the Commissioner in December 2010 relating to the terms of supply of credit card network services and reported in our update last year is scheduled to be heard by the Tribunal in April – June of this year.22
Used Car Dealers of Canada (UCDC)
On the private action front, UCDC was granted leave to file and has filed an application under Section 75 of the Act (refusal to deal) seeking an order requiring the Insurance Bureau of Canada (IBC) to supply certain vehicle accident and claims data to UCDC.23 An interim supply order was issued pursuant to Section 104 of the Act (interim orders) on consent of the parties on October 20, 2011, pending a determination on the application. In December, IBC filed an application seeking recission of the interim supply order pursuant to Section 106 of the Act (variation of consent agreement or order). The Tribunal has since directed IBC to refile its request for recission under Section 104.
Canadian Internet Registration Authority (CIRA)
Conversely, a request for leave to commence a refusal to deal proceeding against CIRA was denied by the Tribunal as the applicant had failed to submit any evidence that CIRA’s refusal to renew its authorization to act as a .ca domain name registrar would have an adverse effect on competition in a market.24
Finally, the Federal Court of Appeal dismissed Nadeau Poultry’s appeal of the Tribunal’s 2009 decision denying Nadeau’s private application for relief under Section 75.25 The Court upheld the Tribunal’s assessment of “ample supply” as requiring that producers have capacity to increase production and would not be obliged to redirect product from one customer to another. The Court also endorsed the Tribunal’s determination that anticompetitive effects should be assessed in downstream markets, and emphasized that the Tribunal’s findings of fact are not subject to appeal absent prior leave of the Court. Leave to appeal to the Supreme Court of Canada has been denied.26
Cartels and Other Criminal Prohibitions
Cartel, bid-rigging and deceptive marketing matters were an enforcement priority for the Bureau. 2011 saw a number of charges laid and convictions through guilty pleas, including in retail gasoline, infrastructure and telemarketing.
There were significant developments for claims made by indirect purchasers of allegedly price-fixed products.
The Supreme Court of Canada granted leave to appeal the British Columbia Court of decisions in Pro-Sys Consultants Ltd. v. Microsoft Corporation (Microsoft)27 and Sun-Rype Products Ltd. v. Archer Daniels Midland Company (Sun-Rype).28 Microsoft and Sun-Rype were two to one majority decisions concluding that indirect purchasers of allegedly price-fixed products have no cause of action recognized in law. These findings suggest a departure from the trend of previous decisions that signaled greater opportunities for indirect plaintiffs to achieve certification.
Conversely, the Québec Court of Appeal in Option Consommateurs v. Infineon Technologies AG29 allowed indirect plaintiffs to proceed with their price-fixing claim. The Court expressly disagreed with the British Columbia Court of Appeal’s decision in Microsoft and Sun-Rype that indirect plaintiffs have no cause of action recognized in law.
The stage now appears to be set for the Supreme Court of Canada to clarify the scope of indirect purchaser claims in Canada.
- Enforcement Guidelines: Merger Enforcement Guidelines, Competition Bureau (6 October, 2011), available at http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/cb-meg-2011-e.pdf/$FILE/cb-meg-2011-e.pdf.↵
- Enforcement Guidelines: Merger Enforcement Guidelines, Competition Bureau (1 September, 2004), available at http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01245.html.↵
- Melanie L. Aitken, Commissioner of Competition, “Remarks” (delivered at 2011 Competition Law and Policy Forum, Northwinds Professional Institute, 24 February, 2011), available at http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03377.html.↵
- Competition Act, RSC 1985, c C-34, as amended.↵
- The 2011 MEGs, supra note 1 at 9-10.↵
- Ibid at 28.↵
- Enforcement Guidelines: Efficiencies in Merger Review, Competition Bureau (2 March, 2009), available at http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/02982.html.↵
- Bulletin: Competition Bureau Merger Remedies Study, Competition Bureau (11 August, 2011), available at http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/cb-merger-remedystudy-summary-e.pdf/$FILE/cbmerger-remedy-study-summary-e.pdf.↵
- Information Bulletin on Merger Remedies in Canada, Competition Bureau (22 September, 2006) available at http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/Mergers_Remedies_PDF_EN1.pdf/$FILE/Mergers_Remedies_PDF_EN1.pdf.↵
- Competition Bureau Updates Guidance on Merger Review “No Action” Letters, Competition Bureau (8 August, 2011), available at http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/03398.html.↵
- <NTD: the announcement is not available to cite yet.>↵
- Melanie L. Aitken, Commissioner of Competition, “Keynote Speech” (delivered at the Canadian Bar Association 2011 Fall Conference, 6 October, 2011), available at http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03424.html.↵
- Enforcement Guidelines: Merger Review Process Guidelines, Competition Bureau (11 January,
2012), available at http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/vwapj/merger-review-process-2012-e.pdf/$FILE/merger-reviewprocess-2012-e.pdf.↵
- Commissioner of Competitionv. CCS Corporation, Complete Environmental Inc., Babkirk Land Services Inc., Karen Louise Baker, Ronald John Baker, Kenneth Scott Watson, Randy John Wolsey, and Thomas Craig Wolsey, CT-2011-002.↵
- The Commissioner of Competition v. Air Canada, United Continental Holdings Inc., United Airlines Inc., and Continental Airlines Inc., CT-2011-004.↵
- Canadian Tire/Forzani Position Statement, Competition Bureau (August 2011), available at http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03421.html.↵
- Competition Bureau Approves Divestitures in Novartis Acquisition of Alcon, Competition Bureau (10 March 2011), available at http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/03356.html.↵
- Position Statement [re: Satellite Radio Holdings Inc. and Sirius Canada Inc.], Competition Bureau (23 February 2011), available at http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/03353.html.↵
- Competition Bureau Statement Regarding BCE’s Acquisition of CTV, Competition Bureau (1 February, 2011), available at http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/03345.html.↵
- The Commissioner of Competition v. The Toronto Real Estate Board, CT- 2011-003.↵
- The Commissioner of Competition v. Visa Canada Corporation and MasterCard International Incorporated et al., CT-2010-010.↵
- Used Car Dealers Association of Ontario v. Insurance Bureau of Canada, CT-2011-008.↵
- Brandon Gray Internet Services Inc. v. Canadian Internet Registration Authority, 2011 Comp. Trib. 1.↵
- Nadeau Poultry Farm Limited v. Groupe Westco Inc., 2011 FCA 188.↵
- Nadeau Ferme Avicole Limitée / Nadeau Poultry Farm Limited v. Groupe Westco Inc., Groupe Dynaco, Coopérative Agroalimentaire and Volailles S.E.C. and Volailles Acadia Inc./Acadia Poultry Inc., 2011 CanLII 82376 (SCC).↵
- Pro-Sys Consultants Ltd. and Neil Godfrey v. Microsoft Corporation and Microsoft Canada Co./MicrosoftCanada CIE, 2011 CanLII 77282 (SCC).↵
- Sun-Rype Products Ltd. and Wendy Weberg v. Archer Daniels Midland Company, 2011 CanLII 77189 (SCC).↵
- Option Consommateurs v. Infineon Technologies, a.g., 2011 QCCA 2116.↵