Law Times

Law Times • sepTember 17, 2018 Page 11 www.lawtimesnews.com Bureau offers guidance on efficiencies analysis BY DALE SMITH For Law Times T he Competition Bureau released a draft guidance document on efficien- cies analysis in merger reviews, which has allowed oth- erwise anti-competitive mergers to happen in Canada that would be blocked in other jurisdictions. Lawyers say that while the paper does offer some guidance as to what the Bureau is looking for in terms of an efficiencies defence, some have concerns that it presents new problems for their clients. The draft paper is intended to inform businesses and their lawyers about the Bureau's re- cent experiences with trade-off analysis about the circumstanc- es where the commissioner may exercise his discretion not to challenge an otherwise anti- competitive merger due to effi- ciency gains, according to s. 96 of the Competition Act. The guidance is focused on the Bureau's internal assessment of whether s. 96 applies to the merger. Debbie Salzberger, partner with McCarthy Tétrault LLP in Toronto, says that an efficien- cies defence could mean the dif- ference between a merger going through or having it blocked. "I think it's helpful as a prac- titioner to have this guidance, whether or not you agree with the position that's taken by the Bureau in terms of how the de- fence should be applied and the analysis that should be brought to bear," says Salzberger. Navin Joneja, partner at Blake Cassels & Graydon LLP in Toronto, says that economic efficiency is a driver for a lot of mergers and business conduct, which allows companies to be more competitive. "This whole area of how ef- ficiencies are integrated into a competition law analysis is quite important," says Joneja. Part of the guidance in the document stems from the re- cent Supreme Court of Canada decision in Tervita Corp. v. Canada (Commissioner of Competition), 2015 SCC 3 and in the series of decisions related to Superior Propane at the Fed- eral Court of Appeal in its ac- quisition of ICG. In Tervita, the Supreme Court ruled that the commis- sioner did not meet the burden to prove anti-competitive effect and allowed a merger under s. 96. A recent transaction where Superior Propane was attempt- ing to acquire Canexus was al- lowed in Canada while it was blocked in the United States and ultimately did not go through. Salzberger says that while the efficiencies defence is unique to Canada, there is a similar con- cept in the United States that is adopted at a different stage of the analysis but has the added requirement that efficiencies be passed on to consumers. Salzberger says she agrees with comments made by the Ca- nadian Bar Association's compe- tition law section in its response to the document that some of the guidance is impractical in a real- world transaction. "The Bureau talks about hav- ing early-on discussions and assessments of efficiencies and trade-off analysis in particular markets and based on potential remedial orders," she says. Salzberger says that, early on in a merger, when lawyers are trying to advocate the position that there are few if any compe- tition issues being raised, there isn't a lot of appetite for an in- depth look at efficiencies. Salzberger notes that effi- ciencies are often seen at a fairly high level early in a transaction, particularly in a cross-border transaction, which is also a product of competition law compliance considerations. "Parties are reluctant to get into each other's details about what they're spending, what they're doing, what their R&D plans are and so on on a very specific level because that may be competitively sensitive infor- mation," says Salzberger. "As a practical matter, it's very difficult for parties to com- ply with that sort of request." Julie Rosenthal, partner at Goodmans LLP in Toronto, says that another problematic aspect of the document is the sugges- tion that the Bureau would take X-inefficiencies — human fac- tors that may not make a merger as efficient as initially proposed — into account. "It's not clear that there's scope to consider that under s. 96," says Rosenthal. "The bigger question is how do you measure that, because it really is quite ephemeral." Rosenthal adds that the Bu- reau may be using the paper to signal a desire for legisla- tive change, particularly given comments by John Pecman, the former competition commis- sioner, about requiring claimed efficiencies to be passed on to consumers. She says that change would add to long-term uncertainty over the efficiencies defence. "The defence has a much nar- rower scope," says Rosenthal. Salzberger says concerns about sharing competitively sensitive information are man- ageable, but they add complexi- ty, time and costs to the analysis. "There is an argument that if the parties are being asked to put forward a detailed, early- on review efficiencies assess- ment on a with-prejudice basis, there should be quid pro quo, such that the Bureau should be equally held to providing on a with-prejudice basis the theory of anti-competitive harm," says Salzberger. Joneja says the guidance document doesn't make it an obligation to provide the infor- mation upfront and thinks this request for more information at the outset is designed to gener- ate more dialogue about the ef- ficiencies and allow the Bureau the ability to consider them prior to the end of its review or before matters go to litigation. "I think it's a positive step and it's a useful part of the docu- ment," says Joneja. "There are certainly some issues in the document that the Bureau takes positions on that we don't necessarily agree with from a legal point of view or a policy point of view, but the document is a useful step." Joneja says s. 96 was included in the Competition Act because of some of the specific circum- stances surrounding the Cana- dian economy and that it was looked at both when the legis- lation was enacted and when it was revisited in 2009 when there was a broad review of the act. "Parliament changed other provisions in the act dealing with joint ventures and other types of agreements that are not mergers and included pro- visions regarding efficiencies similar to the one that we have for mergers," says Joneja. LT FOCUS Debbie Salzberger says that an efficien- cies defence could mean the difference between a merger going through or having it blocked. • The New Construction Act: Transition • Key Modernization Provisions • Prompt Payment • Adjudication • The New Act and PPP/AFP Projects • Panel Discussion on Prompt Payment COURSE HIGHLIGHTS: *Discount applies to in-class only REGISTER BEFORE OCTOBER 12 AND SAVE $300* THE NEW CONSTRUCTION ACT: WHAT YOU NEED TO KNOW Toronto & Webinar | November 13 COURSE LEADERS: BRUCE REYNOLDS, SINGLETON REYNOLDS SHARON VOGEL, SINGLETON REYNOLDS Register online at www.lexpert.ca/legal-programs For questions and group rates, please contact: Toll-Free: 1-877-298-5868 • Direct: 416-609-5868 Fax: 416-609-5841 • • Email: cpd.centre@thomsonreuters.com Untitled-3 1 2018-09-12 11:28 AM LawTimesNews.com Fresh Ontario legal news and analysis available on any device. Get More Online

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