Law Times

Page 8 September 21, 2015 • Law timeS www.lawtimesnews.com Mergers and monopolistic practices Busy time for new Competition Bureau branch BY JULIUS MELNITZER For Law Times T he first six months of 2015 proved a busy time for the Competition Bureau's new mergers and monopolistic practices branch. The branch, which started operations on April 1, 2015, as part of an organiza- tional restructuring of the bureau, brings together the former mergers and civil mat- ters branches. The year began with the Supreme Court of Canada's ruling in Tervita Corp. v. Cana- da (Commissioner of Competition), the first decision from the top court to deal with the test around prevention of competition that will have significant implications for com- panies planning mergers. The decision stemmed from a Com- petition Tribunal decision in May 2012 that ordered CCS Corp. (now Tervita), the purchaser of a company that owned a proposed British Columbia landfill, to divest itself of the site on grounds that the transaction would lead to a substantial prevention of competition in the market for the disposal of hazardous waste within the province. The Federal Court of Appeal upheld the decision. One significant aspect of Tervita was that the landfill in question wasn't yet op- erational but was a poised entrant. The bu- reau maintained that notwithstanding the relatively small $6-million purchase price, the merger would leave CCS as the only se- cure landfill operator in the region. "The commissioner's theory of com- petitive harm was premised on the argu- ment that the proposed merger would result in a substantial prevention of competition rather than the traditional argument that it would produce a sub- stantial lessening of competition," says Anita Banicevic of Davies Ward Phillips & Vineberg LLP in Toronto. While the top court cautioned against looking too far ahead in applying the pre- vention test and stated that the time frame to determine whether a merging party would enter the market but for the merger had to be discernible, it upheld the appeal court's conclusion that the arrangement would likely result in a substantial preven- tion of competition. But Tervita also dealt with the effi- ciencies defence. The court found that the commissioner of competition hadn't met the burden of quantifying the anti- competitive effects of the merger and had failed to prove any qualitative ones either. Consequently, the efficiency gains proven by Tervita, albeit modest, weren't offset in any way, allowing the company's efficien- cies defence to succeed. "I would say that apart from the spe- cific mixed outcome, the bureau emerged a winner because the court materially clarified the law, and that's part of the bu- reau's objective in pursuing these cases," says Anthony Baldanza of Fasken Mar- tineau DuMoulin LLP. "The bureau now knows that it has to quantify anti-competitive effects to meet the efficiencies defence, and I doubt that failing to do so will happen again." The first half of 2015 also saw clarifi- cation of the test governing the issue of a hold-separate interim order. The clarification came in a case involving a merger in the retail gasoline sector between Parkland Fuel Corp. and Pioneer Energy. The merger contemplated that Parkland would acquire 181 Pioneer corporate stations and 212 supply agree- ments in Ontario and Manitoba. The bureau challenged the merger on the basis that it would substantially lessen competition in 14 geographic markets. The parties refused to delay closing pend- ing a determination of the issue. The up- shot was that the bureau sought the hold- separate interim order requiring Parkland to preserve and independently operate the assets in the disputed geographic markets. "Interestingly, this was not a case where the bureau sought a hold-separate order because it was concerned that it would not be able to effect a post-closing remedy," says Michelle Lally of Osler Hoskin & Harcourt LLP. "Instead, the bureau sought to justify the order as required to prevent consum- ers from paying higher gasoline prices during the interim period." The Competition Tribunal issued the order but only in six of the 14 markets for which the bureau sought the restriction. In order to obtain an order under s. 104 of the Competition Act, the tribunal ruled, the commissioner had to establish that there was a serious issue at stake; there was "clear and non-speculative" evidence demon- strating irreparable harm in the absence of an order; and the balance of convenience weighed in favour of granting it. Here, while there was a serious issue at stake, the bureau had failed to provide the necessary evidence of the likelihood of ir- reparable harm in eight of the 14 markets in dispute. For the six remaining mar- kets, however, the balance of convenience favoured granting the order as Parkland's projected losses were either unsupported or speculative. "The tribunal established that the bureau has a high burden when it proceeds under s. 104," says Baldanza. "But it also clarified the law, and again that's a win for them." Lally begs to differ. "The results had to be slightly embarrassing for the bureau," she says. Reading the case law, however, wasn't the only thing that kept the bureau busy. According to Osler's antitrust advisory bulletin, the Bureau also entered into three consent agreements; issued advance ruling certifications or no-action letters in more than 70 transactions; issued detailed press releases in five of the merger reviews that resulted in no-action letters; and imple- mented a compliance program following the failure of Parrish and Heimbecker Ltd., an agricultural business, to file statutory notifications on two separate transactions. The bureau also published merger statistics for the fiscal year that ended on March 31, 2015. The highlights included 240 filings in 2014-15, the most in the post-recession period and a 10.6-per-cent increase over 2013. The statistics also dem- onstrated that the proportion of complex reviews increased by almost three per cent, but their average review time dropped by nearly three days. Overall, Lally lauds the transparency that has characterized commissioner John Pecman's tenure. "There's been a statement or back- grounder on virtually every single merg- er," she says. LT Michelle Lally, right, lauds the transparency that has characterized commissioner John Pecman's tenure. FOCUS ON Competition Law LEGALFEEDS.CA A DAILY BLOG OF CANADIAN LEGAL NEWS FEEDS LEGAL POWERED BY V O T E D BEST NEWS BLOG CLAWBIES 2014 Untitled-7 1 2015-09-16 4:03 PM

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