On October 6, 2011, Canada's Competition Bureau released newly revised Merger Enforcement Guidelines ("MEGs"). The MEGs set out the analytical framework used by the Bureau in its review of mergers and acquisitions under Canada's Competition Act. Of all the Bureau's various enforcement guidelines, the MEGs are the most used in practice.
These new MEGs replace the prior 2004 edition. Whereas the 2004 revision involved a considerable rewrite of the original 1991 MEGs, the new 2011 MEGs are intended to "address certain discrete areas where the  MEGs do not fully reflect current Bureau practice and current economic and legal thinking". Given that there has been no contested merger decision in Canada since the release of the 2004 MEGs, the latest revision may also be seen as reflecting the Bureau's desire to keep pace with revisions last year to the U.S. Horizontal Merger Guidelines and revisions to guidelines in other jurisdictions.
This perspective provides an overview of key changes in the new MEGs and discusses practical implications for merger parties.
The MEGs' basic "hypothetical monopolist" test for defining relevant product and geographic markets remains intact. The more significant, and controversial, change is the proposition that market definition itself may be unnecessary in certain situations where it is possible to more directly assess potential competitive effects of a merger. Specifically, the MEGs now state that market definition "is not necessarily the initial step, or a required step, but generally is undertaken".
Since the vast majority of mergers obviously raise no significant competition concerns under any conceivable market definition, there may be no need to precisely define markets in many cases.
However, potentially more problematic is the Bureau's suggestion that it may now find a merger to be anticompetitive without engaging in the traditional exercise of defining relevant markets or assessing market shares. In particular, the MEGs now state that where different possible market definitions may yield significantly different market shares, the Bureau "may give greater weight to evidence regarding likely competitive effects that is not based on market share and concentration". For context, developments in economic thinking over the past several years, particularly in the United States, have led to attempts to directly assess (without defining markets) whether the merging firms are particularly close substitutes such that the loss of competition between them is likely to lead to higher prices. For example, in a merger of Firms A...