Merger Review

• Author: John S. Tyhurst
• Pages: 183-262

183

CHAPTER 5

MERGER REVIEW

A. INTRODUCTION

1) Why Review Mergers?

Since 1986, the Competition Act has given the Commissioner of Com-

petition authority to apply to the Competition Tribunal to block a pro-

posed merger, or to seek to dismantle a completed merger, on the basis

that the merger would be likely to substantially prevent or lessen com-

petition.1 The legislative scheme a lso requires parties to any acqui sition2

over def‌ined size thresholds (regardless of its eect on competition) to

notify the Competition Bureau of the transaction and to provide pre-

scribed information before the merger can be closed.

The applicable legal test is focused on the eects of a merger on

competition. In addition to the eects of a merger on competition, other

policy concerns, such as the impact of foreign invest ment, the eects of

a plant closure on employment, or impacts on minority shareholders,

may be raised. Wh ile these are evidently legitimate consider ations, they

are not the concern of competition law per se,3 although a competition-

1 Section 92 of the Competition Act,RSC 1985, c C-34 [Competition Act or Act].

2 As referred to i n s 110 of the Competition Act, ibid, and as prescrib ed in applic-

able regulations.

3 See Chapter 3. In Impe rial Oil, the Tribunal st ated the following:

It is clear th at there is a social value in keepi ng the ref‌inery runn ing. It is

common knowledge th at employment opportunities a re not as numerous

CANA DIAN COMPETITION LAW AND POLICY184

 5.1. , The Toronto Brewin g & Malting Company (from , renamed

Canadian Bud Bre weries Ltd), north of Dunda s Street, west of Universit y Ave, Toronto, and

 5.2. , The O’Keef e Toronto Brewery, – Gould Street (near Yonge and D undas),

Toronto, were acquired by Canadia n Breweries Ltd in  and , respectively

Merger Review185

focused scheme may have an impact in t hese areas. Other regimes, such

as foreign investment review, industrial polic y, or securities and corpor-

ate law, may apply to address them.

Why is this competition-focused regime necessary? Mergers may

often have benef‌icial eects th rough the overhaul of management, prod-

uct improvement s, or cost reduct ions from consolid ation and economie s

of scale. Given the potential for such benef‌its, why not permit mergers

simply to proceed, and deal with a ny undesirable eects after the fact, if

they ever occur? Available remedies in competition law include review

of anti-competitive practices by dominant f‌irms, or if coordinated

behaviour occurs, application of the Act’s prohibitions against collusion

and anti-competitive agreements.

There are a number of reasons for a merger review regime. First,

as the Economic Council’s 1969 Interim Report explained, a merger

between competing f‌irms, or the acquisition of an emerging competi-

tor by a dominant f‌irm, may cause an immediate adverse eect on

competition:

[T]he basic reason for public policy to be concerned with mergers is

that in the majority of cases they re sult in permanent changes in t he

structure of industry — changes which can have important implica-

tions for the future per formance of the economy.4

Mergers which prevent or reduce competition may result in price

increases, eliminate the potential for future price reductions, or harm

service or other competitive term s of trade. These are akin to the eects

of a horizontal conspiracy, and with a more enduri ng impact on industry

structure. As rev iewed in Chapter 3, such combinations, when resulting

in the creation or enhancement of market power, can adversely aect

allocative, productive, and dynam ic eciency, as rivalry is lost bet ween

competing f‌irms, or as an emerg ing disruptive competitive force is stif‌led

by a takeover. In data-related markets, for example, concern s have been

in the Atlant ic region as elsewhere in the cou ntry. At the same time the

focus of the Tribuna l’s attention could not be primaril y on that considera-

tion, if competit ion concerns could equally be met by u se of the terminali ng

facilitie s. There was some concrete evidence th at this might be the case . The

primar y concerns of the Tribunal have t o be factors such as those lis ted in

section 93 of the Competition Act, with a vie w to the issues which Profes sor

Trebilcock indicated shou ld be the focus of attention in any merger c ase:

possible emergence of a dom inant f‌irm; enhance d ability for tacit collusion.

Canada (Director of Investigation a nd Research, Competition Act) v Imperia l Oil

Limited, [1990] CCTD No 1 at para 79.

4 Economic Council of Can ada, Interim Report on Comp etition Policy (Ottawa:

Queen’s Printer, 1969) at 113.