Canada's New Merger Enforcement Guidelines: A “Nuts and Bolts” Review

• Published date: 01 December 1991
• Date: 01 December 1991
• DOI: 10.1177/0003603X9103600407
• Subject Matter: New Directions in Canadian Law

The Antitrust Bulletin/Winter 1991 883

Canada's new merger enforcement

guidelines: a"nuts and bolts"

review

BY PAUL S. CRAMPTON*

Introduction

On April 17, 1991,

after

close to 5

years'

experience

with

Canada's amended merger law, and after substantial public con-

sultation, the Director

of

Investigation and Research under

the Competition Act released Canada's first Merger Enforcement

Guidelines (MEG's). The principal objectives

of

the government

in enacting the 1986 amendments to the Act included addressing

*Stikeman, Elliott, Toronto, Canada.

AUTHOR'S NOTE: Prepared

for

the Western Economic Association Inter-

national 66th Annual Conference. July 2,

1991,for

a special Contempo-

rary Policy Sessionjointly sponsored by WEA and The Antitrust Bulletin.

Before joining Stikeman, Elliott to practice law. I was Special Advi-

sor to the Director

of

Investigation and Research, Competition Act. In

this capacity. my duties included being the

principal

drafter

of

the

Merger Enforcement Guidelines. The views expressed in this article may

therefore reflect aparticular bias. However, they do not necessarily

reflect those

of

the Bureau

of

Competition Policy.

@1992 by Federal Legal Publications. Inc.

884 : The antitrust bulletin

the "undesirable degree of uncertainty" 1that had developed in

relation to the merger provisions and "[e]nsuring that the rules

of

the game are well understood and

fair.

...

"2

Unfortunately,

these objectives could not be attained by merely amending the

Act. Indeed, to the extent that the revisions to the Act created a

sophisticated framework for merger review that involved many

concepts that were novel to the Act, they introduced additional

uncertainty. Implicitly, it was left to the new Competition Tri-

bunal to expand upon the meaning

of

the key

test

"prevent

or lessen competition substantially," and to provide guidance

with respect to complex matters such as market definition, barri-

ers to entry, foreign competition, business failure, high market

shares/concentration levels and the efficiency gains trade-off

provisions.

As it has turned out, the Tribunal has not had a good opportu-

nity since it was created to address these and other critical issues

that arise in merger review. As a result, in the period leading up to

the release of the MEG's, many observers called upon the Direc-

tor to make public the manner in which the Bureau of Competi-

tion Policy approaches the assessment of mergers under the Act.3

In response to the foregoing, and following questions that

arose regarding the respective roles

of

the Bureau and the

CONSUMER

AND

CORPORATE

AFFAIRS

CANADA,

COMPETITION

LAW

AMENDMENTS,

A

GUIDE

3 (1985).

2Id., at 5.

3

See,for

example, Hunter, The New Merger Provisions

of

the Com-

petition Act-s-Cenainty or a Random Walk, 8

CAN.

COMPo

POL.

REC.

58,

66 (1987); Kaiser in

QUEBEC

INC.,

(TJ.

Courchene ed.) 36, 37 (School of

Policy Studies, Queen's University, 1990); M. Boucher, Competition

Policy as a Framework Policy: Some Political Economy Considerations,

Paper presented to the National Conference on the Centenary of Com-

petition Law and Policy in Canada, Toronto 14 (Oct.

24-25,

1989);

R. Davidson, Independence Without Accountability Won't Last, Paper

presented to the National Conference on the Centenary of Competition

Law and Policy in Canada, Toronto 14,33 (Oct. 24-25, 1989); and Stan-

bury, An

Assessment

of

the Merger Review Process,

CAN.

Bus. L.J.

(forthcoming).

Canada's merger guidelines :885

Tribunal

in

merger

review, in the wake

of

the

Tribunal's

refusal

to

endorse

a

proposed

consent

order

that

had

been

submitted

to it

by

the

Director

and

Imperial

Oil

Limited.s

Howard

Wetston

announced

shortly

after

becoming

Director

his intention to

issue

merger

guidelines

that

would

provide

a

"comprehensive

state-

ment"

of

how

the

Bureau

assesses mergers. He observed:

"After

analyzing

in

varying

detail

more

than

500

mergers

since

June

1986, I

believe

we are

now

in a

position

to

undertake

such

an

ini-

tiative.

"5

It

is

made

clear

at

the

outset

of

the

MEG's

that

"[tlhey

do

not

represent asignificant

change

in

enforcement

policy."6

The

prin-

cipal

objective

of

the

Director

in issuing

the

document

was:

. . . to provide insight and guidance to businesspersons and their

counsel regarding the manner in which the [Bureau] approaches the

assessment of mergers under the Act.

It

is hoped that this will promote

4See.

for

example, Goldman, The Merger

Resolution

Process

Under the Competition Act: A Critical Time in its Development, 22 Orr.

L.R. I,

7-8,

36-37 (1990). Rowley, Canadian Competition Tribunal

Ensures New Competition Chief Has Full Plate 18,

INT'L

Bus.

LAW.

13

(1990); and W. Grover and J. Quinn, Recent Developments in Canadian

Merger Law, Paper presented to the National Conference on the Centen-

ary

of

Competition Law and Policy in Canada, Toronto 29-31 (Oct.

24-25, 1989).

The proceedings before the Tribunal involved Imperial Oil Limited's

acquisition of Texaco Canada Inc. The Tribunal refused to issue the pro-

posed order in its "provisional" decision of November 10, 1989 (CT-89/3

#360) and reiterated its unwillingness to issue the revised proposed order

without further changes on January 26, 1991 (CT-89-3 #390). A member

of the Tribunal suggested at a round-table discussion at the University of

Ottawa in February 1991 that the Tribunal's difficulty with the Imperial

Oil consent order and with the earlier Palm Dairies proposed consent

order that

it

rejected, involved the extraordinary and complex nature of

some of the behavioral provisions set forth in the orders sought in those

cases.

H.

WETSTON,

NOTES

FOR

AN

ADDRESS

TO

THE

INSIGHT

EDUCATIONAL

SERVICES

CONFERENCE

8(Consumer and Corporate Affairs, Canada,

Speech #S-I-290), Toronto, December 4,1989.

6Consumer and Corporate Affairs Canada (Director of Investiga-

tion and Research-Competition Act), Merger Enforcement Guidelines

(interpretation statement at beginning of document).