Contested Mergers in Canada: The Tiger in the Cage

• Author: Julie Soloway,Jennifer Ju
• DOI: 10.1177/0003603X1305800206
• Published date: 01 June 2013
• Date: 01 June 2013
• Subject Matter: Article

* Partner, Competition, Antitrust & Foreign Investment Group, Blake,

Cassels & Graydon LLP,Toronto, Ontario.

** Associate, Competition, Antitrust & Foreign Investment Group, Blake,

Cassels & Graydon LLP,Toronto, Ontario.

AUTHORS’ NOTE: We are grateful for the insightful comments provided by Brian A.

Facey, Co-chair, Competition, Antitrust & Foreign Investment Group, Blake, Cassels

& Graydon LLP. We thank everyone who assisted with the research and preparation

of this article, particularly Emma Costante, Robert Zakaib, and Jason Kolarich.

THE ANTITRUST BULLETIN:Vol. 58, Nos. 2 & 3/S ummer-F all 2013 :323

Contested mergers in

Canada: The tiger in the cage

BY JULIE SOL OWAY*AND JENNIFER JU**

Canada adopted a sophisticated merger review regime in 1986, but

cont est ed mer gers r ema in a rar ity. Nev erth ele ss, t he spe cte r of

merger litigation influences most co mplex merger reviews. Indeed,

actual litigation is merely the tip of the iceberg. The prospect of litiga-

tion and the discipline it brings to the process influence all but the

simplest cases. This article explains the Canadian merger review par-

adigm, including judicial oversight. It also provides a summary of

the litigated merger case s and explains the signifi cance of a recent

case involving hazardous waste disposal in British Columbia to the

tactical and strategic dec isions operating in mergers tha t may seri-

ously affect competition. Finally, this article provides insights as to

why so few mergers are litigated in Canada as compared to the

United States.

KEY WORDS:antitrust, competition, merger, litigation, Canadian Competi-

tion Bureau

© 2013by Federal Legal Publications, Inc.

I. INTRODUCTION

Despit e havin g adopte d a sophi sticat ed merge r review re gime in

1986, contested mergers in Canada are a rarity. Although the Compe-

tition Bureau (Bureau) h as reviewed over 5000 mergers since then,

very few have r equi red rest ruct urin g and even fewe r have b een

resolved by litigation. Nevertheless, the specter of merger litigation

influences most complex merger reviews.1As in most areas of law, lit-

igation occurs when the parties have differing views about the out-

come of litigation,2whic h in turn is influenced by the degree of

uncertainty in the law and facts and asymmetry in the costs of win-

ning and losing. In this regard, a recent case, Canada (Commissioner of

Competition) v. CCS Corp.,3litigated up to the Federal Court of Appeal,

has added both clarity and uncertainty to the law.4

324 :THE ANT I T R U S T BULLETIN:Vol. 58, Nos. 2 & 3/Summer-Fall 2013

1For an overview of the general treatment of mergers in Canada, see

BRIAN A. FACEY & CASSANDRA BROWN, COMPETITIO N AND ANTITRUST LAWS IN

CANADA: MERGERS, JOINT VEN TURES AND COMPETITOR COLLA BORATIONS (2013)

and BRIA N A. FACEY & DA NY H. ASSA F, COMPETI TION AND AN TITRU ST LAW:

CANADA AND THE UNITED STATES (3d ed. 2006).

2See Richard A. Pos ner, An Economic Approach to Legal Procedure and

Judicial Administration, 2 J. LEGAL STUD. 399 (1973).

3Can. (Comm’r of Competition)v. CCSCorp., [2012]C.C.T.D.No. 14 (Can.

Comp.Trib.),aff’d, TervitaCorp. v.Can. (Comm’rof Competition), 2013 FCA28.

4CCS was the first fully c ontested merger in Canad a since 2005. On

November 10, 2005, the Bureau filed an application before the Competition

Trib un al c ha ll en gi ng a g ra in h an dl in g jo in t ve nt ur e be tw ee n th e

Saskatchewan W heat Pool and Jame s Richardson Inte rnational Ltd. a t the

Port of Vancouver. Notice of Application, Comm’r of Com petition v. Sask.

Wheat Pool Inc., CT-2005-009 (Nov. 10, 2005) (Can. Comp. Trib.). The parties

and the Bureau ultimate ly entered into a consent ag reement on March 28,

2007. Although CCS is the most recent fully contested merger case in Canada,

notably the Bureau entered into a consent agreement on October 24, 2012,

with regard to a joint venture between Air Canada and United Continental

Holdings, Inc., that would merge their flight operations between Canada and

the United States. Under the terms of the consent agreement, the parties were

prohibited from executing the joint venture with respect to fourteen air pas-

senger routes between Canada and the United States. The remainder of the

joint venture agreement was allowed to proceed. See Press Release, Competi-

tion Bureau of Can., Competition Bureau Reaches Agreement with Air

Canada and United Continental (Oct. 24, 2012), available at http://www

.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03507.html.

In this article, we explain the Canadian merger review paradigm

under the Competition Act, undergirded as it is by judicial oversight

at every turn. We also provide a summary of the litigated contested

merger cases and explain the significance of CCS to the tactical and

strategic decisions operating in mergers that may seriously affect

competition.5Finally, we provide insights as to why so few mergers

are litigated in Canada as compared to the United States.

II. THE CANADIAN MERGER ENFORCEMENT REGIME

A. Development of merge r enforcement in Canada

Canadian law has provided for merger review and enforcement

since the enactment of the Combines Investigation Act of 19106(the

CIA) (the predecessor statute to the Competition Act7(the Act)). Sig-

nifi cant c hang es in th e merg er regime in 1986 le d to the m erger

review structure we see today. Between 1910 and 1986, mergers were

regulated solely under criminal provisions in Canadian law. Because

the burden of proof for a conviction of an anticompetitive act under

the crimin al provisions required proof beyond a reasonable doubt

that the merger would be detrimental to the public, scrutinizing

mergers under the former legislation was highly ineffective.

In 1910, the CIA was enacted to provide a system for the investiga-

tion and prosecution of “combines,” which included “what is known as

a trust, monopoly or merger.”8Although this legislation was significant

in that it recognized “mergers” as part of competition law in Canada,

the CIA did not specifically define the term and it was not the basis of

any reported decisions.9Furthermore, the CIA focused on ex post regu-

CA N A D A :325

5See Julie Soloway & Jennifer Ju, “It’s Not Over ‘Til It’s Over”: The Cana-

dian Competition Commissioner’s Post-Closing B.C. Landfill Merger Challenge, 20

THE THRESHOLD, NEWSL.OF THE MERGERS & ACQUI SITIONS COMM., AMER. BAR

ASS’NSECTION OF ANTITRUST LAW 54 (2012).

6S.C. 1910, c. 9.

7R.S.C. 1985, c. C-34.

8Combines Investigation Act, §2(c).

9See COMPETITION LAW OF CANADA §10-6 (Calvin S. Goodman & John D.

Bodrug eds., 2010).