The Virtually Unconstrained Legal Environment for Mergers in Canada

• Author: C. W. Borgsdorf
• Published date: 01 December 1973
• Date: 01 December 1973
• DOI: http://doi.org/10.1177/0003603X7301800406
• Subject Matter: Article

THE

VIRTUALLY

UNCONSTRAINED

LEGAL

ENVIRONMENT

FOR

MERGERS

IN

CANADA

by

C. W. BORGSDORF·

Of all the industrialized nations in the world, Canada has

recently engaged in perhaps the most thorough examination

of competition law. During the

past

two decades, Canadian

competition law and policy have undergone considerable

analysis and no small amount of revision.

The

legal examina-

tion has ranged from agovernment commission set up in the

early 1950'SI through significant court decisions- and statu-

tory

amendments" in 1960, to the

report

of the Economic

Council of Canada on competition policy' which resulted in

the introduction of a completely revised Competition

Law

by

the government in 1971.5This proposed law has been with-

drawn from Parliament

for

changes in response to widespread

criticism," Since this policy re-examination has reached the

•Assistant Dean, University of Michigan Law

School,

Ann Arbor,

Mich. (Formerly Assistant Professor of Business Law, McMaster

University, Ontario, Canada.)

IReport of the Committee to Study Combines Legislation, 1952

(MacQuarrie Committee).

:I

R. v. Canadian Breweries Ltd., [1960] 33 C.R. 1; R. v. British

Columbia Sugar Refining Company, Ltd., [1960] 32 W.W.R. 577.

a S.C., 1960, c. 45.

• Economic Council of Canada, Interim Report on Competition

Policy, Queen's Printer, Ottawa, 1969.

&The House of Commons of Canada. Bill

C-256:

The Competition

Act, Third Session, Twenty-eighth Parliament, 19-20 Elizabeth

II,

June

1971.

6Since the withdrawal of Bill

C-256

from Parliament for further

study, there has been a Canadian federal election with uncertain

results.

It

is not clear whether the Liberal government of Prime

Minister Pierre Trudeau, which introduced the Bill, will remain in

power for long. Furthermore, the cabinet Minister of Consumer and

Corporate Affairs who introduced the Bill has since switched port-

folios. His replacement lasted only a month or two and then he was

replaced. The views of the present minister, Herb Gray, appear to be

that

no re-introduction can be expected for several months, even

if

the present government does survive.

809

810

THE

ANTITRUST

BULLETIN

point of

statutory

overhaul, an analysis of

part

of the law

which is being altered is appropriate. The analysis will be

directed mainly

at

merger policy.

The desire to develop a

merger

policy is not peculiar to

Canada. Although Canada's economy has some unique prob-

lems, in general it resembles

that

of

any

world-trading, indus-

trialized nation.

In

the broader sense, then, this analysis has

some application to most

Western

trading

nations

and

in

particular to the United

States

and the United Kingdom,

which have legal systems similar to Canada's. Mergers

are

of significance in Canada, the U.S. and the U.K.

if

for no

other reason

than

that

they

are

apopular

form

of business

activity."

There is nothing about mergers

that

makes them either

inherently good or inherently evil.

But

they

are

asignificant

phenomenon, both from alegal

and

from an economic stand-

point. Both aspects

are

worthy of analysis.

The legal investigation which follows will examine the

history of Canada's merger policy.

It

will also consider the

nature

and

substance of some of the proposed changes in the

existing law. An analysis of the economic-financial signifi-

cance of mergers is contained in an article entitled "Financial

Performance

of

Merging

Firms

in a Virtually Unconstrained

Legal Environment" by

Professor

S. N. Laiken in this issue

of The Antitrust Bulletin.

THE

LEGAL

ENVIRONMENT

Canadian competition policy as enunciated in a statute

has

the distinction of being one of the first in the world. The

first Canadian combines law, enacted in 1889, antedated even

the

U.S. Sherman Act. Considerable debate surrounded the

1889 legislation regarding whether the law reflected the com-

l'

During the period from 1960to 1970 inclusive,the merger activ-

ity

in

Cana~

more than doubled. This paralleled atrend mthe U.S.

where merger activity in manufacturinr and mining reported to the

Federal Trade Commission more than tripled in the same period.