During his keynote speech at the Canadian Bar Association’s Competition Law Spring Conference on May 7, 2019, the Commissioner of Competition discussed several important topics, including more active enforcement, a refined approach to the efficiencies defence and greater transparency with merging parties. Each of these developments has significant implications for the merger review process, particularly in the context of complex transactions.
More Active Enforcement
First, the Commissioner stated that “active enforcement will be an area of primary focus” and that “the [Competition] Bureau will not hesitate to take appropriate action to safeguard Canadians against anticompetitive conduct”. This includes the use of all tools at the Bureau’s disposal, including increased and more frequent consideration of injunctions to prevent the closing of mergers pending a full hearing before the Competition Tribunal.
The Commissioner also stated that the Bureau will bring forward principled cases when it cannot reach a reasonable and appropriate consensual resolution with the parties. While the Commissioner acknowledged that this could result in difficult cases being litigated, he recognized that these cases will provide valuable jurisprudence and help clarify the law – regardless of “[w]hether we win or lose”.
Approach to Efficiencies Defence
Second, the Commissioner acknowledged that “the efficiencies defence is a reality in Canadian competition law”. However, he also noted that, as result of recent experience, the Bureau has changed its procedural approach to this defence. Specifically, the Commissioner emphasized that the “refined procedural approach” will call for the provision of detailed evidence supporting the efficiencies claimed; the ability to test the evidence underlying those claims; and adequate time, set out in a timing agreement, to conduct a meaningful assessment of the efficiencies claimed.
The Bureau intends to release a model form of timing agreement for consultation that will include timed stages for production of information and evidence and engagement with the Bureau during a review that involves efficiencies claims. Part of this model timing agreement will also include a commitment that the Commissioner will not file an application with the Tribunal while this process is ongoing, provided that parties also commit to not take steps towards closing the proposed transaction. In the absence of the parties agreeing to such a timing agreement, it appears that the Commissioner will not be willing to exercise his discretion to consider efficiencies claims as part of the merger review process. Rather, it will likely be left up to the Tribunal to determine, in the context of a contested application, whether the efficiencies likely to arise from a merger are greater than and offset its anti-competitive effects.
Finally, the Commissioner noted that the Bureau will work hard to continuously improve the timeliness, effectiveness and efficiency of its enforcement work. This will be realized through a number of initiatives, including empowering officers to be as transparent as possible with merging parties and their counsel, on a without-prejudice basis, earlier in the merger review process. While the Commissioner cautioned that the Bureau’s analysis and views may evolve as the review progresses, he indicated that such changes would be communicated to the parties as part of “an ongoing dialogue with our teams”.
As noted above, each these developments has significant implications for the merger review process, particularly in the context of complex transactions. For example, more active enforcement will likely require merging parties to carefully consider issues relating antitrust risk, including the need to build remedies or a hell-or-high-water clause into the transaction documents. Similarly, the refined procedural approach to the efficiencies defence will likely require merging parties to raise efficiencies claims earlier in the process in order to allow the Bureau sufficient time to test these claims. At the same time, increased transparency with merging parties earlier in the process should allow for more timely merger reviews by the Bureau.