On July 1, 2021, the Competition Tribunal (the “Tribunal”) ruled that it does not have the power to issue “interim, interim orders” in the context of a proposed merger of two companies in the midstream infrastructure and environmental solutions space. Rather, the Tribunal found that, in the case of mergers, interim relief is limited to that expressly provided for by sections 100 and 104 of the Competition Act (the “Act”).
On March 9, 2021, Secure Energy Services Inc. (“Secure”) and Tervita Corporation (“Tervita”) announced that they would be merging (the “Transaction”), and submitted a request for an advance ruling certificate and pre-merger notification filing three days later.
The Commissioner of Competition (the “Commissioner”) had serious concerns with the Transaction and, on April 9, 2021, issued Supplementary Information Requests (“SIRs”) to the merging parties. They certified their responses to the SIRs on May 31, 2021 and, in the absence of an interim order by the Tribunal or an undertaking not to close, would have been a position to legally close the Transaction on July 1, 2021.
Prior to the expiry of the second 30-day waiting period, the merging parties agreed to provide the Commissioner with 72 hours advance notice of their intention to close the Transaction. The merging parties provided this notice to the Commissioner at 11:15 p.m. on June 28, 2021, with the result that they would be able to close the Transaction at 11:15 pm on July 1, 2021, absent an order from the Tribunal.
On June 29, 2021, the Commissioner filed a Notice of Application pursuant to section 92 of the Act alleging that the Transaction: (a) is likely to substantially lessen competition in the provision of oil and gas waste services (“Waste Services”) for those customers in the Western Canadian Sedimentary Basin (the “WCSB”) who benefit from the fierce rivalry between Secure and Tervita; (b) is likely to substantially prevent competition in Northeastern B.C. where Secure had planned to build a landfill in Wonowon, B.C., that would have competed with Tervita’s Silverberry and Northern Rockies landfills for Waste Services; and (c) is likely to substantially lessen competition for the provision of certain environmental services associated with drilling for oil and gas (“Environmental Services”) where Secure is likely to have the ability and incentive to increase price and/or degrade service quality of Waste Services to Environmental Services competitors (the “Section 92 Application”). In light of these concerns, the Commissioner sought an order from the Tribunal directing the merging parties not to proceed with the Transaction or, in the alternative, requiring Secure not to proceed with the acquisition of such assets as are required for an effective remedy in all the circumstances.
At the same time he filed the Section 92 Application, the Commissioner also filed a Notice of Application for Interim Order pursuant to section 104 of Act for an order preventing the merging parties from proceeding with the Transaction until the Section 92 Application is finally disposed of (the “Section 104 Application”). In this regard, the Commissioner alleged that, in the absence of an interim order, Secure would be able to increase prices and otherwise limit competition to provide Waste Services in certain markets in the WCSB, which would cause irreparable harm before the Section 92 Application was dealt with.
Finally, because the merging parties intended to close the Transaction shortly after midnight on July 2, 2021, the Commissioner requested, in an e-mail sent to the Tribunal shortly after the Section 104 Application was filed, “an emergency case conference … where we will seek an interim order preventing the respondents from closing the transaction until the section 104 application is heard”. During the case conference, which took place on June 30, 2021, the Commissioner recognized that the relief available under section 104 is itself interim relief. Therefore, he characterized the relief he was seeking pending the hearing of the Section 104 Application as being “interim, interim” relief.
On July 1, 2021, Chief Justice Crampton issued his reasons and order in respect of the Commissioner’s request for “interim, interim” relief. Specifically, as discussed in more detail below, Chief Justice Crampton concluded that the Tribunal “does not have the jurisdiction to issue the specific interim and unprecedented relief sought by the Commissioner”. This decision was subsequently upheld by the Federal Court of Appeal (“FCA”) the very next day.
Following the FCA’s decision, the merging parties proceeded to close the Transaction on July 2, 2021.
In the case of mergers, the Commissioner may apply for interim orders pursuant to sections 104 or 100 of the Act. As summarized below, there are significant differences between the interim orders that can be issued under these provisions.
- Section 104 Orders: An interim order under section 104 of the Act is available for all reviewable conduct under part VIII of the Act, including mergers. In exercising its discretion to issue an interim order under section 104, the Tribunal is directed to consider “the principles ordinarily considered by superior courts when granting interlocutory or injunctive relief”. In this regard, the Tribunal has consistently applied the tripartite test for injunctive relief set out by the Supreme Court of Canada in RJR-MacDonald. The general purpose of an interim order under section 104 is to prevent irreparable harm during the interim period pending the disposition of an application before the Tribunal.
Importantly, the Commissioner is only permitted to seek an interim order under section 104 of the Act after he has filed an application for a substantive order under part VIII of the Act, and, in the case of a merger, an application under section 92 of the Act.
- Section 100 Orders: Pursuant to section 100 of the Act, the Tribunal may issue an interim order forbidding the completion or implementation of a proposed merger for a limited period of time where the Commissioner (a) certifies that an inquiry under paragraph 10(1)(b) of the Act is being made in respect of the proposed merger; (b) the Commissioner certifies that more time is required to complete the inquiry; and (c) the Commissioner proves, on a balance of probabilities, that a party to the proposed merger or any other person is, in the absence of an interim order, likely to take an action that would substantially impair the ability of the Tribunal to remedy the effect of the proposed merger on competition because that action would be difficult to reverse. In other words, the Commissioner must demonstrate that, without an interim order, the Tribunal’s remedial powers under section 92 would be substantially impaired.
An interim order under section 100 of the Act may be sought where no application under section 92 has been made.
Competition Tribunal Decision
Chief Justice Crampton concluded that (a) the relief contemplated by section 100 is available where the Commissioner is still in the process of conducting an inquiry and no application under section 92 has been made and (b) the relief contemplated by section 104 is available anytime after the filing of an application under section 92.
In his reasoning, Chief Justice Crampton noted that the Tribunal is a “statutory court of record” that “only has the jurisdiction accorded to it by Parliament, together with the plenary powers “necessary or proper for the due exercise of its jurisdiction’”. The nature and scope of these latter powers “are informed and … bounded by the statutory scheme set forth in the Act and the [Competition Tribunal Act]”. Insofar as interim relief in relation to proposed transactions is concerned, Chief Justice Crampton said that the statutory scheme is sufficiently detailed and specific that it must be viewed as providing “a complete code”.
More specifically, Chief Justice Crampton stated as follows:
Given the detailed nature of the merger review scheme set forth in the Act and the [Competition Tribunal Rules], Parliament can be taken to have addressed its mind to the specific types of relief it wished to make available to the Commissioner and the different points in time at which such relief is available pursuant to sections 100, 104 and 92, respectively. In not providing for the type of relief that the Commissioner is now seeking, it can be inferred that Parliament decided not to grant the Tribunal the jurisdiction to provide such relief.
That relief would also undermine the predictability, certainty and transparency that is achieved by the existing scheme of the Act. Among other things, that scheme clearly informs merging parties of what their obligations are in the merger review process, how long they must wait before they can close their merger, and the potential remedies that are available to the Commissioner to prevent them from doing so.
Chief Justice Crampton recognized “that it can be extremely difficult in some cases for the Commissioner to properly prepare applications under sections 92 and 104 in the 30-day period set forth in subsection 114(2) of the Act”. However, he emphasized that “the solution to this problem is not to seek an unprecedented remedy that finds no support in the statutory scheme”. Instead, the solution, at least in part, is for the Commissioner to bring an application under section 100 of the Act and consider reducing the amount of information being requested from merging parties in SIRs.
The Tribunal’s decision has a number of implications for merging parties going forward, including the following:
- No “Interim, Interim” Orders: The Tribunal does not have jurisdiction to issue an interim order in what is already an application for an interim order.
- Increased Reliance of Section 100: While the Commissioner has historically been reluctant to bring applications pursuant to section 100 of the Act, this could change in the future. Specifically, the Commissioner may opt to file an application under section 100, followed very shortly thereafter by applications under sections 92 and 104 of the Act. In this regard, as suggested by Chief Justice Crampton, “it would be open to the Commissioner to argue that the scheme of [the Act] permits an order that is issued under section 100 to extend to the point in time at which an application under section 104 can be heard and determined, assuming that this is within the 30 day period contemplated by subsection 100(5)”.
- Procedural Fairness: The merging parties were unable to address the three-prong test applicable to injunctive relief during the emergency case conference because they had only received the 2,795 page application record the day before. This resulted in, as stated by Chief Justice Crampton, “a substantial curtailment of procedural fairness rights of the merging parties. We hope that Chief Justice Crampton’s remarks prevent similar situations from arising in the future – particularly since it is the Commissioner himself who has control over the timing of filings with the Tribunal.
If you have questions about the merger provisions in the Competition Act, you can reach out to any member of Fasken’s Competition, Marketing & Foreign Investment group. Our group has significant experience advising clients on all aspects of Canadian competition law.
The information and guidance provided in this blog post does not constitute legal advice and should not be relied on as such. If legal advice is required, please contact a member Fasken’s Competition, Marketing & Foreign Investment group.
 The Tribunal may issue the interim order under section 104 of the Act if the Commissioner proves the following on a balance of probabilities: (a) there is a serious issue to be tried; (b) irreparable harm would ensue if an interim order is not granted; and (c) the balance of convenience favours granting the interim order.