Competition Act (Canada): Substantive Merger Provisions – The Bureau tends to focus on horizontal mergers between competitors. Vertical mergers between a customer and a supplier have rarely been a standalone basis for challenging a merger in Canada. However, vertical relationships between merging parties may lead to extensive questions, primarily in terms of whether the merger is likely to create or enhance an ability or incentive to foreclose competition in an upstream, downstream or related market. The Bureau may, for example, examine whether the merged entity will be better able to observe the pricing, volumes or strategies of competing downstream customers, thereby increasing coordination risks or dampening rivals’ incentives to pursue pro‑competitive initiatives post-merger. SUBSTANTIVE TEST FOR CHALLENGE – The substantive merger provisions apply independently of the notification provisions. Thus, even non-notifiable transactions can be challenged on substantive grounds, and the Bureau actively monitors merger activity for transactions that fall below the notification thresholds. The last litigated non-notifiable merger challenge brought by the Commissioner was in 2019, and remedies (interim and final) have been obtained by the Commissioner on a consensual basis in a number of non-notifiable mergers since then. – The Commissioner may initiate a challenge to a merger on substantive grounds until one year after substantial completion of a notified transaction, or three years for other mergers. – The test for imposing a remedy is whether the proposed merger is likely to lessen or prevent competition substantially in a market in Canada (e.g., the merged entity will be able to raise prices or to reduce service, quality or innovation). The Commissioner will also assess the merger’s impact on buying power and the merged firm’s ability to suppress amounts paid to suppliers or employees below competitive levels, as well as the impact of the merger on non-price factors or aspects of competition such as “network effects,” quality, consumer choice and consumer privacy. – Product and geographic market definition play a key role in assessing whether a merger is likely to substantially lessen or prevent competition. CONCENTRATION THRESHOLDS – PRESUMED ANTI-COMPETITIVE EFFECT – The Competition Act provides that mergers will be presumed to prevent or lessen competition substantially if they (a) (i) combine firms with more than a 30% aggregate market share; or (ii) result in a post-merger “concentration index” of more than 1,800 (determined by squaring the market shares of the participants in the relevant market); and (b) result in an increase in the concentration index of more than 100 from pre-merger levels. The presumption would, for
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Canadian Mergers & Acquisitions
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