Merger Enforcement Trends Although most mergers that raise competition issues are resolved by a consent agreement between the parties and the Commissioner (typically requiring
The recent amendments repealed a statutory efficiencies defence for mergers. Relatively few mergers had proceeded in reliance on that formal efficiencies defence. Recent Bureau guidance recognizes that pro competitive benefits could still be one consideration, among others, in the overall competitive effects analysis. Likely and verifiable merger-specific, rivalry-enhancing pro-competitive benefits (such as cost savings that directly intensify competition or consumer-facing improvements) should be relevant, but some Bureau guidance conveys a skepticism of, or hesitancy to give full weight to, a merger's pro-competitive benefits where a merger raises substantial competition concerns. Whether the Tribunal will share this perspective remains to be seen. Where the Tribunal finds that a merger is likely to result in a substantial lessening or prevention of competition, the Act now provides that the Tribunal may make an order “to preserve the level of competition” that would prevail “but for the merger.” Prior court decisions had established that the objective of an order under the merger provisions was to restore competition to the point at which it is no longer substantially less than it was before the merger. The Commissioner long advocated for this amendment with a view to reducing the burden to obtain more extensive remedies or blocking altogether a merger found to prevent or lessen competition substantially. However, it remains to be seen how the Tribunal will assess the “level of competition” in this context. The Tribunal also retains discretion with respect to the issuance of orders – even where a merger is found to result in a substantial prevention or lessening of competition. Nevertheless, this amendment and any resulting difference between the standard to block a merger (or an aspect of it) and the remedy that may be required to preserve competition may lead parties to restructure and then refile their transaction or be more inclined to propose remedies up front.
divestiture of some businesses or assets), the Commissioner continues to be prepared to litigate merger challenges before the Tribunal. Significant amendments to the Competition Act enacted from 2022 to 2024 designed to make it easier for the Commissioner to challenge mergers have created some uncertainty in the Canadian merger review process. Perhaps most significantly, the Act now 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 example, be triggered if a firm with a 30% share acquired a firm with a 2% share of a properly defined market, or if a firm with a 16% share merged with a firm with a 15% share. Similarly, depending on the number of other competitors and their market shares, a merger of two firms with market shares of 7% and 8%, respectively, could potentially also trigger the presumption. In considering whether parties to a merger have rebutted such a presumption, Bureau guidance to date indicates that it will apply a sliding scale: the more the thresholds are exceeded, the greater the need for "persuasive evidence" to overcome the presumption. For example, evidence of effective remaining competition, likely timely and sufficient entry, and other market-specific constraints on any potential exercise of market power by the merged firm may help to rebut the presumption. Although the Bureau has not provided details of its analyses, it appears to have been issuing NALs for mergers that exceeded the Act’s concentration threshold.
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