Canada: Competition Bureau’s Decision In XM/Sirius Demonstrates Continued Importance Of Efficiencies In Merger Review

Copyright 2011, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Competition, Antitrust & Foreign Investment, February 2011

On Wednesday, February 23, 2011, the Competition Bureau announced that it would not challenge the proposed acquisition of Sirius Canada Inc. by Canadian Satellite Radio Holdings Inc. (which operates under the trade name XM Canada), relying in part on the efficiencies that were likely to be generated by the transaction. Under Canada's competition laws, a merger may proceed where the efficiencies resulting from the transaction are greater than, and will offset, its anticompetitive effects. The case reflects the continued importance of this defence for parties to strategic mergers in Canada. A similar defence exists in respect of non-criminal agreements between competitors, such as strategic alliances and non-concentrative joint ventures.


In July 2008, XM and Sirius' counterparts in the U.S. merged but the Canadian entities remained independent. On November 24, 2010, XM Canada announced a proposed acquisition of Sirius Canada. XM Canada and Sirius Canada were the only two satellite digital audio radio service providers in Canada.

During its review, the Bureau consulted with the U.S. Department of Justice Antitrust Division, which had thoroughly scrutinized the merger of the U.S. entities in 2008. The Bureau also reviewed information collected from the parties and market participants.

After considering the impact of the proposed transaction on existing and potential future satellite radio subscribers, the Bureau concluded that the transaction was not likely to result in a substantial lessening or prevention of competition.


The Bureau has released a Position Statement setting out the reasons for its decision, including:

  • The proposed transaction would not likely have a substantial impact on existing subscribers, who rarely switch between XM Canada and Sirius Canada due to the need to purchase new equipment.
  • The proposed transaction would not likely have a substantial impact on customers who purchase a satellite radio receiver that is pre-installed in a new car, as the decision to purchase a car is not likely to be influenced by the satellite radio brand that is installed.
  • Any competitive harm from the proposed transaction primarily would be limited to first-time retail subscribers, who likely view XM Canada and Sirius Canada as close competitors. However, for these subscribers, competitive discipline would continue to be imposed by alternatives to satellite radio such as AM/FM radio, MP3 players, and, increasingly, Internet radio streamed to smart phones.
  • Finally, the Bureau found that any anticompetitive effects stemming from the proposed transaction would more likely than not be outweighed by efficiencies. In other words, the Bureau accepted that the real cost savings that would result from merging the two digital satellite radio networks would more than offset any negative effects on consumers.

Significance Of The Case

In 2009, the Bureau released guidance on its approach to merger efficiencies (see our March 2009 Blakes Bulletin: Canadian Competition Bureau Issues Practical Guidance Regarding Efficiencies Claims In Merger Cases). The Bureau's guidance confirmed its position that, in appropriate cases, it will not necessarily resort to litigation before the Competition Tribunal to resolve efficiency claims but will first assess whether the gains in efficiency arising from a transaction are greater than, and will offset, any anticompetitive effects.

But while the Bureau released this guidance in 2009, it has not publicly relied on efficiencies in clearing a transaction since that time. The Bureau's decision to cite the efficiencies that would likely be generated by a merger between XM Canada and Sirius Canada as a factor in its decision should highlight for merging parties the potential importance of efficiencies claims in securing clearance for strategic mergers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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