Canada: Competition Bureau Releases Study Of Canadian Merger Remedies

On August 11, 2011 the Competition Bureau (Bureau) released a summary of an internal study on the efficacy of remedies obtained under the merger provisions of the Competition Act. The study examined the efficacy of the Bureau's policies and procedures on merger remedies for the years 1995-2005. In particular, the survey focused on 23 merger cases in which different remedial measures were implemented over the ten-year period. The Bureau interviewed different stakeholders in the merger review process, including merged entities, customers and purchasers of divested assets, as well as third parties affected by the remedy. The study utilized 135 interviews, approximately 50% of which were responses from customers.

The Competition Act allows for the Commissioner of Competition to make an application to the Competition Tribunal preventing a merging entity, alone or in combination with others, from having the ability to exercise market power as a result of its merger. The Commissioner can challenge the merger under section 92 of the Act, or seek to resolve the competition concerns by negotiating remedies with the merging parties. In practise, very few merger cases in Canada are litigated. Accordingly all of the remedies examined had been agreed with the parties. The Bureau's 2006 Bulletin on Merger Remedies specifies four types of remedial measures used by the Bureau and the Tribunal to address mergers that have, or are likely to have, detrimental effects on competition. The study, which will be used to validate and refine certain aspects of the Bureau's practice, describes key observations on the four principal remedies currently used by the Bureau, including: structural remedies, quasi-structural remedies, combination remedies, and stand-alone behavioural remedies. For purposes of the public summary of the report, however (details of the complete study must remain confidential pursuant to the confidentiality provisions of section 29 of the Competition Act), results have been summarized for structural, and for all other categories.

Structural Remedies

Structural remedies are by far the most common remedial measures used by the Bureau when negotiating the terms of a proposed merger. Of the 23 merger cases reviewed in its study, 20 involved some form of divestiture where a merging entity's assets were sold to new market participants. The study found that divestitures had been completed in all but two cases. Interviewees reported that the divestitures had generally been effective in achieving their objective of eliminating the anti-competitive effects of the merger.

In the two cases where divestitures had not been completed, participants in the Bureau's study pointed towards several possible explanations. First, certain assets designated for divestiture were not perceived by interviewees as being attractive to buyers, partly due to economic conditions. Second, divestiture orders included minimum pricing provisions that did not accord with the market value of the assets. Third, foreign ownership restrictions limit the pool of potential buyers in some industries. Change of control provisions or the need to obtain third party consents to the assignment of contractual rights (e.g. intellectual property licences), can also complicate divestitures involving such rights. Importantly, respondents in the Bureau's survey noted that successful divestitures were more likely to occur when purchasers were financially stable and had prior industry experience.

The Bureau's study also commented on the length of sale periods for divested assets. Typically, consent agreements provide for an initial sale period during which the purchaser can attempt a sale, followed by a trustee sale period (which occurs if there is no sale during the initial period) during which a trustee appointed by the Bureau will take charge of the sale process. Initial sales periods ranged from 3 to 24 months while trustee sale periods ranged from 3 to 12 months. The study found that longer sales periods frequently resulted in a degradation of assets, a concern which is discussed in greater detail below.

The study also examined the use of "crown jewels" provisions. In cases where a divestiture does not occur within a specified initial sales period, additional assets can be added to the divestiture package in order to make it more attractive to purchasers. The Bureau noted that of the five cases in its study which involved crown jewels provisions, none had been triggered.

As noted, the Bureau's study identified a number of problems that arose during the sale period, prior to the divestiture of assets. Concerns were raised about the degradation of assets, failure to keep the business to be divested at arm's length from the purchaser, lack of investment in the assets, an exodus of key personnel from the business, divulging of confidential information to purchasers interested in the business, as well as a failure to maintain customer/supplier relations during the sale period. The Bureau noted that there was no discernible trend in the approach to asset maintenance during the interim period. Rather, maintenance obligations were imposed on a case- by-case basis, suggesting that the divestiture remedy continues to be a very fact-sensitive task in which the Bureau considers, inter alia, the types of assets and their viability, the timeline of divestiture, and the independence of the proposed purchaser. For more information on specific divestiture guidelines, see the Bureau's Bulletin on Merger Remedies.

Quasi-Structural and Behavioural Remedies

Quasi-structural remedies include strategies designed to reduce barriers to entry or to provide access to essential facilities, infrastructure, or technology, and generally facilitate entry or expansion into the market place. They include things such as compulsory licensing, removal of non-competition clauses, the imposition of non-discriminatory access to facilities or property, and the removal of quotas, tariffs and other regulatory barriers.

In its study, the Bureau noted that quasi-structural remedies had been far less effective when structural divestitures were not also implemented. In cases where behavioural commitments were made, a lack of oversight by a monitor was felt to have contributed to the ineffectiveness of this remedy. Moreover, the success of purchasers was often contingent on the availability of and access to downstream services which could be arranged through long-term supply agreements. Parties also expressed a frustration with formal arbitration procedures when they were put into place due to the ongoing business relationships between third parties and the merged entity. Finally, in cases where a business was operated independently as a stand-alone enterprise there was concern about continued information sharing between the merged entity and the supposedly independent business.

Standalone behavioural remedies are seldom used by the Bureau since it is difficult to create remedial measures that adequately replicate competitive market forces. Furthermore, the Bureau's view is that it is difficult to design such remedies, make them workable, and continue to enforce them. The Bureau's survey found that in circumstances where it has imperfect information about future entry in a market, the terms of a standalone behavioural remedy are critical. The study also found that without underlying structural reforms in a market prior to the expiration of a behavioural remedy, a merged firm will have the opportunity to continue to exercise market power. Overall, market participants were less enthusiastic about standalone behavioural remedies noting that they do not address the underlying issue of a merged firm's ability to exercise market power. That said, while not discussed in the study, we do note that behavioural remedies have been agreed to in several recent cases, either in combination with divestitures or on a stand-alone basis , particularly where the anti-competitive concerns were vertical in nature.

Merger Remedies Going Forward

The Bureau sees the remedies study as confirming the effectiveness of its existing policies and procedures relating to the design and implementation of merger remedies. The Bureau intends to use the knowledge gained from its survey to update its Bulletin on Merger Remedies as well as the standard consent agreement that it uses as the basis for negotiations over remedies with parties during the merger review process. The study likely also will inform the Bureau's approach to structural, quasi-structural, and standalone behavioural remedies used to prevent the substantial lessening of competition in the merger context.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions