The Competition Bureau recently concluded its review of a
proposed transaction in the aerospace sector, clearing United
Technologies Corporation's acquisition of Goodrich Corporation.
While the terms of the transaction are not unusual, the clearance
is noteworthy in that demonstrates the Bureau's willingness to
scrutinize even those transactions in which:
the parties do not have any overlapping assets in Canada;
the vast majority of customers are located outside of
Stated differently, the decision suggests that in the era of
global commerce virtually any merger, anywhere, is subject to the
Bureau's reach, at least in the Bureau's view.
UTC and Goodrich manufacture and sell a broad range of parts and
components to aircraft manufacturers. In September 2011, they
entered into an agreement pursuant to which Goodrich would merge
with and become a wholly-owned subsidiary of UTC. In its review of
the proposed deal, the Bureau found that "the vast majority of
aerospace manufacturing facilities and customers of UTC and
Goodrich are located in the U.S. and Europe," suggesting that
sales into Canada did not form a material part of either
party's balance sheet. Even more significant was the finding
that neither party had any relevant assets in Canada. Thus,
according to the Bureau's own assessment, this was a merger
with virtually no Canadian connection.
Following the lead of U.S. and European authorities, the Bureau
identified two product markets that raised competition issues: the
manufacture, sale and supply of electrical generators and engine
controls. While the Bureau determined that the transaction would
have resulted in the lessening of competition in the manufacture
and sale of certain aircraft parts and components in a Canadian
market (notwithstanding that the "vast majority" of UTC
and Goodrich customers were outside of Canada), remedial orders
issued by authorities in the U.S. and Europe were sufficient to
mitigate the Bureau's concerns regarding potential
anti-competitive effects in Canada.
Impact of this decision
The Bureau's decision to assert jurisdiction over this
proposed merger, even after having satisfied itself that there was
little connection to Canada, serves as a powerful reminder of the
Bureau's view of its jurisdictional reach. While it is unclear
how effective the Bureau would be in enforcing a remedy in
circumstances where parties do not have relevant assets in Canada,
readers are cautioned that when it comes to jurisdiction, in the
Bureau's view, the sky's the limit.
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
The Commissioner of Competition addressed innovation, enforcement and policy initiatives at the Competition Bureau in his keynote speech, "Strengthening Competition: Innovation, Collaboration and Transparency."
Used car listing website operator CarGurus Inc.'s attempt to force rival Trader Corporation to supply it with vehicle listing data has encountered a dead end as the Competition Tribunal denied it leave to commence a private application under several provisions of the Competition Act.
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