On November 1, 2013, the Competition Bureau (the Bureau) announced a Consent Agreement with La Coop
fédérée (LCF) and Groupe BMR (BMR) in relation
to LCF's acquisition of a minority interest in BMR. A position statement was released on November
13, 2013, outlining the Bureau's analysis of the proposed
Under the terms of the Consent Agreement, LCF and BMR are required to
(i) terminate franchise agreements with certain retail store
franchisees in four Quebec regions; and (ii) continue to supply
these franchisees on competitive terms until a new franchisor is
found or until December 31, 2014. In essence, the Consent Agreement
will require the affected franchisees to find new competitor
banners under which to carry on their retail businesses in these
regions or to otherwise carry on business independently of LCF and
Notwithstanding that the transaction involved the acquisition of
a minority interest, the transaction was reviewed by the Bureau as
a "merger" within the meaning of section 91 of the Competition Act(the Act). As noted in the
Bureau's Merger Enforcement Guidelines(the MEGs),
section 91 of the Act defines a "merger" broadly to
include any acquisition or establishment of control over or a
significant interest in the business of a competitor, supplier,
customer or other person. The MEGs define a "significant
interest" as "the ability to materially influence the
economic behaviour of the target business, including but not
limited to decisions relating to pricing, purchasing, distribution,
marketing, investment, financing and the licensing of intellectual
LCF and BMR are both engaged in the wholesale supply of
hardware, renovation, agricultural machinery and gardening products
to retailer networks that are mostly comprised of franchised
stores. As part of its assessment of the transaction, the Bureau
examined the extent to which the parties' franchisees are
independent from their respective networks and considered a number
of factors, including:
retail pricing practices;
obligations related to flyers and marketing practices; and
the parties' integration plans post-transaction.
The Bureau concluded that both LCF and BMR were in a position to
materially influence the economic behaviour of their franchisees
and, moreover, that LCF, post-acquisition, would have the ability
to materially influence the economic behavior of both LCF and BMR
The Bureau identified the geographic scope of the market as
local, and found that the relevant geographic market in rural areas
generally did not extend beyond a 30km radius from a retail store.
In such local markets, the Bureau found that sufficient competition
from established players such as Rona, Home Hardware, Ace and Canac
would remain post-transaction and that barriers to entry or
expansion into new lines of products were relatively low for
existing retailers. However, the Bureau identified four Quebec
regions where the Bureau found LCF and BMR to be each other's
closest competitors, and that little or no remaining competition
and high barriers of entry would exist in those areas
The Bureau ultimately found that the proposed transaction would
likely result in a substantial lessening or prevention of
competition in the retail sale of hardware products and building
materials in Saint-Pampile, Saint-Cyprien, Lac Megantic and
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about your specific circumstances.
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