On February 7, 2014, the Competition Bureau released a Position Statement summarizing the approach taken in its review of the acquisition by Canadian Tire, through its wholly-owned affiliate FGL Sports, of Pro Hockey Life. The transaction was entered into on November 28, 2013, and closed on August 12, 2013. The Bureau determined that the transaction was not likely to substantially lessen or prevent competition in the retail market for hockey equipment and hockey-related merchandise.
The transaction provided the Bureau with the opportunity to review a retail merger between retailers carrying on business using three different business models: Canadian Tire is a national mass merchandiser selling products, through a network of independent dealers, across a range of categories; FGL Sports is a national sporting goods retailer; and Pro Hockey Life is a specialized hockey retailer with a geographic presence limited to 11 areas in Canada.
In reviewing the transaction, the Position Statement notes that the Bureau reviewed internal documents, met with a number of market participants and issued section 11 orders to gather information from key suppliers.
Consistent with the approach taken in recent retail mergers, the Bureau's review consisted of various econometric analyses to quantify the estimated price effects of the merger. The Bureau compared prices using a cross-sectional analysis to quantify the competitive impact that Pro Hockey Life had on FGL Sports stores. The analysis showed that the difference in prices at FGL Sports Stores in areas where there was no Pro Hockey Life were not statistically significant. The Bureau also used merger simulation techniques.
The Bureau considered other factors set out in the Merger Enforcement Guidelines, such as the presence of remaining competitors and barriers to entry. The Bureau determined that, given the presence of remaining competitors and the fact that barriers to entry and expansion are not likely sufficiently high to deter entry or expansion, the parties would not likely be able to sustain a material price increase.
Stikeman Elliott LLP acted as competition counsel to Canadian Tire and FGL, with a team consisting of Lawson Hunter, Jeffrey Brown and Marisa Muchnik.
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