Earlier today, the Supreme Court of Canada issued its
long-anticipated decision in Tervita Corp. v. Canada
(Commissioner of Competition), where it allowed the appeal on
the basis that the Commissioner of Competition (the
"Commissioner") had failed to "quantify quantifiable
anti-competitive effects." In its decision, the SCC overturned
the findings by the Federal Court of Appeal and the Competition
In 2011, Tervita Corporation ("Tervita"), a waste
management services company in Western Canada, acquired Complete
Environmental Inc. ("Complete"), which owned land in
northeastern British Columbia and a permit allowing it to operate a
secure landfill at that site. While the value of the transaction
was well below the pre-merger notification thresholds under the
Competition Act, it was challenged by the former
Commissioner of Competition on the basis that it was likely to
result in a substantial prevention of competition in the market for
"the disposal of hazardous waste produced largely at oil and
gas facilities in northeastern British Columbia."
The Commissioner also believed that the transaction would
prevent the entry of a competitor that was otherwise poised to
enter that market and would have resulted in lowering tipping fees
for producers of hazardous waste. The matter was brought before the
Competition Tribunal (the "Tribunal"), which agreed with
the Commissioner that the transaction would result in the
substantial prevention of competition. The Tribunal also considered
- and rejected - Tervita's efficiencies defence, on the basis
that any potential efficiency gains were not likely to be offset by
the anti-competitive effects flowing from the merger.
On appeal, the Federal Court of Appeal ("FCA") upheld
the Tribunal's decision and Tervita subsequently appealed to
the Supreme Court of Canada.
The SCC decision is important for several reasons.
First, it upheld the Tribunal and FCA's finding that the
transaction was likely to substantially prevent competition.
Second, it overturned the decisions of by the Tribunal and
Federal Court and upheld Tervita's ability to invoke the
efficiencies defence. In doing so, the SCC clearly stated that the
Commissioner bears the "burden to quantify all quantifiable
anti-competitive effects." This finding was determinative
because the Commissioner had made no effort to quantify the alleged
anticompetitive impact of the merger.
Third, the SCC noted that, in assessing the application of the
efficiencies defence, the Tribunal should consider all available
quantitative and qualitative evidence. Further, effects that can be
quantified should be quantified, even as estimates, so long as the
estimates are grounded in evidence that can be challenged and
Lastly, the SCC did not establish a minimum threshold of
efficiency gains that must be present before an efficiency defence
can be raised. In this case, because the Commissioner did not
quantify the alleged anticompetitive effects, the relatively modest
efficiencies that Tervita was able to quantify were held to be
sufficient for the efficiencies defence to apply.
The Tervita decision provides guidance with respect to
the type and scope of analysis the Bureau must complete before it
can properly challenge the validity of an efficiency defence raised
by merging parties in the context of a merger review. This appears
to be supported by the statement released by the Commissioner
shortly after the SCC decision was released, which stated that
"the Bureau will consider the guidance provided on
efficiencies and any changes to our analysis and information
gathering that may be required during merger review."
Practically, this means that, where a merger raises significant
substantive issues and the merging parties could raise an
efficiencies defence, the Competition Bureau will have to
proactively quantify the alleged anticompetitive effects.
As a result, the Bureau is likely to ask for more information
from both the merging parties and other industry participants than
has previously been the case. This additional layer of work may
impact both the timing of Bureau's review of transactions and
increase the use of compulsory production orders against
third-party industry participants.
For a copy of the Supreme Court decision, please click here and here.
For a copy of Competition Bureau's press release, please
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The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
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