Canada: Supreme Court Decision Underscores Importance Of Quantifying Efficiency Gains In Merger Reviews

The Supreme Court of Canada has provided important guidance for determining whether a merger is likely to prevent competition substantially, and for the proper application of the "efficiencies defence" under section 96 of the Competition Act ("Act").

In Tervita Corp. v. Canada (Commissioner of Competition) ("Tervita"), issued January 22, 2015, the Court upheld the finding of the Competition Tribunal ("Tribunal") that a merger can be blocked based on a forward-looking analysis of whether, but for the merger, competition would likely be substantially greater. This "but for" analysis can consider a range of evidence and the analysis is not entirely dependent on the parties' assets, plans and businesses at the time of the merger.

However, the Court overturned the Tribunal and Federal Court of Appeal on the correct application of the efficiencies defence. Basing its decision on principles of transparency, objectivity and fairness, the majority of the Court held that where anti-competitive effects of a merger are capable of being quantified, the Commissioner of Competition (the "Commissioner") bears the burden of doing so, failing which they will be assessed at "zero." The Court held that the Tribunal should then balance this against evidence led by the merging parties of any efficiencies resulting from the transaction to determine whether these efficiencies are greater than, and offset, its anti-competitive effects.

The Supreme Court relied on relatively marginal efficiencies in this case to deny the Commissioner's application to dissolve the merger.

By insisting on the strict quantification of anti-competitive effects wherever possible, and confirming the absence of any threshold amount for efficiencies that can be weighed against these anti-competitive effects as a defence, Tervita underscores the importance for merging parties to identify any efficiencies generated by their proposed transaction and to support such in the merger review process.


Tervita involved a relatively small transaction of C$6 million, far below the current pre-merger notification review threshold for transactions. In 2010, Tervita Corp., an environmental solutions company operating hazardous waste disposal landfills in Northeastern British Columbia, acquired a company that had obtained regulatory approval to open another landfill site in the region. The Commissioner sought to block the transaction after closing, and asked the Tribunal to order the transaction be dissolved or that Tervita Corp. divest the acquisition in whole or in part.

The Tribunal is empowered under section 92 of the Act to make remedial orders, such as merger dissolution or the divestiture of shares or assets, where a merger or proposed merger substantially prevents or lessens competition, or is likely to substantially prevent or lessen competition. However, parties to a merger can invoke the so-called "efficiencies defence" under section 96 of the Act, which prohibits an order being made under section 92 if the Tribunal finds that the merger is likely to generate efficiencies that would be "greater than" and would "offset" the merger's anti-competitive effects.


Under section 92 of the Act, the Court upheld the Tribunal and Federal Court of Appeal's analysis of whether, "but for the merger, the acquiring firm would have entered the relevant market independently, or through the acquisition and expansion of a smaller firm, a so-called 'toe-hold' entry." The Court's analysis was not restricted to what could be discerned from the merging parties' assets, plans and business at the time of the merger (e.g., the fact that the purchased landfill site was not yet operational). The Court's forward-looking consideration of whether the merger was likely to prevent competition, was supported by its finding that "but for" the merger, the vendor would have likely entered the relevant product market (i.e., transformed the purchased site to a secure landfill so as to compete with the acquiror).

Section 96 of the Act is relatively unique, in that it is an efficiencies defence explicitly written into Canada's competition statute. As noted by the Court, this codification of the efficiencies defence reflects Parliamentary recognition that "in some cases, consolidation is more beneficial than competition" to realize economies of scale and help Canadian businesses in a relatively small domestic market to compete in international markets. (The leading authority on the efficiencies defence remains the Superior Propane series of cases.)

In Tervita the Court clarified that the Commissioner has a legal burden "to quantify by estimation all quantifiable anti-competitive effects," and if the Commissioner fails to meet this burden, "the quantifiable anti-competitive effects should be fixed at zero." The Court also overturned the Federal Court of Appeal's conclusion that a "threshold level of efficiencies" exists under the section 96 defence, which would require more than marginal efficiency gains to defend against a finding of anti-competitiveness (the merging parties, however, still bear the onus of proving the remaining elements of the section 96 defence).

This does not mean that anti-competitive effects of a transaction can never be qualitative. As the Court observed, it requires the Commissioner to at least establish estimates of quantifiable anti-competitive effects to provide the merging parties with the case they have to meet.

Practically speaking, these clarifications to the balancing test under section 96 can mean that in a case like Tervita, where a merger is found to be likely to prevent or lessen competition substantially, but the Commissioner fails to meet his legal burden of quantifying its anti-competitive effects, the merger will nonetheless be permitted to proceed. In short, even marginal efficiency gains will outweigh anti-competitive effects set at zero.


For merging parties, Tervita underscores the importance of developing evidence of the efficiencies generated by their proposed transaction, particularly where the proposed transaction is likely to raise competition concerns and the parties may need to rely on the efficiencies defence in addition to other submissions relating to issues of competitive effects. It can be expected, however, that where the parties intend to rely on the efficiencies defence, the Commissioner and staff at the Competition Bureau may now demand considerable evidence and more time to review a proposed transaction in order to quantify the possible anti-competitive effects of the proposed transaction. It may, therefore, be premature to assess the decision's impact on merger reviews generally, although the decision does establish a clear new burden on the Commissioner in the merger review process and any ensuing litigation.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific 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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.