Canada: SCC Undoes The Competition Tribunal And FCA Decisions In Tervita

Last Updated: February 11 2015
Article by Laurie Baptiste

Most Read Contributor in Canada, September 2018

Confirms Tribunal Cannot Try to Predict the Future or Weigh Undetermined Effects to Prevent Competition

The highly anticipated judgment of the Supreme Court of Canada (SCC) in Tervita Corporation, et al v Commissioner of Competition is finally here (leave was granted back in July 2013 and argument heard in March 2014; reported on previously here and here).  Many expressed concerns about potential problems arising from the Tribunal and Federal Court of Appeal (FCA) decisions in this case, including greater complications and less predictability in merger assessment and the reach of the Bureau, regardless of the size of the merger.  The SCC decision seems to have brought some clarity and addresses the central problematic aspects of the underlying decisions.

As anticipated, the SCC confirmed the proper analytical framework to apply to the "prevention" branch of s. 92(1); the seven justices were unanimous on this point. A majority of the SCC (six of seven justices) also confirmed the proper approach to the "efficiencies defence" set out in s. 96 (with Karakatsanis J. in dissent).  The SCC did not in any way restrict the scope of the Bureau's power to review and undo mergers of any size, but it did comment briefly that this case (dealing with competition on a local scale) did not appear to reflect the policy considerations Parliament likely had in mind in in creating the efficiencies defence; although the current wording of the statute did support finding the defence was available in this case.

Overall, this decision is important because it: (i) should reduce complications in assessing competitive effects of mergers, since there cannot be any speculation about the future; and (ii) returns an objective standard to the efficiencies defence, making it more predictable. While the SCC did not comment on the remedy of divestiture vs unwinding of transactions, divestiture may remain the more likely order, given the comments of the Tribunal and FCA in that regard.

Brief Background – Decisions of the Tribunal and FCA

Tervita was an appeal from a divestiture order of the Competition Tribunal in regards to the acquisition of a hazardous waste disposal site.  Tervita owned and operated two hazardous waste landfills in Northeastern BC. In 2011, it sought to acquire a third site, which would have given it three of the four permits for the operation of hazardous waste landfills in that area.  Despite the fact the merger price was only about $6 Million (far below the limit for notifiable transactions), the Commissioner of Competition opposed the transaction on the basis that it was likely to substantially prevent competition in secure landfill services in that area.

The Competition Tribunal found the merger was likely to prevent competition substantially in the relevant market. It also concluded that the efficiencies exception in s. 96 of the Act did not apply. The Tribunal ordered Tervita to divest itself of the newly acquired site; the Commissioner's request for unwinding was found to be an intrusive and overbroad remedy when divestiture was available and would be effective.

Tervita's appeal from the Tribunal's order was dismissed by the FCA in 2013. The FCA agreed with the Tribunal's analytical framework and decision on prevention of competition, but found its methodology for the efficiencies defence was overly subjective. In any event, however, the FCA's own application of the efficiencies defence in a more "objective" manner still concluded that it did not succeed on the facts of the case.

SCC: The proper framework for "prevention" merger reviews under s. 92 of the Act

Rothstein J. (writing for the entire Court on this issue) confirmed that a forwarding-looking "but for" market condition analysis should be used to determine if a merger gives rise to a substantial prevention of competition under s. 92(1). This involves a two-stage analysis: (i) identify the potential competitor – the firm(s) the merger would prevent from independently entering the market; and (ii) determine whether, "but for" the merger, the potential competitor (usually one of the merging parties) would have likely entered the market and, if so, whether that entry would have decreased the market power of the acquiring firm, i.e., had a substantial effect on competition.  At the second stage of the analysis, the Tribunal should consider evidence of any factor that could influence entry, including those in s. 93.

Rothstein J. clarified that the timeframe for likely entry must be discernable, so there must be evidence of when the potential competitor is realistically expected to enter the market (in absence of the merger) , assessed on balance of probabilities. It was emphasized that the further into the future the Tribunal looks, the more difficult it will be to meet the test and that there should be no effort to look farther into the future than the evidence supports – speculation is improper and mere possibilities are insufficient to meet the standard – nor should the Tribunal or courts try to make future decisions for companies.

In the present case, it was found that the Tribunal's analytical framework and conclusion that the merger was likely to substantially prevent competition was correct. The Tribunal properly used a forward-looking "but for" analysis, did not speculate and made factual findings based on abundant evidence.

SCC: The proper approach to the s. 96 efficiencies defence

Rothstein J. (writing for the majority of five as well as Abella J.) explained that the s. 96 efficiencies defence is a balancing test, requiring analysis of whether the quantitative and qualitative efficiency gains of the merger outweighs the anti-competitive effects.  The Tribunal has flexibility to choose which methodology should be used in light of the particular circumstances of each merger.  However, the approach should be objectively reasonable, quantifying all effects that are realistically measurable and ensuring that the estimates provided are grounded in the evidence.  This will minimize the degree of subjective judgment necessary in the analysis so the Tribunal can make the most objective assessment possible. In addition, it was held that: (i) not all economic efficiencies should be taken into account, e.g., efficiencies resulting from the regulatory process; (ii) consideration cannot be given to the existence of a monopoly per se as opposed to its effects; (iii) environmental effects that have economic dimensions may be considered; and (iv) more than marginal efficiency gains should not be required for the defence to apply, as that would require an overly subjective analysis.

In this case, the majority found that the Commissioner failed to meet the burden under s. 96 by failing to quantify certain quantifiable anti-competitive effects, resulting in the quantifiable effects being assigned a weight of zero. The FCA improperly allowed subjective judgment to overtake the analysis when it weighed undetermined effects based on a rough estimate. This did not meet the requisite objective standard and also raised concerns of fairness, putting the parties in an impossible position because they would not know the case they have to meet). The FCA also erred in holding that an anti-competitive merger cannot be approved if only marginal or insignificant gains in efficiency result. Here, there were some efficiency gains established and so the efficiencies defence was made out.

Karakatsanis J., in dissent on this issue, did not agree with the majority that "reasonable objectivity" required qualitative effects to be treated as less important than quantitative effects, that failure to quantify quantifiable anti-competitive effects means such undetermined effects become irrelevant or invalid or that a court cannot find efficiency gains are too marginal.  Overall, she could not agree that Tervita was entitled to the benefit of the efficiencies defence in this case.

SCC: The Competition Tribunal must be Correct, not just Reasonable

As a final note, Rothstein J. confirmed (for the majority of five as well as Karakatsanis J.) that the standard of reasonableness, which presumptively applied given the issues were questions of law under the Tribunal's governing statute, did not apply in this case given the statutory language granting the right of appeal in the Act. Rather, the less deferential standard of correctness was required on questions of law. This has been the consistent finding of the FCA in other cases.

Nonetheless, Abella J., in partially concurring reasons, raised concerns about the majority's finding that the correctness standard applied.  In her view, the presumption of reasonableness should apply regardless of the legislative wording since statutory wording alone is not determinative of the applicable standard of review. She described this as "a reversion to the pre-Pezim era", bringing confusion back to the analysis and "chipping away" or eroding the long-standing deference given to specialized tribunals. Nonetheless, she found the Tribunal's interpretation of s. 96 was unreasonable, so concurred in the result.

Case Information

Tervita Corporation, et al v Commissioner of Competition, 2015 SCC 3

SCC Docket: 35314

Date of Decision: January 22, 2015

To view original article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Davies Ward Phillips & Vineberg
Affleck Greene McMurtry LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Davies Ward Phillips & Vineberg
Affleck Greene McMurtry LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions