Speaking at the Canadian Bar Associationís Annual Fall Conference on Competition Law, Sheridan Scott, Commissioner of Competition, offered new insights to the Bureauís approach to efficiencies in merger analysis. Most significantly, the Commissioner stated that the Bureau "would not necessarily require recourse to the [Competition] Tribunal in a case where the efficiencies resulting from the merger would clearly be greater than and offset any anti-competitive effects; rather, while our experience suggests that such cases are rare, we could, if sufficiently satisfied on the evidence, make our own independent assessment of efficiencies, and clear the merger on that basis."1 In that regard, the Commissioner urged parties to make efficiencies submissions and "not to be deterred by an unfounded notion that to do so is somehow an admission of anti-competitive concern."
Under section 96 of the Competition Act Ė the so-called "efficiency defence" Ė a merger cannot be prohibited if it is likely to result in efficiency gains that are greater than, and offset, the effects of any substantial prevention or lessening of competition from the merger, provided that the efficiencies would not likely be achieved if the merger were prohibited. The Bureauís past practice had been to litigate the application of section 96 before the Tribunal, rather than to clear a transaction on those grounds.2
The Bureauís apparent change of approach to the application of section 96 is welcome news, given the Bureauís responsibility to administer the statute as a whole. Given the extreme rarity of cases in which the efficiencies defense is the determining factor, however, the change of approach will not ultimately affect many transactions.
1. Sheridan Scott, Commissioner of Competition, Speaking Notes for Address to Canadian Bar Association Annual Fall Conference on Competition Law, 28 September 2006, at 13.
2. In the most recent such case, Superior Propane (Canada (Commissioner of Competition) v. Superior Propane Inc. (2003), 23 C.P.R. (4th) 316; (2001), 11 C.P.R. (4th) 289), the Federal Court of Appeal held that, for purposes of the trade-off between efficiencies and anti-competitive effects under section 96, the Tribunal and the Bureau must consider not only the deadweight loss brought about by the merger, but also the wealth transfer and, in particular, the "socially adverse" portion of the transfer. The Commissionerís announcement did not address the specifics of how such a subjective element is to be measured.
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