Canada: Commissioner of Competition Fails to Block Closing of Beer Merger

On March 28, 2007, the Competition Tribunal dismissed the Commissioner of Competition's application for an interim order pursuant to section 100 of the Competition Act (the "Act") to prohibit Labatt Brewing Company Limited from acquiring all of the outstanding units of the Lakeport Brewing Income Fund. The Tribunal's reasons were released on March 30, 2007 and are available at The Commissioner announced on April 11, 2007 that she will appeal the Tribunal's decision to the Federal Court of Appeal.

The Tribunal's decision in Labatt/Lakeport marks the first time that the Tribunal has considered the current version of section 100, which permits the Commissioner to apply to the Tribunal for an interim injunction to prohibit the closing of a merger where the Competition Bureau has not yet completed its review of the transaction. If upheld on appeal, the Labatt/Lakeport decision will make it more difficult for the Commissioner to obtain interim injunctions under section 100 because it sets a high standard for obtaining such relief. In the result, merging parties who are willing to risk a potential post-closing challenge to their transactions should find it easier to proceed to closing even if the Bureau has not yet finished its review.


On February 1, 2007, Labatt announced its intention to buy all of the outstanding units of Lakeport Brewing Income Fund and thereby acquire the operations of Lakeport Brewing Limited Partnership ("Lakeport"). Lakeport beer is marketed as a lower-priced alternative to other brands of beer. Labatt is the second largest brewer in Canada and the third largest participant in the discount beer segment.

On February 12, 2007, Labatt and Lakeport filed a "long form" notification with the Bureau pursuant to the Act's pre-merger notification provisions. Long form notifications are generally filed in connection with transactions that are considered to raise substantive competition issues.

The filing of a long form notification triggers a 42-day waiting period within which the parties to the merger are prohibited from implementing their transaction. Under Canada's merger review system, however, expiry of the 42-day statutory waiting period does not represent substantive clearance. Instead, the Bureau's substantive review runs on a separate and parallel track that is governed by different (and non-binding) time frames (called "service standard periods"). For example, the Bureau normally takes longer than the 42-day waiting period to review transactions that raise significant competition issues. (Bureau guidelines state that such a merger may take up to five months to review.)

In the Labatt/Lakeport case, the 42-day waiting period triggered by the parties' long form filing was set to expire on March 26, 2007. The Bureau advised the parties that it would not complete its review by that date because it believed the transaction raised potentially significant issues (e.g., the Bureau characterized Lakeport as a "maverick" in the market whose removal might prevent or lessen competition substantially). Labatt nevertheless proposed to close the Lakeport acquisition shortly after the expiry of the waiting period. However, Labatt also offered to implement a "hold separate" arrangement that would delay integration of the Lakeport business for 30 days to allow the Bureau more time to complete its review. The Commissioner declined to accept this proposal and on March 22, 2007 filed an application with the Tribunal for a temporary injunction under section 100.

The Tribunal's Decision

In order to obtain relief under section 100, the Commissioner must demonstrate that (i) she is "on inquiry" (i.e., formally investigating the competitive effects of the proposed transaction), (ii) she requires more time to complete her review of the transaction and (iii) failure to prevent a party to the merger from taking "an action" (e.g., closing the transaction) would "substantially impair the ability of the Tribunal to remedy the effect of the proposed merger on competition… because the action would be difficult to reverse".

The central issue before the Tribunal was whether allowing the transaction to close would "impair" the Tribunal's ability to remedy the effect on competition post-merger if the transaction were successfully challenged.

The Commissioner argued that, because the Act provides the Tribunal with fewer remedies where a merger has already been completed, permitting the acquisition to close would impair the Tribunal's ability to order an appropriate post-merger remedy. The Commissioner also argued that, once a merger has been closed, it is often difficult to achieve an effective remedy after the acquired assets have been integrated into the operations of the acquirer. Labatt and Lakeport responded that there was no evidence to demonstrate that the merger would impair the Tribunal's ability to order dissolution or divestiture, especially given that they had offered to comply with a hold separate arrangement of the type that the Tribunal had endorsed in the past.

The Tribunal held that the relevant question to be answered under section 100 is whether allowing the transaction to close would substantially impair the Tribunal's ability to order a post-merger remedy that would "restore competition to the point at which it can no longer be said to be substantially less than it was before the merger". The Tribunal concluded that the Commissioner had failed to adduce sufficient evidence to meet this test and dismissed the Commissioner's application. The Tribunal also did not consider it necessary to order that a hold separate arrangement be put in place to temporarily preserve its remedial authority post-merger. Indeed, the Tribunal held that it lacked the jurisdiction to impose a hold separate arrangement under section 100.

In the result, Labatt and Lakeport were permitted to close their transaction without any restraint on their ability to integrate the two businesses. However, the Commissioner still has the ability under the Act to challenge the transaction at any time within three years of closing. The Bureau is continuing its review of the transaction.

Implications of the Tribunal's Decision

When section 100 was amended in 1999, the prevailing view was that the threshold for relief was relatively low. In particular, it was thought that the prospect of post-merger integration ("scrambling the eggs") would be sufficient in most cases for the Tribunal to hold that the failure to issue an interim injunction would substantially impair its remedial authority. If upheld on appeal, the Labatt/Lakeport decision signals that the Commissioner will face more significant hurdles than previously anticipated in seeking a temporary injunction under section 100. For one, merging parties may not be required to offer up a hold separate arrangement in order to advance their case.

The impact of the Tribunal's decision upon the Bureau's merger review process is likely to become clearer over the next few months. Subject to what happens on appeal, it is conceivable that the Tribunal's decision will lead more parties to close their transactions once the applicable waiting period expires, even if the Bureau has yet to complete its review. However, before merging parties rush to close a transaction that raises significant competition issues in Canada, they should consider the following:

  • The Commissioner will still retain the right to challenge the merger within three years of closing.
  • If the Commissioner challenges the merger and establishes that it is likely to substantially prevent or lessen competition, the Tribunal could order significant asset or share divestitures, which may have to occur within a short time frame at fire-sale prices. Furthermore, the Tribunal could order post-closing divestitures that go beyond the acquired assets if required to eliminate the substantial lessening of competition.
  • In future section 100 proceedings, the Commissioner may lead more focussed evidence of how permitting closing to take place could result in the dissipation of critical assets or personnel, such that closing would likely substantially impair the ability of the Tribunal to effectively remedy any competition concerns raised by the transaction.
  • In cases that raise particularly serious issues, the Commissioner may be prepared to proceed straight to a substantive merger challenge, even within the 42-day waiting period, and seek an injunction to prevent closing pursuant to the usual criteria (i.e., determination of a serious issue to be tried, irreparable harm if the injunction is not issued, and balance of convenience).

In the past, the Bureau has often responded to litigation setbacks by proposing legislative amendments. Thus, even if the Tribunal's decision is upheld on appeal, the Commissioner could propose amendments to the Act to (i) give the Bureau substantially more time to review transactions, or (ii) alter the evidentiary threshold under section 100 to make it easier to secure injunctive relief.

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

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

Mark C. Katz
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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

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