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 Topics
Related Articles
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
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 (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

To Use 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.


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.


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