Canada: Warm Beer from the Federal Court of Appeal: The Labatt/Lakeport Section 100 Decision

Last Updated: February 1 2008
Article by Oliver J. Borgers, Donald B. Houston, Randal Hughes and Jeanne L. Pratt

Most Read Contributor in Canada, September 2018

On January 22, 2008, the Federal Court of Appeal (FCA) dismissed the Commissioner of Competition's appeal of a March 2007 Competition Tribunal order that denied the Commissioner an interim order to delay closing of Labatt's acquisition of Lakeport Brewing for 30 days to permit the Commissioner to complete her review.1 This was the Commissioner's first Section 100 application since the Competition Act had been amended, in 1999, to make it easier for the Commissioner to get an interim order.

While the Commissioner lost her appeal in Labatt, businesses and their advisors should be cautious in relying on the case as a precedent for the future. First, the FCA's interpretation of Section 100 is more favourable to the Commissioner than that of the Tribunal. Specifically, the FCA expressly confirmed that, under Section 100 of the Competition Act, the Commissioner need not demonstrate a likely substantial lessening of competition in order to be granted an interim order to delay closing. Second, the decision has no bearing at all on substantive merger rights.

For most mergers, the Labatt decisions will have little or no impact. They may have an impact in the limited number of cases where a proposed transaction raises serious competition issues, the acquiring party is prepared to assume the competition risk of closing, and the parties are willing to litigate with the Government. In those cases, the Labatt decisions may change the dynamics between merging parties and the Competition Bureau during the statutory waiting period. The Bureau may go into litigation mode earlier in the review process, possibly demanding long-form filings from parties in order to extend the statutory waiting period to the maximum available time, seeking onerous court orders for the production of information and documents with short return dates earlier in the process, and filing substantive applications to challenge transactions before expiry of the statutory waiting period.

Section 100

Section 100 of the Competition Act provides a mechanism for the Commissioner to seek interim orders from the Tribunal to stop parties from completing mergers for a temporary period of time after the statutory waiting period has expired, to allow the Commissioner to complete her inquiry. Under the wording of the prior Section 100, the Tribunal had to determine whether the proposed merger was reasonably likely to prevent or lessen competition substantially — and whether, without an interim order, an action would be taken that would substantially impair the ability of the Tribunal to remedy the effect of the proposed merger. In 1998, the Director of Investigation and Research (as the position of Commissioner was then known) sought an interim order to stop the proposed merger of Superior Propane and ICG Propane, which was refused because the Commissioner could not prove a likely substantial lessening of competition.2 As a result, in 1999, Section 100 was amended to remove the condition of a finding of a reasonable likelihood of substantial lessening or prevention of competition. The amended Section 100 provides that the Commissioner may seek an interim order where, "In the Commissioner's opinion, more time is required to complete the inquiry." It also requires that the Tribunal must be satisfied that in the absence of an order, an action would be taken that would "... substantially impair the ability of the Tribunal to remedy the effect of the proposed merger on competition ..."

The Labatt/Lakeport Decision

In the Labatt/Lakeport application, the Commissioner brought a Section 100 application on the basis that she needed more time to review the returns made by industry participants pursuant to Section 11 of the Competition Act. Labatt and Lakeport argued that the Tribunal should not exercise its discretion in this particular case, since the Commissioner had ample opportunity to review the beer industry in other recent investigations and since they were willing to enter into a "hold separate" agreement to preserve divestiture as an effective remedy. Much of the evidence before the Tribunal was focused on the effectiveness — or ineffectiveness — of Labatt's proposed "hold separate."

The Tribunal held that although the 1999 amendments to Section 100 are intended to make an application for an interim order less onerous for the Commissioner, they had been passed at the same time as other amendments that had increased the statutory waiting period for merger review from 21 days to 42 days (for a long-form filing). This has created a heightened expectation that 42 days should be enough time for the Commissioner to complete a merger review.

Further, the Tribunal held that in considering whether its ability to remedy would be substantially impaired, the focus must be on the preservation of " ... the ability to remedy, not on the availability of a particular remedy."3 On its face, the Tribunal decision would require the Commissioner to identify the specific anti-competitive effects to be remedied — a very difficult burden at this early stage. This is different from the Tribunal's past reasons in the Superior Propane case, where the Tribunal indicated that it should not, at the stage of a Section 100 application, foreclose any available remedy, including preventing completion of the proposed transaction.4 The Tribunal in Labatt/Lakeport concluded that the Commissioner had not adduced adequate evidence to establish that allowing the parties to close would substantially impair the ability of the Tribunal to remedy the effect of the merger on competition.

Before the FCA, the Commissioner argued that the Tribunal's approach would require the Commissioner to demonstrate, at this early stage in the process, that the proposed transaction is reasonably likely to prevent or lessen competition substantially in a relevant market — since, in order to establish impairment of the Tribunal's ability to remedy, the Commissioner would necessarily have to identify the problem to be remedied. The FCA disagreed. In a generous interpretation of the Tribunal's reasons, the FCA held that the Tribunal's test did not require the Commissioner to demonstrate that a substantial lessening of competition is reasonably likely to result from the proposed transaction. Rather, the Commissioner need only demonstrate that without an interim order, the Tribunal's remedial powers would be substantially impaired.

In the Labatt case, the Commissioner failed to adduce sufficient evidence to establish that the Tribunal's remedial powers would be substantially impaired in the absence of an interim order. However, the FCA confirmed that the Commissioner does not need to establish a substantial lessening of competition in order to succeed under Section 100. In future cases, the Commissioner will know the evidentiary burden she has to meet.


Businesses should be cautious about reading too much into this decision. It does not preclude or limit a substantive merger challenge of the Labatt/Lakeport transaction by the Commissioner. In completing the Lakeport transaction and integrating the businesses, Labatt has assumed the competition risks of the deal and now faces the prospect of divestitures in the future — although the Commissioner has not, to date, launched a merger application with the Tribunal to substantively challenge the Labatt/Lakeport merger.

Further, in contrast with the Tribunal's approach, the FCA decision does not impose an unduly onerous burden on the Commission for future Section 100 applications. While the Commissioner will have to lead evidence to show how the Tribunal's ability to order a remedy would be "substantially impaired" by allowing the transaction to close, the FCA has made it clear that she need not prove a likely substantial lessening of competition.

We would also hope that the Commissioner and the Government do not react to the Labatt decisions by seeking to once again amend Section 100. A single defeat on the specific facts of the Labatt case is not a sufficient reason to seek to change the law.


1 Canada (Commissioner of Competition ) v. Labatt Brewing Co. [2007] C.C.T.D. No. 5 (Comp. Trib.).

2 Canada (Director of Investigation and Research) v. Superior Propane (1998), 85 C.P.R. (3d) 194 (Comp. Trib.).

3 Canada (Commissioner of Competition) v. Labatt Brewing Co. [2007] C.C.T.D. No. 5 (Comp. Trib.) at paragraph 47.

4 The FCA and Tribunal's reasons are remarkable because they do not judicially consider the Tribunal's statements in Superior Propane that the purpose of Section 100 is "to preserve the pre-merger status quo and all the remedies provided under Section 92." Canada (Director of Investigation and Research) v. Superior Propane (1988), 85 C.P.R. (3d) 194 (Comp. Trib.) at paragraph 16.

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.

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