In Canada, parties to a notifiable merger transaction are
legally entitled to complete the transaction once the statutory
waiting period has expired. This is the case even where the
Competition Bureau has not yet completed its merger review.
However, a recent decision by a U.S. court highlights the
potentially significant antitrust risk that merger parties
assume when they elect to close in these circumstances.
In late 2000, Chicago Bridge & Iron Company notified the
U.S. Federal Trade Commission (FTC) that it proposed to acquire
Pitt-Des Moines, Inc., a close competitor in the manufacture
and sale of industrial storage tanks. Following expiry of the
30-day waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act – the U.S. equivalent of
Canada's pre-merger notification regime
– but before the transaction had been
completed, the FTC advised the parties that it had begun a
merger review. In early 2001, with the review still in
progress, the parties completed the transaction. The FTC
subsequently concluded that the transaction violated U.S.
antitrust laws and sought and obtained a remedial order.
Earlier this year, after a lengthy appeal process, the U.S.
Court of Appeals for the Fifth Circuit upheld that
Significantly, the remedy required in the Chicago
Bridge case to restore competition in the affected market
was that Chicago Bridge divide the business resulting from its
merger with Pitt-Des Moines into two separate entities and
divest one of the entities to a third party – in
effect, a wholesale unwinding of the transaction. Although the
Chicago Bridge case is not binding on courts in
Canada, it is relevant to merger review in Canada for two
First, the case serves as a reminder that completing a
merger transaction in the face of an ongoing regulatory review
provides the parties with no assurance that the transaction
will not subsequently be challenged – under section
92 of the Competition Act, the Competition Tribunal
can make a remedial order in respect of a completed merger for
up to three years after it has been completed.
Second, the powers of the Competition Tribunal in remedying
the effects of a completed merger include the power to dissolve
the merger or to dispose of shares or assets in such manner as
the Tribunal directs. Chicago Bridge serves as a
reminder that, in appropriate circumstances, far-reaching
remedial orders can and will be imposed by the courts where
such orders are necessary to restore the competition lost
through an anticompetitive merger. This, in turn, highlights
the critical role of antitrust risk assessment in devising and
pursuing merger strategy.
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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The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
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