Canada: Mind The Gap: Merger Efficiencies In The United States And Canada

Co-authored by Paul Cuomo And Jeffrey Oliver

THE  PEACE  BRIDGE, LOCATED  AT the end of Lake Erie, connects the United States to Canada. Opened in 1927, it was named to commemorate 100 years of peace between the two countries and remains one of North America's most important commercial ports.

Notwithstanding the close ties between Canada and the United States, there is an important difference in the way that mergers are reviewed on either side of the border. In Canada, the efficiencies defense is typically credited and increasingly determines the outcome of transactions that would otherwise be considered anticompetitive under the law. In the United States, efficiencies are seldom credited and almost never influence the outcome of mergers that are otherwise deemed anticompetitive. This is important because a significant number of mergers are reviewed by both the Canadian Competition Bureau (the Bureau) and the U.S. antitrust agencies.1

The differing treatment of efficiencies can lead to different results on different sides of the border. 2/ This is despite the fact that U.S. government officials stated in the aftermath of GE/Honeywell that convergence is desired whenever possible to avoid one authority blocking a transaction that may be procompetitive and efficiency-enhancing in another. 3 As discussed in this article, when it comes to efficiencies, the differences are greater than the similarities.


Efficiencies remain the primary rationale for almost all mergers; they allow the merging firms to achieve economies of scale and scope in production, staff rationalization, financial synergies (e.g., lower cost of capital), and other synergies. 4 Intergovernmental agencies such as the Organization for Economic Co-operation and Development (OECD), as well as most antitrust authorities, have generally acknowledged the importance of an assessment of efficiencies in merger review. 5 The International Competition Network recommends that competition agencies include an assessment of potential efficiencies in their overall merger review analytical framework, noting that certain efficiencies "may bring synergies on a potentially continuous basis, thus enhancing the potential performance of the merged entity and the potential benefit to competition and consumers." 6

While the U.S. Horizontal Merger Guidelines expressly recognize that "a primary benefit of mergers to the economy is their potential to generate significant efficiencies," 7 the U.S. Supreme Court has not expressly recognized an efficiencies defense for mergers. However, the Sixth, Eighth, Eleventh, and District of Columbia Circuits, and most recently, the Ninth Circuit, have at least suggested that efficiencies could save the day for the right merger—although the Ninth Circuit recently cautioned that "we remain skeptical about the efficiencies defense in general and about its scope in particular." 8

By contrast, the Supreme Court of Canada has recently approved a merger to monopoly based on the efficiencies defense, noting that only "marginal efficiency gains are required for the defense to apply." 9 Questions remain in both countries and in cross-border cases as to how efficiencies are to be treated in strategic mergers. This is particularly important given the 2014 publication of the Best Practices on Cooperation in Merger Investigations by the U.S. antitrust agencies and the Bureau, which encourages them to work together. 10

Regardless of whether merger laws give primacy to economic efficiency (as in Canada) or incorporate economic efficiency as an element in merger review (as in the United States), there is significant value in ensuring consistent results with conclusions that  are supported by sound economic principles. Economics provides an objective basis for assessing antitrust issues, which is important when agencies may be feeling pressure to take into account more political factors, such as the impact on employment. As new issues emerge, particularly in terms of the assessment of vertical mergers, or mergers that can result in significant dynamic efficiencies and innovation, tools that are used to evaluate economic efficiency offer the potential for an objective approach to such assessments, often through sophisticated and quantifiable economic analysis.

Prominence of Efficiencies in Canadian Merger Review

Canada has a strong track record of crediting efficiencies in merger reviews, and even clearing transactions that would otherwise be challenged if not for the claimed efficiencies. In Canada, primacy is given to economic efficiency as a statutory objective in Section 96 of the Canada Competition Act (the Act), 11 which provides a defense to mergers that are otherwise likely to lessen or prevent competition if efficiencies from the merger are likely to be greater than and offset the merger's anticompetitive effects. 12 As the Supreme Court of Canada recognized in Tervita Corp. v. Canada (Commissioner of Competition), this efficiencies defense was introduced following a report from the Economic Council of Canada that "identified economic efficiency as the overriding policy objective" behind reforming the Act. 13

The efficiencies defense in Section 96 of the Act recognizes the important benefits that mergers can generate for the economy through cost savings and economies of scale, which make the Canadian economy more competitive and more efficient. At the same time, the provision acknowledges that certain mergers can also have negative impacts on competition, and seeks to balance these factors to determine whether a merger will result in a net economic benefit to the Canadian economy. There is no requirement that efficiencies be passed on to consumers; therefore, fixed cost savings are an important consideration in addition to variable cost savings. As a result, efficiencies could save a merger to monopoly in Canada, even if it leads to higher prices or less choice for consumers.

In economic terms, Section 96 posits a cost-benefit analysis that aims to maximize total surplus (the sum of producer surplus and consumer surplus) for Canadian society. This total surplus approach set out in Canada's statute has led commentators to call it the "most economically literate" competition law in the world. 14 As set out in the Merger Enforcement Guidelines, the Bureau will exclude efficiency gains that would have been achieved through alternative means even if an order from the Canadian Competition Tribunal were issued; efficiency gains that would not be affected by a Tribunal order; gains that are redistributive in nature (e.g., cost reductions from increased bargaining leverage); efficiency gains that do not accrue to the benefit of the Canadian economy; and savings resulting from a reduction in output, service, quality, or product choice. 15


1 More than one-quarter of the Bureau's merger reviews involve a significant level of cooperation from at least one international antitrust counterpart. See John Pecman, Comm'r of Competition, Can. Competition Bureau, Remarks at the International Privacy Enforcement Meeting (June 4, 2015),

2 For example, the Superior/Canexus merger was cleared in Canada on the basis of the efficiencies defense but challenged in the United States. Compare Can. Competition Bureau, Competition Bureau Statement Regard- ing Superior's Proposed Acquisition of Canexus (June 28, 2016), http://, with Press Release, Fed. Trade Comm'n, FTC Challenges Proposed Merger of Canadian Chemical Companies Superior Plus Corp. and Canexus Corp. (June 27, 2016), 06/ftc-challenges-proposed-merger-canadian-chemical-companies.

3 Deborah Platt Majoras, Deputy Assistant Att'y Gen., U.S. Dep't of Justice, Remarks Before the Antitrust Law Section, State Bar of Georgia (Nov. 29, 2001),


5 Id. at 16.


7 U.S. Dep't of Justice & Fed. Trade Comm'n, Horizontal Merger Guidelines 29 (2010) [hereinafter Horizontal Merger Guidelines],

8 St. Alphonsus Med. Ctr.–Nampa Inc. v. St. Luke's Health Sys., Ltd., 778 F.3d 775, 790 (9th Cir. 2015; see also ProMedica Health Sys., Inc. v. FTC, 749 F.3d 559 (6th Cir. 2014); FTC v. H.J. Heinz Co., 246 F.3d 708 (D.C. Cir. 2001); FTC v. Tenet Health Care Corp., 186 F.3d 1045 (8th Cir. 1999); FTC v. Univ. Health, Inc., 938 F.2d 1206 (11th Cir. 1991).

9 Tervita Corp. v. Canada (Comm'r of Competition), 2015 SCC 3, para. 151 (Can.).

10 Can.-U.S. Merger Working Group, Best Practices on Cooperation in Merger Investigations (Mar. 25, 2014),

11 See e.g., Canada (Comm'r of Competition) v. Superior Propane, Inc., 2002 Comp. Trib. 16, paras. 80, 215, aff'd, 2003 FCA 53 (CanLII); Tervita, 2015 SCC 3, paras 111–113.

12 Competition Act, R.S.C. 1985, c. C-34, § 96 (Can.).

13 Tervita, 2015 SCC 3, para. 85.

14 MICHAEL J. TREBILCOCK ET AL., THE LAW AND ECONOMICS OF CANADIAN COMPETITION POLICY 31 (2002). The Canadian approach, as articulated by the Bureau, also includes somewhat extraneous considerations where a merger results in these "socially adverse" wealth transfers from low-income consumers. See Tervita, 2015 SCC 3, paras. 90–99. The incorporation of wealth transfers into the efficiencies trade-off analysis has been criticized by the Canadian Competition Tribunal because of the need to rely on value judgments that go beyond the traditional scope of antitrust law. See Superior, 2002 Comp. Trib. 16, para. 372.

15 Can. Competition Bureau, Merger Enforcement Guidelines 12.20 (Oct. 2011) [hereinafter Merger Enforcement Guidelines]

To view the full article, please click here.

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.

Events from this Firm
27 Sep 2018, Speaking Engagement, Toronto, Canada

Blakes is pleased to introduce a new program in our continued partnership with Women General Counsel Canada. Stepping Beyond is directed to women general counsel who are preparing for opportunities beyond their GC role.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
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