In March, 2009, the Competition Bureau released in final form a
Bulletin to provide "practical guidance" on the
Bureau's approach to "efficiencies" claims in
mergers, as provided for in section 96 of the Competition
Act (the Act). In particular, the Bulletin addresses
the information required and the analytical approach to be used to
determine when the Bureau will refrain from challenging on a merger
on the grounds that the efficiency gains likely to be brought about
by the merger will be greater than and will offset the
anticompetitive effects likely to arise from it. The Bulletin,
released in draft for public comment in August 2008, is said to
supplement the discussion of efficiencies in the Bureau's
Merger Enforcement Guidelines (revised in 2004), commonly
known as the MEGs.
Of note in the final version of the Bulletin, the Bureau appears
to have softened its approach to the strict separation of its
consideration of the anticompetitive effects of a merger (which the
Bureau must prove) from the efficiencies to be brought about by the
merger (which the merging parties must prove). The Bulletin now
states that cost savings from substantiated efficiency gains may be
relevant to a consideration of whether the merger will produce
anticompetitive effects if, as a result of the cost savings,
"the parties to the merger are better positioned to compete in
a competitive market or are less likely to engage in coordinated
behaviour." In addition, the Bulletin expressly identifies
so-called "dynamic efficiencies" (defined as the
"optimal introduction or improvement of products and
production processes") as often being a "key factor in
Bureau reviews in concentrated industries characterized by rapid
technological change or innovation."
Most importantly, the final version of the Bulletin no longer
contains the section of the draft suggesting that the Bureau would
consider whether, as a result of the merger, efficiencies would be
forgone (i.e., reasonably contemplated resource savings by one or
both of the merging parties would not be achieved because of the
merger). The Bureau would then discount any efficiency gains
established by the merging parties by the amount of the foregone
efficiencies. This section of the draft Bulletin was the subject of
substantial criticism on the grounds that, among other things, it
was not contemplated by the Competition Act and was not
susceptible to meaningful evaluation by the Bureau; the removal of
this section of the Bulletin is a welcome development.
In the end, the Bulletin amounts to a helpful - but not highly
enlightening - supplement to the MEGs' discussion of the
Bureau's approach to efficiencies. The real test of the
Bureau's stated willingness to clear mergers on the basis of
efficiencies will be whether the Bureau will refrain from
challenging a merger it believes will produce anti-competitive
effects on the grounds of the efficiencies it will generate or
whether, as has historically been the case, parties will have a
very difficult time 'clearing' an otherwise
anti-competitive merger by relying on the "efficiencies
defence" in section 96 of the Act. Only time will
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