This spring, the Canadian Competition Bureau released for public comment a revised version of its Merger Enforcement Guidelines (MEGs), the document that explains how the Bureau analyzes proposed mergers. The Bureau is in the process of reviewing comments provided by various stakeholders and plans to finalize the revised MEGs this summer.
Generally, the draft MEGs:
- reflect developments in the law, primarily decisions of the Competition Tribunal, that have occurred since the publication of the current MEGs in 1991; and
- in many areas, follow the approach set out in the 1992 US Merger Guidelines, which reflects the trend towards convergence and consistency in merger review, which is particularly important in cross-border transactions.
More specifically, among other things, the draft revised MEGs:
- include a substantially revised section on efficiencies that is consistent with the Federal Court of Appeal's decision in the Superior Propane case. Essentially, the anti-competitive effects of a merger will be balanced against the efficiencies resulting from the merger. (It should be noted that the new section on efficiencies could be outdated shortly after the draft revised MEGs are finalized. Bill C-249, which in the opinion of many experts would effectively remove the efficiencies defence from Canada's Competition Act, has been passed by the House of Commons and is under review by the Senate Committee on Trade, Banking and Commerce.);
- set out in detail how a merger may lessen or prevent competition by making it easier for market participants to engage in coordinated behaviour. This addition is particularly helpful because, due to the relatively concentrated nature of the Canadian economy, many mergers exceed the current MEGs' safe harbour threshold (which is not changing) relating to coordinated behaviour, that is, the market share of the four largest participants in the relevant market exceeds 65% and the market share of the merged entity exceeds 10%;
- state that market definition will be based on substitutability and focus on demand responses to price changes;
- include a new section on countervailing buyer power which explains how one or more buyers may be able to constrain the exercise of market power; and
- provide additional guidance as to what constitutes a merger. For example, the concept of control is expanded to include de facto control.
The full text of the draft revised MEGs is available at http://competition.ic.gc.ca/ epic/ internet/ incb-bc.nsf/ vwapj/ ct02818e.pdf/ $FILE/ ct02818e.pdf.
Ian Macdonald, Catherine Pawluch and Nicholas Dietrich
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