Merger Controls First Edition - J Sagar Associates

Osler, Hoskin & Harcourt LLP Canada
access to Dr. Pepper’s marketing plans or other commercially sensitive information. In order to resolve concerns, The
Coca-Cola Company agreed to certain information use restrictions and restrictions related to accessing relevant personnel.
The consent agreement reached with The Coca-Cola Company will be in effect for 20 years, and an independent monitor
has been assigned to ensure that The Coca-Cola Company complies with the above restrictions.
While it is of interest that behavioural remedies have been accepted in two recent cases, it is too early to conclude that
purely behavioural remedies may be accepted as sufficient to resolve concerns in Canada more generally. In this regard,
in Ticketmaster, the behavioural remedy supplemented a structural remedy. Coca Cola involved a vertical merger with a
fairly limited concern primarily related to access to commercially sensitive information.
Key policy developments and reform proposals
In September 2010, the Bureau announced a public consultation to consider the merits of revising the MEGs. The purpose
of the consultation is to assess whether the MEGs accurately reflect current practice at the Bureau, the potential impact of
the revised Horizontal Merger Guidelines in the United States, and address other legal and economic developments. In
February 2011, the Bureau announced that it would be making “moderate” changes to the MEGs and released a draft for
public consultation in June 2011.
The proposed revisions to the MEGs do not reflect a material change in the Bureau’s substantive approach to merger
review and include:
• clarification of the role of market definition whereby the Bureau explains that merger review is an iterative process
and while market definition generally forms a part of that process, it is not the required first step of the analysis nor
is it a mandatory step in the analysis;
• more detailed discussion of unilateral effects and acknowledgment that the Bureau has considerable discretion in
deciding which economic or other analytical tools should be used in the review process. One such economic tool
discussed in the proposed revisions is the diversion ratio. The proposed revisions also state that the Bureau
considers whether the merger removes a vigorous and effective competitor, whether buyers are price sensitive, the
likely competitive response of rivals by way of expansion or repositioning of products, entry, past buyer-switching
behaviour in response to pricing changes, information based on customer preference surveys, win-loss records and
estimates of own-price and cross-price elasticities. The proposed revisions refer to the use of qualitative evidence
such as ordinary-course documents created by the merging parties or first-hand observations of the industry by
market participants, as well as quantitative evidence such as statistical analyses of price, quantity, costs or other
data;
• further guidance on the analysis of coordinated effects;
• expanded discussion of the Bureau’s approach to monopsony power, countervailing power, interlocking directorates
and minority interests;
• elimination of the two-year timeframe for potential entry into the market when the Bureau is assessing whether such
new entry will constrain the merged entity from exercising market power;
• elaboration on the Bureau’s approach to non-horizontal mergers; and
• more detailed discussion of efficiencies.
Final revised MEGs are expected to be published in the Fall of 2011.
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1
Endnotes
Commissioner of Competition v. CCS Corporation, Complete Environmental Inc., Babkirk Land Services Inc.,
Karen Louise Baker, Ronald John Baker, Kenneth Scott Watson, Randy John Wolsey, and Thomas Craig Wolsey (CT-
2011-02), see http://www.ct-tc.gc.ca/CasesAffaires/CasesDetails-eng.asp?CaseID=336.
2 Fees and Service Standards Handbook for Merger and Merger-Related Matters (November 1, 2010) at 4 and 11
(“Fee and Service Standards Handbook”), see http://www.competitionbureau.gc.ca/eic/site/cb-
3
bc.nsf/eng/03295.html.
Merger Review Process Guidelines (September 18, 2009) at 6, see http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/03128.html.
4 Fees and Service Standards Handbook at 11.
5 Information Bulletin on Merger Remedies in Canada (September 22, 2006) at 22 (“Remedies Bulletin”), see
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02170.html.
6 Competition Bureau, “Competition Bureau Requires Significant Divestitures in Waste Services Merger” (June 29,
2010), see http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03256.html.
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