HIGHLIGHTS

The Competition Tribunal’s decision:

  • Clarifies the test for interim injunction under the merger provisions of the Competition Act
  • Requires the Commissioner of Competition to make out a strong, non-speculative case in order to obtain an interim injunction to block or delay a merger
  • Impacts parties’ risk allocation considerations with respect to potential challenges, hold separate and remedies

On June 3, 2015, the Canadian Competition Tribunal issued a decision requiring Parkland and Pioneer to hold separate six retail gas stations for the duration of the Commissioner of Competition’s challenge to their proposed merger. The Parkland/Pioneer decision has important implications for parties planning complex mergers. It provides that, among other things, the Commissioner must make out a “non-speculative” case that competition will be harmed in the markets of concern in order to succeed on an interim remedy application. Parties planning complex mergers should therefore carefully consider both interim remedies (such as a hold separate or a preservation commitment) and final remedies early in the transaction planning stage, as this may prove helpful in closing contested transactions.

On April 30, 2015, the Commissioner filed an application against Parkland in respect of its proposed acquisition of Pioneer gas stations and supply contracts in 14 locations, the first challenge to a merger since the Supreme Court of Canada’s January 2015 decision in Tervita Corp. v. Canada (Commissioner of Competition) (Tervita). More information about the Tervita decision can be found in our January 2015 Blakes Bulletin: Supreme Court of Canada Breathes New Life into Merger Efficiencies in Canada.

The merging parties supply gasoline to consumers through retail gas stations. In his application challenging the proposed acquisition, the Commissioner alleged that the merged party would give rise to unilateral and coordinated effects in 14 local markets across Ontario and Manitoba. Though Parkland proposed to divest stations and make other commitments to address the Commissioner’s concern in 11 of the 14 markets, the Commissioner sought an order under section 92 of the Competition Act, prohibiting Parkland and Pioneer from implementing the proposed transaction in all 14 markets or, alternatively, requiring Parkland to dispose of assets in those markets. The application challenging the proposed acquisition remains pending.

The Commissioner also sought an interim injunction under section 104 of the Competition Act, to require the parties to hold separate the assets at issue for the duration of the section 92 proceedings. In deciding the Commissioner’s section 104 application, the Tribunal clarified that the test for an interim injunction under section 104 is based on the standard for injunctive relief used in Canadian courts; namely, the Commissioner must:

  • Demonstrate there is a serious issue to be tried
  • Establish, using “clear and non-speculative” evidence, that irreparable harm will result if the interim relief is not granted
  • Demonstrate that the balance of convenience supports the granting of relief

In Parkland/Pioneer, the Tribunal found that:

  • There would be serious issues to be tried in all 14 local markets because (1) Parkland did not offer a remedy in three of the markets and (2) Parkland’s proposed remedy in the remaining 11 markets would not satisfy the Commissioner’s concerns because the remedies were not sufficiently detailed.
  • The Commissioner had not demonstrated that irreparable harm would result in all markets because the Commissioner’s expert did not provide sufficient evidence or information as to how the geographic markets were defined. (Irreparable harm would result in six markets where Parkland’s expert did not contest the Commissioner’s position.)
  • The balance of convenience favours issuing an interim injunction in respect of the six locations where irreparable harm would result since Parkland would suffer minimal inconvenience in holding separate the six stations while the possibility of harm to the public interest expected in the absence of the interim order was high.

On the basis of this reasoning, the Tribunal ordered that Parkland hold separate stations in six markets pending the outcome of the section 92 proceedings.