The Canadian Competition Bureau (“CCB”) has released new Merger Enforcement Guidelines.  The new Guidelines are intended to reflect the CCB’s current merger review practices, case law and updated economic thought.  Commentators consider that the new Guidelines do not reflect a significant change in the CCB’s approach to merger control.

The Guidelines make several key clarifications:

  • (market definition) market definition is not necessarily the initial step, or a required step, in the CCB’s review but is generally undertaken and generally sets the context for the CCB’s assessment of the likely competitive effects of a merger;
  • (“significant interest” in a business) section 91 of the Canadian Competition Act defines a “merger” as the acquisition or establishment of control over, or a significant interest in, the whole or part of a business of a competitor, supplier, customer or other person.  The revisions expand on what constitutes a significant interest and set out factors to consider when evaluating material influence;
  • (interlocking directorate) an interlocking directorate may arise where a director of one firm is an employee, executive, partner, owner or member of the board of directors of a second firm, or has another interest in the business of the second firm.  The Guidelines clarify that an interlocking directorate is generally of interest to the CCB when the interlocked firms are competitors, are vertically related, or produce complementary or related products;
  • (unilateral effects) the incentive to raise prices following the merger will typically be greater when the products of the merging firms are close substitutes, when the merger removes a vigorous and effective competitor from the market, or when buyers are not very sensitive to price increases.  However these are not the only circumstances which may raise concerns for the CCB;
  • (countervailing power of customers) there must be evidence that a customer has the ability and incentive to constrain an exercise of market power by the merged firm.  The CCB will not presume that a customer has the ability to exercise countervailing power merely by virtue of its size.  The Guidelines also provide greater guidance on monopsony power; and
  • (vertical mergers) the CCB will consider whether the merged firm has the ability and incentive to foreclose rivals, and whether foreclosure would substantially lessen competition.  The Guidelines also clarify the four main categories of foreclosure that the CCB will consider in a review of a vertical merger.  

Although there are similarities between the CCB’s new Guidelines and the ACCC’s Merger Guidelines, there are some notable differences.  A significant point of difference is the approach the respective regulators take regarding market definition.  In contrast to the CCB’s Guidelines which provide that it is not necessary to start by defining markets, the ACCC’s Guidelines state that “market definition establishes the relevant ‘field of inquiry’ for merger analysis” and that “the ACCC will examine the competitive impact of the transaction in the context of the markets relevant to the merger.”