In Canada, parties to a notifiable merger transaction are legally entitled to complete the transaction once the statutory waiting period has expired. This is the case even where the Competition Bureau has not yet completed its merger review. However, a recent decision by a U.S. court highlights the potentially significant antitrust risk that merger parties assume when they elect to close in these circumstances.
In late 2000, Chicago Bridge & Iron Company notified the U.S. Federal Trade Commission (FTC) that it proposed to acquire Pitt-Des Moines, Inc., a close competitor in the manufacture and sale of industrial storage tanks. Following expiry of the 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvements Act – the U.S. equivalent of Canada’s pre-merger notification regime – but before the transaction had been completed, the FTC advised the parties that it had begun a merger review. In early 2001, with the review still in progress, the parties completed the transaction. The FTC subsequently concluded that the transaction violated U.S. antitrust laws and sought and obtained a remedial order. Earlier this year, after a lengthy appeal process, the U.S. Court of Appeals for the Fifth Circuit upheld that decision.
Significantly, the remedy required in the Chicago Bridge case to restore competition in the affected market was that Chicago Bridge divide the business resulting from its merger with Pitt-Des Moines into two separate entities and divest one of the entities to a third party – in effect, a wholesale unwinding of the transaction. Although the Chicago Bridge case is not binding on courts in Canada, it is relevant to merger review in Canada for two reasons.
First, the case serves as a reminder that completing a merger transaction in the face of an ongoing regulatory review provides the parties with no assurance that the transaction will not subsequently be challenged – under section 92 of the Competition Act, the Competition Tribunal can make a remedial order in respect of a completed merger for up to three years after it has been completed.
Second, the powers of the Competition Tribunal in remedying the effects of a completed merger include the power to dissolve the merger or to dispose of shares or assets in such manner as the Tribunal directs. Chicago Bridge serves as a reminder that, in appropriate circumstances, far-reaching remedial orders can and will be imposed by the courts where such orders are necessary to restore the competition lost through an anticompetitive merger. This, in turn, highlights the critical role of antitrust risk assessment in devising and pursuing merger strategy