The announcement by the Competition Bureau on January 16, 2009 that it has concluded there is insufficient evidence to challenge the acquisition of Lakeport Brewing Income Fund (Lakeport) by Labatt Brewing Company (Labatt) brings to an end one of the most heated skirmishes in the annals of Canadian competition law. The outcome of what could be among the lengthiest merger reviews in Canadian legal history may well result in support by the Government for less judicial oversight of the merger review process, and for longer waiting periods, with a proposed move to US-style second request procedures.1
The acquisition of Lakeport by Labatt was first proposed in January 2007, following closely on the heels of another acquisition, during which the Competition Bureau had reviewed Ontario beer markets in some detail. In February 2007, the Competition Bureau obtained court orders against eleven parties, requiring them to produce significant additional documents and information in furtherance of its review of the Lakeport acquisition. With the closing date looming and the Commissioner voicing serious concerns, the parties offered to enter into a so-called "hold-separate arrangement" to permit the public takeover bid to proceed, even while the Bureau continued its investigation. The Bureau rejected the form offered, however, and instead sought an injunction from the Competition Tribunal, pursuant to section 100 of the Competition Act, to delay the closing of the transaction. The Tribunal dismissed the Commissioner's application on March 28, 20072, citing insufficient evidence, and the transaction closed the next day.3
The Competition Act permits the Commissioner to challenge a transaction for up to three years after closing, however, and the Bureau's investigation continued. More than seven months later, in November 2007, the Commissioner obtained, on an ex parte basis, court orders against fifteen parties (including Labatt and Lakeport) for the production of additional documents and information. Labatt quickly asked the Federal Court to set aside the November orders against it and Lakeport. In a stinging rebuke, the Federal Court issued a decision on January 28, 2008, setting aside its own order requiring Labatt to produce additional documents, on the basis that the disclosure by the Commissioner to obtain the order had been "misleading, inaccurate and incomplete," and had full disclosure been made, the order would not have been issued.4 Just days earlier, on January 22, 2008, the Federal Court of Appeal had also rejected the Commissioner's appeal of the Tribunal's decision not to grant the interim injunction.5 The Bureau's investigation of the competitive effects of the merger continued, apparently, until January 16, 2009 - almost two years after receipt of the original filings.
While exceptional cases do arise, it should be noted that the Competition Bureau's own non-binding "service standard" for review of a transaction that raises "very complex" issues is five months. The Labatt/Lakeport transaction was exceptional in many ways - including the length of the review.