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Competition and Antitrust Laws in Canada: Mergers, Joint Ventures and Competitor Collaborations
Brian A Facey, Cassandra Brown
Toronto: LexisNexis Canada, 2013
Excerpt from Chapter 1
Looking back at Canada’s experience with competition law provides only limited insights into its current application. Indeed, the history of Canadian competition law is littered with unsuccessful attempts to address business conduct, and uninformed and almost nascent academic and political dialogue about the role of competition legislation in Canada. That is not so today. The past 25 years in particular have witnessed a sea change, with new laws, new institutions and new understandings of the importance of competition, innovation and efficiency — and hence competition laws — in Canada. This trend is perhaps nowhere clearer than in the treatment of mergers.
Canada’s merger laws have undergone frequent changes under the country’s evolving approach to government oversight of competition and, more specifically, mergers over the course of the last century. From an initial point of restraint, where the Courts had no statutory basis for interfering with a merger that did not constitute an outright conspiracy, the law of mergers in Canada has evolved into an elaborate structure consisting of a specialized competition tribunal and a bureau of law officers and economists that regularly identify and investigate mergers that may affect competition in Canada.
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In contrast to this slow and uncertain start, merger review today now rests at the vanguard of modern competition law in Canada. Efforts to ensure that transactions of significant financial magnitude are reviewed in advance of closing have resulted in thousands of mergers and acquisitions being notified to Canada’s Competition Bureau (“Bureau”) since 1986, and have spurred a cottage industry of lawyers, academics and government officials all specialized in merger control and merger review. As such, today, more than 100 years after the word “merger” was first inserted into Canada’s competition lexicon, we are witnessing the high water mark of merger review, with ever increasing complexity in the tools being employed to review mergers.
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Historically, Canadian merger law and policy finds its roots in the approach to competition law fashioned in post-Confederation Canada, where social and economic circumstances differed significantly from the environment in England where the jurisprudential predecessors to modern antitrust law had developed.
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Thus, both then and now, the goals of merger review in Canada have been influenced largely by characteristics of the Canadian economy. Canada’s small and open economy, with its history of government intervention and foreign involvement, as well as Canada’s other national attributes — its vast geography, sparse demography and high industry concentration — all have played key roles in shaping merger policy and law. Many of these characteristics are also interrelated. For example, Canada’s high industry concentration is linked to its small economy. Where an economy is smaller in size, economies of scale in production or distribution reduce, by definition, the number of firms necessary to supply any given level of demand. At the same time, the larger firm size required to achieve minimum efficient scale means that higher industrial concentrations may be necessary in order to achieve productive efficiency.
Debate persists as to whether competition enforcement agencies should exercise leniency in reviewing mergers in economies that exhibit these characteristics. Openness of an economy is sometimes thought to allow for sufficient competition from foreign firms to justify the development of strong domestic firms that can compete effectively on a global scale. The promotion of so-called “national champions” would justify less intensive scrutiny of domestic efficiency enhancing mergers. The opposing argument is that intense domestic competition and a policy of being “tough” on mergers is necessary to achieve the goals of competition policy in such an economy. The final report of the Competition Policy Review Panel, aimed at modernizing the Competition Act and Canadian competition policy, appears to articulate both goals. It states that Canada “must become more engaged with enhanced competition domestically and with increased efforts to penetrate global markets”.
As merger law continues to evolve, it is important to be able to delineate the goals of merger review as it fits within the framework of competition policy more generally. However, the identification of such a coherent set of goals remains elusive.
Thus, while there are many identifiable objectives of Canadian competition law, the hierarchy of these objectives remains in flux. Merger laws and policies continue to be shaped by this ever-changing ideological backdrop, as well as the evolving social and economic conditions that define the Canadian context. In an increasingly interconnected world, both socially and economically, Canadian merger law and policy will likely see further debates like these in the future.
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From its origins as a legislative tool aimed at combating conspiracies, to its present incarnation as a sophisticated body of law and policy designed to protect the country’s competitive landscape, Canadian merger review has undergone a dramatic century of transformation. With merger review now taking on a heightened profile and increasingly international dimension, this book aims to provide a timely treatise for the reader that clearly and comprehensively sets out the law of merger review in Canada. In the remaining chapters of this book, we describe in greater detail the process and substance of Canadian merger review.