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Successful Challenge of a Completed Merger: Competition Tribunal Refuses to Order Dissolution

Date

June 1, 2012

AUTHOR(s)

Marilyn Leblanc
Madeleine Renaud


On May 29, the Competition Bureau (Bureau) announced that the Competition Tribunal (Tribunal) reached a decision in Commissioner of Competition v . CCS Corporation. According to the Bureau’s press release, the Tribunal ordered CCS Corporation (CCS) to divest the Babkirk hazardous waste landfill site, thereby refusing to grant the Bureau’s requested primary remedy to dissolve the transaction.

The Commissioner was therefore successful in demonstrating that the merger was anticompetitive, but not in convincing the Tribunal that dissolving the merger was the only appropriate remedy in this case, as had been argued in the context of a preliminary motion.

This is the first time a merger is challenged on the grounds that it will result in a substantial prevention, as opposed to a substantial lessening, of competition. The Tribunal’s decision also provides an important reminder that due diligence is critical in mergers, even in circumstances where notification to the Bureau is not required, as mergers may be challenged for up to one year after their completion.

Background

In January 2011, for the first time since 2005, the Commissioner of Competition (Commissioner) applied to the Tribunal for an order dissolving CCS’s acquisition of Complete Environmental Inc. (Complete Environmental) or, in the alternative, requiring the divesture of assets to a purchaser that had been approved in advance by the Commissioner.

CCS was the only owner and operator of the other secure landfill in North-Eastern British Columbia. Complete Environmental obtained regulatory approval authorizing the conversion of the Babkirk landfill into a “secure landfill” for hazardous waste, which would have allowed a new entrant in the area.

However, Complete Environmental did not enter the market, but rather sold the Babkirk landfill site to CCS. The acquisition, which was not notifiable under the Competition Act, prompted a Bureau’s investigation, which resulted in the Commissioner’s allegations that the merger would substantially prevent competition for the disposal of hazardous waste in North‑Eastern British Columbia.

The vendors filed a preliminary motion, arguing that the dissolution of the transaction sought by the Commissioner was not the appropriate remedy. The motion was dismissed among other reasons because the vendors had failed to demonstrate that divestiture would be an effective remedy in this case. The Tribunal specifically pointed out that in the absence of a potential buyer, the effectiveness of the divestiture as a remedy had not been established.

Tribunal’s Decision

The Tribunal’s reasons have not yet been made public, but when released, they will be of interest, as they will likely provide insight into several novel issues in Canadian competition law, including:

  • the circumstances in which the acquisition of assets that are not part of an operating business will be considered to result in a substantial “prevention” of competition (as opposed to a “lessening” of competition resulting from the acquisition of an operating business);
  • the factors considered by the Tribunal in exercising its discretion to order the divestiture of the landfill site as a remedy, as opposed to ordering the dissolution of the merger, the primary remedy sought by the Commissioner. More specifically, it will be interesting to see whether the Tribunal required the Commissioner’s advance approval of the purchaser prior to ordering the divestiture.

We will publish a more detailed report on the Tribunal’s reasons upon their release, which should occur in the near future.

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