...When we look around at the monopolies and near-monopolies in Canada which dominate so much of our economy, Mr. Mackenzie King's Combines [Investigation] Act resembles nothing so much as the bleating of a pathetic vegetarian lamb in the midst of a carnivorous jungle...Mr. King never quite got it that our civilization is dominated by carnivorous animals...and that sooner or later the statesman must clear out the jungle and make it habitable.(1)
Attacked for decades as being "totally ineffective"(2) and a "national embarrassment,"(3) King's "pathetic lamb" was finally sacrificed on June 19, 1986, by the federal government's enactment of the long awaited Stage II amendments to what is now the Competition Act.(4) These amendments promised to introduce to Canada an ambitious and comprehensive framework by which merger activity in our country could be controlled, consumers protected, and thus, the "jungle" cleared. At the same time, however, both business and legal historians agreed that the relatively small size of the Canadian market and the overall importance of international trade to the economy had traditionally necessitated that certain industries be concentrated in order to achieve scale or other efficiencies required to compete in world markets.(5) Thus, it was feared by some that the replacement of the "lamb" with a more rigid and effective merger control policy might prove counter-productive to Canada's economic growth by imposing a "significant barrier to the establishment of efficient world-scale firms..."(6)
The importance of balancing these conflicting objectives of consumer welfare maximization and international competitiveness underlies modern merger law, and was recognized by the Competition Act in its stipulated purpose to "maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy...[and] to provide consumers with competitive prices and product choices."(7) The ultimate success or failure of the Competition Act's merger provisions will be contingent on their ability to foster a fair and efficient merger regulatory regime in which both opposing perspectives are rationally integrated.
The intent of this paper, ten years after the political rebirth of Canadian merger controls, is therefore two-fold: 1) to examine the merger regulatory regime established by the Competition Act, including its substantive law, administration, and its ability to satisfy its diverse underlying objectives; and 2) to propose reforms of this merger regulatory regime which would allow it to integrate more efficiently and effectively the rights and interests of both consumers and corporations.
The paper is divided into six sections, including this introduction. Part II conveys background information on the history of mergers, competition law and merger controls in Canada; Part III examines the substantive merger provisions of today's Competition Act; Part IV offers a critical review of the respective roles of the Bureau of Competition's Director of Investigation and Research and of the Competition Tribunal; Part V is devoted to the regulatory reform of the merger provisions; and Part VI provides a conclusion to the paper.
We are never completely contemporaneous with our present. History advances in disguise; it appears on stage wearing the mask of the preceding scene, and we tend to lose the meaning of the play.(8)
To fully understand the current Canadian merger regulations, it is useful to first relive the past. By tracing both the history of mergers in Canada and the corresponding history of legislative merger controls from their origins at the end of the 19th century, one gains a sharper sense of the historical need for merger control, and of the best ways of satisfying this need while avoiding the errors of the past.
The history of mergers in Canada has been characterized by four cycles or waves - periods of high levels of mergers followed by periods of relatively low activity. These occurred between 1897 and 1904; 1909 and 1929; 1965 and 1969; and 1984 and 1989.(9) The first wave, beginning after the Depression of 1883, was stimulated in the United States and Canada by the development of large national markets and the expanding overseas markets for manufactured products. Firms wanting to grow as quickly as possible during these opportunistic times joined with like-minded corporations in the same industry in order to acquire their additional manufacturing capacity,(10) thus creating a boom in horizontal integration.
The second wave of mergers, commencing in 1909, and peaking the following two years, was founded on a desire to reduce operating costs and maintain profit margins through the economies of scale offered by vertical integration.(11) As a result, corporations merged with both supplier and buyer firms in the attempt to internalize previously external risks.(12) Contrasting the first and second waves, Economics Nobel Laureate, George Stigler, described the former as a "merging for monopoly" and the latter as a "merging for oligopoly." (13)
The third merger wave led to the rise of corporate conglomeration in Canada and the United States. While the previous waves had been directed at the integration of firms within one's own industry, 80% of the mergers that took place throughout this period were conglomerate-oriented and involved the merger by firms from different industries.(14) This cycle was driven by a variety of different corporate motivations, including a desire to circumvent tough anti-trust laws which had made it very difficult to pursue either horizontal or vertical integration strategies of expansion, and an attempt to achieve greater financial stability through diversification of products and industries.(15)
The fourth wave of mergers that swept through Canada and the United States in the 1980s was characterized by the mega size and prominence of the merging companies, and by the new phenomenon of hostile take-overs. This period witnessed a transformation in industries,(16) and the arrival of primarily speculative investors who purchased and rapidly resold corporations purely for profit.(17)
Although it has yet to be labelled as such, the period between 1992 and the present has seen the rise of a fifth wave of mergers in Canada and the United States. Following the recovery of the United States economy from the 1990-91 recession, as corporations once again began to seek to expand, mergers were viewed as a quick and efficient manner in which to do exactly that. This "fifth wave" of consolidation has thus far been financed primarily through the increased use of equity instruments. The quantity and economic value of the mergers and acquisitions that have occurred in North America since 1990 have steadily increased, with there being no hint of the trend slowing down in either Canada or the United States.(18) This continued and substantial growth in corporate mergers signifies the importance of ensuring that the regulation of mergers under the Competition Act be as efficient, effective and fair as possible.
Canada's first competition legislation, An Act for the Prevention and Suppression of Combines Formed in Restraint of Trade,(19) was enacted in 1889. While regulating combinations or conspiracies in restraint of trade, it made no mention of mergers.
In 1910 the first Combines Investigation Act(20)was introduced by Prime Minister Mackenzie King, partly in response to the second wave of Canadian merger activity. Although it marked the first appearance of the term merger in Canadian legislation - in the definition of a combine as "a trust, monopoly or merger"(21) - the statute did not actually contain a separate definition of or provision for mergers. As well, despite providing a framework by which ordinary citizens could initialize investigations into alleged combines, the 1910 Combines Investigation Act was a colossal failure overall, with only one investigation being conducted under its guise before its repeal in 1919.
This 1910 Act was repealed and replaced in 1919 by the Combines and Fair Prices Act(22) which prohibited combines that operated or were likely to operate to the detriment of or against the interest of the public.(23) A three-person board was established to supervise the administration and enforcement of this Act, having wide powers to investigate, restrain and prohibit the formation and operation of combines.(24)Although an improvement on the 1910 statute, the Combines and Fair Prices Act again contained no definition of mergers, and in 1923 was struck down by the Privy Council as being unconstitutional in that it interfered with the provincial power of property and civil rights.
Responding quickly to defuse its latest legislative embarrassment, in that same year the federal government enacted a second Combines Investigation Act.(25) Like the 1919 legislation, this statute again made it an offense to be a party or privy to combines which operated or are likely to operate to the detriment of or against the interest of the public.(26) However, while the term combine remained defined as "mergers, trusts or monopolies," for the first time in Canadian history a legal definition was set out of the term merger. This second Combines Investigation Act provided a number of significant improvements over its 1910 predecessor. For example, under the 1923 legislation the proceedings were private, and the identity of the individual complainants was never revealed to the accused.(27) As well, while the 1910 statute lacked a permanent body to regulate and ensure compliance with its decisions, the 1923 legislation created the post of Registrar, who was a permanent official responsible for the administration of the Combines Investigation Act.(28) Furthermore, while a complainant under the 1910 legislation was obligated to set out a prima facie case at his/her own cost, before a judge, the 1923 legislation deemed it sufficient for a complaint to be made to the Registrar, who would, in turn, conduct an investigation at the expense of the federal government.(29) Finally, studies indicate that the length of an inquiry under the 1923 Act was, for the most part, "relatively expeditious" as compared to its 1910 counterpart.(30) Although undergoing cosmetic changes, including a minor 1935 alteration in the definition of combine, and the 1960 separating out of the definition of merger from the definition of monopoly, the 1923 Combines Investigation Act remained substantively unchanged for 63 years until its repeal in 1986.(31)
On the whole, despite improvements in the 1923 legislation, the federal government's attempts between 1910 and 1986 to regulate mergers in Canada was a dismal failure. A lack of resources(32) and "a political environment which did little more than tolerate competition as a necessary evil"(33) contributed to the fact that there were only 8 merger prosecutions over the 76-year period. In the end, the few legislative teeth that the second Combines Investigation Act did possess were extracted by the courts in a trilogy of damaging cases. First of all, in R. v. Canadian Breweries Ltd.,(34) although the accused firm had used 37 acquisitions over 28 years to increase its market share from 11.2% to 60.9%, the court held that detriment to the public had not been proven. Next, in the R. v. British Columbia Sugar Refining Co. Ltd. and B.C. Sugar Refinery Ltd.(35) case, the court found that proving mere detriment was not enough -- it must be undue. Finally, in 1978 the Supreme Court of Canada in R. v. K.C. Irving Ltd. et al(36) held that detriment could not be presumed even where there was proof that competition had been lessened by a merger. Rather, proof of actual detriment beyond reasonable doubt was required for conviction, making it almost impossible to obtain a conviction under the Combines Investigation Act.(37) Thus, by 1978 Canada's merger law had become virtually irrelevant, and was badly in need of reform.
Recognizing the shortcoming of its competition laws, particularly of its merger provisions, the federal government initiated the process of reform several years before the death of the Combines Investigation Act at the hands of the Supreme Court of Canada. In 1969 the Economic Council of Canada published a report at the request of Parliament in which it identified economic efficiency as the overriding policy objective of competition law. Some of the less controversial matters were taken care of in the 1975 Stage I of reform.(38)
An independent study commissioned by the government in 1976, Dynamic Change and Accountability in a Canadian Market Economy,(39) served as the foundation for the Stage II merger and monopoly amendments. Its authors encouraged the federal government to "develop policies to alter the reaction of the economy so as to promote economic development and dynamic change rather than to attempt to 'fine tune' merger policy in such a way as to sort out comprehensively and with precision the mergers that are undertaken."(40) Several attempts to implement these reforms failed due to opposition from various business interest groups, but Prime Minister Mulroney's Conservative government was finally able to complete the Stage II reform with the passing of Bill C-91(41) in 1986, thus creating the Competition Act and the merger controls that exist today.
A. Objectives of the Competition Act
The objectives of the Competition Act and its merger provisions are discussed in the introduction to the statute and in the Guide(42) that accompanied Bill C-91, and can be summarized in four major categories.
First, the governing philosophy of the legislation recognizes that competition is not an end in itself, but rather, a means of impartially allocating resources in the economy so as to achieve the ultimate goal of economic efficiency and fairness in the marketplace.(43) However, while it is apparent that the primary objective of competition is to maximize efficiency and economic welfare, it is less clear whether consumer or total economic welfare should be maximized.
A second aim of competition and merger law is to "expand the opportunities for Canadian participation in world markets [and] at the same time [recognize] the role of foreign competition in Canada."(44) This reflects the view of the authors of the Dynamic Change Report that "the capacity to respond flexibly and promptly to unforeseen technological, organizational and marketing changes at home and abroad will be the minimum requirements for successful survival."(45)
Another purpose of the legislation is to ensure "that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy."(46) While this aim seems to be related to the overall commitment of fairness in the marketplace, it threatens to conflict with the underlying goal of economic efficiency.
The fourth and final objective of the Competition Act is to ensure "that consumers are provided with competitive prices and product choices."(47) It also has the potential to conflict with the overriding goal of economic efficiency.
Having reviewed the philosophy underlying the Competition Act, the next step is to analyze its substantive merger provisions. The intent is two-fold: 1) to describe the legislative framework that has been built over the past decade by the Bureau of Competition Policy and the Competition Tribunal for controlling mergers in Canada; and 2) to determine whether these provisions operate in a manner consistent with their underlying objectives.
B. Substantive Merger Provisions of the Competition Act
There are five primary substantive law issues involved in a review of the Competition Act's merger framework: the definition of merger, the anti-competitive threshold, the definition of relevant market, the evaluative criteria for assessing anti-competitive effects, and the efficiency exception.
Section 91 of the Competition Act defines merger as:
...the acquisition or establishment, direct or indirect, by one or more persons, whether by purchase or lease of shares or assets, by amalgamation or by combination or otherwise, of control over or significant interest in the whole or a part of a business of a competitor, supplier, customer or other person.
This definition of merger plays a critical role in serving as the foundation for Canada's merger provisions. It is generally considered to be very comprehensive, extending the Competition Act's authority to virtually any manner of acquisition or establishment of "control over, or a significant interest" in, the whole or part of a business of another person. Under subsection 2(4) of the Competition Act, control is defined as de jure control, or, in other words, a direct or indirect holding of more than 50% of the votes that may be cast to elect the directors of a corporation, and which are sufficient to elect a majority of such directors.
Although the provisions themselves provide no interpretation of the term significant interest, the Director of Investigation and Research for the Bureau of Competition Policy (the "Director"),(48) the public official charged with enforcing the merger regime, provides considerable guidance on this point in the Merger Enforcement Guidelines (MEG's).(49) The MEG's conclude that when a person acquires or establishes the ability to influence materially the economic or business behaviour of another entity, then the significant interest test will be met.(50) Rejecting the 10% threshold employed by all the Canadian provincial securities statutes, the MEG's hold that shareholdings in a public corporation of above 20%, and in a private corporation at or about 35%, are likely to constitute significant interests.(51)
In summary, the definition of merger has not proven to be a controversial aspect of Canada's merger laws. Its broad wording has ensured that it encompasses most transactions having the requisite interest, including all types of mergers (i.e. horizontal, vertical and conglomerate) as well as all standard modes of acquisition (i.e. purchases and leases of shares or assets, amalgamations, and combination).
The heart of the Competition Act's merger provisions is contained in subsection 92(1), which provides that the Competition Tribunal (the "Tribunal"),(52) the body which has been assigned adjudicative responsibilities for mergers, may make an order in respect of a merger where it finds that the merger "prevents or lessens, or is likely to prevent or lessen, competition substantially." It is against this standard that all mergers in Canada must ultimately be evaluated. However, since the Competition Act fails to define the terms competition or substantially, it has been necessary to rely on external sources for their interpretation. The MEG's offer considerable assistance, providing that a "prevention or lessening of competition can only result from a merger where the parties are, or would likely be, able to exercise a greater degree of market power, unilaterally or interdependently, than if the merger did not proceed."(53) The Tribunal also endorsed this view in its Hillsdown decision, concluding that a merger is anti-competitive if it enhances the ability of the merging parties to exercise market power.(54)
The next question is how to measure a firm's "degree of market power." The Bureau of Competition Policy again provides guidance on this point, equating market power with the price dimension of competition. In other words, a firm's market power is deemed to be enhanced if it is able to maintain higher prices than if the merger did not proceed.(55) However, both the MEG's and the Tribunal in its Southam(56) decision have made it clear that an assessment of market power may also be made in relation to nonprice dimensions of competition, where rivalry in terms of variables such as quality, variety, service, advertising and innovation is important.(57)
A distinction must also be recognized between the two branches of proscribed conduct: "lessen" and "prevent." The lessening of competition involves accumulation and is analogous to increasing market power. On the other hand, the preventing of competition involves firm preservation, and is more akin to obstructing or impeding competition. Two methods by which a merger can prevent competition are by purchasing a firm which is threatening to enter the market,(58) or by buying an incumbent firm which is competing with increasing vigor.
Putting it all together, the Competition Act prohibits any merger which lessens competition such that it is likely to enable the merged identity to either unilaterally or interdependently raise price in any part of the relevant market, or which prevents competition in that it enables a single firm to unilaterally or interdependently maintain higher prices than would exist in absence of the merger.
A final ingredient in the anti-competitive threshold formula is the substantially requirement. Not defined in the legislation, it has been argued by some writers that the term was intended "to be a fluid one under which the Tribunal... [would] have sufficient discretion to render economically and commercially sensible decisions on a case by case basis."(59) The Tribunal's only contribution to this debate is its equating the substantial lessening of competition with "significantly higher prices or significantly less choice over a significant period of time."(60) Fortunately, the Director has provided authoritative guidance as to the meaning of substantially, holding that it consists of three dimensions: magnitude, scope and duration. In general, the MEG's explain that "a prevention or lessening of competition will be considered to be substantial where the price of the relevant product is likely to be materially greater, in a substantial part of the relevant market, than it would be in the absence of the merger; and where the price differential would not likely be eliminated within two years by new or increased competition from foreign or domestic sources."(61) Overall, considering that none of the attempts to formulate it have proven satisfactory, the application of the substantially standard has remained a highly discretionary step.
To determine whether or not a merger exceeds the anti-competitive threshold, it is necessary to compare the merging companies' relevant markets, before and after the consolidation. Because the Competition Act is silent on how to identify the relevant product and geographic markets in which the merging firms operate, assistance must be canvassed from external sources.
Turning first to the MEG's, the Director has adopted the hypothetical monopolist's approach, similar to that articulated in earlier United States merger guidelines,(62) defining a relevant market in terms of "the smallest group of products and smallest geographic area in relation to which sellers, if acting as a single firm that was the only seller of those products in that area, could profitably impose and sustain a significant and non-transitory price increase above levels that would exist in the absence of the merger."(63) Since this technique is somewhat complicated, it is best explained as a series of economic "snapshots". For example, to define the relevant product market, a snapshot is first taken of the firms' pre-merger product market, including all of the products that the firms' customers consider to be good substitutes at prevailing prices. A snapshot is then taken of the product market one year after a hypothetical 5% price increase, which is assumed to result from the merger. To estimate what this post-merger product market would look like, the pre-merger snapshot is expanded to include additional products to which customers would likely have switched due to the price increase.(64) Thus, the relevant product market is ultimately the group of products for which the hypothetical monopolist can profitably impose a 5% price increase of at least one year's duration.(65)
The Director proposes a similar approach for the identification of the relevant geographic market. First, a snapshot is taken of the existing pre-merger geographic market, including all competitors who at present supply the customers of the merging companies. A second snapshot is then taken of the geographic market one year after the hypothetical price increase. This post-merger geographic market expands upon the original market to include all those competitors within this geographic area who would switch to producing the product, as well as competitors in the relevant geographic market who would begin shipping to customers in the original market.(66) Thus, the territorial area is expanded to include neighbouring and foreign sources of supply until buyers, for reasons of transportation costs or otherwise, would not have the option of purchasing from sources outside the area at a price lower than the hypothetically increased price imposed by the merged entity.(67)
In striving to identify the relevant markets, the Director follows a concrete checklist of factors set out by the Bureau of Competition Policy in the MEG's. With respect to the product market, the MEG's encourage consideration be given to all relevant information in assessing the nature and magnitude of likely supply and demand responses to a future price increase. However, particular weight is assigned to factors which provide indirect evidence of substitutability, including: the views, strategies, behaviour and identity of buyers; the views of knowledgeable third parties such as suppliers to the industry who may be able to provide helpful information regarding historical and likely future developments in the relevant market; the past behaviour of the merging parties; the extent to which two products are functionally interchangeable in end use; and the costs to buyers of retooling to switch to allegedly competing products. In the case of the geographic market, the MEG's recognize that information relating to the views, strategies, past behaviour and identity of buyers is equally applicable to the analysis of the geographic scope. Moreover, the Director is advised to assess the extent to which considerations relating to convenience influence what buyers are likely to do in the event of the postulated significant and non-transitory price increase.(68)
While the MEG's have established a technical framework for market definition, the Competition Tribunal, on the other hand, has taken a more ad hoc, and arguably, less effective, approach. In Hillsdown, for example, despite accepting and applying the MEG's market definition paradigm, the Tribunal refused to explicitly adopt or endorse the approach.(69) Then in the subsequent Southam decision, the Tribunal was criticized by the Federal Court for ignoring the MEG's guidance altogether.(70) Inconsistencies such as these haunt the Tribunal's decisions. As a consequence, despite the initial hope that it would build upon the Bureau's contributions to develop a more thorough framework by which to evaluate the definition of market, the Tribunal has been a disappointment, missing opportunities in both Hillsdown and Southam to articulate general principles of market definition.(71) For example, legal analysts have observed that it would have been helpful for the Tribunal to provide objective measures of how close substitutes need to be in order for them to be in the same market. Rather than increasing certainty in this regard, the Tribunal actually reduced certainty by stating that it did not find it useful to apply rigid numerical criteria, such as a likely 5% price rise sustainable for one year, in determining what will constitute a substantial lessening of competition. It would also have been helpful had the Tribunal indicated which analytical framework should be employed as a matter of law, in most circumstances. Instead of stating that a particular approach should be applied generally, such as the hypothetical management technique recommended by the MEG's, it left the question unanswered.
Notwithstanding these weaknesses, however, the comprehensive definition of relevant market developed by the Director serves a valuable function as a backdrop against which a number of section 93 factors are evaluated in assessing a merger's anti-competitive effects.
As mentioned above, section 93 of the Competition Act provides a non-exhaustive list of seven evaluative factors for the Tribunal to consider in determining whether or not a merger prevents or lessens competition.
Although not listed as one of the statutory criteria, the MEG's submit that a high market share or concentration is a necessary although not sufficient(72) condition for finding a merger to be anti-competitive.(73) The Director sets out so-called "safe harbours", or threshold levels, below which mergers will not be challenged.
The first provides that, absent any concern about coordinated behaviour, if the post-merger market share of the merged firms is less than 35%, then the merged entity is presumed not to be able to unilaterally exercise greater market power and, as a result, the merger will not be challenged.(74) The MEG's recognize that market shares are primarily measured in terms of dollar sales, unit sales, or production capacity. Where the relevant market is composed of a single product that is undifferentiated, and where firms are all operating at full capacity, it is recommended that either dollar or unit sales serve as the basis for calculating the total size of the relevant market and the market shares of individual firms. However, capacity is often considered to be a preferable measurement where substantial excess capacity exists in the industry, since it can exert a constraining influence on attempts to exercise market power. In such circumstances, therefore, the proportion of the total market capacity that is accounted for by a firm's own total capacity is considered to be the more significant ratio.(75)
The second "safe harbour" applies where anti-competitive effects are thought likely because of interdependent behaviour. In such circumstances, the Director will not generally challenge a merger where the post-merger market share of the merged firms is less than 10%, or where the post-merger market share of the four largest firms is less than 65%.(76)
Thus, market share and concentration are just the starting points of the merger analysis. Given that both the MEG's and the Tribunal have agreed that they alone cannot serve as a prima facie indication of an anti-competitive merger, it is evident that Canadian merger law recognizes the economic reality that competition is a process that can be just as, if not more, intense in a market involving two giants (i.e. Pepsi and Coca-Cola) as it is in a less concentrated market.
Section 93(a) of the Competition Act urges the Tribunal to consider the extent to which foreign products or competitors provide, or are likely to provide, effective competition to the merged firms. This foreign competition factor has become increasingly relevant, reflecting the economic reality for Canada of integrating global markets and the liberalization of international trading relationships, particularly with the United States and Mexico as a result of the North American Free Trade Agreement.(77)
The Director has allowed several mergers on the basis that foreign firms would be available to temper or discipline a highly concentrated domestic industry.(78) The Tribunal has also followed suit, concluding In Hillsdown, for example, that the proposed merger would not result in a substantial lessening of competition due to competition from American-based companies.
Section 93(b) draws attention to the importance of assessing "whether the business, or a part of the business, of a party to the merger or proposed merger has failed or is likely to fail." A truly failed or failing firm is not likely to be a future source of effective competition and thus its elimination through merger is less likely to result in a substantial lessening of competition. The key to this criterion is whether there are likely alternatives to the merger that would result in a materially higher level of competition than would prevail if the merger proceeded. As a result, the Director will only accept a business failure or exit explanation where the parties demonstrate that failure or exit was imminent, or that there exist no commercially viable and less anti-competitive alternatives to the merger, such as acquisition of the failing firm by a third party, retrenchment by the failing firm, or liquidation.(79)However, where this defense is accepted, it is generally determinative of the anti-competitiveness issue.
Section 93(c) directs the Tribunal to consider whether substitutes for the products supplied by the merged companies are available so as to help maintain the level of competition in the market. In evaluating the extent to which acceptable substitutes are likely to be available, the MEG's indicate that the principal factor to be considered is the extent to which sellers of existing substitutes have, or could easily add, sufficient excess capacity to ensure that a material price increase cannot be maintained in a substantial part of the relevant market.(80) The Tribunal has thus provided little guidance on the subject of substitutes outside the context of market definition.
Described by the Tribunal as "[u]ndoubtedly the most significant consideration with respect to the retail markets," entry barriers, as outlined in section 93(d), constitute one of the most integral factors in evaluating the anti-competitiveness of a merger. The basic test laid out in the MEG's is whether "entry by competitors would likely occur on a sufficient scale in response to a material price increase or other change in the relevant market brought about by the merger, so as to ensure that the price increase could not be sustained for more than two years." In assessing this question, the Bureau's analysis focuses upon any cost disadvantages and sunk costs associated with entry which may delay or hinder the arrival of other competitors. The MEG's recommends consideration be given to the costs involved in designing, building and equipping a competitive facility, training a work force, and securing or developing distribution and market channels. The Bureau also attempts to determine the likelihood of the necessary investments being made given these costs and the estimated return. The Tribunal has fully endorsed the Director's position, holding in both Hillsdown and Southam that the test as to whether potential entry will discipline the market is "whether such entry is likely to occur, not merely whether it could occur."(81)
Furthermore, both the Bureau and the Competition Tribunal have recognized that the issue of entry barriers may be determinative in merger reviews, having made it clear that in the absence of significant barriers to entry, a merger cannot prevent or lessen competition substantially.(82) The Tribunal, in particular, has emphasized in a number of recent decisions the underlying significance to the merger review process of determining the ease of entry of competitors into the merged firms' market.(83)
Given the importance of this factor for evaluative purposes, it has been suggested by some legal analysts that it should be further refined to embrace the principles used in the United States by the Department of Justice for assessing the likelihood and sufficiency of entry.(84)One test which could provide greater objectivity to merger investigations in Canada focuses on whether a new entrant, or several new entrants in combination, could likely gain at least 5% of total market sales within two years and maintain profitability at pre-merger prices. If so, then the merger would be deemed as not likely to prevent or lessen competition substantially.(85)
Another factor to be considered by the Tribunal in assessing whether a merger is anti-competitive is whether or not the post-merger market would consist of effective remaining competition. The MEG's outline a number of factors on which such effectiveness could be evaluated, including the number, size, capacity and strength of the remaining competitors.(86) To ease the concerns of the reviewing agency, the level of the remaining competition must be great enough to prevent the merged firms from raising prices or from imposing other market restrictions.
One weakness with this criterion is that mergers may come to be almost routinely approved if all that is necessary is a demonstration that some remnants of effective competition would exist in the post-merger market. As well, as observed by Crampton, this factor has little, if any, independent significance since foreign competition, substitutes, and barriers to entry already encompass all possible sources of actual or potential remaining competition.(87) Thus, in many ways the effective remaining competition element is redundant.
In addition to the factors outlined above, section 93 of the Competition Act sets out other evaluative criteria for assessing the anti-competitiveness of a merger, including, the extent to which the merger would result in the removal of a vigorous and effective competitor, the nature of change and innovation in the relevant market, and, pursuant to section 93(h), a "catch-all" provision which encompasses any other relevant consideration. Overall, these tend to be less integral to the ultimate decision of whether or not a merger is or is not likely to prevent or lessen competition.
In summary, the combined efforts of the Competition Act and the Bureau of Competition Policy (in its MEG's) have helped to create an extensive framework of evaluative criteria by which to guide and structure our merger review process. Unfortunately, the Tribunal has again failed to make a valuable contribution to the merger regime, offering little more than a rubber stamp of the framework. It has not made an effort to consider every factor in its decisions, it has not proposed many substantial interpretations of the factors, and it has provided very few statements of general principle with regard to these factors. The Tribunal needs to develop a more thorough and consistent body of jurisprudence which may eventually be used to balance the views of the Director, and to clarify and enhance merger law in Canada.
The most intricate and ambitious of the Competition Act's merger provisions is its efficiency exception, as outlined in section 96. Applicable only where the Tribunal concludes that a merger is likely to prevent or lessen competition substantially, the exception offers the merging parties an opportunity to nevertheless proceed, if it can be demonstrated that the resulting economic efficiencies of the merger outweigh its anti-competitive effects. Thus, the efficiency exception provides a balancing mechanism by which the Tribunal attempts to measure a merger's net economic benefit or detriment.(88)
It can be argued that section 96 is fundamental to the operation of the entire merger regime in that it allows the Competition Act to integrate its diverse, if not somewhat conflicting, objectives. While the majority of the substantive merger provisions appear to be aimed at maintaining competition and stable prices for the benefit of consumers, the efficiency exception ensures that the primary goal of competition law is achieved, namely the maximization of total economic welfare in the marketplace.(89) To illustrate more clearly, the anti-competitive threshold of preventing or lessening competition substantially seems to be based on the assumption that competition is a means of achieving economic efficiency. Thus, by preserving competition, the merger regime supposedly strives to maximize total economic welfare. Yet, since the only definite consequences of promoting competition are price maintenance and consumer protection,(90) the real objectives of the anti-competitive threshold are clearly to protect consumers, as well as small-to-medium sized businesses, not necessarily to achieve economic efficiency. The efficiency exception, however, by upholding mergers whose economic efficiencies outweigh their anti-competitive effects, has ensured that the maximization of total economic welfare is indeed the primary and ultimate goal of the Competition Act.
To reiterate, section 96 creates a trade-off framework, in which efficiency gains that are likely to be brought about in Canada by the merger, are balanced against the anti-competitive effects that are likely to result from the merger. The obvious difficulty in implementing this formula is in obtaining reasonable estimates of the amounts on either side of the equation. Turning first to the efficiency gains, the MEG's concentrate primarily on quantifiable production-related gains, especially those deriving from economies of scale, scope (when multiple products or services are produced together) and integration.(91) These first two categories have likewise been cited as potentially relevant by the Tribunal.(92) However, in certain circumstances, the MEG's and the Tribunal also recognize that qualitative dynamic efficiencies -- i.e. development of better products, processes and organizational structure -- should be allotted significant weight, and where possible, weighed qualitatively in the balancing process.(93) To be included in the formula, the MEG's require efficiency gains to possess two other attributes: 1) they would not likely be attained other than as a result of the merger; and 2) they cannot be solely the result of a redistribution of income between two or more persons.(94)
On the other side of the equation, anti-competitive effects are measured by the total loss likely to be incurred by buyers and sellers attributable to the diversion of resources to lower valued uses.(95) In other words, the measure of the "deadweight loss" resulting from the merger is the negative resource allocation effect that is attributable to the price increase and the corresponding output reduction,(96) plus any non-quantifiable losses in quality, service, variety and innovation in Canada.(97)
The final step in the efficiency exception is the actual tradeoff analysis involved in determining whether the efficiency gains are "greater than, and will offset" the anti-competitive effects. While the MEG's provide very complicated definitions of the terms greater than and offset, the approach can be simplified as follows. In order for an anti-competitive merger to be upheld by the Tribunal, its total qualitative and quantitative efficiency gains must be greater than and compensate for its total qualitative and quantitative anti-competitive effects.(98) While the Director bears the responsibility of proving anti-competitive effects on a balance of probabilities, there is an implicit reversal of onus when efficiency gains are claimed as a justification for a merger, causing the burden to shift to the merging parties.(99)
Despite the tremendous opportunity offered the efficiency exception to play an integral role in facilitating efficient corporate restructuring in Canada, not a single merger in the ten-year history of section 96 has proceeded on the basis of having met the requirements of that provision.(100) The possible reasons for its apparent failure are numerous. First of all, the efficiency defense has been potentially relevant in only a small number of cases. Of the 1340 instances in which mergers have been examined by the Bureau for "preventing or lessening competition," only 30 have been found to contain any serious issues of anti-competitiveness.(101) Furthermore, Crampton has suggested that section 96's record may have been richer if its standard of proof had not been so strict. Observing that it is very difficult to prove on a balance of probabilities that efficiencies will likely materialize, Crampton went on to suggest two less onerous approaches: adopting the New Zealand standard of proving "a tendency or real probability" of the efficiencies materializing; or simply requiring the merging parties to establish that there is a real probability that the merger will result in substantial efficiencies.(102) A third justification for section 96's lack of use may be its confusing and disturbing interpretation by the Competition Tribunal in the Hillsdown decision. Reasoning that its legislative mandate was not only to ensure efficiency but also to provide customers with competitive prices, the Tribunal concluded that the definition of anti-competitive effects should be expanded to include the deadweight loss and the neutral wealth transfer resulting from a price increase (in order to maximize consumer economic welfare rather than total economic welfare).(103) Unfortunately, under the Tribunal's approach, the anti-competitive effects of a merger would almost always far exceed its efficiencies, making it almost impossible to trigger the efficiency exception.(104)
In sum, while Canada's substantive merger provisions require further refinement and interpretation by the Director and the Tribunal, there is no doubt that they are already capable of satisfying a number of their underlying objectives, including the promotion of economic efficiency, the protection of consumers and small-to-medium businesses, and the maintenance of prices and products.
The Director of Investigation and Research for the Bureau of Competition Policy and the Competition Tribunal were both intended by the drafters of the Competition Act to play central roles in the merger review process. As it has turned out, however, their contributions to Canadian merger policy have been drastically disparate.
The Director serves as the head of the Bureau and is charged with the statutory responsibility of administrating and enforcing the Competition Act. In the context of mergers, the Director's critical functions are to review all mergers brought to his/her attention, to investigate those which may threaten to violate the anti-competitive threshold, and finally to make a decision as to how each merger should be disposed.(105) The Tribunal, on the other hand, is the Court of Record for competition issues, and the final arbiter of whether a merger may proceed or must be resolved. Having no power to initiate the merger review process itself, and lacking any investigative functions, its consent powers are limited to matters referred to it by the Director.(106)
It had originally been expected that the Tribunal would make a number of valuable contributions to the merger regulatory regime. First and foremost, it would offer an impartial, adjudicative review of the Bureau's decisions to determine whether they had been made fairly and reasonably. As well, it had been hoped that through its judicial decisions, the Tribunal would eventually become a rich source of authoritative interpretations of the merger provisions, and thus serve to both complement and challenge the guidelines being developed by the Director. Unfortunately, ten years after its conception, the Tribunal has thus far played only a minor role in regulating mergers in Canada, and continues to struggle to define its role.
A number of explanations have been put forward to account for the Tribunal's impotence. One is the fact that the Director has rarely determined a merger to be potentially anti-competitive.(107) As a result, there have been only limited opportunities for the Bureau to make a formal application to the Tribunal for a consent order. Moreover, virtually all the instances where a merger was perceived likely to result in a substantial lessening of competition have been resolved within the Director's office either by the parties undertaking to restructure or cancel the consolidation.
The personal philosophy of Calvin Goldman, the first Director to reign over the new merger regime, also played a key role in shaping how the review process evolved. Mr. Goldman's "compliance-oriented" approach emphasized the importance of administrating competition policy in a manner that was "expeditious, provided certainty to the parties and did not raise unnecessary obstacles to commerce".(108) Following from this, he advocated the frequent use of negotiated settlements in which the merging parties undertook to restructure their consolidation.(109) The corporate community has also worked to trivialize the Tribunal, pressuring Bureau officials to provide a merger review process that is fast, confidential and relatively free of uncertainty.(110) Comparing the efficient, rather covert negotiation tactics taken by the Director with the slower and very public option granted by the Tribunal, it is no surprise that business leaders have overwhelmingly favoured the Director's approach. Likewise, the introduction of Canada's new merger laws in the middle of the merger boom of the 1980's forced the Director to adopt a streamlined method of handling the huge number of merger cases, and thus thwarted the development of a more comprehensive, judicial approach which would have accentuated the role of the Tribunal.
Given the Director's domination of the merger review process, the Tribunal has decided only two contested merger cases -- Hillsdown and Southam -- and thus has been unable to build an extensive framework of judicial interpretation of Canada's competition law. Further weakening the regulatory regime is the fact that the Director's negotiated settlements preclude the Bureau both from developing precedent and from being held accountable for its decisions. While settlements are eventually disclosed in summary form, there is little hard information on which outsiders can judge the appropriateness of the Director's arrangements. It is crucial, therefore, that the roles of the Director and the Tribunal change if Canada is ever to produce a rich, uniform source of legal analysis and interpretation with which to complement and supplement its new merger provisions.
Having extensively reviewed Canada's substantive merger provisions, it is clear that changes must be implemented to make the legislation more effective and efficient. Most in need of re-evaluation and reform are the roles and responsibilities of the Bureau and the Competition Tribunal. In order to make the Director more accountable to the public and to stimulate legal precedents, it is recommended that the Director be obligated to publish in a timely fashion copies provided by the parties of any undertakings, as well as a detailed report outlining the Director's analysis of the facts of the case and his/her interpretation of the relevant law.
Related to this is the need to expand the role of the Competition Tribunal. Doing so could further balance the sweeping powers of the Director and, at the same time, lead to the development of a body of judicial decisions to clarify and interpret the merger provisions. The most obvious means to this end is to implement an analysis framework for the Tribunal to follow in reviewing a merger to ensure that its decisions contain more structured and consistent reasoning. This would, in turn, provide both business leaders and the Director with greater confidence in the Tribunal. As well, to further accommodate the corporate community, measures could be taken to guarantee to potential parties that the Tribunal's deliberations will be shorter.
Another area of Canada's merger provisions requiring reform is the procedure for determining the anti-competitiveness of mergers, in particular the analysis of the relevant market and of ease of entry. There is considerable room for expanding upon and improving the Competition Act's definition of relevant market. While the Director has provided a reasonably coherent framework by which to identify the appropriate market to be used in any merger analysis, the Competition Tribunal's puzzling approach has created uncertainty in this area. Therefore, the Tribunal should take the next possible opportunity to clarify its interpretation. Likewise, given the importance of entry barriers as an evaluative criteria, it has been recommended that an objective test be applied to determine the probability and sufficiency of new firms entering the market. If it could be shown, for example, that a group of new entrants could likely gain at least 5% of total market sales within two years and maintain profits at pre-merger prices, then one could conclude that the merger would not likely prevent or lessen competition substantially.
The final major merger provision desperately in need of reform is the section 96 efficiency exception. It has already been demonstrated that this provision has the potential to play a fundamental role in helping the merger review process integrate its numerous objectives, while ultimately ensuring the protection of all efficient consolidations in Canada. Yet, it has never been employed to save an anti-competitive merger. To encourage its future use, it is recommended that a lower standard of proof be adopted (i.e. "a real probability" instead of "a balance of probabilities") for proving the likelihood of merger efficiencies. Furthermore, it is also urged that the Tribunal adopt the Director's view regarding the definition of anti-competitive effects: that they should not include the neutral wealth transfer resulting from a price increase. Otherwise, if the Tribunal continues to include this wealth transfer in its measurement of anti-competitive effects, then it will become practically impossible for merging firms to take advantage of the efficiency exception and the valuable protection it offers. Serious efforts must thus be devoted to achieving these and other reforms to ensure that Canada's merger laws continue to attain higher levels of fairness, clarity and utility.
The ideal competition statute lies somewhere between extreme protectionism and social Darwinism -- not a lamb, or a lion, but a vigilant watchdog. Parliament's enactment of its Stage II Amendments in 1986 finally quieted the "pathetic bleating" of Mackenzie King's 1923 Combines Investigation Act, and marked the end of more than 60 years of feeble, merger regulation. In contrast, its successor, the Competition Act, promised to be much more dynamic and proactive, having potentially more teeth than its predecessors. However, a review of the enforcement and effect of Canada's new merger law, a decade since its inception, has yielded ambivalent results. On the one hand, a reasonably solid framework for the evaluation of proposed mergers has been established which successfully integrates a variety of policy objectives. On the other hand, the Director has only rarely found traces of anti-competitiveness to exist, and has essentially barred the Tribunal from any judicial involvement in the merger review process. This is especially astonishing in light of the fact that Canada's level of merger activity continues to reach historical highs. The obvious question that arises, therefore, is whether the Bureau of Competition Policy lacks the political will to exercise its teeth on Canada's business community. The degree to which this fear can be erased, and the roles of the Director and Tribunal more effectively linked, will determine the fate of merger regulation in Canada, and ultimately the legacy of the Competition Act as either that of a watchdog, or a lamb.
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1. F.A. Underhill, In Search of Canadian Liberalism (Toronto: Macmillan, 1960) at 114-15.
2. C.S. Goldman, The Impact of the Competition Act on Corporate Concentration - Notes for an Address to the Corporate Counsel Section of the Canadian Bar Association (Ottawa, 1987) at 10.
3. P.S. Crampton, The Merger Test: The Substantive Provisions of Canada's Amended Merger Law (Toronto: University of Toronto, 1987) at ii [hereinafter Crampton, Merger Test].
4. R.S.C. 1985. c. C-34, as amended by 1986, c. 26, Part II.
5. Ministry of Consumer and Corporate Affairs, Competition Law Amendments: A Guide (Ottawa: December, 1985) at 4.
6. P. Morici, et al, Canadian Industrial Policy (National Planning Association, 1986) at 50-51.
7. Competition Act, supra note 1, s. 1.1.
8. R.S. Khemani and W.T. Stanbury, eds, Historical Perspectives on Canadian Competition Policy (Halifax: The Institute for Research on Public Policy, 1991) at xi.
9. A. Tarasofsky & R. Corvari, Corporate Mergers and Acquisitions: Evidence on Profitability (Ottawa, Minister of Supply and Services Canada, 1991) at 9.
10. J.E. McCann & R. Gilkey, Joining Forces: Creating and Managing Successful Mergers and Acquisitions (Toronto: Prentice Hall, 1988) at 20.
11. P.K. Gorecki and W.T. Stanbury, "The Administration and Enforcement of Competition Policy in Canada, 1889 to 1952" in R.S. Khemani and W.T. Stanbury, eds, Historical Perspectives on Canadian Competition Policy (Halifax: The Institute for Research on Public Policy, 1991) 53 at 65.
12. McCann, supra note 10 at 21.
14. Statistical Report on Mergers and Acquisitions, Federal Trade Commission, Washington, D.C., 1977
15. McCann, supra note 10 at 21-22.
16. P.A. Gaughan, Mergers, Acquisitions, and Corporate Restructurings (Toronto: John Wiley & Sons, 1996) at 43.
17. E.R. Bruning, "The Economic Implications of the Changing Merger Process" in D.L. McKee, ed., Hostile Takeovers: Issues in Public and Corporate Policy (New York: Praeger, 1989) 47 at 57.
18. Gaughan, supra note 16 at 48.
19. S.C. 1889, c. 41.
20. S.C. 1910, c. 9.
21. Ibid., s. 2(c).
22. S.C. 1919, c. 45.
23. Ibid., s. 2.
24. This board was actually legislatively enacted and empowered by the Board of Commerce Act, S.C. 1919, c. 45.
25. S.C. 1923, c. 9.
26. Ibid., s. 2(a).
27. Gorecki and Stanbury, supra note 11 at 99.
30. Ibid, at 102.
31. Crampton, Merger Test, supra note 3 at 4-5.
32. J.A. Ball, Canadian Antitrust Legislation (Baltimore: William and Wilkins, 1934) at 99.
33. Gorecki and Stanbury, supra note 11 at 111.
34.  O.R. 601 (H.C.J.).
35. (1960), 129 C.C.C. 7 (Man. Q.B.).
36.  1 S.C.R. 408.
37. G.B Reschenthaler, and W.T. Stanbury, "Benign Monopoly: Canadian Merger Policy and the K.C. Irving Case" (1978) 2 Can. Bus. L.J. 135 at 135 and 165.
38. An Act to amend the Combines Investigation Act and the Bank Act and to repeal an Act to amend the Combines Investigation Act and the Criminal Code, S.C. 1974-75-76, c. 76. The Stage I amendments included modifications to the conspiracy and resale price maintenance offences, and the extension of the legislation to the regulation of services and vertical restraints.
39. L.A. Skeoch and B.C. McDonald, Dynamic Change and Accountability in a Canadian Market Economy - Proposals for the Further Revision of Canadian Competition Policy by an Independent Committee Appointed by the Minister of Consumer and Corporate Affairs (Ottawa: Ministry of Supply and Services, 1976) [hereinafter the Dynamic Change Report].
40. Ibid., at 70.
41. Bill C-91, An Act to Establish the Competition Tribunal and to amend the Combines Investigation Act and the Bank Act and other Acts in consequence thereof, 1st Session, 33rd Parliament (1984-85).
42. Ministry of Consumer and Corporate Affairs, supra note 5.
44. Supra note 4, s.1.1.
45. Skeoch and McDonald, supra note 39 at 105.
46. Supra note 4, s.1.1.
48. The Director is appointed under subsection 7(1) of the Competition Act, supra note 4.
49. Director of Investigation and Research, Competition Act, Merger Enforcement Guidelines (Canada: Minister of Supply and Services, 1991) [hereinafter MEG's]. These guidelines are the Director's most comprehensive pronouncements about the merger provisions. They are intended to be descriptive and educational.
50. Ibid at 1.
52. The Tribunals' enabling legislation is the Competition Tribunal Act, R.S.C. 1985, c. 19 (2nd Supp.), Part I.
53. MEG's, supra note 49 at 3.
54. DIR v. Hillsdown (Holdings) Ltd. et al (1992), 41 C.P.R. (3d) 289 (Comp. Trib.) [hereinafter Hillsdown]. In this case the Competition Tribunal decided not to require Hillsdown to divest itself of Ontario Rendering Company Limited, which it had acquired in July 1990. This decision was the first instance where the Tribunal decided a contested merger case.
56. Director of Investigation and Research v. Southam Inc. et al (Reasons and Order) (1992) 43 C.P.R. (3d) 161 (Comp. Trib.) [hereinafter Southam]. In this case the Competition Tribunal ordered Southam to divest itself of either North Shore News or the Real Estate Weekly.
57. Ibid at 177. See also MEG's, supra note 49 at 3.
58. Southam, supra note 56 at 287-88.
59. C. Neff and R. Nozick, The Annotated Competition Act 1992 (Toronto: Carswell, 1992) at 172.
60. Southam, supra note 56 at 285.
61. MEG's, supra note 49 at 5.
62. P.S. Crampton, "A Comparative Review of Canada's Merger Enforcement Guidelines" (1992) 13:1 Can. Comp. Pol. Rec., 51 at 55 [hereinafter Crampton, "Comparative"].
63. MEG's, supra note 49 at 7.
64. R.J. Roberts, J. Anderson and A. Brackett, Cases and Materials for Trade Regulation (London: University of Western Ontario, 1993) at 363.
65. MEG's, supra note 49 at 10.
66. Roberts, supra note 64 at 363.
67. Rowley, J.W. and D.I. Baker, International Mergers: The Antitrust Process (London: Sweet & Maxwell Ltd., 1991) at 182.
68. Crampton, P.S., "Canada's New Merger Enforcement Guidelines: a 'Nuts and Bolts' Review (1991) Antitrust Bulletin, 883 at 915-17 [hereinafter Crampton, "Nuts and Bolts"].
69. Hughes, R.T. and D.D. Smith, "The Canadian Merger Enforcement Guidelines: Lessons from Recent Litigation" (1992) 13:2 Can. Comp. Pol. Rec. 43 at 44.
70. Crampton, P.S. and R.F. Corley, "Merger Review Under the Competition Act: Reflections on the First Decade" (1995-96) 14 Can. Comp. Pol. Rec. 37 at 51.
71. Ibid. at 49.
72. Supra note 4, s. 92(2). The Competition Act provides that "the Tribunal shall not find that a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially solely on the basis of evidence of concentration or market share."
73. MEG's, supra note 49 at 21.
75. Ibid. at 22.
76. Ibid. at 21.
77. Rowley and Baker, supra note 67 at 186.
78. See Scott Paper Limited/Sanitary Tissue Division of E.B. Eddy Forest Products Limited, summarized in Director of Investigation and Research, Press Release - DIR's Decision on E.B. Eddy Sale to Scott (Ottawa: Consumer and Corporate Affairs Canada, #NR-10190, February 10, 1989).
79. Crampton and Corley, supra note 70 at 60.
80. Ibid. at 940.
81. See Hillsdown, supra note 54 at 327, and Southam, supra note 56 at 306.
82. Crampton and Corley, supra note 70 at 55. Therefore, as explained by Crampton in Crampton, "Nuts and Bolts", supra note 68 at 941-42, the Bureau assesses entry barriers immediately after considering market share and before the remainder of the section 93 factors.
83. See the press releases or backgrounders published by the Bureau in relation to the following cases: the acquisition of Purolator Courier Inc. by Canada Post Corporation (NR-113343-25, November 26, 1993); the acquisition of Square D Company by Schneider S.A. (NR-105221-33, September 17, 1991); and the backgrounder to the Director's review of SmithBooks' acquisition of Coles Book Stores Limited in (1995) 16:1 Can. Comp. Pol. Rec. at 25.
84. Crampton and Corley, supra note 70 at 57.
86. MEGS, supra note 49 at 37-38.
87. Crampton, "Nuts and Bolts", supra note 68 at 948.
88. See generally the following sources: A. Weiss, "Using the Efficiencies Defense in Horizontal Mergers" (1992) Spring Antitrust Bulletin, pp. 123-131; R.J. Gilbert, and S.C. Sunshine, "Incorporating Dynamic Efficiency Concerns in Merger Analysis: The Use of Innovation Markets" (1995) 63 Antitrust L.J., pp. 569-601; J. Kattan, "Efficiencies and Merger Analysis" (1994) 62 Antitrust L.J., pp. 513-535; D.T. Levy, and J.D. Reitzes, "Anti-competitive Effects of Mergers in Markets with Localized Competition" (1992) 8 Journal of Law, Economics, & Organization, pp. 427-440; and R.B. Starek, and S. Stockum, "What Makes Mergers Anticompetitive?: Unilateral Effects Analysis Under the 1992 Merger Guidelines" (1995) 63 Antitrust L.J., pp. 801-821.
89. The MEG's, supra note 49, at 49-50, make it clear that economic efficiency refers to the maximization of total economic welfare and not just consumer economic welfare. In other words, the redistribution of income is considered a neutral effect (as also provided in section 96(3) of the Competition Act).
90. There is no consensus among economic theorists that competition automatically maximizes total economic welfare.
91. Rowley and Baker, supra note 67 at 184.
92. Hillsdown, supra note 54 at 331. See also Director of Investigation and Research v. Imperial Oil Ltd. et al (Reasons and Decision) (CT-89/3,#390, January 26, 1990) [hereinafter Imperial Oil].
93. MEG's, supra note 49 at iii.
94. Ibid. at 46-8.
95. Rowley and Baker, supra note 67 at 184.
96. Crampton, "Nuts and Bolts", supra note 68 at 964.
97. McFetridge, D.G., "The Prospects for the Efficiency Defense" (1995-96) 26 Can. Bus. L.J., 321 at 327 [hereinafter McFetridge, "Prospects"].
98. Crampton, "Nuts and Bolts", supra note 68 at 963-64.
99. Neff and Nozick, supra note 59 at 173.
100. Crampton and Corley, supra note 70 at 58.
101. McFetridge, Prospects, supra note 97 at 332.
102. Crampton and Corley, supra note 70 at 58.
103. McFetridge, D.G., "The Role of Economists in Merger Cases" (1993) 14:4 Can. Comp. Pol. Rec., 65 at 72 [hereinafter McFetridge, "Role"].
104. Crampton, P.S., "The Efficiency Exception for Mergers: An Assessment of Early Signals from the Competition Tribunal" (1993) 21 Can. Bus. L.J., 371 at 386 [hereinafter Crampton, "Efficiency"]. See also Fisher and Lande, "Efficiency Considerations in Merger Enforcement" (1983), Cal. L.R. 1580 at 1644; and M.A. Warner, "Efficiencies and Merger Review in Canada, the European Community, and the United States" (1994) 26 Vanderbilt J. of Transnational L., 1059 at 1089.
105. Rowley and Baker, supra note 67 at 194 -224.
107. Stanbury, W.T., "An Assessment of the Merger Review Process Under the Competition Act" (1992) 20 Can. Bus. L.J.,422 at 426. See also McFetridge, Prospects, supra note 97 at 332.
108. Ibid. at 444.
110. Ibid. at 441.
Reschenthaler, G.B. and W.T. Stanbury, "Benign Monopoly: Canadian Merger Policy and the K.C. Irving Case" (1978) 2 Can. Bus. L.J.
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