The Power of Perspectives

The Canadian Bar Association

Kim Covert

Draft M&A guide takes positions inconsistent with jurisprudence

May 23 2018 23 May 2018

 

Google “mergers” and “efficiencies” and the helpful suggestion for a search that comes up is “mergers create efficiencies.” It’s apparently so true that even Google knows it.

In March, the Competition Bureau released a draft document, A practical guide to efficiencies analysis in merger reviews, sharing its perspective and experience on trade-off analysis, and when the Commissioner may decide not to challenge a merger due to efficiency gains.

The CBA’s Competition Law Section commends the Bureau on its commitment to transparency and public consultation, but has a number of concerns with the document, recommending that language in a number of areas be clarified or reconsidered.

For example, “in many instances, the draft  guide takes positions not supported by existing efficiencies-related jurisprudence, or applies a particular perspective to complex issues that have not been adjudicated by the Competition Tribunal or courts,” the submission says.“The draft guide should be more consistent with prevailing jurisprudence (or acknowledge the lack of jurisprudence where applicable).”

The draft guide encourages early submissions from merging parties on expected efficiencies, but the Section notes that, as the guide acknowledges, there are often significant factors weighing against making detailed efficiencies claims at an early stage, including information limitations, uncertainty on the nature of any remedial order required that might affect the scope of efficiencies, and the considerable investment of time, money and resources required.

The Section says that additional guidance in certain areas could help parties bring detailed efficiencies information earlier in the process, including, among others, timely and frank indications from the Bureau on its theory of harm and the impact on relevant markets; clarifying what factors are likely to influence the Bureau’s decision to conduct a trade-off analysis; and clarifying that efficiencies submissions will receive the required attention without creating bottlenecks elsewhere.

As well, the draft guide states that information supporting efficiency claims should be provided on a “with-prejudice” basis, which the Section says is counterproductive and unnecessary. “Requiring parties to give data on a with-prejudice basis will only chill the dialogue that is so essential to advancing and evaluating a cogent efficiencies analysis.”

The Section encourages the Bureau to reconsider the approach it takes in Section 4, where it effectively endorses “an approach that compares the efficiencies realized in one market with the anti-competitive effect in that same market.” A market-by-market approach is inconsistent with the statutory language and governing jurisprudence, the Section says.

Another area inconsistent with governing jurisprudence is section 3.6.2 of the draft guide, which appears to require that efficiencies realized must be purchaser-specific. “This approach is highly impractical as it requires the Bureau to speculate on commercial terms of transactions never consummated,” the Section says, urging the Bureau to reconsider its position.

“It would be unfortunate if the Bureau were to discount or disqualify certain claimed efficiencies based on highly speculative estimates or best guesses of likely efficiencies from potential transactions involving the target.”

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