Competition Bureau statement regarding Chartwell and Health Care REIT's acquisition of Maestro Retirement Residences
OTTAWA, April 11, 2012 — This statement summarizes the approach taken by the Competition Bureau in its review of the acquisition by Chartwell Seniors Housing REIT (Chartwell) and Health Care REIT Inc. (HC) of the Maestro Retirement Residences Portofolio from the Maestro Retirement Residences Funds (Maestro)Footnote 1, as announced on February 15, 2012.
On April 10, 2012, the Bureau issued a No Action Letter (NAL) to Chartwell and HC indicating that the Commissioner of Competition (Commissioner) does not, at this time, intend to make an application under section 92 of the Competition Act in respect of the proposed acquisitionFootnote 2. The Bureau focussed its review on the types of retirement residences to be acquired and the local nature of competition among retirement residences. The Bureau found that, owing to the differences in services offered by the retirement residences and demand considerations, Independent Supportive Living programs (ISL) and Assisted Living programs (AL) are separate product markets. However, complicating the assessment, the Bureau recognised that many retirement residences offer both types of programs and that there was likely a degree of supply side substitutability between the two programs that could counter a post-merger exercice of market power.
In late 2011, Chartwell and HC entered into an agreement with Maestro to acquire a number of retirement residences from Maestro in Alberta, British Columbia, Ontario, and Quebec. Chartwell and Maestro operate retirement residences in Canada while HC operates retirement residences in the U.S. but not in Canada.
The level of care provided by ISL programs can range from providing just a few minor additional services over and above a place to live, to assistance with meals, homemaking and personal care. The services provided at the lower end of the range target the most autonomous category of seniors and often provide à la carte services for an extra fee. Their amenities are comparable to a condominium (e.g., games rooms, sitting rooms, exercise rooms and, in some cases, chapels, and "wellness" clinics). At the higher end of the range, ISL programs offer meals and housekeeping as part of a total package, and provide some basic care and assistance to residents. ISL residents typically receive 24-hour emergency response, social programs, housekeeping, laundry and transportation.
In contrast, AL programs provide tenants with a more comprehensive package, including services such as assistance with daily living activities, housekeeping and more specialized care programs like administering medication, rehabilitation, and memory care services to residents. Tenants requiring AL services typically do not view ISL programs as effective substitutes.
Categorizing retirement residences as ISL and AL is not scientific. Many residences will offer a mix of ISL and AL services and, as noted above, this fact complicated the assessment of assigning market shares. The Bureau observed that retirement residences are able to be flexible in their marketing of ISL and AL programs as demand fluctuates; as such, the Bureau was able to examine market shares based on retirement residences generally, and then use information regarding individual residences to judge the likely degree of supply side substitutability within each geographic market.
The choice of a particular retirement residence is usually based on factors such as the area where the individual grew up and previously lived, proximity to family and friends, income level, and the availability of community services and amenities such as shopping centres, hospitals, entertainment venues, places of worship, transportation options, etc. Based on information collected by the Bureau, it concluded that the relevant geographic market for retirement residences is local, with each residence having a catchment area of 5 to 20 km for the bulk of its customers.
The Bureau examined the potential competitive effects of the transaction in 21 local markets where Chartwell and Maestro both operated. These markets were in Gatineau, Montreal, Laval, Sherbrooke, Trois Rivières, and Québec City, in Quebec; Windsor, London, Guelph, Burlington, Toronto, Newmarket, Barrie, Kanata, Cornwall, Pembroke and Ottawa, in Ontario; Calgary, Alberta; and Langley, British Columbia.
As noted above, in light of the ability that most retirement residences have to substitute ISL and AL services, and, coupled with the level of effective remaining competition, low barriers to entry by new players and expansion by existing ones, and high vacancy rates in many overlap markets, the Bureau issued a NAL to the parties.
The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.
However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.
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