Remarks by Melanie L. Aitken, Commissioner of Competition
2012 NYSBA Summer Merger Forum
Antitrust Section Summer Merger Program
"Merger Enforcement in the Americas"
New York State Bar Association Antitrust Law Section in conjunction with The International Section of the NYSBA, Brazilian Institute on Competition, Consumer Affairs, and International Trade (IBRAC) Canadian Bar Association
New York, New York
July 17, 2012
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Good evening and thank you Ilene for that kind introduction. It is a pleasure to have this special opportunity to join my colleagues in merger enforcement and participate in this discussion with you today.
As mentioned, I will be stepping down from my position as Commissioner in September, and I do so with mixed emotions. It has truly been an honour and a privilege to work at the Bureau for the past seven years, over half of that time as Commissioner. I was appointed at a time of exciting changes to Canada's competition landscape, and I am very pleased to be here to discuss these changes in Canada's merger enforcement program, as well as significant developments relating to coordination and harmonization in cross-border merger control. I would like to thank the New York State Bar Association, IBRAC and the CBA for the opportunities they have all given the Bureau, and me, over the years, to talk about the Bureau's work and solicit input.
It has been three years since Canada's Parliament passed sweeping amendments to the Competition Act, amendments that laid a strong foundation for the Competition Bureau to become a more effective enforcement agency.
The updated Act not only facilitates more effective enforcement, but aligns us with our international counterparts to ensure that both businesses and consumers benefit from a competitive marketplace. It is our job to ensure we take that opportunity and make the most of it, and this is an opportune time to take stock of our experience so far.
In my remarks today, I would like to 1) look back at our experience with the immediate implementation of our new merger review process, and 2) outline some of the significant enforcement initiatives that demonstrate our ongoing priorities as we focus on the core of our mandate: the objective and principled enforcement of the Competition Act.
I would also like to touch on the subject of international cooperation, and more specifically a recent initiative in the mergers area between the U.S. and Canadian competition authorities that has enhanced both the efficiency and effectiveness of multi-jurisdictional reviews.
By way of background, for those less familiar with Canada's merger process, when our legislation was amended in March 2009, the changes to the merger review regime were some of the most significant. A new merger review process was introduced, the notification threshold was raised, and the limitation period was shortened from three years to one.
Most importantly, like the U.S., we now have a two-stage merger review — 30 days for the vast majority of merger reviews, and a second stage for problematic transactions.
I firmly believe that, thanks to this amendment, we now have a coherent process in place that not only aligns the incentives of merging parties to cooperate so that I can discharge my responsibility as Commissioner of Competition, but also promotes timely, responsible and focused reviews of proposed mergers. No longer does our ability to evaluate mergers before it is too late, as everyone expects, turn on the parties' risk tolerance.
Indeed, our ability to to review mergers expeditiously, approving the vast majority, has been positively influenced by the move to a two-stage review process, particularly in the case of complex transactions. In the two years pre-amendments, the average review of a complex merger took approximately 50 days, whereas in the two years following the amendments, that has declined to just under 36 days, a marked improvement, freeing up parties to complete or, occasionally adjust, their deal plans more quickly, and the Bureau staff to move on to other reviews expeditiously.
Under the two-stage process, for transactions that raise significant competition issues and for which the Bureau requires additional information to conduct a proper review, the Bureau may issue a Supplementary Information Request, or "SIR", to the merging parties to obtain that information — in broad terms, similar to a U.S. second request.
At the outset, not surprisingly, we heard some anxiety about the frequency and enthusiasm with which it was feared the Bureau may issue requests for additional documents.
Appropriately, we have focused on implementation, particularly on the articulation of our enforcement approach, in a way that reduces the time and cost to the merging parties wherever reasonably possible, while first and foremost ensuring that we receive the information needed to properly review transactions.
In the vast majority of cases, merging parties have been very responsive to the new process and have exhibited a willingness to work closely with the Bureau to assist us in implementing the regime. In some cases, this has even allowed us to dispense with the need for a SIR altogether, or significantly reduce the scope of the SIR.
We recognize that complying with a SIR may be demanding, depending on the circumstances. But it is also worth putting these anxieties into perspective. Since the amendments to the merger review process came into force in March 2009, we have issued SIRs in only 18 cases. To break that number down, over the past three years, on average, we have only issued six SIRs per year, a small fraction (about 3%) of the 200 to 225 transactions that we review annually.
We remain committed to using these requests only in respect of those transactions for which we require additional information to conduct a sufficiently thorough review.
A recent and high profile example would be the Maple/TMX transaction, a bid by a consortium of Canadian financial institutions to acquire the TMX Group, owner of Canada's main stock exchange. The complexity of the case, which also involved several provincial securities regulators, demanded an extensive review for which additional information was absolutely necessary. Even here, I leave it to counsel to expound upon their perception of the burden, but whatever it was, all the implicated respondents were able to fully comply in 3½ months.
It is also worth noting that, generally, the time parties needed to respond to SIRs has been relatively short, and is decreasing as we benefit from all sides' increased familiarity with the process — an outcome we have worked to facilitate by making all such processes as clear and predictable as possible.
Consulting with stakeholders & updating guidance materials
To make this aspiration a reality, since the amendments were introduced, much of the work at the Bureau has been dedicated to articulating and updating our enforcement guidance.
Immediately following the passage of the amendments, we worked closely with our stakeholders to develop a revised set of Merger Review Process Guidelines. In addition to the engagement of our domestic stakeholders, including the thoughtful participation of the Bar, we also benefitted immensely from the views and advice of our colleagues at other competition authorities, and groups of international practitioners and academics.
This past January, with the benefit of almost three years of experience with the new process, we made additional changes to the guidelines to enhance clarity and transparency. The updated Process Guidelines provide stakeholders with, among other things, increased guidance on the SIR issuance process, including pre and post-issuance dialogue and the identification of custodians; sample SIR instructions; and more information on the use of timing agreements.
In 2010 and 2011, we also conducted extensive outreach and consultation with a view to determining whether changes were required to our existing Merger Enforcement Guidelines (the "MEGs"), which describe, to the extent possible, how the Bureau will approach its analysis of merger transactions.
We were looking to ensure that the MEGs accurately reflected current merger review practices at the Bureau, and to assess the potential impact of legal and economic developments such as the recent publication of the revised Horizontal Merger Guidelines in the U.S.
Based on consultations with our stakeholders and other competition agencies, and on a focused internal review, we decided to undertake moderate revisions to the MEGs, and published a final revised version last October. The revisions were not a full rewrite, but addressed certain discrete areas where we believed the MEGs did not fully reflect current Bureau practice and/or current economic and legal thinking.
For example, we elaborated upon our approach to minority interest acquisitions and vertical mergers. As well, we acknowledged the role we consider market definition to play — typically an important one, but only insofar as it assists in the ultimate search, in that deal, for competition effects.
As is evidenced by the amount of work we have put into updating our guidance materials, one of my overall goals is to increase transparency for our organization and improve certainty and predictability for our stakeholders. I believe it is important to ensure that we are not only meeting our confidentiality obligations, but also fulfilling our responsibility to our stakeholders to be as open as possible.
To that end, following the recommendations of an internal working group on transparency, we have begun publishing more position statements that describe the Bureau's analysis of complex merger cases.
A position statement briefly describes the Bureau's analysis of a particular proposed merger and summarizes its main findings to provide transparency to the antitrust community and industry stakeholders.
In determining whether the review of a proposed transaction merits the publication of a position statement, we consider a number of factors including: whether the review involved issues that were sufficiently important or complex; the level of interest in the case; and whether the review involved novel analytical tools, findings and/or outcomes.
We have also established an online merger register — a list of all closed merger reviews, updated on a monthly basis. This report provides the names of the parties to the transaction, the industry sector involved and the outcome of the Bureau's review.
In terms of our experience to date, it is clear that the new merger process has allowed us to review transactions more effectively and in a more timely manner to achieve more robust remedies.
It is not irrelevant that these remedies have been obtained in tandem with my expression of a willingness to take cases to litigation if absolutely necessary — and I will speak to two such cases in a moment. But I do think that it is more a result of the aligned incentives and benefits of a cohesive, predictable framework that allows us all to get down to business.
That said, it remains important that our framework is supported by our demonstrated preparedness to litigate where we believe the public interest requires it.
While we strive to resolve matters, consent agreements are only meaningful and robust in their terms when all players understand the role the Bureau is committed to play as a principled and consistent enforcer of the law, unafraid of the consequences of litigation when the tests under the Act are met and Canadians are at risk.
Active enforcement serves to deter anticompetitive conduct, but willingness to litigate also furthers our aim of certainty and predictability by providing the clarification that comes through case law.
Our January 2011 court challenge to landfill operator CCS Corporation's acquisition of Complete Environmental is a good example. Our position was that CCS, which owned the only two hazardous waste disposal sites in the province of British Colombia, was entrenching its monopoly in Northern BC by acquiring the Babkirk Landfill site before it could enter the hazardous waste disposal market and thereby preventing it from becoming a competitor.
Significantly, the transaction did not surpass the merger pre-notification threshold, demonstrating the Bureau's willingness to enforce the merger provisions of the Act in respect to mergers of all sizes. The parties to the transaction closed their deal over our objections, and the Bureau moved quickly to obtain a remedy, as the longer CCS could keep its potential competitor out of the market, the longer it could exploit its monopoly.
The challenge also set an important precedent for future prevention of competition cases. In May, the court ruled that the acquisition amounted to a substantial prevention of competition, requiring CCS to divest the Babkirk Lanfill site, and sending a clear message to companies who seek to eliminate competitive threats though acquisition.
While CCS has appealed the Tribunal's ruling, whatever the outcome of the appeal, there will be two important lessons: A clarification of the law on prevention of competition, and the demonstration of our preparedness to litigate where we believe competition is being denied, regardless of the size of the transaction.
The same is true of our June 2011 application with the court to prohibit a proposed joint venture between Air Canada, Canada's legacy airline, and United Continental airlines. The proposed joint venture is effectively a merger of the airlines on all their Canadian and US operations. It would allow Air Canada and United Continental to operate and set prices as one airline, effectively monopolizing air travel on ten transborder routes, reducing competition on nine more, and resulting in significantly higher prices for travellers.
Significantly, in addition to challenging the proposed joint venture under the merger provisions of the Competition Act, we are also seeking to undo three existing "coordination agreements" between the airlines. This is our first challenge under section 90.1 of the Act, a new civil provision that came into force in 2010, allowing us to challenge anti‑competitive agreements between competitors.
Again, a consistent and principled approach to enforcement, and strong enforcement preparedness, pursued by an ever-stronger Bureau in terms of powers and human capital, will have the added value of testing these new provisions, and increasing certainty through jurisprudence.
Cooperation and coordination in merger review
Turning now to the international context, another benefit of our new review process is that we are now very much on the same page as the U.S. and other international competition agencies, which has facilitated cooperation on multi-jurisdictional reviews.
We have cooperation agreements with a number of jurisdictions, including the jurisdictions of my co-panellists today (Mexico, Brazil and the United States). These formal cooperation agreements facilitate the exchange of information in merger cases that may require notification in multiple jurisdictions.
But we have also found that developing strong working relationships with other competition agencies through regular communication, staff exchange, and multilateral organizations has a positive impact on our ability to cooperate when cases of mutual interest arise.
For example, we were happy to host some of our Brazilian colleagues in 2011 for a discussion of our respective competition regimes, and we participate in a number of international organizations including the International Competition Network and OECD Competition Committee.
Cooperation in competition law enforcement can take many forms. Given the level of cross-border activity between the U.S. and Canada, our cooperative relationship with the U.S. antitrust agencies is well-developed.
We routinely engage in extensive cooperation in our reviews, including sharing preliminary analysis and information, weekly (and sometimes daily) conference calls to discuss case-related issues, and meetings and joint interviews, all of which materially advance our ability to conclude our inquiries expeditiously and with confidence in our findings.
With a view to further deepening ties between the mergers staff at our three agencies, the Bureau and the U.S. FTC and DOJ have recently established a "mergers working group". The goal of the group is to improve the understanding of the merger review processes in both countries, ultimately, facilitating more efficient and stronger multi-jurisdictional reviews.
This working group consists of team leaders and the focus of the meetings is not to discuss ongoing cases, but to discuss our respective processes, lessons learned from past cases, and strategies to address common challenges that we encounter during merger reviews.
These efforts are having a tangible positive impact on cases where we cooperate. We are very pleased as well, that we are in the early stages of a similar initiative with our colleagues at the Directorate General for Competition in Europe.
Although differences will always remain, depending on individual jurisdictions' laws and unique economic frameworks, a valuable exchange can still be achieved through regular communication and the development of strong working-level relationships.
One of the key areas that I consider will continue to drive communication among agencies is the topic of remedies. In our increasingly interconnected world, it is very often the case that a jurisdiction can't stand alone for an effective remedy.
Similarly, and I speak only from a Canadian perspective, there can be cases, such as where the Canadian impacts are not significant, and/or there are no Canadian assets,
that we will consider dispensing with the requirement for parties to independently and thoroughly memorialize with us a remedy being imposed in another jurisdiction that we believe will cure any Canadian competitive concerns.
In an appropriate case, we will accept a commitment from parties to comply with the remedy in a jurisdiction where we trust the enforcement efforts of our counterparts. This is not deference, it is a sensible and constructive approach to our use of scare resources in a context where we have deep and trusting relationships with our counterpart agencies.
The amendments to the Competition Act in 2009 provided us with a renewed enforcement mandate. In the past three years we have seized the opportunity to reinvigorate the Bureau's enforcement activities, and to make a difference in the lives of Canadians by ensuring that Canadian competition laws are respected.
Overall, I firmly believe that in aligning incentives for merging parties and the Bureau, and also in aligning our process with that of our major trading partners like the U.S., we have taken a huge step forward to a coherent merger assessment and enforcement regime that ensures both businesses and consumers benefit from a competitive marketplace.
With that, I would like to thank you for your attention and look forward to our discussion. Thank you.
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