COMP BUREAU LOST ON EFFICIENCIES.

On June 30, the Competition Bureau, the federal watchdog over the business operations of Corporate Canada, issued a bold news release announcing it was “seeking to block” the merger of two oil and gas waste-management companies in Western Canada. The companies, Secure Energy Services and Tervita, were set to close their merger within days.

The bureau said the proposed $1-billion merger was “likely to result in higher prices and a loss in the quality of service for customers.” In an application filed with the Competition Tribunal, a judicial body, the commissioner sought to have the merger blocked by the tribunal on the grounds it “is likely to result in a substantial lessening of competition” and “prevent competition.”

The bureau’s commissioner, Matthew Boswell, portrayed the attempt to block the merger as part of the bureau’s “rigorous enforcement of Canada’s competition laws” to support economic recovery and benefit Canadians.

So one might wonder: How has this rigorous effort progressed? Let’s search the bureau’s website. Nope: nothing new on the Secure/tervita merger since the June 30 news release.

But that’s odd, since there is much to report. As summarized in this space in early July, Boswell’s self-promotional attempt to block the merger went nowhere as two judicial bodies — the tribunal and a Federal Court judge — threw out his application.

Even odder is that the commissioner suffered a further setback in August when he again went before the Competition Tribunal to prevent the two companies, which had already merged, from integrating their assets. The application was tossed out by the tribunal, with the decision turning in part on one of the more contested aspects of Canadian competition law — an aspect some competition bureaucrats have been trying to overthrow for years.

But you would never know any of this from the media section of the bureau’s website, where not a word can be found on its ill-fated attempt to block the Secure/tervita merger. Could it be that the bureau’s attack on the merger was an attempted power-run around a key section of the competition law that allows companies to merge even though the result might be higher prices and less competition?

At least three law firms with an interest in the case — Mcmillan, Blakes, Mccarthy Tétreault — have issued commentaries noting the commissioner’s failure. “Strike two …” said Mcmillan. Blakes, which argued the case for Secure, said the tribunal decision “made it clear that efficiencies are of primary importance in merger reviews and provides additional incentives for both merging parties and the bureau to prioritize the assessment of merger efficiencies at an early stage in the merger review process.”

The concept of efficiencies from mergers taking precedence over other consequences — established in 1985 legislation — has been somewhat polarizing in the Canadian competition law and academic communities.

A paper Thursday from the Competition Policy Council of the C.D. Howe Institute set out priorities for a post-election reform of the legislation. Among other issues, it singled out the need to “better articulate” the efficiencies defence. What that means is unclear. “Most council members believe that the efficiencies defence for mergers has become difficult for the bureau and merging parties to deal with as a result of the formalistic requirements … However, there was no consensus on whether the government should seek to address the issues through amendments or leave matters for further development through jurisprudence.”

With the Secure/tervita waste-management merger case, however, jurisprudence has spoken. The argument from the company was that efficiencies — laid out with evidence and statistical analysis — were strong enough to overcome the commissioner’s attempt to block the merger by ignoring the efficiency gains.

In the Secure case, the commissioner was trying to get the tribunal to do something that the Competition Act prohibits. Section 96 says that “The Tribunal shall not make an order (to block a merger)… if it finds that the merger or proposed merger … has brought about or is likely to bring about gains in efficiency that will be greater than, and will offset, the effects of any prevention or lessening of competition that will result.”

Should Section 96 be scrapped? No such provision dominates U.S. anti-trust, and some on the activist side of the current anti-trust movement in search of slaying Big Tech say it should be removed from Canadian law. That idea was backed by former commissioner John Pecman. In a 2018 speech, Pecman said it was “harmful to competition, innovation and ultimately to the Canadian economy.” The efficiencies defence, he said, “is bad for business and bad for consumers. It is also out of line with the approach being taken by many of our country’s major trading partners, including most notably, the United States.”

On the other side of the debate is Brian Facey, a competition lawyer at Blake, Cassels & Graydon. Facey argues in a paper with another Blake partner that the Competition Bureau fails to quantify and understand the “proven benefits of a merger on productivity and innovation” — efficiency gains that outweigh the other costs of mergers. Efficiencies “should be given a more prominent role in Canadian merger review, as Parliament intended” in the 1985 legislation.

With the commissioner on the sidelines, let the ideological competition begin!

A KEY DEBATE OPENS OVER THE COMPETITION ACT.