Supreme Court

Competition Law

No more than marginal efficiency gains required for efficiencies defence to apply

Oil and gas operations in northeastern B.C. produce hazardous waste, generally disposed of in secure landfill. Four permits for dedicated landfill operations issued; two held by Tervita, which operates two landfills, one for Peejay site, not yet constructed, and one for Babkirk site. BLS, owner of Babkirk, retained firm to prepare documentation to apply for secure landfill permit. At same time, individual respondents (Vendors) negotiated agreement to purchase shares of BLS. Shortly prior to issuance of Environmental Assessment Certificate for Babkirk secure landfill, Vendors acquired shares of BLS through Complete Environmental. Vendors, intending to operate Babkirk site primarily as bioremediation facility, subsequently sold shares in Complete to Tervita. Commissioner applied to Tribunal pursuant to s. 92 of Competition Tribunal Act (Can.), for order that transaction be dissolved on ground it was likely to prevent competition. Tribunal found that quantified anti-competitive effects of merger exceeded quantified gains in efficiency and ordered Tervita to divest itself of BLS shares. Appeal by Tervita, Complete and BLS to Federal Court of Appeal dismissed but further appeal allowed. There was sufficient evidence upon which Tribunal could find that merger would be likely to substantially prevent competition. In order for Tribunal to make most objective assessment possible in efficiencies analysis, Tribunal should consider all available quantitative and qualitative evidence. Commissioner failed to meet s. 96 of Act burden to quantify quantifiable anti-competitive effects; possible range of deadweight loss resulting from merger was unknown due to lack of price elasticity information. Those quantifiable anti-competitive effects, therefore, should be assigned zero weight. Federal Court erred by allowing for subjective judgment to overtake analysis in setting weight of these effects at undetermined. Also unfair to require merging parties to demonstrate that efficiency gains exceed and offset undetermined amount. Section 96 of Act does not require more than marginal efficiency gains for efficiencies defence to apply. Federal Court of Appeal erred in finding that anti-competitive merger could not be approved under s. 96 of Act if only marginal or insignificant gains in efficiency result from that merger. Weight given to quantifiable effects is zero and there were no proven qualitative effects. Tervita made out efficiencies defence by establishing overhead efficiency gains resulting from BLS obtaining access to Tervita’s administrative and operating functions.

Commissioner of Competition v. CCS Corp. (Jan. 22, 2015, S.C.C., McLachlin C.J.C., Abella J., Rothstein J., Cromwell J., Moldaver J., Karakatsanis J., and Wagner J., File No. 35314) Decision at 226 A.C.W.S. (3d) 719 was reversed.  248 A.C.W.S. (3d) 811.

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