On June 23, 2006, the Competition Bureau (the "Bureau") announced that it had entered into an agreement to resolve its concerns arising from the merger of the electronic television audience measurement ("TAM") operations of BBM Canada ("BBM") and Nielsen Media Research Limited ("NMR").   

BBM is a not-for-profit, non-share capital corporation that supplies local and national radio and television audience data across Canada.  Its operations are managed by a board of directors elected from its members, who consist of broadcasters, advertisers and advertising agencies.  Similarly, NMR (a for-profit company) provides, among other things, various television information services to numerous customers in Canada and the United States.  BBM and NMR are currently the only providers of electronic TAM services in Canada.

As discussed in more detail below, the settlement is significant because it does not include any structural remedies.  Instead, it simply imposes a number of long-term behavioural obligations on the parties to the merger.  

Bureau Investigation

Following a detailed investigation, which included interviews with broadcasters, advertisers and advertising agencies, the Bureau concluded that the merger would likely prevent or lessen competition substantially in respect of electronic TAM in Canada.  However, the Bureau did not explain the nature of this likely anticompetitive effect.  Rather, the Bureau said that it found strong industry support for the creation of a standard TAM system in Canada, the norm in the United States, Britain and Australia.  Similarly, the Bureau found that the merger would likely result in a decrease in the overall cost of TAM services for the majority of purchasers since it would create a corporation ("Newco") that would pass on savings to its members (some of whom are purchasers of TAM). 

Terms of Consent Agreement

The Consent Agreement, which is to remain in effect for 15 years or until another person establishes an electronic TAM operation in Canada, requires that Newco undergo independent audits if and when it (a) implements new electronic TAM technology, (b) makes major adjustments to such technology and/or (c) considers providing electronic TAM in new markets in Canada.  The results of any such audits must be forwarded to BBM, NMR and the Commissioner and made available to BBM's members upon request.  According to the Information Notice issued by the Bureau, the audits will provide members with access to impartial and complete information required to determine whether the new services meet their needs or whether the system requires improvement. 

The Consent Agreement also requires that Newco follow BBM's current processes for choosing new technology and deciding whether to enter new markets, which processes may be modified from time to time with notice to the Commissioner.

Finally, the Consent Agreement requires that BBM treat all persons eligible for membership in BBM alike, in that the same services shall be available to such persons at a rate and on terms comparable to the rate and terms applicable to other similarly situated BBM members, whether or not they were BBM members prior to the merger.

Implications

With respect to mergers, the Commissioner has traditionally expressed a strong preference for structural remedies.  For example, the Bureau's draft Information Bulletin on Merger Remedies in Canada dated October 2005 states that "[s]tand-alone behavioural remedies are rarely accepted by the Bureau" and that "[a] stand-alone behavioural remedy may be acceptable when it is sufficient to eliminate the substantial lessening or prevention of competition arising from a merger, when there is no viable structural remedy, and when it will require minimal or no ongoing monitoring and enforcement required by the Bureau or the Tribunal".  Notwithstanding these and similar prior statements, the Bureau has, over the past few years, agreed to resolve its concerns in respect of at least three mergers through the use of entirely behavioural remedies.  These include the Budget/Cendent merger, the CN Railway/BC Rail merger and the BBM/Nielsen merger.

Moreover, as is evident from the BBM/Nielsen merger, the Bureau appears to have agreed to behavioural remedies even in the context of a merger-to-monopoly.  It  may be, however, that the Bureau's willingness to agree to behavioural remedies in the BBM/Nielsen case was significantly influenced by the strong industry support and efficiencies associated with the merger and/or fact that BBM, one of the shareholders of Newco, is a non-profit, member-controlled company. 

Finally, it is noteworthy that the Consent Agreement has a term of up to 15 years.  In the past, the duration of behavioural provisions has generally not exceeded ten years, although some of the provisions in the Consent Agreement relating to the CN/BC Rail merger have no apparent expiry date. 

If you have any questions regarding the foregoing, please contact George Addy, John Bodrug or Christopher Margison in the Toronto office (416.863.0900) and Hillel Rosen in the Montréal office (514.841.6400). 
 

Davies Ward Phillips & Vineberg LLP, with over 235 lawyers, practises nationally and internationally from offices in Toronto, Montréal, New York and an affiliate in Paris and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and overseas clients.  

The information and comments herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstance. For particular applications of the law to specific situations, the reader should seek professional advice.