Last month, the Canadian Competition Tribunal released the public version of its reasons for issuing a divestiture order pursuant to the first fully contested proceeding under the merger provisions of the Competition Act in over a decade.
The Commissioner of Competition challenged the completed acquisition by CCS Corporation of Complete Environmental Inc. The Tribunal ordered divestiture of a subsidiary of Complete that owned property in northeastern British Columbia (known as the Babkirk site) which had been licensed for operation as a secure hazardous waste landfill.
The key implications of this decision for future transactions include:
- Small competitive overlaps may be successfully challenged by the Commissioner - divestiture was ordered notwithstanding a relatively small geographic area of potential competitive overlap between CCS and the Babkirk site, with only 12 customers and a small volume of commerce.
- Parties need to consider prospective competitive overlap in the absence of the merger - the Babkirk property was not operational and had never competed with CCS; if, as here, the acquired business or assets are found likely to have become a significant competitor of the purchaser in the absence of the challenged merger, that may form the basis for a finding that the merger is likely to substantially prevent competition, and provide grounds for a remedial order by the Tribunal.
- The Tribunal may be willing to substitute its business judgment for that of a party - the Tribunal found that, at the time of the original transaction, there were no other prospective purchasers for Complete and, absent the merger, the vendors would likely have used the Babkirk site for a bioremediation business that would not have been a significant competitor of CCS. However, the Tribunal also concluded that such a business was likely to fail, following which the site would likely have been operated as a landfill in competition with CCS.
- Customer complaints are not essential for a successful merger challenge - the Tribunal commented on the "unusual paucity" of evidence from customers, but still found a likely substantial prevention of competition based in part on internal CCS documents.