Canadian Competition Bureau Publishes Draft Updated Merger Enforcement Guidelines

The Competition Bureau (Bureau) has released for consultation draft Merger Enforcement Guidelines (draft MEGs), updating its last comprehensive merger guidelines issued in 2011 (2011 MEGs). The draft MEGs seek to describe the Bureau's recent and evolving approach to merger review, particularly in light of major legislative amendments to the Competition Act (Act) enacted over the past three years.

The draft MEGs do not represent a major shift in the Bureau's analytical approach to the assessment of a substantial lessening or prevention of competition in the merger context. However, they do provide some additional insight into the way the Bureau intends to, among other things:

1. apply the Act's new rebuttable presumption that a merger lessens or prevents competition substantially if it exceeds certain market concentration thresholds;
2. assess minority interests;
3. account (or not account) for a merger's pro-competitive benefits;
4. assess a merger's impact on innovation and dynamic competition;
5. assess the effects of increased access to competitively sensitive confidential information arising from a "vertical" merger between an upstream supplier and a downstream customer; and
6. assess the impact of a merger in labour markets.

Only the Bureau can seek an order from the Competition Tribunal (Tribunal) enjoining, unwinding or requiring other remedial measures regarding a merger under the merger provisions of the Act. To obtain such an order, the Bureau must demonstrate that the merger is likely to prevent or lessen competition substantially. It remains to be seen whether the enforcement positions adopted by the Bureau and as reflected in the draft MEGs will, in turn, be adopted by the Tribunal. Notably, the draft MEGs no longer include specific references to case law, although the Bureau asserts that they were drafted to be "consistent with case law."

The draft MEGs, which are discussed below, are open for public comment until February 11, 2026. Once finalized, they will replace the 2011 MEGs.

Below we summarize the key takeaways from the draft MEGs.

Structural Presumption: From Safe Harbours to a Statutory Rebuttable Presumption

Following recent amendments, the Act now provides that mergers will be presumed to prevent or lessen competition substantially if they (a) (i) combine firms with more than a 30 percent aggregate market share; or (ii) result in a post-merger "concentration index" of more than 1,800 (determined by squaring the market shares of the participants in the relevant market); and (b) result in an increase in the concentration index of more than 100 from pre-merger levels. The presumption would, for example, be triggered if a firm with a 30 percent share acquired a firm with a 2 percent share of a properly defined market, or if a firm with a 16 percent share merged with a firm with a 15 percent share. Similarly, depending on the number of other competitors and their market shares, a merger of two firms with market shares of seven and eight percent respectively could potentially also trigger the presumption.

In considering whether parties to a merger have rebutted such a presumption, the draft MEGs indicate that the Bureau will apply a sliding scale: the more the thresholds are exceeded, the greater the need for "persuasive evidence" to overcome the presumption. The draft MEGs do not identify specific categories of rebuttal evidence that the Bureau would consider to be particularly persuasive, but the commentary suggests that evidence showing effective remaining competition, likely timely and sufficient entry, and other market‑specific constraints on any potential exercise of market power by the merged firm will be central.

The most notable change to the Bureau's guidance on market concentration is the removal of the Bureau's non‑statutory market share safe harbours. Safe harbours are used as a screening mechanism to reduce the number of mergers subject to detailed review, providing greater regulatory certainty for businesses and allowing the Bureau to focus on matters more likely to harm competition. The 2011 MEGs state that the Bureau will generally not challenge a merger on the basis of unilateral market power when the post-merger market share of the merged firm would be less than 35 percent. In contrast, the draft MEGs do not include any safe harbours at all. In fact, the draft MEGs state that mergers that do not meet the statutory presumption thresholds noted above may still be found to substantially lessen or prevent competition under the Act.

Market Definition and Structure: Same Tools, Higher Stakes

The Bureau's market definition methodology remains grounded in demand‑side substitutability and the hypothetical monopolist test. Although the 2011 MEGs already used these tools, the draft MEGs provide a somewhat more detailed exposition. Both the 2011 MEGs and the draft MEGs make clear that, in some cases, the Bureau may proceed without precise market boundaries if anti‑competitive effects are apparent under all plausible definitions; or conversely, it may be clear that a merger will not harm competition substantially under any plausible market definition.

Given the low bar for triggering the statutory presumption, parties should be prepared, in a wider range of mergers, to have conversations with the Bureau and provide more detailed information about the relevant market and how market shares and the concentration index should be calculated, including acceptable denominators or proxies where third‑party data are limited or unavailable. It may be challenging to predict how the Bureau will approach the structural presumption where reliable internal or third-party market share data are unavailable and/or where the definition of the relevant market is open for debate.

Minority Interests: A More Considered Analysis

The draft MEGs state the Bureau's position on its assessment of minority interests in greater detail, although they are generally aligned with the 2011 MEGs and are consistent with the Bureau's recent enforcement practice. In this respect, the draft MEGs state that the Bureau will consider both common ownership (when the same investor or group of investors holds stakes in two or more competing firms) and cross-ownership (when one firm holds a direct ownership interest in a competitor – for example, by owning shares in a rival firm).

In evaluating the impact of minority interests in a given transaction, the draft MEGs state that the Bureau will consider the following factors: how closely the interest holder's and target's products compete; the extent to which sales are diverted between them; how profitable those sales are; and how likely and significant the change in the interest holder's incentives would be. In addition, the Bureau will evaluate whether the interest holder could influence the target business's behaviour – how much influence the interest holder has and how likely it is that the exercise of that influence will prevent or lessen competition substantially. Finally, the Bureau will consider whether the interest provides access to confidential information about the target business, and whether such access could make it easier for firms to coordinate their behaviour or influence the way the receiving firm competes on its own, or both.

From the Efficiencies Defence to Pro‑Competitive Benefits as a Factor

With the repeal of the statutory efficiencies defence in the recent amendments to the Act, the draft MEGs introduce a framework for the consideration of "pro‑competitive benefits" of a merger. The Bureau's position is that pro‑competitive benefits could be one consideration, among others, in the overall competitive effects analysis. The draft MEGs say that the Bureau will take into account verifiable merger‑specific, rivalry‑enhancing pro-competitive benefits (such as cost savings that directly intensify competition or consumer‑facing improvements) that are likely to occur. Notably, the Bureau's position is that cost savings arising from reduced headcount, overhead consolidation or other forms of internal restructuring will generally not be relevant unless they are shown to likely result in direct, tangible and timely enhancements to competition. In addition, cost decreases that result from an increase in bargaining leverage due to the merger will not be considered by the Bureau. Importantly, where substantial competition concerns otherwise exist, the Bureau's position is that even pro‑competitive gains that are supported by rigorous evidence may not alter the outcome of its assessment. The draft MEGs appear to reflect a skepticism of, or hesitancy to give full weight to, a merger's pro-competitive benefits. Whether the Tribunal will share this perspective remains to be seen.

Anti‑Competitive Effects: Expanded Focus on Non‑Price Competition, Dynamic Competition and Digital Markets

The draft MEGs preserve the familiar unilateral market power and coordinated effects frameworks in the 2011 MEGs but expand on how the Bureau assesses non‑price dimensions (quality, variety, privacy or any other dimension of competition) and dynamic competition (i.e., the impact of a merger on innovation).

With respect to dynamic competition, the Bureau will scrutinize whether a merger is likely to lessen incentives to innovate or to entrench incumbents by raising barriers to future disruption. Where innovation is central to competing in a particular market, the Bureau may consider assets and markets that do not yet exist (e.g., R&D programs, intellectual property, specialized personnel and innovation road maps). Multi‑sided platforms receive an expanded discussion in the draft MEGs, including the implications of network effects, economies of scope in data, and platform conduct that may foreclose or disadvantage present or future competitors (e.g., self‑preferencing, default settings or interoperability degradation).

With respect to coordinated effects arising in concentrated markets with relatively few competitors, the Bureau's position is that certain factors make coordination among remaining competitors more likely or sustainable, with updated observations on market transparency. For example, the draft MEGs state that algorithms, machine learning or tools that allow real-time pricing updates may make a market more transparent and may also, in some cases, increase the speed and frequency of interactions between firms and make coordination easier to sustain. More generally, algorithmic pricing and its implications for competition is an emerging area of interest for the Bureau. Consistent with the 2011 MEGs, the draft MEGs expressly note a merger's elimination of a "maverick" or reduction of asymmetries as potentially facilitating coordination.

Non‑Horizontal Mergers: Foreclosure, Access to Competitively Sensitive Information and Entrenchment

The 2011 MEGs addressed vertical and conglomerate mergers primarily in terms of whether such mergers are likely to create or enhance an ability or incentive to foreclose competition in an upstream, downstream or related market. The draft MEGs expand on that analysis.

The Draft MEGs highlight a merger's impact on access to competitively sensitive information as an important aspect of the Bureau's competitive effects analysis. For example, the Bureau will consider whether vertical integration of an upstream supplier with a downstream customer enables the merged entity to observe the pricing, volumes or strategies of competing downstream customers, thereby increasing coordination risks or dampening rivals' incentives to pursue pro‑competitive initiatives post-merger.

Entrenchment of leading incumbents is now an explicit potential concern. Even if short‑term price effects are not readily measurable, mergers that raise barriers to entry or deny rivals network effects or scale may be viewed as substantially harming competition.

Although the structural presumption does not apply in the context of purely non-horizontal mergers, the Bureau will consider market shares and concentration in the relevant market as part of its analysis. The draft MEGs state that the Bureau is more likely to investigate a non-horizontal merger where the merged firm's share exceeds 30 percent of the supply of a related product.

Entry and Expansion: A Broader Catalogue of Barriers

The timeliness, likelihood and sufficiency framework for the market entry analysis remains largely unchanged; however, the draft MEGs expand upon the list of barriers to entry that the Bureau may consider in its review by adding network effects, "learning by doing" (whereby existing firms become more effective competitors the more they compete), access to data and to key inputs. Notably, the Bureau does not include much detail on what it will consider most probative in establishing whether entry is timely, likely and sufficient so as to rebut presumed anti-competitive effects.

Labour and Buyer Power: Express Framing of Monopsony Risks

Consistent with the legislative emphasis in recent amendments to the Act, the draft MEGs expressly address buyer power and labour markets. The analysis broadly mirrors the general seller‑side framework and focuses on whether suppliers or workers have competitive alternative buyers/employers and whether the merger would materially worsen terms of trade, wages or working conditions. The draft MEGs assert that the Act's structural presumption where a merger exceeds the specified concentration threshold applies in buyer markets as well. That said, the Bureau has signalled in other forums that it continues to refine its labour market analysis and it may be supplemented by future guidance.

Failing Firm and Exiting Assets: Narrow Path, Familiar Evidentiary Demands

Aligned with the 2011 MEGs, the draft MEGs confirm that probable business failure is not in itself a defence for a merger that is likely to prevent or lessen competition substantially but may show that the merger is not the cause of lost competition if, for example, imminent failure is probable and the assets would otherwise exit. The Bureau's evidentiary expectations remain rigorous but consistent with the 2011 MEGs, including requiring supporting financial statements and evaluations of alternatives to the merger, such as potential third‑party sale processes.

Practical Implications

The Bureau will consult widely on the draft MEGs and incorporate stakeholder feedback as it considers appropriate. Although the draft MEGs are not yet in final form, the Bureau has stated that until the final guidelines are published, the draft MEGS provide information about how the Bureau enforces the amended merger provisions of the Act.

The draft MEGs reinforce that early consideration of whether a proposed merger may exceed the concentration threshold for the Act's presumed substantial lessening of competition will be warranted in a broader range of cases. Particularly where data to support market shares and concentrations are limited, more lead time may be required to assess the competitive dynamics of a proposed transaction and to develop optimal communication and filing strategies.

Although relatively few mergers proceeded in reliance on the formal efficiencies defence before it was repealed, the draft MEGs appear to evidence skepticism of claims of a merger's pro-competitive benefits particularly where necessary to overcome presumed anti-competitive effects. That said, the Bureau's acknowledgment of a sliding scale with relatively less evidence required to rebut a presumption where the merger exceeds the concentration threshold by only a relatively small amount may be a promising indicator of a pragmatic enforcement approach.

The Davies Competition, Antitrust and Foreign Investment group would be pleased to advise clients with respect to mergers, interpreting the draft MEGs or assisting in the preparation of comments on the draft MEGs by interested parties.