Rarotonga, 2010

Simon's Megalomaniacal Legal Resources

(Ontario/Canada)

ADMINISTRATIVE LAW | SPPA / Fairness (Administrative)
SMALL CLAIMS / CIVIL LITIGATION / CIVIL APPEALS / JUDICIAL REVIEW / Practice Directives / Civil Portals

Home / About / Democracy, Law and Duty / Something Big / Testimonials / Conditions of Use

Civil and Administrative
Litigation Opinions
for Self-Reppers

Simon's Favourite Charity -
Little Friends Lefkada (Greece)
Cat and Dog Rescue


TOPICS


Competition - Mergers

. Secure Energy Services Inc. v. Canada (Commissioner of Competition)

In Secure Energy Services Inc. v. Canada (Commissioner of Competition) (Fed CA, 2023) the Federal Court of Appeal considered an Competition Act s.13 appeal against Competition Tribunal orders [under Competition Act s.92 ('Merger Orders')] requiring divestiture of assets ('facilities') of a recently-merged corporation. The appeal was grounded in the s.96 ['exception where gains in efficiency'] statutory exception:
[1] The appellant, SECURE Energy Services Inc. (Secure), is the result of a merger with Tervita Corporation (Tervita) that closed on July 2, 2021 (the Merger). The respondent, the Commissioner of Competition (the Commissioner), as part of his responsibilities, looked into whether the Merger “prevents or lessens, or is likely to prevent or lessen, competition substantially” such that section 92 of the Competition Act, R.S.C. 1985, c. C-34 (the Act), might apply to empower the Competition Tribunal (the Tribunal) to order the dissolution of the Merger or the disposition of certain assets or shares. Section 92 of the Act is reproduced in the Annex to these reasons.

....

III. Interpretation of subsection 96(1) of the Act

[10] The core of the dispute between the parties on the interpretation of subsection 96(1) concerns which gains in efficiency are considered relevant (cognizable) in determining whether they “will be greater than, and will offset,” anti-competitive effects of the merger in question. The parties appear to be agreed, and I concur, that this is a question of law, and that the applicable standard of review is correctness.

[11] This dispute centers on the final words of subsection 96(1): “and that the gains in efficiency would not likely be attained if the order were made.” The Tribunal concluded, and the Commissioner agrees, that these final words qualify the “gains in efficiency” that are to be weighed against anti-competitive effects to determine whether section 96 applies to prohibit the Tribunal from making an order under section 92. Where subsection 96(1) asks whether the merger in question “has brought about … gains in efficiency that will be greater than, and will offset, the effects of any prevention or lessening of competition that will result or is likely to result from” the merger, the Tribunal applied the final words to limit the scope of the “gains in efficiency” underlined above to those that “would not likely be attained if the order were made.” Effectively, the Tribunal and the Commissioner interpret subsection 96(1) to read more or less as:
The Tribunal shall not make an order under section 92 if it finds that the merger or proposed merger in respect of which the application is made has brought about or is likely to bring about gains in efficiency not likely to be attained if the order were made that will be greater than, and will offset, the effects of any prevention or lessening of competition that will result or is likely to result from the merger or proposed merger.

Le Tribunal ne rend pas l’ordonnance prévue à l’article 92 dans les cas où il conclut que le fusionnement, réalisé ou proposé, qui fait l’objet de la demande a eu pour effet ou aura vraisemblablement pour effet d’entraîner des gains en efficience qui ne seraient vraisemblablement pas réalisés si l’ordonnance était rendue, et qui surpasseront et neutraliseront les effets de l’empêchement ou de la diminution de la concurrence qui résulteront ou résulteront vraisemblablement du fusionnement réalisé ou proposé.
[12] The Tribunal required that, in order for Secure’s section 96 defence to be successful, Secure would have to establish that the gains in efficiency brought about by the Merger and that would not likely be attained if the Tribunal issued an order under section 92 would be greater than all of the anti-competitive effects of the Merger. This is referred to as the order-driven approach.

[13] For its part, Secure argues that the order-driven approach leads to unintended asymmetry in the section 96 defence whereby only a subset of gains in efficiency brought about by the Merger (those that would not likely be attained if the order were made) are compared to all of the anti-competitive effects thereof. Secure argues that this “apple to oranges” approach should not be followed, and that the final words of subsection 96(1) should instead be read as a separate limitation on the Tribunal’s power to make an order under section 92. By this approach, if the total of all gains in efficiency brought about by a merger “will be greater than, and will offset,” all of the anti-competitive effects thereof, then the Tribunal cannot make an order that would cause any of those efficiencies to be lost. As characterized by Secure, subsection 96(1) asks two questions: (i) whether efficiency gains resulting from a merger exceed anti-competitive effects thereof, and (ii) whether efficiency gains will be attained if an order is made. Though Secure did not state its position this way, its argument appears to interpret subsection 96(1) to read more or less as:
The Tribunal shall not make an order under section 92 if it finds that the merger or proposed merger in respect of which the application is made has brought about or is likely to bring about gains in efficiency that (i) will be greater than, and will offset, the effects of any prevention or lessening of competition that will result or is likely to result from the merger or proposed merger and (ii) would not likely be attained if the order were made.

Le Tribunal ne rend pas l’ordonnance prévue à l’article 92 dans les cas où il conclut que le fusionnement, réalisé ou proposé, qui fait l’objet de la demande a eu pour effet ou aura vraisemblablement pour effet d’entraîner des gains en efficience, (i) qui surpasseront et neutraliseront les effets de l’empêchement ou de la diminution de la concurrence qui résulteront ou résulteront vraisemblablement du fusionnement réalisé ou proposé et (ii) qui ne seraient vraisemblablement pas réalisés si l’ordonnance était rendue.
[14] The Commissioner opposes this interpretation on the basis that it would prevent the Tribunal from making an order under section 92 even where most of the claimed gains in efficiency would likely be attained in any event. As argued by the Commissioner, a single dollar of efficiency gains that would be lost as a result of an order by the Tribunal would engage the section 96 defence, which could not have been Parliament’s intent. Secure does not dispute this consequence of its interpretation.

[15] Secure also offers an alternative interpretation in the event that this Court concludes that subsection 96(1) does indeed contemplate an order-driven approach. In that event, Secure argues that this provision should nevertheless be interpreted to provide for a symmetrical analysis. By such an analysis, both gains in efficiency brought about by the merger and anti-competitive effects thereof should relate to the same time period and the same geographic markets. Presumably, they should also be similarly limited to such gains and effects as would not be attained if an order under section 92 were made. It is not clear to me what meaning is being given to the final words of subsection 96(1) under this interpretation.

....

[26] As indicated at the beginning of these reasons, section 92 empowers the Tribunal, in appropriate circumstances, to order the dissolution of a merger or the disposition of certain assets or shares. Section 96 acts as a check on this power in cases where a merger brings about certain gains in efficiency. As stated in Tervita Corp. v. Canada (Commissioner of Competition), 2015 SCC 3, [2015] 1 S.C.R. 161 at paragraph 111 (Tervita), and as recognized by the Tribunal at paragraph 491 of its Decision, section 96 gives primacy to economic efficiency, but not without limitation. At paragraph 110 of Tervita, the majority of the Supreme Court of Canada rejected the argument that all gains in efficiency, however arising, should be considered under section 96. At paragraph 113, the majority stated:
In order for a party to gain the benefit of the s. 96 defence, the Tribunal must be satisfied that the merger or proposed merger has brought about or is likely to bring about gains in efficiency. The Tribunal must also find that the gains in efficiency would not likely be attained if a s. 92 order were made. In addition, and despite the paramountcy given to economic efficiencies in s. 96, s. 96(3) prohibits the Tribunal from considering a “redistribution of income between two or more persons” as an offsetting efficiency gain. The limitation in s. 96(3) demonstrates that Parliament does not intend for all efficiency gains, however arising, to be taken into account under s. 96.

[Emphasis added]
[27] In my view, the underlined sentence in the quote above, being part of a discussion of the limits of the section 96 defence, demonstrates that the majority of the Supreme Court of Canada favoured an interpretation of subsection 96(1) that is consistent with that argued by the Commissioner and found by the Tribunal: the gains in efficiency to be compared to anti-competitive effects are limited to those that would not likely be attained if a section 92 order were made. There is no suggestion in that paragraph that the final words of section 96 are intended to limit the scope of a section 92 order, as Secure argues.

D. Purpose

[28] Section 1.1 of the Act provides that its purpose is “to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy.” The goal of efficiency is clearly the key motivation for the section 96 defence: Canada (Commissioner of Competition) v. Superior Propane Inc., 2001 FCA 104 at paragraph 110 (see also Tervita at para. 87). That said, Parliament clearly tempered this goal by its choice of wording. It did not set aside entirely the goal of maintaining and encouraging competition, so as to deprive the Tribunal of the power to make an order under section 92 where such an order would stop any efficiency gains, even in the case of a merger with major anti-competitive effects. I do not accept Secure’s argument that this is implicit in section 96. In the English version, when addressing anti-competitive effects, this provision refers to “the effects of any prevention or lessening of competition…” (Emphasis added). The word “any” was not included in addressing efficiency gains in section 96, though it could have been.
At paras 16-42 the court undertakes a conventional statutory interpretation of s.96(1), concluding that:
[42] Having considered the text, context and purpose of subsection 96(1) of the Act, I conclude that the Tribunal was correct in its interpretation of this provision [SS: see para 12, "the order-driven approach."].



CC0

The author has waived all copyright and related or neighboring rights to this Isthatlegal.ca webpage.




Last modified: 08-08-23
By: admin