Canadian companies relying on efficiencies defense in mergers must provide more proof, bureau head says

Merging companies that want to use Canada's efficiency defense will have to offer detailed data or face a potential merger challenge, Canada's Competition Bureau chief said today.

An anticompetitive but supposedly efficient merger is unlikely to clear if the parties don't offer extensive, testable data about the efficiencies created, Commissioner Matthew Boswell said at a conference in Toronto.

"I am highly unlikely to exercise my enforcement discretion and not challenge a potentially anti-competitive merger without reliable, credible, and probative evidence that supports and validates the efficiencies defense being advanced," he said.

"We will always take principled decisions when exercising our enforcement discretion," Boswell said. "Our decisions must be based on a solid evidentiary foundation."

Canada's competition law allows an anticompetitive merger to proceed if the parties can show that the new entity would operate more efficiently than the premerger parties, a provision that in theory was intended to help the country's relatively small economy turn out companies that can compete globally.

In 2015, Canada's Supreme Court, in the widely watched Tervita case, made it more difficult for the bureau to shoot down the defense.

The bureau intends to change its mergers procedure and ask for detailed evidence supporting the efficiencies claimed, the ability to test the evidence, and time to assess the efficiencies, Boswell said.

The bureau also has created a merger intelligence unit to detect potentially anticompetitive mergers that would otherwise not be brought to the bureau's attention. The unit, in operation for less than two months, has already found two potentially problematic transactions, Boswell said.