Canadian COMPETITION LAW

In a recent decision, the Federal Court of Appeal granted a stay of the Competition Tribunal’s May 29, 2012 decision in the contested CCS merger case Commissioner of Competition v. CCS Corporation.

This decision relates to a recent contested BC landfill merger, in which CCS Corporation acquired Complete Environmental Inc. and its wholly-owned subsidiary Babkirk Land Services (the first contested merger case in Canada in six years, an uncommon example of a “prevent” merger case under the Competition Act and a non-notifiable merger challenged by the Competition Bureau).

As a result of the Tribunal’s May decision, following a challenge of the merger by the Bureau, CCS Corporation (now Tervita Corporation) had been subject to a Tribunal order to divest the shares or assets of acquired Babkirk before the end of the year, after which a trustee was to be appointed to effect the sale.  The Tribunal had also issued a related Divestiture Procedure Order in July, setting out the terms for the divestiture process (see: Divestiture Procedure Order).

In this regard, the Tribunal partially granted the Commissioner of Competition’s application accepting that the transaction would likely prevent competition substantially in the relevant secure landfill services market in Northern BC, though ordered divestiture rather than dissolution (see: Competition Tribunal Releases Decision in BC Landfill “Prevent” Merger Case and Commissioner of Competition v. CCS Corporation).

The stay of the Tribunal’s decision now granted by the Federal Court will apply until the final determination of the appeal.  In granting a stay, the Court applied the test in RJR – MacDonald Inc. v. Canada (A.G.), [1994] 1 S.C.R. (S.C.C.), in which the Supreme Court set out a three-part test (serious issue, irreparable harm and balance of convenience).

With respect to a serious issue, the Court held that there was at least one serious issue raised by the appellants – namely the correct test for a substantial prevention of competition.  Under section 92 of the Competition Act, mergers can be challenged where they either substantially lessen or prevent competition.  The Tribunal recognized that its previous decisions have not addressed in any detail the appropriate approach to evaluate competitive effects in a prevent case, which led to a brief definition by the Tribunal of the appropriate analytical framework (but led one of the Tribunal’s judicial members to write long concurring reasons).  According to the Federal Court, the issue of whether the Tribunal applied the correct test was indeed a “serious and important” issue worthy of reconsideration.

With respect to irreparable harm, the Commissioner conceded that CCS would suffer irreparable harm if compelled to effect the Tribunal’s divestiture order, based on an inability to re-acquire the assets or claim damages against the Commissioner, but argued that the allegation of irreparable harm was premature.  The Court rejected this argument on the basis that CCS was obligated as a result of the Tribunal’s order to make active efforts to sell its interest in Babkirk and not merely, for example, to prepare for divestiture.

As for the balance of convenience, the Commissioner made arguments related to the public interest in the timely determination of competition cases and diminishing effectiveness of the remedy.  The Court, however, found that there was also a public interest in due process, accepted the appellants right to appeal and found that there was no general rule based on an expeditious determination of competition cases that would fetter its discretion to grant stays.  The Court also pointed to the fact that, given that this is a prevent case, no existing competition had been eliminated and therefore the status quo would not be altered in granting a stay.

The Court also made its stay order conditional on the preservation of the Babkirk assets.

For a copy of the Federal Court of Appeal’s decision see: Tervita Corporation et al. v. Commissioner of Competition et al., 2012 FCA 223 (F.C.A.).

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