Canadian COMPETITION LAW

February 11, 2013

Earlier today, the Competition Bureau announced that the Federal Court of Appeal has dismissal the appeal from the Competition Tribunal’s decision in the CCS B.C. hazardous waste landfill merger case (see: here).  In making the announcement, Canada’s Interim Commissioner of Competition John Pecman said:

“We are pleased that the Court has dismissed Tervita’s appeal with costs and upheld the Tribunal’s order. … If the acquisition had been allowed, Tervita would have been in a position to entrench its monopoly on secure hazardous waste disposal in Northeastern British Columbia.”

The Bureau initially filed an application with the Tribunal in 2011 to challenge this non-notifiable merger, arguing that the transaction, if it proceeded, would result in a substantial prevention of competition in the market for the disposal of hazardous waste in Northern British Columbia (the case was a “prevent” merger case).

The Competition Tribunal’s Decision

In May, 2012, the Tribunal ordered CCS to divest the Babkirk hazardous waste landfill assets acquired by CCS Corporation (now Tervita) from Complete Environmental.  For a summary of the Tribunal’s decision last year see: Competition Tribunal Releases Decision in BC Landfill “Prevent” Merger Case.

In brief, on May 29, 2012, the Tribunal concluded that the acquisition by CCS of the shares of Complete substantially prevented competition and ordered CCS to divest Complete’s wholly-owned subsidiary Babkirk.  The divestiture order was stayed pending appeal to the Federal Court of Appeal, which was heard last December.  Tervita is the owner of the only operating secure landfills in North-Eastern British Columbia permitted to accept solid hazardous waste.  These landfills primarily service oil and gas industry operators seeking to dispose of materials generated through drilling activities. Babkirk had secured regulatory approvals for development of a further secure hazardous waste landfill.

On January 7, 2011, CCS acquired the shares of Complete from five individuals for just over $6 million.  The acquisition fell well below the financial thresholds for mandatory pre-closing notification to the Bureau.  On January 24, 2011, the Commissioner of Competition filed an application with the Tribunal seeking a remedy under the merger provisions of the Competition Act.

Although Babkirk had not yet constructed a landfill, the Commissioner contended that the acquisition was a merger that prevented, or was likely to prevent, competition substantially by eliminating the only likely imminent competitor for secure landfill services in NEBC.  The vendors were also named as respondents since the Commissioner sought an order to dissolve the acquisition.  Normally the Bureau’s preferred merger remedy is divestiture by the purchaser.

Following a hearing in late 2011, the Tribunal concluded that the acquisition was a “’merger” that “… was more likely than not to maintain the ability of CCS to exercise materially greater market power” and “likely to prevent competition substantially.”  The Tribunal rejected CCS’s defence that the merger was likely to achieve efficiencies that outweighed any anti-competitive effects (though the Tribunal did hold that the Commissioner’s proposed dissolution remedy would be overbroad, intrusive and less effective and ordered divestiture instead).

The Commissioner is normally selective in bringing contested merger cases, with the CCS case being only the sixth contested merger decided by the Tribunal since 1986.  The case reinforces that the Commissioner may pursue any merger, including one that is localized or is relatively small in terms of deal size, for up to one year after closing.  The case provided an opportunity for the Tribunal to articulate its approach to an alleged prevention (as opposed to a lessening) of competition and for the application of the efficiencies defence under section 96 of the Act.

The Federal Court of Appeal’s Decision

The Federal Court of Appeal’s decision was not yet available when I posted this – I’ll update the post once the Court’s decision becomes available.  According to the Bureau, the FCA’s reasons are expected to be available next week.

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