🚮 a garbage merger
enshrined irreparable harm on the "balance of convenience"
There was a garbage merger between Secure and Tervita that is of significant public interest. I need you to know about it.
🗑️ Why should you care about garbage? The associated decision has negative consequences for merger control, demonstrates the limits of the Competition Commissioner’s powers and shows that the Competition Tribunal is more interested in shareholders than everyday Canadians. It’s also a super dramatic read!
*This is a wonkier-than-usual post, and awesomely illustrative of how the current competition regime is failing us - badly.
In considering the Commissioner’s request to delay this merger, the Tribunal agreed that, “irreparable harm to the competitive process and to purchasers of the services...has begun to occur.” But it will still let the merger pass.
What happened: Basically, the Commissioner tried to stop (or pause) the merger, but the two firms merged anyway, and even bragged about it in a press release. 🤨
This contested merger, “raises important issues with respect to each of the three parts of the tripartite test for an injunction that have not previously been addressed in this context.”
The Commissioner (Matthew Boswell) tried to direct that certain facilities be “held separately and operated independently” while the Bureau analyzed whether the anticipated transaction would cause harm to Canadians, but was rejected. This is pretty harsh. The threshold for the Commissioner to be able to press pause on a merger is pretty high - somewhat akin to proving a crime before questioning a suspect. In this case, he needs to show a strong likelihood of success + evidence, but he met only the first two conditions of a tripartite test, which is:
(i) there is a serious issue to be tried;
(ii) the applicant would suffer irreparable harm if the application were refused; and
(iii) the balance of convenience favours the applicant (this is what the Bureau was faulted for).
EVEN THEN, the Tribunal DOESN’T HAVE TO give an injunction because it’s at their discretion.
[I believe the test comes from tobacco companies trying to get around labour laws.] 🚬
The application was denied, so the Tribunal did not consider the “second general issue raised on the application” - which was an Order to permanently prohibit the completion of the transaction.
Check out the text below from the decision regarding the probable price increase(s) from this merger:
“… the merged entity will have significantly enhanced market power that is unlikely to be constrained. Oil and gas producers will likely pay materially higher prices and experience a deterioration in the quality of service to dispose of waste at a time when the oil and gas industry, an important sector of the Canadian economy, is struggling.”
More specifically, the Commissioner alleges that competition is likely to be substantially lessened in a large number of local geographic markets for (i) the supply of waste processing and treatment services by TRDs; (ii) the disposal of solid oil and gas waste into industrial landfills; and (iii) the disposal of produced water and wastewater into water disposal wells owned by third-party waste service providers.
Secure indicated that they intended to use the efficiency defence under Section 96, which means that this decision is essentially a “Superior Propane 2.0.”
For context: the 1998 merger between Superior Propane Inc. and ICG Propane Inc. is arguably one of the most controversial in Canadian history. It created a monopoly for the retail sale of propane in 16 communities, and the market share of Superior Propane increased to 80% in an additional 32. After the merger, Superior Propane made up about 70% of the entire Canadian retail market for propane.
This recent decision is of considerable public interest, and the extent of the resultant “irreparable harm” can now only be evaluated through a wait-and-see approach. That is: we’ll need to independently monitor prices for waste processing, the disposal of solid oil and gas waste into industrial landfills, and the disposal of produced water and wastewater. Good times!
When the Bureau believes that a merger is likely to prevent or lessen competition substantially, it can either apply to the Competition Tribunal to challenge it under section 92 of the Competition Act, or negotiate remedies with the merging parties in order to resolve the competition concerns by consent. Even if there IS a 92 complaint, merging parties can go ahead and close BUT a 104 stops a merger - IF the Commissioner can get the requisite analysis filed on time.
Another super relevant part of the Act is Section 100 - before a “92” is issued by the Commissioner, which can unlock more time.
100 (1) The Tribunal may issue an interim order forbidding any person named in the application from doing any act or thing that it appears to the Tribunal may constitute or be directed toward the completion or implementation of a proposed merger in respect of which an application has not been made under section 92 or previously under this section, where
(a) on application by the Commissioner, certifying that an inquiry is being made under paragraph 10(1)(b) and that, in the Commissioner’s opinion, more time is required to complete the inquiry, the Tribunal finds that in the absence of an interim order a party to the proposed merger or any other person is likely to take an action that would substantially impair the ability of the Tribunal to remedy the effect of the proposed merger on competition under that section because that action would be difficult to reverse; or
(b) the Tribunal finds, on application by the Commissioner, that there has been a contravention of section 114 in respect of the proposed merger.
Without a s.100, the Commissioner has a 30 day waiting period to decide whether to ask for more information to analyze the transaction, followed by a second 30 day waiting period once that information is received to determine whether or not it will make a s.92 application. Without a s.104 injunction, parties can close a transaction as soon as the second 30 day timer runs out. For more on the typical timing of a merger, see this Model Timing Agreement for Merger Reviews involving Efficiencies from the Bureau.
In this instance, the two companies took a bit of a gamble - should the Competition Commissioner launch a Section 92, they may have bet that they will be able to close right away thanks to the efficiency test, and the Commissioner will not win on analysis. The Tribunal sided with Secure, because of the failure on the balance of convenience test. The judge told the Bureau to do super quick math.
Now, along with Section 100, take a look at Section 104 - an Interim Order.
104 (1) If an application has been made for an order under this Part, other than an interim order under section 100 or 103.3, the Tribunal, on application by the Commissioner or a person who has made an application under section 75, 76 or 77, may issue any interim order that it considers appropriate, having regard to the principles ordinarily considered by superior courts when granting interlocutory or injunctive relief.
Even McCarthy’s thinks that interim injunctions in merger control are a high bar to meet.
This merger review was très dramatique and I would 100% watch it dramatized on Netflix. 📺
The Commissioner filed a 92 RIGHT at the end of the 30-day waiting period, saying that he will ask for a 104 (with 72 hours left in the waiting period) and then asking for an Interim Order to make the parties hold the transaction before it is rendered.
Before this, the Competition Tribunal decided that it didn’t have jurisdiction in this case, and went ahead with the 104.
Meanwhile, the merger was already starting to close.
It seems to me that Crampton may have been exposing the Bureau to significant legal risk in pushing the boundaries of how quickly the Bureau can produce fancy economics. Something I’m not clear on is: what are the consequences if hasty, back-of-the-envelope calculations from the Bureau are way off? Why couldn’t we take a second and evaluate the implications of this merger more deeply?
This case sets a bad precedent in terms of speed, rushed analysis, and a preference for the convenience of shareholders.
It’s also illustrative of the increasing absurdity of the 30-day period, and the skill of well-paid lawyers to exploit the legislation’s freakish vulnerabilities in favour of business interests (thank you, Blake’s).
It’s a garbage decision. What stinks even more is that we’re not talking about it. #FreeBoswell
Come chat about the innovation economy on Twitter spaces! 🗣️
I’ll also be speaking on a panel about the business implications of changing privacy legislation later this month c/o the Empire Club.
Our sixth (and final!) event with the Toronto Public Library is coming up on October 8th at 12.00 ET. 📚
And I wrote a quick bit for the Hub on telecom stuff: ☎️
Vass Bednar is the Executive Director of McMaster University’s new Master of Public Policy in Digital Society Program.