Canada ends merger efficiencies defence

Summary#

This bill repeals the “efficiencies defence” in Canada’s Competition Act. That defence let a merger go ahead even if it reduced competition, as long as the merger’s cost savings and productivity gains were larger than the harm to competition (Competition Act s.96). The bill removes that defence so the Competition Tribunal can block or remedy anti-competitive mergers without weighing claimed efficiencies against harm (Bill: repeal of s.96; amendment to s.92(1)).

• Ends the statutory efficiencies defence for mergers (Bill: repeals Competition Act s.96).
• Leaves all other merger rules in place, including the test for whether a merger lessens competition (Competition Act s.92; Bill text).
• Likely applies on Royal Assent, since the bill has no separate coming-into-force clause (Bill text).
• Aligns Canada more closely with jurisdictions that do not allow efficiencies to justify anti-competitive mergers (Competition Bureau, 2022 submission).

What it means for you#

• Households

  • Mergers that would reduce competition are more likely to be blocked or fixed, even if companies claim cost savings. This may reduce the risk of higher prices or fewer choices compared to current law, but outcomes will vary by market (Bill: repeal of s.96; Competition Bureau, 2022).
  • You will not need to take any action. The change affects how government reviews mergers.

• Workers

  • If fewer anti-competitive mergers occur, there may be less consolidation in some industries. That can affect local job markets and bargaining power, but effects will differ by sector (Bill text; Competition Bureau, 2022). Data unavailable on net job effects.
  • Mergers that offer efficiency-related cost savings alone will no longer justify reduced competition. This could limit some restructuring plans tied to mergers (Bill: repeal of s.96).

• Small and medium businesses

  • You may face fewer instances where a much larger rival can buy a competitor and rely on efficiencies to proceed despite harm to competition. This could help preserve market access and customer options (Bill: repeal of s.96; Competition Bureau, 2022).
  • You may gain more leverage when negotiating with dominant firms if fewer consolidation deals go through in concentrated markets (Bill text). Data unavailable on size of effect.

• Large businesses and merging parties

  • You can no longer rely on efficiencies as a legal defence to an otherwise anti-competitive merger. You will need to show the merger does not substantially lessen or prevent competition, or accept remedies (Bill: repeal of s.96; Competition Act s.92).
  • Deal planning may take longer and face higher litigation risk if the merger raises competition concerns. Claimed cost savings remain relevant to business planning but are no longer a shield in Tribunal proceedings (Bill text). Data unavailable on timing impacts.

• Local and provincial governments

  • No direct duties or funding changes. Possible indirect effects on regulated sectors if merger outcomes change (Bill text). Data unavailable on sector-specific impacts.

• Service users (e.g., farmers, suppliers, creators)

  • In buyer markets (where firms buy from you), fewer anti-competitive mergers may help maintain multiple buyers and bargaining options (Competition Bureau, 2022; Bill text). Actual effects depend on market conditions.

Expenses#

Estimated net cost: Data unavailable.

• No appropriations, taxes, fees, or transfers are included in the bill text (Bill text).
• Administrative costs for the Competition Bureau and Competition Tribunal could change due to litigation mix, but there is no fiscal note or quantified estimate. Data unavailable.

Proponents' View#

• The defence has allowed harmful mergers to proceed when firms claimed cost savings, making Canada an outlier among peers; removing it aligns Canada with other major jurisdictions (Competition Bureau, 2022 submission).
• Blocking anti-competitive mergers can help prevent higher prices and reduced choice for consumers and suppliers, especially in already concentrated markets (Competition Bureau, 2022; Competition Act s.92).
• Efficiencies can still be pursued by firms without needing to merge in ways that harm competition; removing the defence targets only mergers that lessen or prevent competition (Bill: repeal of s.96; Competition Act s.92).
• Litigation will be simpler because the Tribunal will not have to quantify and balance efficiencies against competitive harm, reducing complex “trade-off” analysis (Competition Bureau, 2022).
• Canada’s past cases show that the defence can override competition concerns; repeal restores competition as the primary standard for merger decisions (Competition Bureau, 2022; case history references).

Opponents' View#

• Removing the defence may block some mergers that would create real cost savings or productivity gains, even if those gains could lower costs to consumers over time (risk of lost efficiencies) (Bill: repeal of s.96).
• Greater uncertainty and higher risk of challenge could chill investment or delay efficiency-driven consolidation in sectors that need scale to compete internationally (implementation risk). Data unavailable.
• Without a balancing test, the Tribunal could give too little weight to dynamic gains like innovation or quality improvements that are harder to measure than price effects (unintended consequence) (Bill: repeal of s.96).
• The change may increase the number and length of merger reviews and litigation, raising costs for businesses and the government, with no quantified estimate provided (enforcement concern). Data unavailable.
• The bill has no transition rules, which could affect deals signed before Royal Assent but decided after; parties may face uncertainty about how the new rule applies to in-flight transactions (Bill text).