Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Canada Competition Bureau Finds Metal Products Producer and Distributor Combination Unlikely to Harm Competition, (May 3, 2013)

By Tobias J. Gillett, J.D., LL.M.

The Canada Competition Bureau (CCB) has issued a statement describing the approach it took in issuing a No Action Letter (NAL) regarding metal products producer and distributor Samuel, Son & Co. Limited’s acquisition of its competitor Wilkinson Steel and Metals Inc. The CCB issued the NAL indicating that it did not intend to pursue an enforcement action against the transaction on April 25, 2013.

Samuel is a North American producer and distributor of steel and specialty metals, with 23 Canadian steel services centers, eight of which are located in Western Canada. Wilkinson operates 11 centers, all within Western Canada. On March 28, 2013, the companies entered into an agreement under which Samuel would acquire Wilkinson.

The CCB focused its review of the transaction on the steel plate, flat rolled carbon steel, and specialty metal product segments within the categories of (1) resale and distribution of unprocessed steel produced by steel mills, and (2) processing of that product into value added products and the sale of those value-added products to customers.

The CCB first concluded that the combination would be unlikely to lessen or prevent competition in the resale and distribution of unprocessed products, because Samuel would continue to face direct competition from steel mills and other wholesalers.

With respect to the processing and sale of value-added products, the CCB observed that steel mills and other wholesalers generally do not offer value-added services such as custom cutting and shaping of metals based on customer specifications, and therefore those mills and wholesalers would not provide competition to the combined entity. The CCB limited the geographic market for value-added steel products to Western Canada, and the market for value-added specialty metals to all of Canada.

The CCB determined that the transaction would not lessen or prevent competition in those markets because (1) a number of effective competitors would remain following the merger, (2) the industry possessed excess capacity, and (3) although barriers to entry to the markets were significant, barriers to expansion were likely not high.

Samuel, Son & Co. statement. Samuel has issued a press release, extolling the benefits of the transaction.

"The acquisition substantially increases Samuel’s presence in Western Canada with branches strategically located in British Columbia, Alberta and Saskatchewan," the press release stated. "The acquisition will increase Samuel's strategic alliances with the economies of the three provinces dealing directly with the forestry, mining and shipbuilding industries of BC; oil and gas and mining in Alberta; and agriculture, mining and oil in Saskatchewan."

Companies: Wilkinson Steel and Metals Inc.; Samuel, Son & Co. Limited

News: Antitrust