Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Canada Supreme Court allows blocked Tervita landfill merger, (Jan 23, 2015)

By Linda O’Brien, J.D., LL.M.

The Supreme Court of Canada has struck down the Canada Competition Bureau’s challenge to a $6 million (CAN) merger in the oil-waste landfill business in northeastern British Columbia. In a 6-1 decision issued on January 22, the Supreme Court has allowed an appeal by Tervita Corporation that the Competition Tribunal erred in siding with the Competition Bureau and ordering the firm to divest itself of a hazardous waste landfill site that it acquired in 2011. The company already owned two other similar landfill sites in the area.

Tervita provides hazardous waste disposal services to oil and gas companies. In 2011, Tervita acquired Complete Environmental. Prior to the transaction, Complete had obtained the regulatory approval required to open a solid hazardous waste disposal facility in northeastern British Columbia at its Babkirk site. Following a review, the Bureau concluded that Tervita’s acquisition of the Babkirk site would result in a substantial prevention of competition for the disposal of solid hazardous waste, produced largely by oil and gas companies, within northeastern British Columbia.

In 2011, the Bureau filed an application with the Competition Tribunal, challenging Tervita’s acquisition of Complete, and requested that the Tribunal dissolve the transaction or, alternatively, order the sale of the Babkirk site and related assets. In 2012, the Tribunal ruled in favor of the Bureau, finding that the efficiencies gained by the merger were not greater than and would not offset the anticompetitive effects of the merger. It therefore ordered the sale of the Babkirk site.

Tervita subsequently appealed the Tribunal’s decision to the Federal Court of Appeal (FCA). In February 2013, the FCA upheld the order of the Tribunal, requiring Tervita to sell the Babkirk site. Tervita then appealed the decision before the Supreme Court of Canada, which heard the case on March 27, 2014.

The Supreme Court determined that the Tribunal correctly concluded that the merger was likely to substantially prevent competition. In its consideration of Tervita’s efficiency defense, the Tribunal should have considered all available quantitative and qualitative evidence. It was the Bureau’s burden to quantify all quantifiable anticompetitive effects. In this case, the Bureau failed to meet its burden, since there was no price elasticity information. To permit the Tribunal to consider the price decrease evidence without the information necessary to quantify deadweight loss allowed too much subjectivity into its analysis of the efficiency defense.

However, Tervita established overhead efficiency gains resulting from Babkirk obtaining access to Tervita’s administrative and operating functions. These proven gains met the “greater than and offset” requirement of the efficiencies defense. Therefore, Tervita’s appeal should be allowed and the divestiture order set aside, the court concluded.

In a statement regarding the Supreme Court decision, John Pecman, Commissioner of Competition, commented “I welcome the Supreme Court of Canada’s decision to allow Tervita’s appeal and embrace the clarity it provides on important issues related to the merger review process, including the framework for prevention of competition cases and the efficiencies defense.”

“I am pleased that the Court upheld the conclusions of the Competition Tribunal and the Federal Court of Appeal that competition would be substantially prevented as a result of the merger,” Pecman said. “The Bureau will consider the guidance provided on efficiencies and any changes to our analysis and information gathering that may be required during merger review.”

Companies: Tervita Corporation; Complete Environmental Inc.; Babkirk Land Services Inc.

News: AcquisitionsMergers Antitrust