Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Competition Bureau drops inquiry into merger of hockey equipment retailers, (Feb 10, 2014)

Canada’s Competition Bureau on February 7 released a statement, explaining its decision to drop an investigation into the competitive effects of the acquisition of hockey equipment retailer Pro Hockey Life by Canadian Tire, through its wholly owned affiliate hockey equipment retailer FGL Sports.

On August 12, 2013, Canadian Tire Corporation, Limited (Canadian Tire), through its wholly owned affiliate FGL Sports Ltd. (FGL Sports) completed the acquisition of Pro Hockey Life Sporting Goods, Inc./Les Équipements Sportifs Pro Hockey Life Inc. (Pro Hockey Life). At the time of the acquisition, Canadian Tire and FGL Sports had over 1,000 retail stores across Canada under various names, including Canadian Tire, SportChek, Sports Experts, Hockey Experts, National Sports, Intersport and Sport Mart. Pro Hockey Life had 23 stores in five provinces under the names Pro Hockey Life, Sports Rousseau and L’Entrepôt du Hockey. The parties’ operations overlapped in all areas where Pro Hockey Life had stores.

The Bureau’s announcement explained the rationale behind dropping their inquiry. The decision to discontinue was primarily based on the observation of modest predicted price effects, the presence of remaining competitors and the determination that barriers to entry and expansion were not likely sufficiently high to deter entry or expansion, the Bureau explained.

In order to assess the degree of direct competition between the parties, the Bureau explained, they requested sales data at the transaction level from Pro Hockey Life and FGL Sports stores. Using this data, the Bureau then conducted an econometric study to compare prices at FGL Sports stores in areas where there was no Pro Hockey Life present against prices at FGL Sports stores in areas where there was a Pro Hockey Life store. This type of cross-sectional analysis was used to quantify the competitive impact that Pro Hockey Life had on FGL Sports stores, and thus provide a basis for estimating the potential loss in competition that would arise from the combination of FGL Sports and Pro Hockey Life. The analysis showed that the prices at FGL Sports stores in areas where there was no Pro Hockey Life were higher than in areas where there was a Pro Hockey Life store; however, the observed price differences were relatively modest.

The Bureau also examined the ability of new entrants or existing competitors to obtain the supply of hockey equipment from key vendors on competitive terms. The Commissioner determined that competitive access to supply in this particular case was likely not a high barrier to entry or expansion. The Bureau also determined that there were a number of third-party competitors in each overlapping market that were likely continue to provide meaningful competitive constraint to the parties.

Given the presence of remaining competitors and barriers to entry and expansion that are not likely sufficiently high to deter entry or expansion, the Bureau determined that the transaction was not likely to substantially lessen or prevent competition in the retail market for hockey equipment and hockey-related merchandise.

Companies: Canadian Tire Corp., Ltd.; FGL Sports Ltd.; Pro Hockey Life Sporting Goods, Inc./Les Équipements Sportifs Pro Hockey Life Inc.

News: Antitrust