Section 100 Proceedings

1. Section 100 Proceedings CBA Competition Law Section Young Lawyer’s Initiative, June 5, 2008 Steve Sansom, Competition Bureau Legal Services The views expressed herein are not purported to represent those of the Competition Bureau or the Department of Justice.

2. Section 100 Proceedings • Origin and Purpose of Section 100 • Superior Propane (1998) • 1999 Amendments • Labatt (2007-2008) • American Iron & Metal (2008) • Current Status and Issues

3. Origin and Purpose • Economic Council of Canada, Interim Report on Competition Policy (1969) • Effects can be extremely difficult to reverse or offset once merger completed • Process needed to ensure timely consideration • Interim injunctions to stay “scrambling” of assets while hearings in progress

4. Origin – 1986 Amendments • Short form / long form pre-merger notification • S. 100 (interim order prior to s. 92 application) • S. 104 (interim order after s. 92 application filed) • S. 92 (final order prohibiting/dissolving merger, etc.)

5. Timing – 1986 Provisions • Short form: 7 days • Long form: 21 days • S. 100: 10 days (ex parte) or 21 days • S. 104: such order as Tribunal considers appropriate

6. When Available • Short form: automatic if thresholds exceeded • Long form: if required by Director/Commissioner • S. 104: Ordinary interlocutory or injunctive relief • Serious issue (was prima facie case) • Irreparable harm • Balance of convenience

7. S. 100 Test – 1986 Provisions • Reasonably likely slc / spc, and • In the opinion of the Tribunal, likely action would substantially impair ability to remedy because difficult to reverse • Or: failure to comply with s. 114

8. Superior Propane (1998) • June 26: Parties advised Bureau of possible transaction • July 14: Short form notification filed • July 20: Purchase agreement signed – closing scheduled October 30, “drop dead” December 15 • November 16: Notice of intention to close December 7 • December 1: S. 100 application filed

9. Superior Propane, Rothstein J. (Comp. Trib.) • “Reasonably likely” • Lower threshold than “likely” slc in s. 92 • Higher than “serious issue” (not clear why) • Some evidence of significant concentration or market share required (and probably sufficient) • If product market is propane, market shares high • Not satisfied propane is relevant product market

10. Superior Propane, Rothstein J. (Comp. Trib.) • “Substantially impair” ability to remedy • Any s. 92 remedy impaired, or remaining remedies insufficient? • Alternatives? (Hold separate order?) • At this stage of proceedings, should not foreclose any remedies • Does not contemplate hold separate (must forbid act directed toward completion or implementation, not allow subject to conditions) • Intent is to preserve status quo and all s. 92 remedies

11. 1999 Amendments • 1996 Consultative Panel report • 110(6) (interest in combination) • Short/long form information requirements moved to regulations, modified • Waiting periods: 14 / 42 days • S. 100: 30 days, possible extension to 60 • (10 days ex parte for contravention of s. 114)

12. S. 100 Test – 1999 Provisions • Commissioner certifies s. 10(1)(b) inquiry commenced • In the Commissioner’s opinion, more time required to complete inquiry • In the opinion of the Tribunal, likely action would substantially impair ability to remedy because difficult to reverse • (or contravention of s. 114)

13. Reasonably likely slc / spc In the opinion of the Tribunal, likely action would substantially impair ability to remedy because difficult to reverse Commissioner certifies s. 10(1)(b) inquiry commenced In the Commissioner’s opinion, more time required to complete inquiry In the opinion of the Tribunal, likely action would substantially impair ability to remedy because difficult to reverse 1986 vs. Current Provisions

14. Superior Propane (2000) • Commissioner appealed Tribunal decision to Federal Court of Appeal • Applied for stay and continuation of s. 104/105 hold separate order • Linden J.A. applied RJR – MacDonald test (serious issue, irreparable harm, balance of convenience)

15. Superior Propane, Linden J.A. • “In my view, the metaphor of scrambled eggs is dramatic, but not entirely apt. When one scrambles eggs it is impossible to unscramble them, but a merged company is not exactly like scrambled eggs. It can be broken up, though it may be difficult to do so. Competition can be restored. It is not enough for it to be hard or inconvenient to do so. To obtain a stay, the damage must truly be irreparable and proved to be so.”

16. Labatt

17. American Iron & Metal (2008) • Alleged act that would impair ability to remedy was not closing, but post-closing integration • Resolved by consent agreement to hold separate and preserve assets and operations for 60 days

18. Current Status and Issues • No impact on most transactions – most parties want no action letter before closing • Can avoid s. 100 application by providing sufficient time for Bureau’s review and, if necessary, negotiating remedies, before closing

19. Current Status and Issues • To issue s. 100 order, Tribunal must find intended act or thing: • will substantially impair ability to remedy effect on competition • is difficult to reverse • is likely

20. Current Status and Issues • Impair ability to remedy • Would another remedy eliminate alleged slc? • Labatt: “…establish the impairment of the Tribunal’s ability to remedy in accordance with Canadian law.” • Would hold separate achieve same result? • Commissioner: Will consider hold separate if no likely material and/or lasting harm to competition in interim period, or to ability to remedy

21. Current Status and Issues • Difficult to reverse • Does resale to vendor, or IPO to new purchasers, reverse a merger? • Likely • Is unilateral undertaking sufficient to rebut prior evidence of intent? • What if no intention to act within 30/60 days?