It was just supposed to be a small, $6-million merger in the oil-waste landfill business in remote Northeastern British Columbia, but on Thursday, the Supreme Court of Canada will issue a much-anticipated ruling on the Competition Bureau's extraordinary move to have the deal unwound.
It is rare for the Competition Bureau to actually challenge a merger before the Competition Tribunal, rather than agree to compromise. And it is rarer still for such a case to make it all the way to the Supreme Court. Some competition lawyers say the court could use the opportunity to weigh in on how the bureau should use its powers to block other merger deals that threaten competition or to create monopolies.
The case pits the Competition Bureau against Burlington, Ont.-based Tervita Corp. (formerly CCS Corp.). In 2011, Tervita acquired a recently approved hazardous waste landfill site in Northeastern B.C. near Fort St. John, which is 430 kilometres north of Prince George.
At the time, Tervita owned the only other two such operating landfills in the area cleared by government regulators to handle "drill mud," or contaminated soil produced by the local oil industry.
The deal was far too small to be reported to the Competition Bureau up front. But a rival company, Secure Energy Services Inc., complained to then-competition commissioner Melanie Aitken. SES had been interested in buying the site, and according to court documents, the bureau investigated and the commissioner warned the companies she would challenge the merger before it closed.
The bureau said it found internal Tervita e-mails in which executives plotted to buy the site and warned of a possible "price war." The bureau also argued that securing the environmental and other approvals to open this kind of facility is difficult, making it hard for new competitors to move in.
In 2012, the Competition Tribunal agreed with the bureau and undid the deal, calling Tervita a "monopolist" in the local hazardous waste market and ruling that prices would have dropped by at least 10 per cent if a competitor had instead opened up shop. In 2013, the Federal Court of Appeal upheld that result. Tervita appealed to the Supreme Court of Canada.
One of the issues at stake involves the bureau's arguments that the deal would prevent future competition, not lessen current competition, since no one was operating the landfill at the time of the purchase and the previous owners had actually intended to operate a different kind of facility there.
Tervita argued that both the Competition Tribunal and the Federal Court of Appeal were wrong to "analyze not the merger in question but the potential impact on competition of a possible future merger" involving an "unidentified buyer." This, argued Tervita's lawyers, was "impermissible speculation."
The other main issue is the extent to which the bureau or the Competition Tribunal needs to consider arguments that an anti-competitive merger can be justified because it creates "efficiencies." In this case, Tervita argued that in operating the new landfill site itself would allow it to save money in transportation and "market expansion efficiencies" that could be passed onto customers.
Adam Fanaki, a former senior official at the Competition Bureau in charge of merger reviews who is now in private practice at Davies Ward Phillips & Vineberg LLP, said Thursday's decision could give the top court a chance to weigh in on this efficiencies defence, an area of the law with very little jurisprudence. But he said few mergers solely rely on this defence to get bureau approval.
Mr. Fanaki also expects the court to comment "on whether or not [there was] 'crystal-ball gazing' that went on at the tribunal, trying to look into the future to determine whether or not there is going to be a substantial lessening of competition."
Subrata Bhattacharjee, a Toronto competition lawyer with Borden Ladner Gervais LLP, said the Tervita case also illustrates that no matter how tiny and obscure a merger is, the Competition Bureau could still block it, even if the companies involved are not required to notify the commissioner about the deal.
"This is just a very useful reminder that you have got to keep looking at [competition law] issues, even if you don't have to fill in the forms."
Jeff Gray