As the independent law enforcement agency tasked with administering Canada’s Competition Act, the Competition Bureau operates on the fundamental assumption that competition is good for both businesses and consumers.
So when examining a merger or acquisition, the Bureau will go through three main steps to determine whether a deal will result in reduced competition:
“We look specifically where companies overlap in terms of the products they produce and the geographies that they serve,” explains Shawn Hashmi, competition law officer in the Competition Bureau’s Mergers and Monopolistic Practices Branch, in the interview below.
“Then we assess who the competitors are, what the barriers for a new entrant or expansion by an existing competitor are, and we try to get an understanding of market structure.”
The third step involves trying to quantify the effect of the deal in terms of higher prices, decreased output or decreased quality of output, he says.
Although not allowed to comment on specifics surrounding the current wave of mega-mergers that we’re seeing in agriculture, Hashmi described the approval process at Keystone Agricultural Producers’ annual meeting in Winnipeg last month.
“We have to prove a substantial lessening or prevention of competition, so the question becomes how do you define substantial? We define it as a material price effect,” he explains, noting materiality is a function of the impact on both output and price.
So where does the Competition Bureau gather its insight on the possible impact of a merger? What are the options for preventing a deal if it “substantially lessens or prevents” competition? Could this Canadian agency hold up multinational deal (as is the case for most of the major mergers that have been announced)? These are some the questions we asked…