As reported in the March 2003 issue of The Competitor, the Federal Court of Appeal, in a January 31, 2003 decision, upheld the Competition Tribunal's determination that efficiencies to be generated by the merger of Superior Propane Inc. with ICG Propane Inc. would outweigh its  anticompetitive effects, thereby "saving" the merger pursuant to section 96(1) of the Competition Act, the so-called "efficiencies defence."  On March 31, 2003, the Commissioner announced that he would not seek leave to appeal the decision from the Supreme Court of Canada.

While Superior Propane apparently carried the day in that case, the Commissioner may still have the last word.  In a speech before the Standing Committee on Industry, Science and Technology, the Commissioner stated that:

[a]fter extensive litigation, it is clear that further litigation would not have clarified the efficiency defence.  Only a legislative solution is workable.

The result is Bill C-249, which would narrow the application of the "efficiencies defence" by providing that efficiencies be considered as just one part of the overall assessment of the merger, along with the other factors set out in section 93 of the Competition Act.  The amended section 96(1) would allow the Tribunal to examine whether the merger is likely to bring about gains in efficiency that "will provide benefits to consumers, including competitive prices or product choices, and that would not likely be attained in the absence of the merger or proposed merger."

The current language of Bill C-249 incorporates amendments proposed by Dan McTeague, the Bill's sponsoring Member of Parliament. The original Bill C-249 would not have replaced section 96(1), but rather would have qualified its application in two respects by stipulating that: (i) gains in efficiency could not offset the effects of a lessening or prevention of competition unless the majority of the benefits to be derived from such gains in efficiency were likely to be passed on to customers within a reasonable time in the form of lower prices; and (ii) if, after the transaction was completed, the merger or proposed merger would be likely to result in the creation or strengthening of a dominant market position, the "efficiencies defence" would not apply.

Bill C-249 would rectify what the Commissioner sees as two fundamental problems with the current "trade-off" between efficiencies and anticompetitive effects.  First, Bill C-249 would eliminate the potential result that an anticompetitive merger might survive on the basis of efficiencies, notwithstanding harm to consumers.  It would also remove the possibility that section 96 could be applied so as to condone, in certain instances, mergers that create a monopoly, which, according to the Commissioner, is a "perverse result".   Such changes, in the Commissioner's view, would be consistent with the approach taken in other jurisdictions with respect to efficiencies.

Bill C-249 was passed by the House of Commons and had First Reading in the Senate on May 13, 2003.

[1] Speaking Notes for Konrad von Finckenstein, Commissioner of Competition, 
Bill C-249 An Act to amend the Competition Act, available at http://strategis.ic.gc.ca/pics/ct/ct02543e.pdf.

[2] In his speech to the Standing Committee on Industry, Science and Technology, the Commissioner proposed his own amendments to the original language of Bill C-249 but stated that he preferred those of Mr. McTeague.