Competition Law Update: The Tervita Case


As Aaron Singer mentioned in his February 11, 2015 post, the Competition Bureau has recently set the pre-merger notification threshold relating to transaction size for 2015 at $86 million. However, while a transaction below these thresholds is not notifiable, the Competition Bureau may nonetheless review the transaction if there are legitimate competition concerns and the Bureau is made aware of the transaction – as occurred in Tervita Corp. v Canada (Commissioner of Competition) (“Tervita”).

Tervita attracted a lot of attention, as it was unusual for two reasons.

Firstly, Tervita did not involve a high profile transaction. Simply, Tervita, the operator of two hazardous waste landfills in northeastern British Columbia, acquired Complete Environmental Incorporated and its permit for another secure landfill site. This attracted the attention of the Commissioner of Competition, who initiated the merger review process under the Competition Act. However, the entire value of the transaction was only $6 million – substantially below the notification threshold – and as such, it is interesting that it was reviewed by the Commissioner at all.  This is a good reminder that if you are considering a merger, whether large or small, it is always necessary to consider any potential impact of the Competition Act.

Secondly, the Competition Act refers to mergers that “prevent or lessen, or is likely to prevent or lessen, competition substantially”. Generally, reviewed mergers are those between competitors where such a merger will reduce competition in a given market. Here, the Commissioner argued that this merger would substantially “prevent” competition – an argument that necessarily involves prediction of the future to prove. For the Supreme Court, this was the first chance to examine what substantially “prevent” competition actually means and Tervita is notable for setting out the test to do so.

This test is threefold: (1) identify any firm that the merger would prevent from independently entering the market, then (2) determine whether, but for the merger, the potential competitor would have likely entered the market and finally, (3) consider whether such entry to the market would have a substantial effect. Interestingly, the Supreme Court upheld the Commissioner’s reasoning against Tervita on this basis – but warned that for any future cases, there must be sufficient evidence to support such reasoning. The further into the future one attempts to look, the more difficult it is to prove.

Nevertheless, Tervita was successful against the Commissioner. Under the Competition Act, mergers may still proceed if the “gains in efficiency” are greater than – and will offset – the effects of any prevention or lessening of competition that will result. The Supreme Court held that the Commissioner did not discharge its burden to quantify any such prevention or lessening and, as such, could not be successful. Undoubtedly, this is not something the Commissioner will allow to occur again – but it is noteworthy for any future defendant that any proven gains, even if marginal, would meet the “greater than and offset” requirement.