Competition Bureau releases statement on Chartwell and Health Care REIT's acquisition of Maestro Retirement Residences
On April 11, 2012, the Competition Bureau released a statement summarizing its review of the acquisition of retirement residences by Chartwell Seniors Housing REIT (Chartwell) and Health Care REIT Inc. (HC) of the Maestro Retirement Residences Portfolio (Maestro). The Bureau issued a No Action Letter in respect of the acquisition.
Both Chartwell and Maestro operate retirement residences in Canada, while Ohio-based HC operates retirement residences in the United States. The Bureau’s review focused on the different types of retirement residences and the local nature of competition among retirement residences. The relevant product markets were defined as Independent Supportive Living programs (ISL) and Assisted Living programs (AL), due to differences in the services offered and demand considerations for each.
The Bureau examined the level of care provided by each type of program. ISL programs can range from providing minor additional services to higher end services such as assistance with meals and personal care. AL programs, on the other hand, provide residents with services such as administering medication, rehabilitation and memory care services. However, many retirement residences offer a mix of both ISL and AL services. As a result, the Bureau concluded that there was likely a degree of supply side substitutability between the programs which could counter an exercise of market power post-merger.
The relevant geographic market was defined as local, with each retirement residence having a catchment area of 5 to 20 km. In total, the review consisted of 21 local markets in cities throughout Alberta, British Columbia, Ontario and Quebec. The Bureau examined market shares based on retirement residences generally, and then used the information regarding individual residences to determine the likely degree of supply side substitutability within each geographic market.
The Bureau issued a No Action Letter given the level of effective remaining competition, low barriers to entry by new players and expansion by existing ones, and high vacancy rates in many overlap markets, in addition to the ability of retirement residences to substitute ISL and AL services.