Susan M. Hutton & Edwin Mok -
The Canadian landfill company that lost a merger challenge at the Competition Tribunal in Canada’s first pure prevention of competition case has appealed to the Federal Court of Appeal.
On January 4, 2011, the Commissioner of Competition applied to the Tribunal for an order to dissolve a merger between CCS Corporation and Complete Environmental Inc. In the alternative, the Commissioner sought an order for CCS to divest itself of Complete or Complete’s wholly–owned subsidiary, Babkirk Land Services. Babkirk had obtained approval to operate a secure landfill site in northeastern British Columbia. As such, Babkirk had been poised to compete directly with CCS. The Commissioner alleged that the merger between CCS and Complete would result in a substantial prevention of competition in the market for hazardous waste disposal in northeastern British Columbia.
On May 29, 2012, the Tribunal ruled in favour of the Commissioner, finding that CCS’s acquisition of Complete would likely prevent competition substantially in the market for the supply of landfill services for solid hazardous oil and gas waste. The Tribunal ordered that CCS divest its shares or assets of Babkirk by December 28, 2012. On July 17, 2012, the Tribunal further issued a divestiture procedure order.
CCS (now renamed Tervita Corporation), Complete, and Babkirk filed a notice of appeal at the Federal Court of Appeal on June 26, 2012. They have appealed the May 29, 2012 order, and are seeking to stay that order and the divestiture procedure order pending the appeal.
In a decision dated August 22, 2012, the Federal Court of Appeal granted the stay of those orders, subject to the condition that the appellants preserve the assets pending the outcome of the appeal. The Court applied the test in RJR – MacDonald Inc v Canada (AG):
- First, there was at least one serious issue raised by the appellants: the question of the proper legal framework that applies in a prevention of competition case. The appellants allege that the Tribunal failed to apply or misapplied the test for a substantial prevention of competition and engaged in impermissible and unsupportable speculation. The Court found these to be serious and important issues.
- Second, the Court found that the divestiture procedure order would irreparably harm CCS while the appeal was ongoing, since the order mandated that CCS divest itself of Babkirk at the earliest opportunity.
- Third, the Court balanced the public interest in having competition in the market against the public interest in ensuring due process. The Court ruled that the balance of convenience favoured the appellants.
The outcome of this case is significant in several respects. First, the Tribunal’s decision addressed the test for substantial prevention of competition, an area where the Canadian jurisprudence is very sparse. Second, the case is also notable because the value of the CCS-Complete merger was only about Cdn$6 million, far below the merger notification threshold of Cdn$78 million, yet it was still reviewed and challenged by the Commissioner.