Tervita Corporation v. Canada (Commissioner of Competition)
On January 22, 2015, Tervita Corporation (Tervita), formerly CCS Corporation, won a hard-fought victory in the Supreme Court decision of Tervita Corp. v. Canada (Commissioner of Competition), 2015 SCC 3—the Supreme Court of Canada's first merger decision under the Competition Act since 1997.
In January 2011, CCS Corporation (now Tervita Corporation) acquired Complete Environmental Inc. (Complete) and its wholly owned subsidiary, Babkirk Land Services (Babkirk). At the time of the merger, Complete had certain operating businesses that Tervita considered desirable. Complete also owned, through Babkirk, land in northeastern British Columbia (NEBC) and a permit to operate a "secure" or solid hazardous waste landfill there. The acquisition had a value of approximately C$6 million and fell well below the notification threshold for mandatory merger review under the Competition Act.
Nevertheless, the Commissioner of Competition (Commissioner) opened an investigation as a result of marketplace complaints and ultimately challenged the acquisition. She sought an order requiring the parties to unwind the transaction or divest Babkirk on the basis that it was likely to result in a substantial prevention of competition in the market for the disposal of solid hazardous waste produced at oil and gas fields in NEBC. The Commissioner alleged that, because Tervita owned the only two operating secure landfills in NEBC, it would have a monopoly and associated market power that would allow it to set prices above competitive levels. Tervita appealed the decision to the Federal Court of Appeal in 2013, who upheld the tribunal's decision. Tervita appealed the decision to the Supreme Court of Canada.
Tervita argued to the Supreme Court that the transaction would not result in a prevention of competition because the sellers did not intend to open a competing landfill business. It also asserted the efficiencies defence under section 96 of the Competition Act arguing that the efficiency gains arising from the transaction were greater than, and would offset, the effects of any prevention of competition. While the Supreme Court agreed that the merger would likely prevent competition substantially, it accepted Tervita's efficiencies arguments and allowed the merger.
The Tervita decision allows Tervita to proceed in its business objectives with its merger now approved. Broadly, the decision provides greater clarity in the area of merger enforcement and a more transparent framework for the application of the efficiencies defence for participants in future merger transactions. Its impact will likely be significant for both merging parties considering whether the defence applies and the Commissioner in meeting the burden to prove all quantitative and qualitative effects of a merger.
The decision can be found on Lexum's website.
See our full summary and implications of the case here.