On June 3, the Competition Tribunal granted an interim injunction requiring Parkland Industries to preserve and "hold separate" six gas stations and eight supply agreements that it proposes to acquire from Pioneer. The decision represents a partial victory for the Commissioner of Competition as it relates to six of 14 markets where the Commissioner was seeking an order.1
What You Need To Know
The decision notably marks the first time the Commissioner was able to obtain an interim injunction preventing the integration of part of an acquired business on the grounds that there would be adverse impact on consumers if those assets were merged.
The Tribunal concluded that there had to be "clear and non-speculative evidence" of "irreparable harm" before such an interim order would be made. In this case, the Tribunal concluded that the Commissioner advanced no such evidence on threshold issues such as market definition in eight of the 14 contested markets. The Tribunal commented that injunction proceedings that are made after an extensive merger review require the Commissioner to advance more compelling evidence when challenging a transaction. Although the Tribunal found that both the Commissioner’s and Parkland’s expert evidence were lacking in certain respects, it concluded that there was sufficient evidence of likely increases in market shares and concentration in six of the relevant markets to justify the Commissioner’s allegations of apprehended harm and, therefore, an interim order.
The decision emphasizes the need for both the Commissioner (and merger parties) to identify robust evidence and develop a persuasive economic analysis at the outset of litigation. Although the Tribunal will not "delve too deeply into the merits of the case" at the interim injunction stage, "the Commissioner should possess evidence supporting fundamental elements of his merger review beginning with market definition and market concentration, when those are pivotal to his case." Ironically, the Tribunal’s conclusion in Parkland was (in part) based not on evidence from the Commissioner, but on evidence from an expert retained by Parkland attesting that there were "high concentration levels" and "competition concerns" in the six markets covered by the order.
Also notable is that an 11th-hour offer by Parkland to resolve concerns by divesting assets in certain markets was rejected by the Tribunal as inadequate to address the concerns raised by the Commissioner in his injunction application. A remedy may obviate the need for an interim order, but only where parties can persuade the Tribunal that the proposal is "viable and effective."
1 Further background on the transaction and the Commissioner’s challenge can be found in our earlier bulletin here.
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