‘It’s pretty clear from this decision that the Bureau mismanaged the litigation by lying in the weeds until the last minute’
By Julius Melnitzer | March 3, 2022
A Federal Court of Appeal decision confirming the Competition Bureau’s power to stop a proposed merger in its tracks could make the regulator more likely to pre-emptively challenge commercial combinations in court, unless it is provided with more time to complete merger reviews.
“The whole debate about whether the Bureau has power to halt a merger before it closes could move regulators to an earlier litigation stance, unless the government revises the Competition Act to extend the timelines during which the Bureau can make such a challenge,” said James Musgrove, a competition and antitrust lawyer in McMillan LLP’s Toronto office.
The Competition Act allows the Commissioner of Competition to obtain a court order halting or dissolving a merger, known as a “section 92 application.” The Act also allows the regulator to seek a “section 104” interim order pending the section 92 hearing.
In this case, which involved a merger between Secure Energy Services Inc. and Tervita Corporation, two waste and landfill services providers in western Canada, the parties submitted their initial filings in early 2021. The Bureau made “supplementary information requests” to which the parties responded on May 31 with 396,000 documents. Complying with the request gave the parties the right to close 30 days later.
On June 28, Secure and Tervita provided 72 hours’ of their intention to close at 11:15 p.m. on July 1. The Commissioner did not seek an order extending the time to complete the review. Instead, on June 29, the regulator initiated a section 92 application seeking to block the transaction and a section 104 application for an interim order delaying closing until the Competition Tribunal heard the main application.
Secure and Trevita refused to extend the closing until the interim application could be heard. The Commissioner then brought a last-minute application for an “interim interim” injunction to prevent the closing.
On July 21 at 10:49 p.m., just minutes before the closing time, the Competition Tribunal, concluding that it had no jurisdiction to grant “interim interim” orders, refused to grant the relief. The Federal Court of Appeal (FCA) dismissed the Commissioner’s emergency appeal just before 2 a.m. on July 2. The transaction closed minutes later.
The Commissioner persisted, amending the main application to seek a dissolution rather than enjoining the (now concluded) merger. The regulator followed with a new interim application to the Competition Tribunal seeking to prevent Secure from integrating the Trevita assets.
While that application was unsuccessful as well, the Tribunal did provide guidance to the Bureau should it seek to stop a merger before closing in the future. As the Tribunal saw it, the regulator either had to bring an interim injunction application early enough to allow a reasonable amount of time for it to be heard (the suggestion was one week), or seek an extension of time to complete its review.
“It’s pretty clear from this decision that the Bureau mismanaged the litigation by lying in the weeds until the last minute,” said one veteran counsel, who spoke on condition of anonymity because he deals with the regulator on a recurring basis.
However that may be, the Bureau continued with its appeal of the Tribunal’s earlier decision declaring that there was no jurisdiction to grant “interim interim” relief. In early February, the FCA ruled that the Tribunal did indeed have such jurisdiction.
“The Tribunal might well have been justified in refusing to grant such relief in this case based on the facts, but that was not the basis for the Decision,” the court stated.
As Musgrove sees it, the combined effect of the Bureau’s confirmed jurisdiction to grant an “interim interim” order and the Tribunal’s requirement that any application for an interim order be brought within a reasonable time for the application to be heard, puts tremendous pressure on the Bureau, which has only 30 days from the parties’ compliance with information requests to complete its review, and little more than three weeks to seek an extension of time or an interim order affecting the closing.
“When the parties and Bureau are trying to have a substantive dialogue about perceived problems with a merger and how to resolve them, you don’t really want the regulator’s attention focused on drafting affidavits and going to court,” he said. “Because these cases tend to be complex, the pressure is problematic and probably counter-productive.”
So Musgrove, who says he’s “never on the Bureau’s side,” does acknowledge that legislating a “little more time” for the Bureau to complete its reviews could benefit all.
“To be sure, some of my clients may think a little differently, but personally I’d like the Bureau to have more time to complete the review – – – mostly because I believe that I can use the time to persuade them of my client’s position as opposed to going to court,” he said.
Musgrove’s colleague at McMillan, Joshua Krane, is of similar mind.
“Thirty days is not a lot of time to digest thousands of documents,” he said.
In any case, the Bureau continues with its application challenging the merger of Secure and Trevita. The Competition Tribunal has set the hearing to begin in May 2022.
Julius Melnitzer is a Toronto-based legal affairs writer, ghostwriter, writing coach and media trainer. Readers can reach him at [email protected] or https://legalwriter.net/contact.