Summary of White Paper: Competition Bureau Issues Final Merger Remedies Bulletin 




On September 22, 2006, the Competition Bureau (the "Bureau") issued its final Information Bulletin on Merger Remedies in Canada (the "Bulletin"), outlining its approach to the design and implementation of merger remedies.[1]  The Bulletin is the culmination of recent efforts by the Bureau to formulate a unified approach to merger remedies.

Merger Remedies in Canada

In Canada, proceedings to challenge mergers under the Competition Act (Canada) (the "Act") can only be commenced by the Commissioner of Competition (the "Commissioner"). Where the Tribunal finds that a merger prevents or lessens competition substantially in a relevant market, it may in the case of a completed merger order the dissolution of the merger or the divestiture of assets or shares. In the case of a proposed merger, the Tribunal may, among other things, prohibit all or part of the merger from proceeding.  In reality, contested merger proceedings are rare and the majority of issues that arise in the merger context are typically resolved through negotiated settlements (e.g. consent agreements).

Remedies Bulletin

The Bureau states that the Bulletin is intended to provide guidance on the objectives for remedial action and the general principles applied by the Bureau when it seeks, designs and implements remedies.  The Bulletin also states that while the principles it sets out are "essential elements," which will be taken into account by the Bureau in all cases where remedial action is required, remedies will be tailored to the specific facts and circumstances of each case.

As an overarching principle, the Bureau states that the standard for achieving an acceptable remedy in a contested or consent proceeding is that set out by the Supreme Court of Canada in the Southam decision, where it was held that the "appropriate remedy for a substantial lessening of competition is to restore competition to the point at which it can no longer be said to be substantially less than it was before the merger." [2] In this regard, the Bureau takes the position that eliminating a substantial lessening or prevention of competition may mean that the remedy must go beyond that which is necessary to restore competition to an otherwise acceptable level.

Structural Remedies

The Bulletin is noteworthy in that it articulates the Bureau's ongoing preference for "structural" remedies (e.g. divestiture as opposed to "behavioural" remedies, such as short term supply or licensing arrangements).

As the Bureau's focus is on structural remedies – the disposition of assets or similar changes to the marketplace – much of the Bulletin discusses the design and implementation of divestitures. The Bureau states that structural remedies are "usually necessary to eliminate the substantial lessening or prevention of competition arising from a merger" and that such remedies are "typically more effective than behavioural remedies" on the basis that behavioural remedies may prevent the merged entity from efficiently responding to changing market conditions and may restrain potentially pro-competitive behaviour by the merged entity. The Bureau also states that structural remedies are generally preferred, as they are more clear and certain, less costly to administer and more readily enforceable than behavioural remedies.

The Bureau states that the following criteria must be met for a divestiture to provide effective relief to an anti-competitive merger: (i) the divestiture assets are viable and sufficient to eliminate the substantial prevention or lessening of competition; (ii) the divestiture occurs in a timely manner; and (iii) the buyer is independent of the merged entity and has the ability and intention to be an effective competitor in the relevant market.

Viable Assets

The Bulletin states that a divestiture may be full or partial (e.g. a stand-alone business or components of a stand-alone business), but must include all assets necessary for the buyer to be an effective long-term competitor who will restore or preserve competition in the relevant market.  The Bureau also states that in "certain circumstances" it may be necessary to divest assets outside the relevant market.

A full divestiture will be required when something less than a stand-alone business cannot be separated or the creation of a viable competitor depends on the sale of the entire business unit.  Conversely, the divestiture of part of a stand-alone business may be acceptable if it eliminates the substantial prevention or lessening of competition arising from a merger and some of the components required to operate the business are otherwise available. 

The Bureau, however, states that it "applies greater scrutiny" to divestitures of less than a stand-alone operating business because there is "limited or no proven track record that the components of the business will be able to operate both effectively and competitively" and that it generally prefers a divestiture of a stand-alone operating business from one merging party to a single buyer. According to the Bureau, this approach reduces the uncertainty associated with the viability of the divestiture package and integration issues and limits the detrimental effects that could arise from the acquiring party in the merger obtaining confidential information about the asset(s) to be divested.

Once the Bureau determines that a merger is likely to lessen or prevent competition substantially, it will normally require the merging parties to enter into a "hold-separate" arrangement for the assets that could be subject to a Tribunal order until the completion of the divestiture.  According to the Bureau, hold-separate provisions preserve its ability to achieve an effective remedy, reduce the likelihood that assets will depreciate during the divestiture process and ensure that the merging parties do not combine their operations prior to divestiture. 

While the Bureau's general approach to hold-separate provisions is not a departure from its previous practice, the Bulletin is significant in that the Bureau takes a very broad approach to the assets to be held-separate, stating that it will "usually require that hold-separate provisions apply to asset(s) beyond those that are to be divested" and that in limited cases, such as the divestiture of a stand-alone operating business, the Bureau may require the hold-separate provisions to cover only the portions of the merger that are likely to result in anti-competitive effects.

Timely Divestiture

The Bulletin is also significant in that it strongly emphasizes the quick disposition of assets.  The Bureau states that a timely remedy reduces uncertainty for the parties, minimizes competitive harm and mitigates potential deterioration of assets. In this regard, the Bureau strongly prefers "fix-it-first" solutions where the divestiture of assets to an approved buyer occurs before closing or an agreement is in place that identifies an approved buyer for a specific asset simultaneously with the merger.

Where fix-it-first solutions are not available, the Bureau sets out a number of criteria for timely post-merger divestiture:

  • Short Time Periods.  The Bureau will typically agree to allow an "initial sale period" of three to six months for the acquiror to sell the divestiture assets on the best terms it can negotiate, though may grant short extensions in "exceptional circumstances." Where the acquiror cannot sell the divestiture assets within the initial sale period, a trustee period will be established lasting between three to six months. The Bureau's sale periods are significantly shorter than in the past, where initial and trustee sale periods ranged between six to twelve months or more and may also be an unrealistically short period in some cases in which to locate a suitable buyer.
  • No Minimum Price.  The Bureau also will not agree to any minimum price at which the trustee may sell the relevant assets during the trustee period. While not a departure from the Bureau's past approach, in a market characterized by relatively few potential purchasers, such a provision could significantly prejudice the selling party and give potential purchasers significant increased bargaining power.
  • Crown Jewels.  Finally, the Bureau states that an additional asset package may be required as part of the remedy to reduce "uncertainty as to whether the remedy will be viable." According to the Bureau, crown jewel provisions are not intended to be punitive; are intended to provide the Bureau with confidence that there will still be a viable remedy available if the initial divestiture is unsuccessful; and will, "as much as possible," relate to the competitive harm.
Independent Buyer

The Bureau must also approve the buyer of divested assets. The Bureau sets out the following buyer criteria: (i) the divestiture to the proposed buyer must not adversely affect competition; (ii) the buyer must be independent from the vendor; (iii) the buyer must have the managerial, operational and financial capability to compete effectively in the relevant market; and (iv) the assets being divested must be used by the buyer to compete in the relevant market(s) post-divestiture.

Quasi-Structural & Behavioural Remedies

While the Bureau's clear preference in the Bulletin is for structural remedies, the Bulletin states that in "certain circumstances" an effective remedy may require the merging parties to take some action, in addition to, or other than, divestiture that may have "structural implications for the marketplace." Examples include the licensing of intellectual property, removing anti-competitive contract terms and granting non-discriminatory access to networks.  The Bureau will only accept such "quasi-structural" remedies if they adequately eliminate the substantial lessening or prevention of competition arising from the merger without requiring future intervention or monitoring.

The Bureau states that stand-alone behavioural remedies are seldom accepted by the Bureau, as it is "difficult to design a behavioural remedy that will adequately replicate the outcomes of a competitive market." Stand-alone behavioural remedies may be acceptable when they are sufficient to eliminate the substantial lessening or prevention of competition arising from a merger, there is no appropriate structural remedy, and minimal or no on-going monitoring and enforcement is required.

Despite the Bureau's relatively rigid stance on behavioural remedies, it has accepted partial or total behavioural remedies to alleviate anti-competitive concerns in a number of past cases.  In addition, behavioural remedies may, in some cases, be necessary or provide a more effective or appropriate solution.


With respect to confidentiality, the Bulletin states that the initial sale period for a divestiture will "normally be confidential" and that the existence of crown jewel provisions are not made public until the trustee period commences.  The Bulletin also states that the Bureau may agree to let certain provisions of a negotiated settlement remain confidential.

International Merger Remedies

One of the most noteworthy aspects of the Bulletin is the Bureau's approach to international merger remedies. With the increasing globalization of mergers and the proliferation of competition laws worldwide, the level of interaction and cooperation between competition agencies is increasing.

The Bulletin outlines the Bureau's approach to coordination with foreign antitrust agencies and the design of remedies in the context of global mergers, including the following:

  • Communication and Coordination. The Bureau will coordinate with other competition authorities on remedies when a multi-jurisdictional merger is likely to have anti-competitive effects in Canada that are similar, or related, to those likely to arise in other jurisdictions. 
  • Canadian or Foreign Remedy. The Bureau may rely on remedies imposed in foreign jurisdictions when assets subject to divestiture are primarily located outside Canada and the remedy resolves the Canadian competition issues. Conversely, the Bureau is more likely to formalize negotiated remedies in Canada when the matter raises Canada-specific issues, the Canadian impact is significant, the assets to be divested are in Canada, or it is critical to the enforcement of the settlement terms.  This approach is consistent with the Bureau's approach to international remedies in recent multi-jurisdictional cases including the Procter & Gamble/Gillette, GE/Instrumentarium and Boston Scientific/Guidant mergers. [3]
  • Avoiding Conflicts. Finally, in coordinating cross-border remedies, a primary objective for the Bureau is to prevent conflicts that may arise when remedies are intended to address competition concerns in different jurisdictions.


The Bureau's recent formalized approach to merger remedies may have a number of impacts on Canadian and international transactions. These include:

  • Although there are instances when behavioural remedies will be employed, the Bureau articulates a clear preference for structural remedies and clearly prefers the quick disposition of assets, with very short divestiture periods and fix-it-first remedies. Whether these preferences can be met necessarily will depend on the circumstances of each case.
  • The Bureau is developing a unified approach to domestic and international remedies including uniform consent agreements, short divestiture periods and buyer approval guidelines. 
  • In the context of international mergers, the Bureau may accept non-Canadian remedies in some cases where there are effects in Canada.  This may mean that merging parties may be able to negotiate a more favourable remedy in some cases where it can be shown that the divestiture will also alleviate Canadian competition concerns.
  • Notably, despite a recent speech by the Commissioner that indicates that efficiencies will be given a more prominent role in the Bureau's review of proposed mergers, the Bulletin is conspicuously silent on the role efficiencies will play in the Bureau's evaluation of merger remedies.


1. Competition Bureau, Information Bulletin on Merger Remedies in Canada (September 22, 2006).
2. Canada (Director of Investigation & Research) v. Southam Inc., [1997] 1 S.C.R. 748.
3. Ibid. at 13-14.