Preserving Section 96: The Efficiencies Defence in Competition Policy
Date
2023-05-29
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Abstract
Prompted by the ongoing review of Canada's Competition Act, the Commissioner of Competition, Matthew Boswell, recommended repealing Section 96, otherwise known as the Efficiencies Defence in merger enforcement.
Of thousands of merger transactions reviewed by the Bureau, very few cases are contested before the Tribunal, and only two have ever been decided on the basis of Section 96.
This provision states that the Tribunal cannot prohibit a merger if it is likely to bring about gains in efficiency that will be greater than, and will offset the likely anticompetitive effects of that transaction. The Commissioner claims that the fundamental problem with Section 96 is that it makes a distinction between "good" and "bad" anticompetitive mergers, and that competition law should be premised on the fact that competition leads to beneficial economic outcomes, inferring that the Efficiencies Defence is not founded on this premise.
The Commissioner's argument reflects Louis Brandeis's antitrust philosophy that anticompetitive behaviour is bad because it prohibits equality of economic participation. He appears to equate competition and its protection to competitors and their protection. However, competition is not an end itself but a means to an end. Competition policy - the instrument used to protect competition - arises out of the desire to preserve and promote the economic efficiency of markets. The neo-Brandeisian antitrust fad is steeped in political ambitions and rhetoric, defying the principles of competition and the free market that define the Canadian economy.
As a technocratic process, competition policy is an inappropriate venue for the normative assessments required for the distributional goals advanced by the Commissioner. A host of problems ensue when competition policy is used to address redistributive concerns. This became evident through Superior Propane and Rogers when the Commissioner and his experts attempted to use Social Welfare Functions to engineer competition policy into an instrument of distributive justice. This approach lacks sound economic justification, and is subverted by Arrow's Impossibility Theorem. Any imposition of subjective value judgments and departure from the equal weighting of aggregate gains and losses undermines the very purpose of Section 96, which is included in the Act for critical economic objectives.
The precedent set in Superior Propane and enforced by Rogers is a warning that competition policy in Canada may be heading down a dangerous path. It sets the stage to subject all future mergers and transactions to considerable uncertainty and a decision-making process and ideology well beyond the ambit and appropriateness of competition law.
Canadian competition policy ought to remain focused on sound economic principles and, as the most effective and suitable policy mechanism, continue to promote market efficiencies for the overall benefit of Canadians.
Description
Keywords
Efficiencies, Merger, Competition Policy, Section 96, Tribunal, Redistribution
Citation
de Jonge, C. (2023). Preserving Section 96: The Efficiencies Defence in Competition Policy (Unpublished master's project). University of Calgary, Calgary, AB.