Canadian Competition Bureau Blocks First Merger After 6 Years – And It’s A Non-Reportable, Consummated Transaction

On January 26, 2011, in a surprising enforcement action, the Canadian Competition Bureau publically announced its application to the Competition Tribunal for an order to undo the consummated acquisition by CCS Corporation (“CCS”) of Complete Environmental Inc. (“Complete”) and its proposed Babkirk Secure Landfill in northeastern British Columbia (Babkirk”). The Competition Bureau determined, following a thorough review of the transaction, that CCS's acquisition of Complete would substantially reduce potential competition for the disposal of hazardous waste in northeastern British Columbia. Specifically, the Competition Bureau is seeking an order from the Competition Tribunal dissolving the merger and requiring CCS to divest itself of Complete entirely, or, in the alternative, to divest other appropriate assets to address the Bureau's concerns.
CCS operates the only two secure landfills in British Columbia. A “secure” landfill is designed, constructed and operated to keep hazardous waste confined for an indefinite period of time. These landfills accepted hazardous waste of the type generated by oil and gas producers in northeastern British Columbia. Complete was poised to enter the secure landfill business by opening Babkirk, a competing site near one of CCS' secure landfills. Before opening Babkirk, however, the owners of Complete sold the entire company to CCS, resulting in Complete and Babkirk becoming owned subsidiary of CCS. An independent competing Babkirk was never opened. CCS's acquisition of the Babkirk would give CCS control of all three operational secure landfills in British Columbia. Had CCS not acquired Babkirk, the new secure landfill would have been CCS's only competitor.

The CCS/Complete transaction was not reportable under the Canadian Competition Act. The Competition Bureau learned of the transaction and obtained a “hold separate” from CCS relating to the Babkirk landfill pending completion of its investigation of the landfill competition concerns. Subject to the hold separate, CCS completed it acquisition of Complete on January 7, 2011.

The Competition Bureau made its claim to dissolve this acquisition under Section 92 of the Competition Act. Under Canadian antitrust law, this case is noteworthy for several reasons. First, it is the first merger challenge since 2005, suggesting a more aggressive merger enforcement program in Canada. Second, it is a non-reportable consummated transaction indicating that even small deals will be closely examined if serious antitrust problems exist. Third, this is a challenge not only against the merging companies but also against the shareholders of the acquired company, suggesting that the Competition Bureau is seeking as a potential remedy for CCS to dissolve the merger in its entirety. It appears unlikely a complete divestiture of Complete would be required but it is noteworthy that it remains an option for the Competition Bureau to pursue in its enforcement action. It also gives the Bureau significant leverage in negotiating with CCS over appropriate remedies. Fourth, this is a challenge based on a potential competition theory given that the acquisition would have prevented Babkirk from entering the secure landfill market in northeastern British Columbia. Babkirk was an actual potential entrant poised to enter the relevant market prior to the sale of the company to its only competitor, CCS. Finally, this is a document case. Internal CCS documents lay out a compelling anticompetitive story and reveal that CCS was concerned with Babkirk's entry and the price wars which would result from Babkirk's competitive influences.

Robert W. Doyle Jr.
(202) 589-1834
rdoyle@dbmlawgroup.com