Competition Bureau Approves Proposed Maple‐TMX Transaction
On July 4, the Competition Bureau approved the takeover by Maple Group, whose investors are the key financial institutions and institutional investors in Canada (including the Canada Pension Plan Investment Board, Ontario Teachers' Pension Plan, CIBC World Markets Inc., Scotia Capital Inc., Alberta Investment Management Corporation, Caisse de dépôt et placement du Québec, among others) of Canada's biggest stock exchange operator, which includes TMX Group, Alpha Group and Canadian Depository Services. The Maple Group's bid followed the proposed merger between London Stock Exchange Group PLC and the TMX Group Inc. in the first half of 2011 which was defeated by shareholders last summer.
Background
The stock exchange sector began consolidating in 1999, when the Vancouver, Alberta, Montréal and Toronto Stock Exchanges agreed to restructure the Canadian capital markets, with exchanges specializing in different types of securities (junior companies on an exchange headquartered in Calgary, and derivatives on the Montréal Exchange with larger companies on the Toronto Stock Exchange). The Competition Bureau concluded there were no grounds to challenge the proposed merger given the intention of the Canadian Securities Administrators to remove regulatory barriers allowing for Alternative Trading Systems ("ATS"). The creation of ATSs would promote competition by offering a wide variety of trading options not offered by a centralized exchange.
Further consolidation occurred in 2001 when the TSX Group (formerly TSE) acquired the Canadian Venture Exchange, and in 2007 when the TSX Group and the Montreal Exchange merged, creating a new entity, TMX Group Inc. This latter merger was also cleared by the Competition Bureau, one of the reasons being that Alpha Trading Systems, an ATS organized by nine of Canada's leading financial institutions, was poised to enter the market in 2008 and would likely be a significant competitor to the TSX Group.
The Bureau and the Ontario Securities Commission ("OSC")
The Commissioner of Competition had expressed serious concerns about Maple Group's takeover as it would effectively combine the TMX Group and Alpha Group, the two competitors in the equities trading market that control approximately 85% of all stock trades in Canada, as well as the Canadian Depository Services clearing house.
However, after a lengthy review and in light of the OSC's "recognition order", also issued on July 4, which allows the proposed transaction to proceed on certain conditions, the Bureau concluded that it did not intend to make an application to the Competition Tribunal to challenge the proposed transactions. The Bureau stated in its press release that "while the Bureau conducted its own review of the proposed transactions, the measures contained in the OSC's final recognition orders materially change the regulatory environment sufficient to substantially mitigate [its] competition concerns." No competition remedies were imposed in this proposed transaction, and it will fall to the Canadian securities law regulators to monitor and regulate the proposed transaction.
The Bureau issued a "no action letter" to Maple Group, which means that the Bureau can still challenge the merger once completed for up to one year post‐closing.
The Bureau's press release can be found here.
Glencore Receives Investment Canada Approval for Viterra Takeover
On July 15, Glencore International PLC ("Glencore") received approval under the Investment Canada Act to acquire Canadian company Viterra Inc. ("Viterra"), bringing it one step closer to closing the deal. Glencore is a Swiss commodities producer and trader with worldwide activities, and Viterra is an agri‐business company with operations across Canada and other countries.
Glencore released a statement emphasizing the commitments it made as part of its application for approval under the ICA, including agreeing to increase Viterra's projected capital expenditures in Canada by more than $100 million over five years, contribute to "grain industry initiatives" in Manitoba, maintain Viterra's head office located in Regina, invest $8 million in Viterra's projected expenses in research and development, and work with the Saskatchewan government to establish a Global Institute for Food Security in the province. Another regulatory closing condition of the proposed transaction was clearance under the Competition Act, which Glencore received in May 2012. The Bureau issued a "no action letter", concluding that it would not challenge the proposed transaction before the Competition Tribunal under the merger provisions of the Competition Act.
As part of the proposed transaction, Glencore had struck side deals under which Winnipeg‐based Richardson International would purchase a number of Viterra's Canadian grain elevators, and Calgary‐based Agrium Inc. would acquire most of Viterra's retail stores. According to a press release, the Bureau is expected to begin a 45‐day review of Glencore's deals with Agrium and Richardson after the deal between Glencore and Viterra closes.
Competition Bureau Clears United Technology Corporation's Acquisition of Goodrich Corporation
On July 26, the Competition Bureau issued a "No Action Letter" to United Technology Corporation ("UTC") regarding its acquisition of Goodrich Corporation ("Goodrich"). UTC and Goodrich entered into an agreement in September 2011, by which Goodrich is to merge with and become a wholly‐owned subsidiary of UTC. Both companies are engaged in the global aerospace industry, supplying various parts and components to aircraft manufacturers. The Bureau worked together with the U.S. Department of Justice's Antitrust Division and the European Commission in reviewing the international merger.
As a result of remedies obtained by the U.S. and European antitrust authorities, which included divestitures of some of UTC and Goodrich's operations in the U.S. and Europe, the potential for anti‐competitive effects for the manufacture, sale and supply of electrical generators and engine controls in Canada was addressed. One of the divestitures included the sale of certain assets at Goodrich's Montréal facility that were already in the process of being transferred to its facility in Connecticut. Under these circumstances, the Bureau concluded that the remedial orders issued by the foreign antitrust authorities would sufficiently mitigate any potential anticompetitive effects in Canada and as there were no Canadian assets involved, the Bureau concluded that it would not challenge the proposed transaction.
The Bureau's press release can be found here.
Bid‐Rigging
Quebec's Construction Industry
On June 21, the Competition Bureau released details of an investigation that was conducted in concert with the Sûreté du Québec's Corruption Investigations Unit (Unité permanente anticorruption or "UPAC"), which was set up by the Government of Quebec in 2011. The investigation has led to a total of 77 charges against eleven individuals, two of which are municipal officials, and nine companies in the construction industry. The Bureau and UPAC uncovered an alleged "scheme of collusion, breach of trust and corruption" that began in 2007, allegedly giving preferential treatment to a group of contractors for lucrative municipal contracts, mainly for infrastructure projects in the Saint‐Jean‐sur‐Richelieu region.
Among the criminal charges laid were charges of corruption in municipal affairs, breach of trust, influencing a municipal official, extortion and conspiracy, as well as bid‐rigging charges under the Competition Act.
The Bureau's press release can be found here.
Bid‐Rigging Charge in Ventilation Sector
In another bid‐rigging case, an individual was charged for his alleged role in rigging bids for a private sector ventilation contract for a residential high‐rise building in the Montréal area. The first charges were laid in December 2010, as a result of a Bureau investigation that allegedly uncovered evidence of secretly coordinated bids by several companies specializing in ventilation, air conditioning and heating services. So far eight companies and six individuals have been charged. The Bureau's press release can be found here, and its announcement at the time charges were laid in 2010 can be found here.
Colmatec Inc. Pleads Guilty to Bid Rigging
On June 22, Colmatec Inc. ("Colmatec") and its operations director, Mr. Rénald Drouin, pleaded guilty for their role in a conspiracy to rig bids to obtain municipal contracts for specialized sewer services in the Province of Quebec. Colmatec agreed to pay a fine of $50,000 and is subject to a court order. Mr. Drouin agreed to perform 100 hours of community service and is subject to probation for a period of two years.
The guilty pleas come as part of a larger investigation commenced by the Competition Bureau in 2009, resulting in bid‐rigging charges in November 2011 against six companies and five individuals. Given that the bid‐rigging activities took place before the amendments to the Competition Act came into force in March 2009, the accused companies and individuals face a less severe penalty, a possible prison sentence of up to 5 years and/or a fine at the discretion of the court, as opposed to a fine at the discretion of the court and/or a prison sentence of up to 14 years, as provided in the amended bid‐rigging provisions of the Competition Act.
The Bureau's press release can be found here.
Conspiracies
Korean Air Pleads Guilty to Price Fixing
On July 19, Korean Air Lines Co., Ltd. ("Korean Air") pleaded guilty and was fined $5.5 million for its participation in an air cargo price fixing cartel between April 2002 and February 2006. The conviction is the seventh conviction to date arising from the Competition Bureau's air cargo investigation.
The investigation also saw guilty pleas since 2009 for conspiracy to fix air cargo fuel surcharges from each of Cargolux Airlines International S.A. ("Cargolux"), Société Air France ("Air France"), Koninklijke Luchtvaart Maatschappij N.V. ("KLM"), Martinair Holland N.V. ("Martinair"), British Airways PLC ("British Airways") and Qantas Airways Limited ("Qantas").
To date fines in excess of $22 million have accumulated: Korean Air ‐ $5.5 million, Cargolux ‐ $2.5 million, Air France ‐ $4 million, KLM ‐ $5 million, Martinair ‐ $1 million, British Airways ‐ $4.5 million and Qantas ‐ $155,000.
The Bureau's press releases can be found here.
Commissioner of Competition Resigns
On June 28, the Commissioner of Competition, Melanie Aitken, announced that she will be stepping down, effective September 21, 2012. Commissioner Aitken was appointed in 2009 for a five year term. It will likely take at least several months to appoint Ms. Aitken's successor.
Ms. Aitken is known for pursuing high profile litigation against a number of targets, including the Canadian Real Estate Association (for abuse of dominance), Visa and Mastercard (for price maintenance in relation to merchant restrictions), Rogers (in connection with advertising relating to its Chatr wireless brand) and a non‐notifiable merger involving potential competitors. The Bureau's announcement can be found here.
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