## Facts

- Superior Propane Inc. (Superior) sought to acquire ICG Propane Inc. (ICG), a competing propane distributor, in a horizontal merger affecting many local propane distribution markets across Canada.
- Economic evidence before the Competition Tribunal estimated the merger would likely increase propane prices by about 8% in affected markets; some of the price effects would be borne by customers outside Canada.
- The Commissioner of Competition applied under the *Competition Act* for an order under s. 92, alleging the merger was likely to substantially lessen or prevent competition.
- In an earlier Tribunal decision, the merger was found likely to lessen competition substantially, but the Tribunal concluded the statutory efficiencies defence in s. 96 applied and refused to block the transaction.
- The Federal Court of Appeal subsequently remitted the matter to the Tribunal, directing it to reconsider the s. 96 analysis using a broader understanding of the “effects” of a lessening of competition, not limited to deadweight loss.
- On remand (this decision), Superior and ICG again relied on merger-specific cost savings from combining overlapping operations (e.g., facilities, distribution, logistics, and overhead).
- The Tribunal quantified annual efficiency gains at approximately $29 million.
- The Tribunal quantified anticompetitive effects at approximately $8.6 million, including both allocative inefficiency and an additional component for “socially adverse” income transfers from customers to the merged firm/shareholders, as required by the appellate direction.

## Issues

1. Was the Superior–ICG merger likely to substantially lessen or prevent competition in relevant propane markets under s. 92 of the *Competition Act*?
2. For purposes of s. 96, what anticompetitive “effects” must be weighed against efficiencies on a redetermination, including whether price-related wealth transfers should be included and quantified?
3. Did the respondents prove that the merger was likely to bring about efficiency gains greater than and offsetting the anticompetitive effects, and that those gains would not likely be attained if a s. 92 order were made?

## Decision

- The Tribunal reaffirmed that the merger was likely to substantially lessen competition and lead to higher prices in many affected markets.
- Applying the remittal direction, the Tribunal treated the relevant “effects” under s. 96 as broader than deadweight loss alone, and included a quantified amount for socially adverse income transfers associated with higher prices.
- The Tribunal found that the respondents’ proven efficiencies (about $29 million annually) exceeded and offset the total quantified anticompetitive effects (about $8.6 million annually, including the income-transfer component).
- Because s. 96 applied on the evidence, the Tribunal held it could not make an order under s. 92 to block, dissolve, or restructure the merger, and it therefore declined to grant the Commissioner’s requested remedial relief.

## Legal Principles

- Under s. 92 of the *Competition Act*, where a merger is likely to substantially lessen or prevent competition, the Tribunal has authority to make remedial orders (including prohibition or dissolution).
- Section 96 operates as a statutory limit on s. 92 relief: the Tribunal shall not make a s. 92 order if it finds (a) the merger is likely to bring about gains in efficiency that are greater than and offset the effects of the lessening or prevention of competition, and (b) those gains would not likely be attained if the order were made.
- The efficiencies defence is evidence-based and normally requires proof that the claimed efficiencies are merger-specific and likely to be realized.
- On this redetermination, the “effects” to be weighed under s. 96 were not confined to allocative inefficiency (deadweight loss). Consistent with the appellate direction, the Tribunal included distributional consequences of higher prices by assigning a quantified amount to the socially adverse aspect of transfers from customers to the merged firm/shareholders.
- The Tribunal conducted a quantitative comparison between efficiency gains and anticompetitive effects and treated the s. 96 inquiry as a balancing exercise that, when satisfied, bars the Tribunal from ordering a remedy under s. 92.
- The Tribunal’s effects assessment accounted for expected price impacts, including impacts borne by purchasers outside Canada, as part of the overall competitive effects being weighed.

## Conclusion

In this redetermination decision, the Competition Tribunal again found the Superior–ICG merger would substantially lessen competition and increase prices, but it held that s. 96 prevented any s. 92 remedy because the respondents proved merger-specific efficiencies of about $29 million annually that were greater than and offset total anticompetitive effects of about $8.6 million annually, calculated using a broadened effects analysis that included socially adverse income transfers from customers.


Commissioner of Competition v. Superior Propane Inc., 2000 Canada Comp. Trib. 16 (2002)