Aucerna provides solutions for integrated planning, execution, and reserves. The company is a global source of technology and expertise for the energy industry. Aucerna serves a range of customers that range from super-majors and emerging operators to energy investors, consultants, and educational institutions. Aucerna solutions are deployed in every region of the globe, helping companies make better investment decisions by connecting the people and the data of the modern energy industry.On February 16th, 2021, Aucerna was merged with Aucerna.
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Aug 24, 2022
To embed, copy and paste the code into your website or blog: <iframe frameborder="1" height="620" scrolling="auto" src="//www.jdsupra.com/post/contentViewerEmbed.aspx?fid=6a292a16-9f0b-47ce-acb6-0affebed3ebc" style="border: 2px solid #ccc; overflow-x:hidden !important; overflow:hidden;" width="100%"></iframe> There has been significant and growing debate in recent times about the adequacy of Canadian competition laws. A package of amendments was passed in June 2022, and it is widely anticipated that the Canadian government will in the very near future push for even further changes to the Competition Act. We assess below the current state of Canadian competition laws, with reference to the three major categories of conduct addressed in competition laws globally. This is followed by a more granular survey of the state of merger law in Canada. The author’s perspective is that many influential commentators, and the government itself, may be tempted to prescribe a course of radical treatment without having first engaged in a careful diagnosis of the patient, which we seek to do here. Price Fixing Price fixing, bid rigging and related offences are per se criminal offences in Canada. They carry unlimited fines, imprisonment up to 14 years and class action liability. They cover all sell-side agreements and, as of June 2023, will cover buy-side agreements relating to employees. In short, price fixing laws in Canada could be said to be in a virtual “end state”. It is not clear that the penalties could be any more severe. There has been discussion about amending the “civil competitor collaboration” provision to allow for different forms of relief in respect of such collaborations – which necessarily fall short of criminal cartels – so as to enable the Competition Tribunal (the “Tribunal”) to issue orders that are more tailored and targeted to the specific collaboration in question than is currently the case. This discussion seems sensible. But the existing strength of criminal cartel laws in Canada should be kept in mind as the background to any such discussion. Canada does not lack for extraordinarily powerful cartel laws. Dominance The Commissioner of Competition (the “Commissioner”), or a private party with leave, may bring an abuse of dominance action. Penalties now include fines of up to three times the value of the benefit derived from the conduct in question, or, where that cannot be quantified, 3% of global revenues. These amounts are payable to the federal government. They could potentially amount to tens of millions or hundreds of millions of dollars for large companies. Factors that the Tribunal may consider in dominance cases include new tech-sector or digital economy-focused factors. The Competition Act also now codifies a broad definition of “anti-competitive acts” that had emerged in recent case law. Several of the key features of dominance law in Canada described above are new. It would be smart to allow the impact of the June 2022 amendments on dominance law to be assessed as new cases arise, or do not arise, before seeking to amend it again. Mergers Canada’s merger law was significantly amended in 2009 to introduce a U.S.-style “second request” process. At the time, leading law firms in Canada characterized the 2009 amendments variously as “the most significant in 25 years”, “massive”, “sweeping” and in similar terms. The scope of the 2009 amendments has been largely forgotten in the current clamour. Indeed, the then Commissioner said in relation to the 2009 amendments that: “The result is an updated Competition Act that facilitates more effective enforcement, aligns us with our international counterparts, and ensures that both businesses and consumers benefit from a competitive marketplace. It is our job to ensure we take that opportunity and make the most of it.” Nonetheless, there has emerged a view, strongly held in some quarters, that the current merger rules are overly permissive and that it is not practical for the Commissioner to win a case. Below, we assess this claim with reference to the cases that have arisen in the 13-year period following the (last) modernization of the Competition Act. Surveying the Merger Provisions in the Competition Act, 2009 to the present How many transactions has the Competition Bureau reviewed since 2009? Approximately 3,000. How many of those transactions resulted in a remedy via a “consent agreement” or merger challenge? There have been approximately 53 consent agreements on merger matters since 2009, where no merger challenge occurred. There have also been 9 merger challenges since 2009, of which 4 then settled into a consent agreement, taking the total to 57 consent agreements on merger matters. (The attached table lists these matters in reverse chronological order , with additional information). Notably, the above figures do not account for transactions that were simply abandoned due to competition concerns in Canada or globally, or in respect of which a remedy was obtained outside a consent agreement. There is no good way to account systematically for these cases, but they certainly exist and are further evidence of active enforcement activity. The relative proportion of consent agreements to merger challenges is worth reflecting on. Consent agreements are far more common than merger challenges precisely because the reality is that few companies are prepared to litigate with the Government of Canada. Most companies prefer to settle, a preference that gives the Bureau leverage in settlement negotiations and leads to consent agreements. It should also be noted that the total of approximately 3,000 transactions reviewed is misleading in a sense, as it includes huge numbers of real estate and upstream oil and gas transactions, which, due to the asset thresholds in the Competition Act, are frequently required to be reviewed by the Bureau even though since 2009 they have not resulted in a single merger challenge or consent agreement. What happened with the 9 merger challenges? The 9 merger challenges are Tervita, Air Canada, Parkland, Staples, Aucerna, Parrish & Heimbecker, Secure, GFL, and Rogers. 4 settled into a consent agreement (Air Canada, Parkland, Aucerna, GFL) 2 are awaiting a Tribunal decision following trial (Parrish & Heimbecker, Secure) 1 is awaiting trial (Rogers) 1 was abandoned due to U.S. competition issues (Staples) 1 was decided on the merits (Tervita) How can the Bureau formally block the closing of a transaction under the Competition Act if the merging parties are otherwise prepared to close? Where the relevant thresholds are exceeded, merging parties must make filings with the Bureau, stand ready to provide large volumes of internal data and documents to the Bureau if requested, and observe a waiting period. Following the expiry of this waiting period, parties may seek to close their transaction or continue to advocate for substantive comfort if it has not already been obtained. Section 104 of the Competition Act is the section pursuant to which the Bureau can apply to block the closing of a transaction where that waiting period has expired or is about to expire, where the Bureau has concluded the transaction is anti-competitive, and where the parties are pushing to close. The applicable legal test under section 104 requires that the Bureau establish for the Tribunal that: (a) there is a serious issue to be tried; (b) irreparable harm will result if the transaction is not blocked; and (c) the balance of convenience favours blocking the transaction. Of the approximately 3,000 mergers reviewed since 2009, how many times has the Bureau attempted to block a transaction under section 104? Three times. What happened in those three cases? The Competition Bureau tied the first, lost the second (but won an important legal point on appeal), and in substance won the third. These cases are: Parkland (2015) Notably, the Bureau did not seek to prevent closing in this case, but rather sought to have certain gas stations “held separate”. The Bureau partially won (for some gas stations) and partially lost (for other gas stations) the relief it had sought. Call it a tie. In another sense, though, this case was an important win as the Tribunal seemed to establish that interim price effects could amount to irreparable harm. Remarkably, this had not been apparent from the introduction of the Competition Act in 1986 until 2015. Secure (2021) The Bureau lost, but with the Tribunal finding that had it been provided with a rough, “ballpark” quantification of the economic harm arising from the transaction, the Bureau may instead have won.In another sense, though, this case was a win as it confirmed what the Tribunal found in Parkland, i.e., that interim price effects amount to irreparable harm.This was somewhat debatable between 2015 and 2021, as Parkland had not been appealed. The finding regarding interim price effects, originating in Parkland and then being confirmed in Secure, was not necessarily expected. Indeed, it remains difficult to reconcile with the Federal Court of Appeal’s decision in an older case, Superior Propane, where the Court found that unwinding a merger is not like “unscrambling eggs”, which most observers had taken to mean that harm to competition can often be remedied via a divestiture, i.e., that the harm will often not be irreparable. While much has been written on the Tribunal’s consideration of efficiencies in this case, its approach to interim efficiencies may be seen as the logical corollary of it taking into account interim price effects, which arguably should not be done either, but was the key victory the Bureau had won in Parkland. Six years passed between Parkland and Secure, but Parkland, a quirky case that was never appealed, was implicitly laden with this possibility. Note also that in Secure the Federal Court of Appeal separately confirmed on appeal that the Tribunal can an issue a short-term injunction pending the disposition of the 104 application, something that the Tribunal itself had not thought possible, representing a meaningful procedural win. So while this case is clearly a loss for the Bureau, it did have some silver linings. The Bureau may yet win on the substantive merits, too. Rogers (2022) The Bureau won in substance. Rogers gave the Bureau the relief it sought by agreeing not to close until the merger challenge is decided. It is exactly as if the Bureau won the section 104 on the merits. (As an aside, this was a curious outcome in some sense given the “hell-or-high-water” obligation contained in the Rogers / Shaw transaction agreement). Setting aside the procedural issue of blocking the closing of a transaction, what is the Bureau’s track record at the Tribunal on merger challenges on the merits since 2009? Many commentators do not appreciate that only one merger challenge has resulted in a decision on the merits since the 2009 amendments (Tervita). This is completely lost in the debate about amendments, which seems to presume a litany of lost merger cases necessitating amendments. The Bureau won the Tervita case.The decision was, however, overturned years later by the Supreme Court on a technicality arising from extremely minor efficiencies. We are waiting on the Parrish & Heimbecker and Secure merger challenge decisions. What is going on with the Parrish & Heimbecker and Secure merger challenge decisions? In Parrish & Heimbecker, the Bureau filed its merger challenge application in December 2019. The trial concluded in January 2021. As at August 2022, the Tribunal decision has not yet been issued, some 19 months after the hearing concluded, and more than 30 months after the application was filed. The question at issue in the application is whether Parrish & Heimbecker should or should not be required to divest a single grain elevator in the middle of the Prairies. This timing is seen by many in the Canadian competition bar and we believe the Bureau to be very unfortunate. In Secure, the Bureau filed its merger challenge in June 2021. The trial concluded in June 2022. Since 2009, at what point during a transaction has merger litigation typically taken place in Canada? 4 post-closing (GFL, Aucerna, Parrish & Heimbecker, Tervita) 3 pre-closing (Air Canada, Staples, Rogers) 2 hybrid (Secure, Parkland) What has been the role of the efficiencies defence in Canada since 2009? How many anti-competitive transactions has it saved since 2009? Tervita was saved at the Supreme Court on a technicality related to the efficiencies defense, as noted above. In addition, the Bureau will from time-to-time issue press releases or position statements regarding its merger reviews. Since 2009, the Bureau has explicitly cited the efficiencies defence as a reason for not challenging a merger in a very small number of cases. These are Chemtrade / Canexus,Superior Plus / Canexus (abandoned), Superior Plus / Gibson Energy and CN / H&R.These roughly four transactions are to be seen in the context of approximately 3,000 merger reviews since 2009.It is therefore far from clear that the efficiencies defense has played a decisive role in merger review in Canada, at least since the last amendments in 2009, notwithstanding the intense attention it has attracted. This fact may be deployed in the service of both proponents and opponents of the efficiencies defence. Proponents of the efficiencies defence can credibly say that while academic commentators in particular have levelled heavy and indeed escalating criticism at the efficiencies defence, such criticism ignores the fact that the efficiencies defence almost never carries the day when seen in the context of merger review as a whole, such that its role in saving anti-competitive transactions is greatly overstated. Based on public information, much of which is summarized herein, the efficiencies defence can be said to have saved perhaps five or so presumptively anti-competitive transactions since 2009, versus roughly 60 presumptively anti-competitive transactions that resulted in remedies that it evidently did not or could not save, keeping in mind throughout that only one transaction (Tervita) has resulted in a substantive decision at the Tribunal on the merits since 2009. There simply has been no high-profile transaction saved on the basis of the efficiencies defence since the last amendments, or at least not one that has been disclosed by the Bureau. Instead, there is a small collection of oddities of debatable import as a public policy matter. If there are in fact additional transactions that have been saved by the efficiencies defence, then this should by all means be disclosed – it would further inform this important debate and may shift opinion. Opponents of the efficiencies defence can by the same token credibly point out the rather obscure nature of the transactions that it has saved, which in many respects do not even seem to engage the underlying purpose of the efficiencies defence, combined with the significant evidentiary burden placed on the Bureau to assess and be prepared to overcome the efficiencies defence in all other cases where it is (unsuccessfully) raised, as factors that weigh against its retention as a standalone defence, together of course with its uniqueness in the international context. Let the efficiencies debate rage on. The author’s point here is that the notion, put forward by some academic commentators, that the efficiencies defence results in totally ineffective merger enforcement in Canada, is simply not borne out by experience. Similarly, any claim that the loss of a standalone efficiencies defence would have a massive impact on merger activity in Canada seems to defy logic.
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Aucerna Frequently Asked Questions (FAQ)
When was Aucerna founded?
Aucerna was founded in 2005.
Where is Aucerna's headquarters?
Aucerna's headquarters is located at 2nd Street S.W., Calgary.
What is Aucerna's latest funding round?
Aucerna's latest funding round is Merger.
Who are the investors of Aucerna?
Investors of Aucerna include Quorum Software, Thoma Bravo and BDC Venture Capital.
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