Competition Bureau outlines its assessment of CN’s acquisition of H&R
April 22, 2020 - GATINEAU, QC - Competition Bureau
Today, the Competition Bureau released information on the first merger review to make use of its draft model timing agreement for mergers involving claimed efficiencies. The details appear in a position statement that outlines the analysis conducted by the Bureau while it investigated Canadian National Railway Company’s (CN) proposed acquisition of H&R Transport Limited (H&R) in 2019.
The Commissioner entered into a timing agreement with CN and H&R in July 2019. The purpose of this timing agreement is to give the Bureau the time and information needed to assess potential anti-competitive effects and the parties’ claimed efficiencies before deciding whether to challenge a transaction before the Competition Tribunal. The agreement established timed stages for the parties to engage with the Bureau, including the production of evidence and information to substantiate efficiencies claims.
The Bureau’s investigation concluded that the proposed transaction would likely result in a substantial lessening of competition for full truckload refrigerated intermodal services in eight relevant markets in Canada. In particular, the Bureau found that CN would be able to charge higher prices and provide lower quality service to customers in those markets. However, after assessing the parties’ claims, the Bureau concluded that the efficiency gains would be greater than the likely anti competitive effects of the transaction.
For this reason, the Bureau discontinued its investigation in November 2019. For more information, please consult its position statement.
The Bureau continues to evaluate its draft model timing agreement and expects to provide additional updates in the near future.
CN and H&R are both providers of intermodal transportation services in Canada. An intermodal shipment involves transporting goods in containers using two (or more) modes of transportation, such as truck and train, before it arrives at its destination.
Section 96 of the Competition Act allows for a trade-off analysis between anti-competitive effects and efficiencies resulting from a transaction. If the Bureau’s review concludes that efficiencies gained are greater than, and will offset, the anti-competitive effects, the Bureau may decide not to oppose the merger on these grounds. It is the responsibility of merging parties to demonstrate these efficiencies in their submissions to the Bureau.
The Bureau obtained information from multiple sources during the course of its investigation, including through interviews with numerous stakeholders, information provided by CN, H&R and third parties, as well as analyses conducted by an independent efficiencies expert.
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