This presentation by Canada was prepared for the break-out Session 1, “The role of economists in merger teams and qualitative evidence review”, in the discussion “Economic Analysis in Merger Investigations” at the 19th OECD Global Forum on Competition on 9 December 2020. More papers and presentations on the topic can be found at http://oe.cd/eami. This presentation was uploaded with the author’s consent.

1. Economic Analysis in
Merger Investigations
Role of Economists in Merger Teams
Melissa Fisher
Deputy Commissioner
Mergers Directorate

2. Overview of Merger Review Process in Canada
• Prosecutorial Model
• Commissioner of Competition bears the burden of proving that a merger is likely to prevent of
lessen competition substantially on a balance of probabilities
• Parties may avail themselves of efficiencies defence
• Requires Commissioner to quantify anti-competitive effects
• Typically Commissioner and merging parties negotiate consensual remedy
• Where no consensual resolution, Commissioner may file an application with the Competition
Tribunal
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3. Overview of Merger Review Process in Canada
• Notifiable Transactions
• Parties must notify Commissioner and provide prescribed information
• 30 day statutory waiting period during which parties may not close
• Commissioner may issue Supplementary Information Request (SIR) for records and data
• Extends statutory waiting period for 30 days after complete responses are provided to SIR
• Information sought from third parties voluntarily or through court order
• Non-notifiable Transactions
• Complaint or intelligence gathering
• Information sought from merging and third parties voluntarily or through court order
• No statutory waiting period, may seek court order to prevent closing
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4. Overview of Merger Review Process in Canada
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Initial waiting period
30 day period during which the parties cannot close the
transaction
SIR
Issuance of a request to the merging parties for additional
information typically consisting of documents and data
Interim Period
The period between issuance of the SIR and the parties’
compliance with the SIR
Second waiting period
Commences when the merging parties provide complete
responses to SIRs. 30-day period during which the parties
cannot close the transaction
Litigation
Application filed with
Tribunal to block all or part
of proposed transaction
Remedy
Commissioner and Parties
enter Consent Agreement
SPLC Unlikely
Commissioner issues No Action
Letter

5. Types of Information Sought
• Documents
• Strategic documents vs all records
• Proposed transaction
• Competitive dynamics and rivalry (strengths/weaknesses)
• Pricing, price zones, catchment areas
• Customer wins/losses
• Capacity utilization
• Agreements (e.g. supply)
• Barriers to entry (examples of entry/exit)
• Efficiencies
• Data
• Financial statements, sales or transactional data, cost data and customer win/loss data
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6. Organizational Structure – Economic Expertise
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7. Structure of Economic Expertise
• Economic Analysis Directorate
• PhD and Masters level economists with training in industrial organization, microeconomics and
econometrics
• Chief Economist – TD MacDonald Chair in Industrial Organization
• Mergers Directorate
• Approximately 40 case officers
• Masters level economists
• Lawyers
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8. Role of Economists
• Primarily involved in complex merger reviews
• Engaged during initial waiting period through conclusion of matter
• Involved in the following key tasks:
• Determining market dynamics
• Developing theory(ies) of harm using economic literature
• Participating in data gathering including drafting data questions
• Reviewing data and documents produced
• Engaging with external economic experts retained by the Competition Bureau
• Undertaking economic analysis of data
• Assessing any economic analysis received
• Assessing any remedies proposed
• Assisting with any litigation
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9. Types of Analysis Undertaken by Economists
• Qualitative Analysis
• Economists are integral members of case team
• Assist in developing information requests
• Participate in market calls
• Review information collected
• Assist with developing theory(ies) of harm and a way to quantitatively test of these theories
• Assess incentives of merging parties and their competitive strategies to determines if
consistent with theory(ies) of harm and economic literature
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10. Case Example – Bell/MTS
• Qualitative evidence led our economists to theory of harm and a way to quantitatively test
• Observed regional price differences across provinces on carrier websites that coincided with
the presence of a strong regional competitor
• Observed multi-market contact among competitors
• Documents indicating competition with a strong regional focus was the cause of observed price
differences
• e.g. weighing the advantages of vigorous competition in one area against the danger of
retaliation in other areas
• Commentary in investor calls and regulatory interventions to the telecom regulator explaining
the reason for the regional price differences
• Quantitative test developed based on qualitative evidence
• Tested whether the presence of a strong regional competitor led to lower prices
• Confirmed observed price differences were not explained by a factor other than competition
(e.g. demographics, network quality), were persistent across plans, and persisted in
unadvertised pricing like retention or closing offers
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11. Thank you