One of the many consequential recent amendments to the Competition Act, the so-called “structural presumption” for the identification of anticompetitive mergers has been the subject of robust debate. Join us for this episode as we speak with U.S. practitioner and former FTC attorney Jamie France for a rundown of the approach taken to the structural presumption in U.S. merger law – how is it applied in ordinary course merger reviews and how can it impact the advocacy of parties in merger litigation? – and a discussion of the potential impact of the presumption on Canadian law and practice.
0:01
Counterfactual Podcast
Welcome to Counterfactual, the podcast brought to you by the Competition Law and Foreign Investment Review Section of the Canadian Bar Association. Counterfactual takes a fresh look at issues relevant to business competition and related areas of regulation and explores the real and hypothetical worlds to gain practical insights and debate policy. Hope you enjoy the show!
0:30
Kate McNeece
Welcome to Counterfactual, the official podcast of the Canadian Bar Association’s Competition Law and Foreign Investment Review Section. I'm Kate McNeece. I'm the chair of the Podcast Committee and your host for today's discussion on the structural presumption in Canadian merger reviews. I am delighted to be joined by Jamie France, an antitrust partner at Gibson Dunn in Washington, DC, who is our US expert that will take us through all things structural presumption and help us learn from the US experience, how this may play out in Canada.
1:05
Kate McNeece
Welcome, Jamie. Thank you for joining us.
1:07
Jamie France
Thanks, very happy to be here.
1:09
Kate McNeece
Before we get into the discussion, I wanted to provide - for the audience's benefit, I promised Jamie she doesn't need to know anything about Canadian law to participate in this discussion. And so, both for Jamie and for our audience's benefit, I'll give a quick two-minute overview on what the structural presumption is and what is sort of new in Canada that is sparking this discussion.
1:31
Kate McNeece
Under the Competition Act, the Competition Bureau in Canada cannot unilaterally block a merger they think is harmful to competition. Certain transactions are required to come before the Bureau prior to closing, and the Bureau will do a review where they exceed certain thresholds. But, if at the end of that process, the Competition Bureau has an issue, they have to go to the Competition Tribunal, which is Canada's specialized competition court, to get an order blocking the merger or imposing a remedy.
1:59
Kate McNeece
Section 92 allows the Competition Tribunal to make an order where it finds that the completed or proposed merger prevents or lessens or is likely to prevent or lessen competition substantially. To keep us from having to say that phrase a million times, we're going to call that an SPLC, a substantial prevention or lessening of competition. Prior to this summer, the Section 92 of the Competition Act explicitly prevented the Tribunal from finding an SPLC solely on the basis of evidence of concentration or market share. So even if there was proof that the merger will result in a monopoly, that's not in and of itself sufficient to get the Tribunal to block a merger. There would have to be other evidence of an SPLC to get to that point.
2:44
Kate McNeece
The structural presumption that was introduced and passed in Bill C-59 this summer, came into force June 2024, and it somewhat flips that on its head. Now, it replaces the previous text that said we couldn't only consider concentration or market share. It now says that where the Tribunal finds on a balance of probabilities, that the merger or proposed merger results in an increase in concentration or market share, the Tribunal shall also find that it results in an SPLC.
3:11Kate McNeece
So rather than saying we can't look at concentration as the only reason, it now says we're presumptively anti-competitive, if we result in a significant increase in concentration or market share. And so the significant level is set by the legislation as a concentration index or HHI, which is the sum of squares of market shares in the market, is likely to increase by more than 100, and either that index is likely to be more than 1800. So the sum of squares is likely to be more than 1800, or the market share of the parties to the proposed merger, is likely to be more than 30% market share.
3:46Kate McNeece
So that's a brief overview and those numbers, as we will find in our discussion, are going to look very familiar to Jamie because they are reflected as well in the US Merger Guidelines. With that background, what we're going to do today is discuss how these same concentration and market share thresholds work in terms of merger reviews in the US, and what we can learn in Canada from the US experience to kind of preview what this new concept will mean in Canadian merger law.
4:13
Kate McNeece
So Jamie, again, thank you for joining us today to take us through this somewhat complicated, but I think very interesting, at least for a merger lawyer like me, subject. Before we really dive in, could you tell us a little bit about yourself? What is yourbackground and how long have you been at Gibson?
4:29
Jamie France
Sure. I started my career as a law clerk for Chief Judge Royce Lamberth on the U.S. District Court for the District of Columbia. Then I joined Gibson Dunn and worked here for three years as an antitrust associate doing both merger reviews and conduct litigation and counseling.
4:46
Jamie France
Then I moved over to the U.S. Federal Trade Commission, the FTC, and I spent six years there as a staff attorney in the Bureau of Competition. I was focused particularly on merger reviews and merger litigation in a variety of industries, and was a member of five different trial teams during my time at the agency.
5:07
Jamie France
I then returned to Gibson Dunn three years ago. My work now focuses on both merger reviews and, again, litigation across a variety of industries, health care, technology, consumer goods, pharmaceuticals, a variety of other fun areas of the law, but definitely encounter the structural presumption in particular in merger reviews and merger litigation. So it touches on a big portion of my work.
5:33
Kate McNeece
Fantastic. I think it's great that you're able to put on your regulator hat having been in the enforcement agency, as well as your private practice hat now, advising clients who encounter these issues.
5:46
Kate McNeece
I just gave this brief overview of what the structural presumption is now going to look like in Canada. Can you take us through how the structural presumption works in the US, or how it's laid out, what it means for competition litigation, and just a kind of rundown of how it works in the US?
6 :02
Jamie France
I'll back up first just to give some U.S. overview for our listeners who may not be familiar with it. In the United States, both the FTC and the DOJ antitrust division have overlapping jurisdiction to enforce the antitrust laws.
6:18
Jamie France
Over time, each agency has developed expertise in particular industries, but the approach is more or less the same. If after the government has investigated a merger, it determines that the proposed merger may substantially lessen competition. If the government wants to seek to block the merger, it needs to seek an injunction in court.
6:40
Jamie France
Under US case law, the government can establish a prima facie case in court, that a proposed merger is illegal, by relying on what we've been referring to as the structural presumption. What this means is certain thresholds for the post merger combined market share, and the increase in concentration that a merger is likely to produce. This is based on the US Supreme Court's decision in US v. Philadelphia National Bank in 1963.
7:11
Jamie France
And there's been a variety of case law that's evolved from Philadelphia National Bank, but that's sort of where those thresholds were first set out. Going back to when the government brings a case to challenge a merger.
7:25
Jamie France
Once the government has presented that evidence and a court establishes that a prima facie case has been made, the merging parties can then present evidence to rebut the structural presumption, by showing that the market shares and market concentration evidence that the government presented alone, do not accurately predict the merger's competitive effects. So, focusing for a minute then on that rebuttal case in general, that's done by presenting evidence that either the government's proposed market is incorrectly defined, or that the market shares presented by the government exaggerate the merger's potential anti-competitive harm, or that entry into the proposed market will be timely, likely, and sufficient to discipline any post-merger price increase, or that the merger will produce some sort of offsetting efficiencies or synergies or other pro-competitive benefits, that are sufficient to counteract any anti-competitive effects like price increases.
8:26
Jamie France
And one thing that I think is really important to note is that unlike in Canada, the structuralpresumption in the US is not set out in legislation. It's set out in the FTC and DOJ's merger guidelines, which is agency guidance about how they analyze mergers, and then those are usually adopted by courts who are analyzing a case that the government has brought to block a merger. And so over time, there has developed this body of jurisdiction and case law surrounding the structural presumption.
9:02
Kate McNeece
Great. It seems that we've got sort of some elements of commonality between what merger practice has looked like in Canada, even prior to the structural presumption, which we'llget into a little bit later. But also, now we've got a commonality in terms of what the actual levels of concentration or of market share are that are kind of deemed to be presumptively anti-competitive. But we've also got some differences. In Canada now the structural presumption is set up in our legislation, rather than in potentially more flexible agency guidelines. And we don't have a real body of case law considering how it's going to apply or how you rebut a presumption. I think let's take these kind of commonalities one by one. So number one, the presumption itself, how has this evolved over time? We are currently sitting at a place where the US merger guidelines and the Canadian law have the same numbers written into them in terms of concentration thresholds, but does that reflect the current practice or thinking in the US?
10:05
Jamie France
Yeah, well, in the US, there has also been this shift over time in the exact market share and concentration thresholds that establish the structural presumption. Most recently, in the previous version of the US merger guidelines, which were issued in 2010, mergers that resulted in highly concentrated markets, which was considered an HHI above 2500, and that involved an increase in HHI of more than 200 points, were presumed likely to enhance market power. Meaning they were above that structural presumption threshold. But last year, the agencies issued revised merger guidelines, so 2023 guidelines, and those lowered the structural presumption. Now, if a merger creates or further consolidates a highly concentrated market, which is defined as an HHI above 1800, and results in an increase in HHI of more than 100 points, that merger is presumed likely to substantially lessen competition.
11:11Jamie France
One other thing that I think is particularly important about the 2023 revision of the merger guidelines is they adopt language from Philadelphia National Bank as an alternative. So they say a post merger share greater than 30% and a change in HHI greater than 100, is presumed to substantially lessen in competition, or presumed likely to substantially lessen in competition. So that essentially says that regardless of what the overall market concentration is, if you've got this certain change in concentration and a post merger share greater than 30%, the structural presumption is met. Just a footnote here that I think is kind of important. What we're talking about generally applies to horizontal mergers.
12:01
Jamie France
In the US, there's been a lot of conversation and ink spilled about the 2023 merger guidelines touching on vertical merger analysis and what that looks like. So the 2023 guidelines contain a footnote that suggests that in a vertical merger, if the merged firm has a foreclosure share of above 50%, then that threshold is sufficient for a general inference of harm, in the absence of countervailing evidence. That's sort of where things stand today and what the most recent shift has been. But, back to your original question.
12:39
Jamie France
There's been a body of case law that's developed over time. The agencies periodically update the merger guidelines, and they're considered persuasive guidance. They're not binding on the courts, but in general, federal courts do look to the merger guidelines as persuasive authority. And so over time, you've seen, you know over the past several decades, when the structural presumption thresholds have changed in the merger guidelines, we have seen courts following that. So if you look at that sort of trend over time, you'll see these shift sort of up and down.
13:16
Kate McNeece
And has there been any debate in the context of these revised merger guidelines at the end of last year? Has there been any debate about what is the “right level” of concentration or “right level” of market share above which we should be concerned about a merger? So for example, just to take market share, our merger guidelines, which have been in effect since I've been practicing and haven't changed, currently still say, and this was thought as persuasive on the courts that a market share above 35% was considered to be pretty concentrated or, in any event, mergers that resulted in a market share below 35% sort of are considered not to be likely to result in an SPLC. And now we've changed legislation and it's at 30%. So it's not a huge change, but it is somewhat lower.
14:04
Kate McNeece
And I'm interested to understand, in the US, where did this number come from? Is there a debate about sort of our GDP is X amount, and so this is the concentration that's okay? Or was it a sense of, we're looking at previous antitrust enforcement, and we think that the previous concentration we were using was too high? Can you take us through any of that thinking or debate that's been going on?
14:29
Jamie France
Yeah, there has been a good amount of debate over this over time. Most recently, since the 2023 merger guidelines were released, there's been pretty significant attention and speculation, particularly in the US antitrust community who's really paying attention to this. There's been a lot of questioning about whether courts are going to adopt these lower thresholds or if they're going to continue to rely on the levels set out in the 2010 guidelines.
14:59
Jamie France
And like I said, the guidelines are just persuasive authority. They're not binding on the federal courts. So it's possible we're going to see courts relying on past case law that adopted the higher market share and concentration thresholds. But I think perhaps more importantly, both the 2010 and the 2023 guidelines contain language that suggests that the purpose of the thresholds isn't to provide a rigid screen that separates permissible legal mergers from anti-competitive mergers, especially in early stages of a government investigation. But I think the way that the government, the antitrust agencies view these levels, particularly at the investigation stage, is that these are just one way to identify mergers that are potentially likely to raise competitive concerns.
15:55
Jamie France
And to sort of separate the mergers that are probably unlikely to raise competitive concerns, from mergers where it might just be more important for the government in an investigation or then later on, a court in litigation, to dig deeper and look at other evidence of competitive effects. So that's things like quantitative economic evidence about potential post merger price increases, or qualitative evidence like ordinary course documents or testimony of market participants, other evidence suggesting that the merging parties are particularly close competitors, and then that the elimination of that competition will harm customers and competition overall. So while yes, there has been debate over time about changes in the agency guidance, what we ultimately end up seeing, regardless of what the thresholds are set out at in the current version of the merger guidelines, once you get to merger litigation, you see the government going beyond relying on the structural presumption alone, and presenting that type of competitive effects evidence in court.
17:04
Jamie France
I think even though now, what the attention is on is that these lower market share and concentration thresholds in the 2023 guidelines ostensibly make it easier for the government to establish a prima facie case, I do think we're still going to see the government relying a lot on competitive effects evidence, both in their investigations and once they bring merger challenges. One other thing that I'll note, we talked about Philadelphia National Bank. That's case law from the US Supreme Court. So even if courts aren't following the new threshold set out in the 2023 guidelines, Philadelphia National Bank does remain binding case law on the lower courts.
17:46
Jamie France
The other thing I'll say is the 2023 guidelines contain language that seems to reduce the focus on market definition. And I think we'll probably get into a discussion of market definition because it's really triggered by this structural presumption. But, the revised guidelines sort of focus more on competitive effects and other evidence, as opposed to rigid market definition alone. And I think that, in addition to just relying on the Supreme Court case law, PNB and its progeny, that can help the government, even if the government can't rely on the structural presumption.
18:21
Kate McNeece
I think that's a great point and I do want to get to the market share and market definition point now, because that seems to be sort of part and parcel of this discussion of how the government establishes its case.
18:35
Kate McNeece
Just for a little bit of context as we have this discussion, the structural presumption that was implemented into our law this summer was part of a much broader competition reform bill. But it actually wasn't in the original draft of the bill. It was added in later. And the reason for that is, the Bureau did make a large submission to Parliament in the context of this, suggesting that this is something that needed to be implemented.
18:59
Kate McNeece
And they, in particular, referenced a recent merger case Rogers/Shaw, which was a big telecom case that was litigated about a year and a half ago. One of their main points in the submission was, we had these indicia of concentration, we had indicia of higher market share, and yet the merger was still excused by the Tribunal. And the implication of this submission was, that wouldn't happen if we had this structural presumption. I find that a very interesting point because what I'm hearing from you is that there's a lot of discussion of other competitive effects and other evidence that is definitely already part of the, you know there's a lot of that discussion in the in the Canadian legal system.
19:40
Kate McNeece
Let's unpack it one by one. So market share. Market share is a key component of both elements of the structural presumption. We have the market share test, obviously, but then we also have a concentration index, which is based on establishing market shares for each of the market participants, and sort of summing up the square of each market share.
19:58
Kate McNeece
So where merging parties don't have access to comprehensive market data or maybe the Bureau doesn't have access to competitive market data, number one, how can merging parties manage antitrust risk? Or number two, how would the Bureau sort of find that or get past that in trying to establish a structural presumption?
20:14.51
Jamie France
Yeah, taking your second question first, at least in the US in merger investigations, the antitrust agencies actually use a variety of screening tools to determine whether to launch an in-depth investigation. So it's not just all about the structural presumption. That's just one of many screening tools. So to then shift to your other question, I think this really leaves room for merging parties to point the government to evidence about how market participants view the competitive landscape. And that can be really persuasive if it's found in the merging parties ordinary course documents.
20:52.51
Jamie France
So just one example is that identifying that type of evidence really early on for the investigating agency and then proactively bringing it to staff's attention, that's a pretty typical tool used by US s antitrust lawyers, especially where there may be a question about how to view whatever the antitrust market is and how do you define the antitrust market. The agencies very often look to that type of ordinary course evidence to answer that question.
21:22.79
Kate McNeece
Great, so bringing ordinary course evidence that sort of helps define the bounds of the market to you know potentially have a more favorable market share, I suppose, if you're able to get that data, that's a great strategy. Now, taking the other side of it, the more enforcement agency side, are agencies approach to merger reviews impacted where there's sort of a, I guess, not a strict bright line test, but kind of a threshold you could get to that would make your case easier to prove? In your experience as an enforcer, is there a lot of focus on sort of finding a market in which a threshold is exceeded or is it more of a holistic exercise um at first and then you narrow in if there seem to be competitive effects or concerns expressed by the market that are coming up?
22:08.41
Jamie France
In my experience, I think staff very often start their analysis by looking at competitive effects. But the reality remains that if there is a reason based on that competitive effects evidence to think about is the antitrust enforcement agency going to seek to block the merger in court, there is case law that includes the point that the government needs to establish a prima facie case and the structural presumption is a way to establish that.
22:40.52
Jamie France
So even if staff starts with competitive effects evidence at a certain point, if something is litigation track, there becomes a pretty significant focus on market definition. So in general, once you get to litigation, and this will play out in later stages of a merger investigation, pre-litigation, but you'll very often see the government seeking to define a narrower antitrust market and the merging parties seeking to defeat that market definition by showing evidence of either a broader market or a different market that doesn't hit the structural presumption threshold.
23:19.85
Jamie France
So in effect, once you're in litigation, it gives courts an out to find against the government by letting the court's decision turn on market definition at an earlier stage, even if the government has presented substantial competitive effects evidence.
23:37.95
Kate McNeece
Interesting. So I guess taking on that point, say we have a case where you know the government has established sort of an appropriate market definition and that leads to a finding that the structural presumption has been met or exceeded. When you're in that case, how difficult is it to provide rebuttal evidence that's persuasive on a court. Our courts - Do courts tend to see that the government has kind of made this prima facie case and then it's a very difficult burden to exceed or is there still quite a bit of room for the merging parties to challenge that on the basis of other qualitative or quantitative evidence?
24:16.41
Jamie France
There's certainly room, but it can be really difficult. The case law in the US makes it extremely hard for merging parties to overcome the structural presumption with evidence about efficiencies or pro-competitive effects or entry. But I don't think that's just because of the structural presumption. I think it's because you very often see The government relying on in addition to market share and market concentration data and establishing its prima facie case, you see the government relying on that competitive effects evidence. So ordinary course documents from the merging parties, testimony from competitors or customers, other market participants.
25:06.65
Jamie France
In an effort to show the court, it's not just this economic analysis alone. It's not just this rigid screening tool. We've gone beyond that and really dug into what is the competitive landscape telling us about, you know or what is it allowing us to predict about the competitive effects of the merger? So the government will also, you know I mentioned market participant testimony. The government will also use a variety of predictive tools that they present as evidence of post merger price increases, so anti-competitive harm. That can be really difficult to overcome. I will say in a recent merger challenge that was brought by the FTC in North Carolina district court that I was actually involved in for one of the defendants, but this case was brought after the 2023 merger guidelines were finalized and released.
26:02.82
Jamie France
We saw the government present evidence that both the 2010 and the 2023 merger guidelines thresholds were exceeded by the proposed transaction. My personal view is this was probably presented as a backstop in case the court didn't accept the 2023 thresholds because it was the first case sort of asking a court to accept these more recently lowered structural presumption thresholds.
26:27.90
Jamie France
So I think there probably was a pretty significant attention within the agency pre-litigation to how do we present that evidence. um The court did rely on that evidence presented by the government um in finding that the government had established its prima facie case. But ultimately, the court found that the defendants had rebutted the FTC's case by demonstrating unique economic circumstances that the court thought undermined the predictive value of the government's market share and market concentration evidence. But that's a really rare finding in the overall context of merger litigation.
27:05.39
Jamie France
Usually, if the courts find in the merging parties favor and not the government's favor, it's much earlier. It's because the court will disagree with the government's proposed market definition and say, the government hasn't even established a prima facie case. So we don't even need to get to the point where the merging parties or where the court evaluates the rebuttal evidence presented by the merging parties.
27:29.12
Kate McNeece
Interesting. So it becomes more of sort of a market definition fight than a true competitive effects analysis fight, because you want to sort of move your efforts, I guess, as the merging parties earlier in the process so that you can't establish this rather than, you know, say, okay, well, you've established there's market share, but we've got great evidence on barriers to entry. And, you know, our merger simulation shows low price effects and X, Y, and Z.
27.53.73
Jamie France
Right. I think in effect, when you have a merger trial, all of that evidence is presented. Right. But when courts take back that evidence and are analyzing it and are figuring out how am I going to decide this case, it's easier for them to decide it by saying the government hasn't established a prima facie case in the first place.
28:25.44
Jamie France
So I don't even need to go to the point where I'm weighing Does this rebuttal evidence that the merging parties already presented sort of overcome the presumption of anti-competitive harm? um I think both the government and merging parties, once they're in litigation, they're acutely aware of this burden shifting framework that courts apply.
28:37.76
Jamie France
So they're both putting forward their best case on everything in court. Of course, depending on litigation strategy, different litigants are going to present different types of evidence. And depending on the availability of the evidence, right it needs to actually be there to present to the court.
28:57.58
Kate McNeece
Of course.
28.57.49
Jamie France
But in pretrial and in post-trial briefing, you really see both sides framing their case in the context of the burden shifting framework, even if, say, the merging parties focus more on an argument that the government hasn't appropriately defined a relevant antitrust market, they're still very likely going to also present evidence to undercut competitive effects evidence, right? And say, this is pro-competitive for a variety of reasons. There may be cost savings, or there's not going to be the post-merger price increase that the government's predicting, or there's going to be entry that's going to defeat
29:44.00
Jamie France
any sort of potential anti-competitive effect. So you see all of it, but courts very much do this burden-shifting exercise that you see set out in US s case law.
29:50.13
Kate McNeece
Yeah, because I think, you know, the, I think there's a couple of cases in the US that sort of use the language of, you know, it's like a tennis match, you know, the way that the law is sort of set out is the government serves up its market definition and its prima facie case, and then the parties provide rebuttal evidence, and then the government provides sort of sur-rebuttal evidence. But it seems more that everyone's kind of presenting the whole case, but with this sort of emphasis, I guess, in mind. But it's not as if the government can sort of go in and say, oh, here's you know here's the prima facie case. We're done.
30:16.08
Jamie France
Right, exactly. And I think it's that other evidence that makes courts comfortable in saying, well, the prima facie case has been established because it's not just these numbers alone, it's other evidence that the government relies on.
30:36.58
Jamie France
I'm actually curious to hear your perspective. As you mentioned, I am not a Canadian antitrust lawyer, certainly not an expert on sort of how this will play out in the Canadian context. But I'm curious whether you think this structural presumption framework is going to impact the way that the Bureau in Canada approaches a case, either in an investigation or at a deciding point.
31:01.81
Kate McNeece
Well, I you know, it's a little early to say because I think this has only been in force for what it's September 10th. Now we came into force on June 20th. So we're not even at our - like The Bureau hasn't had a chance to conduct a merger investigation from sort of soup to nuts with this new presumption in force. So definitely still an open question. I think part of the reason I wanted to have this conversation, and I'm lucky that I have a podcast platform to do so, and is that I am very curious to see what this impact is. I think if we had simply imported the US structure into Canada,
31:33.08
Kate McNeece
other than the fact that the kind of concentration test and the kind of market share threshold test are at different levels than what our merger enforcement guidelines say, which just sort of have this, what we call the 35% safe harbor. I'm not convinced there's a huge difference because I think what does happen in the recent Canadian merger litigation that we've seen is that the government provides, the government certainly provides evidence that market shares are high or that concentration is high. Like that's definitely part of the case already. And there's language from the Tribunal saying, well, we can't, you know, 92(2) says we can't rely on this exclusively, but it's certainly persuasive to us under the merger enforcement guidelines that a market share above 35% is, you know, potentially problematic. So, you know, that certainly is already part of our legislation, as well as, you know, other evidence of competitive effects. You know, if you look at, at Rogers/Shaw, which is the example that I showed earlier, the parties presented quite a bit of economic and other evidence about barriers to entry about closeness of competition showing that there were other showing that there were other competitors in the market that were a closer competitor to the target and would continue to compete aggressively, you know showing availability of acceptable substitutes, showing sufficiency of the remedy, which I think is a whole other discussion that would probably take us too long on this episode to get into.
32.55.63
Kate McNeece
um that you know that the target wasn't competing particularly vigorously, et cetera, et cetera. And it seems to me when reading that case that that evidence was persuasive to the court, and that's the reason why the court found in favor of the merging parties. So I think just on that basis, I'm not convinced that there's a huge substantive difference setting aside the kind of specifics of what the threshold levels are. What I'm interested in, and I’d like I'd love your view on kind of the import of this. What I find really interesting is that we in Canada have now imported this into our legislation rather than in kind of persuasive merger guidelines. You know, there's a world in which the Bureau decided, you know, our 35% safe harbor isn't cutting it, concentration is too high, you know, there's been
33:39.50
Kate McNeece
big debates in Canada about the level of productivity, the level of concentration in a lot of our industries. so you know There's a world in which the Bureau could have issued new guidelines and said, you know we're adopting this as our approach and sort of left it as a Tribunal to adopt it. What we've done instead is as we've imported it into our legislation and rather than saying that it's sort of persuasive or relying on case laws developed over time, we've said you know the tribunal will find that this is results in an SPLC if they find this unless there's rebuttal evidence. So I'm interested to see, I think the question for me is how the courts will treat kind of that specific language and how that might impact the burden shifting that's done in the US in a way that either aligns with or diverts from US s case law. But I'm interested in your view. like do you have a
34:29.78
Kate McNeece
Do you have thoughts on what it means to have a structural presumption in your law as more of a firm bright line test versus in in merger guidelines?
34:40.23
Jamie France
I think it's a really interesting question, a really interesting difference in how the two countries have implemented this. In the US, I think the idea of setting out structural presumptions, thresholds, and changing those over time is to adjust the thresholds if needed to account for actual agency practice, as well as changes in economic things. And that's part of the reason why you've seen these thresholds shift over time is there the agencies are saying we're releasing this guidance to the business community to tell you this is how we are going to analyze mergers. This is the framework we're using. These are the types of tools we're using. This is the type of evidence we're looking at. But general economic thinking in the antitrust community and more broadly in the entire economy does morph over time. And so that's part of the reason why you've seen it change.
35:39.02
Jamie France
I think it could be really difficult, at least in the US, the way the process works. It could be really difficult to shift that guidance if it's done through legislation rather than the guidelines. And the guidelines are created through a pretty extensive process that involves enforcers at both the FTC and the DOJ. It involves economists. It involves lawyers. It involves a lot of thinking and research and back and forth.
36:05.12
Jamie France
They're also subject to a public notice and comment period. So you do see right in 2023, for example, we saw the initial proposed revised merger guidelines released earlier in the year. And then after the notice and comment period, you did see revised guidelines that were finalized that incorporated feedback that the public had given the agencies.
36:32.65
Jamie France
But I do think, regardless of whether this is done through legislation or whether it's done through agency guidelines that have ultimately been followed and adopted by the courts, to me, it seems like the effect has sort of been the same. It's just a different deciding body in Canada than in the US. In the US, the antitrust agencies have to go to court, which then goes through that burden shifting exercise. And in practice, courts have adopted the structural presumption set out in the merger guidelines especially if they've previously been adopted by other courts.
I think this sort of circles back to the question we were talking about earlier. There's this debate about, are these the right levels? Are we going to see courts adopting the 2023 guidelines? Should they still be following the case law, relying on the thresholds in the 2010 guidelines? It's still sort of an open question. I think it's pretty early to say here to what we're going to see post-2023 guidelines in terms of the structural presumption. There's a number of other questions, too, that are outside the scope of what we're talking about today. and we can talk about it another day.
37:47.46
Jamie France
But I think it's going to be something interesting in the US that we'll certainly be watching.
37.50.58
Kate McNeece
Yeah.
37.51.33
Jamie France
And I'm guessing the community, the antitrust community in Canada will be watching that, too. Once there are more merger challenges brought in court and they sort of play out through the appellate process, we'll see what happens.
38:02.95
Kate McNeece
Yeah, I mean, I think that final point that you've made is a really interesting point for us in Canada here, because historically, we've had very little merger litigation, right? So, you know, we have our Tribunal, which is just one court, we're not sort of in the federal court system like we are in the US. And historically, the Bureau has been quite judicious in which challenges it brings. So we don't have this kind of body of case law underlying even our sort of competitive effects test as it previously existed. We've got a ah number of cases on our ah former efficiencies defense, which is now no longer in our law. So we've kind of thrown a lot of ah Canadian merger thinking out with these new amendments. And we're starting from a little bit of the blank slate. So I do think we'll probably be looking a lot to the US for sort of guidance on how this type of test works or how the burden shifting.
38.52.67
Kate McNeece
works in practice, but I think one interesting, just as ah as a final point, I said we wouldn't get into remedies and negotiate discussions because that is sort of outside of our scope, but you know one impact I think this may have in Canada is it will give the Bureau a great deal more leverage or may sort of move some of this burden shifting or evidence finding discussion into the review process because if it's less likely to get litigation or less likely to get a view from the Tribunal on how this all works, it's going to kind of play out in the in the negotiated process. so
39:26.09
Kate McNeece
As a final note, just very briefly, even though this probably could be its own podcast, like how does this structural presumption impact your work when you're negotiating a remedy with the US agencies rather than kind of going into litigation mode?
39.41.41
Jamie France
I think it plays out, while it's not this formal presentation of evidence the way it is once you get to court, I think in practice it plays out pretty similarly, right? It's a back and forth with staff about here's the real world evidence to be looking at. Here's what we're seeing in the merging parties, ordinary course documents. Here's what the economic analysis is showing. And I do think that And of course, those countervailing factors, right? Evidence related to entry, evidence related to efficiencies. In the U.S., you know, there's a very open question about does an efficiencies defense exist at all? It's a very difficult
40:20.10
Jamie France
burden to meet. it The merging parties have that burden, but when you're in the investigation stage or when you're in the negotiating a remedy stage, that type of evidence may actually have more weight than it has once you get to court. And it may be more persuasive to staff and it may impact what that ultimate remedy is that you negotiate.
40:41.51
Jamie France
So I do think, like you said, these are just different levers that are sort of utilized by both the government and the merging parties in kind of reaching some sort of consent agreement. But it doesn't play out in such a formal, burden-shifting framework the way it does once you get to court. It's a more holistic view.
41:00.16
Kate McNeece
All right, great. Well, Jamie, thank you so much for joining us to talk about merger policy on this beautiful Tuesday morning. Really appreciate your insight into the system in the US.
41:12.97
Kate McNeece
And I think we both sound like we're going to have a lot to watch as things continue to develop over the next couple of years. So thanks for joining us.
41:20.90
Jamie France
And thanks so much, Kate, for having me. I know I will now definitely be watching what's happening in Canada. So excited to see how this all plays out.
41:27.23
Kate McNeece
Yeah, we'll keep you posted. All right, thank you everybody for listening. This was Counterfactual.