Canada's Efficiency Defence: Why Ignoring Section 96 Does More Harm than Good for Economic Efficiency and Innovation

Abstract

Canada has a defence that allows efficiency enhancing mergers and collaborations between competitors. In another paper published in this edition of the Canadian Competition Law Review, Chiasson and Johnson argue that the efficiencies defence should be repealed because it reduces innovation and causes inefficiencies. In our view, Chiasson and Johnson take an overly simplistic view of the relationship between market concentration and innovation that misses a fundamental point: mergers between competitors often increase efficiency and innovation. We also argue that efficiencies are not given enough weight and anticompetitive effects are overemphasized under the Competition Bureau's approach to merger review, which creates a bias against efficiency enhancing mergers. Removing this bias would help the Competition Act function as Parliament intended. In the words of the Supreme Court of Canada: "the efficiencies defence is Parliamentary recognition that, in some cases, consolidation is more beneficial than competition."