A Reply to Chiasson and Johnson, Facey and Dueck

Abstract

In a recent article in this Journal Matthew Chiasson and Paul Johnson proposed a major reframing of Canadian enforcement policy on horizontal mergers towards the promotion of innovation and away from more established criteria based on static efficiency. As a vehicle for accomplishing this goal they propose the abolition of section 96, the efficiencies defense. In this article, which echoes the position taken by Brian Facey and David Dueck in an earlier reply, I argue against the Chiasson and Johnson proposal. I point out that Canada’s enforcement policy on horizontal mergers has evolved over 30 years to become an exemplary framework for evaluating mergers based on economic efficiency, albeit static efficiency. Their proposal would abandon the current highly sophisticated framework in favour of a much vaguer non-consequentialist approach to merger policy. I show that such a change would introduce greater uncertainty into the enforcement framework, with the potential for both Type I and Type II errors to increase. I also argue that the debate over innovation and market structure has placed too much emphasis on the so called “inverse-U shaped relationship”. I conclude that a better approach would be to keep the current statutory framework but to exercise the discretion already available under the Act to give consideration to the innovation effects of proposed mergers.