Canadian Merger Review: Assessing Failing Firm Claims in Market Conditions Disrupted by COVID-19

The disruption of the economy due to COVID-19 is leading some companies to experience financial difficulties and struggle for survival. It is not unlikely that competition authorities will face an increased number of “failing firm claims” in the context of acquisitions involving distressed targets. This article outlines the Canadian Competition Bureau’s merger framework, its approach to assessing failing firm claims in times of global crisis and to what degree its approach appears consistent with some other jurisdictions. The work of competition authorities, while important in any economic environment, is even more crucial in times of economic crisis to support short and long-term recovery efforts. Conscious of the challenges that businesses are facing, firms raising failing firm arguments may expect that the Canadian Competition Bureau will try to work as quickly as possible to evaluate the evidence, but this will not imply any relaxation of the standards by which mergers are assessed.

By Jeanne Pratt & Darya Shevchenko¹

I. INTRODUCTION

The coronavirus pandemic has disrupted the global economy, transformed supply chains, and shocked daily lives across the world. This is a crisis – a challenging moment in time, and the work of competition authorities, while important in any economic environment, is even more crucial in times of economic crisis to support short- and long-term recovery efforts.

A wave of proposed transactions involving distressed compa