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Canada’s Competition Bureau Economic Analysis of Retail Mergers

Technical Guidance Documents, September 2014

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The Canadian Competition Bureau ("Bureau") has recently reviewed several retail mergers, including Canadian Tire/Forzani, Leon’s/The Brick, Agrium/Viterra, Safeway/Sobeys, La Coop Fédérée/Groupe BMR, Canadian Tire/Pro Hockey Life and Loblaw/Shoppers Drug Mart. Factors relevant to an economic analysis of retail mergers can differ from case to case. These include the number of products offered by the merging parties (e.g., which can range from thousands of products offered for sale at a grocery store versus a more limited number of products offered for sale at a mattress store); whether the products offered are homogeneous or differentiated; and the extent of the parties’ geographic reach. Retail mergers are also unique in that the merging parties may have tens of thousands of direct customers and the merging parties may be competing on bundles rather than individual products. Like other mergers, retail mergers also can involve both downstream and upstream issues. While every acquisition is unique in some respects, and while any Bureau investigation is tailored to the specific facts and evidence relating to that particular merger, the Bureau usually relies on a common core of economic tools when analyzing retail mergers. This paper discusses some of the economics tools and techniques the Bureau has used in its past investigations of retail mergers to provide additional transparency to stakeholders and the general public about these investigations. It is not a step-by-step guide to how the Bureau conducts merger reviews. It does not replace any other Bureau publications and should be read in conjunction with the Merger Enforcement Guidelines (the "MEGs"). The paper also does not provide an exhaustive list of the analyses the Bureau currently conducts or may conduct in the future as the field of economics continues to change: instead it outlines those tools the Bureau has employed or considered in recent retail merger reviews.

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