Canada is on the verge of hard-coding costly mistakes into its merger policy.
The Competition Bureau’s proposed merger guidelines aim to translate Parliament’s recent overhaul of the Competition Act into enforcement practice. The draft instead risks entrenching a merger regime that treats market structure as destiny, discounts consumer-benefiting efficiencies, and substitutes blunt presumptions for evidence of competitive harm. The stakes extend beyond Canada, as jurisdictions worldwide reconsider how aggressively to police mergers.
The guidelines implement statutory changes adopted in 2023 and 2024. Those amendments eliminated Canada’s efficiencies defence, introduced structural presumptions tied to concentration and market share, authorized consideration of labor-market effects, and expanded enforcement authority across the board.
In comments submitted to the bureau this week, scholars at the International Center for Law & Economics (ICLE) identified three features of the draft that should give competition authorities pause.
The Presumption That Swallows the Analysis
The guidelines presume competitive harm when a merger results in a post-transaction Herfindahl-Hirschman Index (HHI) above 1,800 with an increase of 100, or when the merging parties’ combined market share exceeds 30%. These thresholds track the 2023 U.S. Merger Guidelines nearly verbatim—guidelines that were sharply criticized by economists, including former enforcement officials, for lacking a solid empirical foundation.
That critique is not academic quibbling. Economists—including former U.S. antitrust officials—have long warned that simple correlations between concentration and market outcomes provide a weak basis for enforcement. Before the U.S. guidelines were finalized, commentators also cautioned that the evidence was not “clear and persuasive enough” to justify uniform structural thresholds across industries with widely varying cost structures, entry conditions, and competitive dynamics.
Canada has now imported those contested thresholds wholesale and attached a legal presumption of harm. The draft offers little guidance on how parties can rebut that presumption. It states only that the more the thresholds are exceeded, “the greater the need for persuasive evidence” to overcome them, without specifying what evidence would suffice.
Rather than serving as a neutral screen, the structural presumption effectively predetermines the outcome.
The deeper problem is conceptual. Market concentration often reflects competitive success rather than market failure. Firms that innovate, cut costs, or offer better products gain share as less-efficient rivals lose sales. Treating concentration as inherently suspicious revives the structure-conduct-performance paradigm that economists abandoned decades ago because it mistook competitive outcomes for evidence of anticompetitive conduct.
Efficiencies Need Not Apply
The guidelines’ treatment of efficiencies compounds the problem. After Parliament repealed the statutory efficiencies defence, the draft states that efficiency gains are “unlikely to change” the bureau’s conclusions when a merger raises significant concerns. In practice, once a structural presumption applies, cost reductions and innovation gains become nearly irrelevant.
Basic economics predicts the opposite. A merger that sufficiently lowers marginal costs can reduce post-merger prices even if concentration increases. Efficiencies often deliver lower prices, better products, and faster innovation.
The issue is especially acute for vertical mergers. Empirical surveys consistently find that vertical integration benefits consumers in the overwhelming majority of cases, yet the draft imposes demanding evidentiary requirements that largely ignore that evidence.
The guidelines also rely on internally inconsistent assumptions about contracts. In one place, they assert that contractual arrangements are “unlikely to eliminate all potential means of foreclosure.” Elsewhere, they suggest that contracts can replicate the benefits of integration. Both propositions cannot hold simultaneously. If contracts cannot reliably prevent harm, they cannot reliably reproduce integration’s benefits.
When Administrability Beats Accuracy
Every competition authority faces the same choice: ground merger enforcement in evidence of likely competitive harm or rely on structural proxies that favor administrability over accuracy.
Canada’s draft guidelines illustrate the risks of the latter approach. Untested concentration thresholds become legal presumptions. Efficiencies that benefit consumers are acknowledged in principle, but discounted in practice. The draft treats vertical integration—shown in the empirical literature to be pro-competitive—with the same suspicion as mergers among direct competitors. It also advances novel theories extending to labor markets and platform ecosystems on limited evidence and unsettled analytical foundations.
The error-cost framework explains why this matters. False positives in merger enforcement—blocking transactions that would benefit consumers—impose durable costs: forgone efficiencies, deterred investment, and chilled innovation. These harms do not self-correct. False negatives, by contrast, are often temporary, as entry, expansion, and technological change erode anticompetitive positions over time.
The implication is not weaker enforcement, but better targeting. Competition authorities should prioritize mergers supported by substantial evidence of harm and exercise restraint when the evidence is ambiguous or offsetting benefits are likely.
Authorities in Washington, Brussels, and elsewhere considering similar reforms should study Canada’s approach closely. Expanding enforcement authority without clear limiting principles, predictable standards, and engagement with economic evidence risks producing the competitive harm that merger control aims to prevent.
The Competition Bureau still has time to revise its course. The question is whether it will treat these guidelines as an opportunity for evidence-based enforcement, or as confirmation that modern competition policy has shifted to the point where structure becomes destiny.
