Game Theory and the Competition Act: Winners and Losers in Canadian Merger Review

Abstract

In 1986 Canada established new rules for the review of mergers which lessen competition. In doing so, it created a system whereby economic efficiency would be the paramount goal of merger review. Moreover, a specialized court called the Competition Tribunal would oversee the review of mergers in an adjudicative process. However, since that time Canada’s merger review process has evolved into an administrative, rather than adjudicative, process: one in which the Competition Tribunal plays virtually no role, and in which an administrative branch of government (the Competition Bureau), dominates merger review. The authors use a game theoretic approach to examine why this is. In doing so, they provide one possible explanation for the failure of Canada’s merger review process to achieve Parliament?s intent: the incentives and knowledge about the rules of the game as between the players who participate in the merger review process are misaligned. The authors do so in the context of very recent case law. This case law suggests a paradigm shift, and possibly opens the door to a greater role for adjudication in the attainment of Parliaments merger review goals.