2013 FCA 28, 2013 FCA 28

A-302-12 A-457-12 2013 FCA 28 Tervita Corporation, Complete Environmental Inc. and Babkirk Land Services Inc. ( Appellants ) v. Commissioner of Competition, Karen Louise Baker, Ronald John Baker, Kenneth Scott Watson, Randy John Wolsey and Thomas Craig Wolsey ( Respondents ) Indexed as: Tervita Corporation v. Canada (Commissioner of Competition) Federal Court of Appeal, Evans, Stratas and Mainville JJ.A.—Toronto, December 10 and 11, 2012; Ottawa, February 11, 2013. Editor’s Note: Leave to appeal this judgment was granted by the Supreme Court of Canada on July 11, 2013.

Competition — Appeals from Competition Tribunal divestiture order made pursuant to Competition Act, s. 92 — Tribunal finding that proposed merger likely to prevent competition substantially in secure landfill services in north-eastern (NE) British Columbia — Appellant Tervita Corporation operating two secure landfills in NE British Columbia — Other landfill (Babkirk site) operated by Babkirk Land Services Inc. (BLS) — Individual respondents (vendors) acquiring BLS through new corporation (Complete Environmental Inc.) — Vendors subsequently selling shares in Complete to Tervita — Commissioner of Competition opposing transaction on ground likely to prevent competition in secure landfill services in NE British Columbia, applying to Tribunal seeking order that transaction be dissolved or order requiring that Tervita divest itself of Complete or BLS — Tribunal concluding, under s. 92 , that impugned merger likely to prevent competition substantially — Also finding, under Act, s. 96, no or only marginal gains in efficiency warranting order under s. 92 not be made — Issues herein pertaining to alleged errors with respect to Tribunal’s analysis under ss. 92 , 96 — Tribunal erring, breaching rules of procedural fairness by considering Commissioner’s “deadweight loss” quantification under s. 96 — Tribunal should have concluded that “deadweight loss” not properly quantified — Tribunal also erring when favouring subjective balancing exercise for determining whether gains in efficiency offsetting anti-competitive effects under s. 96 — Overall offset analysis under s. 96 having to be as objective as reasonably possible; where objective determination cannot be made, must be reasonable — In light of Tribunal’s errors, fresh assessment of matter conducted — Merger herein providing negligible gains in efficiency while ensuring continuation, strengthening of Tervita’s market monopoly in geographic area at issue — These negligible gains not offsetting known anti-competitive effects even where weight to be afforded to such effects undetermined — Appeals dismissed.

These were appeals from a divestiture order of the Competition Tribunal (Tribunal) made pursuant to

section 92 of the Competition Act on the ground that the proposed merger was likely to prevent competition substantially in secure landfill services in north-eastern (NE) British Columbia. Oil and gas operations in NE British Columbia produce hazardous waste which must be disposed of in accordance with a regulatory framework. One preferred method of disposal is to truck the waste to a secure landfill. Four permits for dedicated landfill operations have been issued for NE British Columbia.

Two permits are held for the Silverberry and Northern Rockies landfill sites owned or operated by the appellant, Tervita Corporation (Tervita), formerly known as CCS Corporation. A third permit was issued for the Peejay site, developed by an aboriginal community. However, that secure landfill had not yet been constructed. The fourth permit was issued for the Babkirk site located approximately 81 km northwest of Tervita’s Silverberry secure landfill. It is the acquisition of the Babkirk site by Tervita which triggered the Commissioner’s intervention and was at the heart of the Tribunal’s decision.

The Babkirk site was operated by Babkirk Land Services Inc. (BLS). In 2008, a group composed of the individual respondents (the “vendors”) acquired all the shares of BLS through a new corporation, Complete Environmental Inc. (Complete). The vendors intended to operate the Babkirk site primarily as a bioremediation facility. The vendors were confident that they could succeed with their bioremediation facility at the Babkirk site if they could complement this service with a secure landfill facility allowing for the storage of waste which was not amenable to bioremediation.

Subsequently, the vendors decided to sell their shares in Complete to Tervita in 2010. However, prior to the closing of this transaction the Commissioner of Competition informed the parties that she opposed the transaction on the ground that it was likely to prevent competition substantially in secure landfill services in NE British Columbia. Shortly after the closing, the Commissioner applied to the Tribunal pursuant to

section 92 seeking an order that the transaction be dissolved or, in the alternative, requiring that Tervita divest itself of Complete or BLS. The Tribunal found that absent the merger, the bioremediation facility offered at the Babkirk site would have been unprofitable and that by October 2012, the vendors would have sought to generate additional revenues by accepting more waste into their secure landfill.

It further concluded that by the spring of 2013, the site would have ended up being operated as a full-service secure landfill and that as such, the Babkirk site and Tervita’s secure landfills would have become direct, serious and substantial competitors by no later than the spring of 2013. The Tribunal found that there were no other proposed new entrants in the Contestable Area, and that the barriers to entry into the relevant market were significant.

It thus concluded that the impugned merger was likely to prevent competition substantially in the supply of secure landfill services in at least the Contestable Area, and by no later than the spring of 2013. The Tribunal noted that under

section 96 of the Competition Act (which provides that the Tribunal shall not make an order under

section 92 where there are gains in efficiency), it is necessary to: (

a) identify and, if possible, quantify the gains in efficiency resulting from the merger; (

b) identify and, if possible, quantity the effects resulting from the merger; and (

c) determine if these gains in efficiency exceed and offset these effects. The Tribunal further noted that the Commissioner bore the burden of proving the extent of the anti-competitive effects resulting from the merger where they are quantifiable, even if only roughly so, as well as any non-quantifiable or qualitative anti- competitive effects. On the other hand, Tervita bore the burden of establishing that the gains in efficiency resulting from the merger were

likely to be greater than, or to offset, these effects. The Tribunal went on to find that in the present instance, there were no gains in efficiency or that these gains were marginal. As to the effects of the merger, the Tribunal was persuaded, on a balance of probabilities, that the approach adopted by the Commissioner’s expert and the numbers he used in reaching his estimate of the likely “deadweight loss” were reasonable for the purposes of the Tribunal’s assessment of effects under

section 96. The Tribunal acknowledged that this approach to calculating the “deadweight loss” was deficient, but it found nevertheless that the “rough” estimate produced by this approach was sufficiently reliable for its purposes. Turning to the qualitative effects resulting from the merger, the Tribunal recognized that the reduction in tipping fees resulting from competition between Silverberry and Babkirk would induce waste generators to more actively clean up legacy sites in NE British Columbia. The Tribunal also recognized as a qualitative effect the reduction in “value propositions”.

It found that competition from the Babkirk site would lead Tervita to offer certain of its customers link prices on some of its other services, which would in turn lead to a lower total cost for overall waste services used by such customers. Finally, with respect to offset, the Tribunal held that the quantified anti-competitive effects exceeded the quantified gains in efficiency. Alternatively, the qualitative anti-competitive effects taken together would outweigh the merger gains in efficiency under any reasonable approach.

At issue were a number of alleged errors with respect to the Tribunal’s analysis under sections 92 and 96 of the Act.

Particularly, the alleged errors were that the Tribunal erred: by acting on a theory of the case that had not been pleaded; by extending the analysis of potential entry beyond the time of the impugned merger; by engaging in speculation regarding possible future events; by reversing the onus and shifting the burden of proof on Tervita and the vendors; by considering the Commissioner’s “deadweight loss” quantification in the face of a finding that the Commissioner had failed to meet her burden to prove such quantification; by not considering the one year transportation and market expansion gains in efficiency resulting from the merger; and by applying an offset methodology which tipped the scale in favour of anti-competitive effects on the basis of an unreasoned and subjective assessment of unquantifiable qualitative effects.

Held , the appeals should be dismissed. The Tribunal did not base its decision on a theory of the case that had not been pleaded. The feasibility of a bioremediation facility at the Babkirk site was squarely before the Tribunal, as was the issue of whether Complete was a “poised entrant” in the market for secure landfills once it ceased to pursue bioremediation. In any event, the appellants were not prejudiced by the fact that these issues were considered and decided by the Tribunal. The Tribunal could extend the

section 92 analysis beyond the date of the merger. The analysis required for the review of a merger under

section 92 involving the prevention of competition is necessarily forward-looking. The Tribunal was thus correct in concluding that while “poised entry” should be considered by taking into account the date of the merger, it need not be limited to that date. The analysis may require that the Tribunal look into the future to ascertain whether the entry into the market would have occurred within a reasonable period of time. What is a reasonable period of time will necessarily vary from case to case.

However, certain guidelines should be followed to ascertain an appropriate temporal framework: the time frame must be discernible, and the time frame for market entry should normally fall within the temporal dimension of the barriers to entry into the market at issue. In this case, the Tribunal discerned a clear time frame under which the Babkirk site would enter the market for secure landfills, and this discernible time frame was well within the temporal framework of the barriers to market entry. The Tribunal did not engage in unfounded speculation regarding possible future events.

The Tribunal’s findings were supported by abundant evidence. The Tribunal did not reverse the onus and shift the burden of proof away from the Commissioner. It implicitly accepted that the burden lay with the Commissioner.

Moreover, in his concurring reasons, Crampton C.J. explicitly and correctly stated that the burden was on the Commissioner to establish, on a balance of probabilities, that “but for” the merger, one of the merging parties likely would have entered or expanded within the relevant market within a reasonable period of time, and on a sufficient scale, to effect either a material reduction of prices or a material increase in one or more levels of non-price competition, in a material part of the market.

It was implicit in the Tribunal’s reasons that this approach to the burden of proof was applied by the Tribunal as a whole. The Tribunal erred and breached the rules of procedural fairness by considering the Commissioner’s “deadweight loss” quantification. The Commissioner did not discharge her burden to quantify the “deadweight loss” resulting from the merger, and the Tribunal erred by allowing her to correct that failure through a reply report using an admittedly deficient methodology. The Tribunal compounded that error by not allowing Tervita an opportunity to formally respond to that report.

As a result, the Tribunal should have concluded that the “deadweight loss” had not been properly quantified, and that consequently the weight to be attributed to it was not zero, as the appellants submit, but was rather undetermined. The Tribunal correctly refused to consider the one year transportation and market expansion gains in efficiency resulting from the merger. The Tribunal found these one-year gains in efficiency to be the result of delays in the implementation of its order, and concluded that it would be contrary to the purposes of the Competition Act to recognize them.

Indeed, it would be contrary to the overall scheme of the Competition Act to consider order implementation gains in efficiency since the results of a merger review should not be driven by the delays required to properly implement a divestiture order from the Tribunal resulting from such a review. In addition, under subsection 96(1) of the Competition Act , the Tribunal must find “that the merger ... has brought about or is likely to bring about gains in efficienc[ies]” (emphasis added).

Thus, gains in efficiency claimed for the period preceding the merger review decision must have been in fact achieved in order to be recognized (“has brought about”). Gains in efficiency claimed for the period subsequent to the merger review decision must be likely to be achieved (“likely to bring about”). Possible gains in efficiency which could have been brought about prior to the merger review decision, but were not actually achieved, are consequently not considered.

This is because the gains in efficiency defence rests on the premise that the trade-off between merger gains in efficiency and anti-competitive effects must actually benefit the Canadian economy. In the case at bar, Tervita has admittedly still not started to build or operate a secure landfill operation at the Babkirk site. Consequently, the one-year transportation and market expansion gains in efficiency have not in fact been realized by Tervita, and will now never be realized. These gains in efficiency are irremediably lost for the Canadian economy.

They should therefore not be considered in the balancing exercise required under

section 96.

Finally, the Tribunal erred when it favoured a subjective balancing exercise for determining whether the gains in efficiency offset theanti-competitive effects under

section 96. The offset analysis must not be based on subjective judgment. The overall offset analysis undersection 96 must be as objective as is reasonably possible, and where an objective determination cannot be made, it must be reasonable. Inthe case at bar, the Tribunal considered reduced site clean-up and the resulting environmental benefits as qualitative effects of themerger. However, it was questionable whether the environmental effects of a merger, where no economic effect is ascribed to them,could be taken into account in a merger review under the Competition Act. Environmental concerns having no economic impact are notlisted under

section 1 of the Competition Act, which sets out the purposes thereof, nor are they otherwise considered under theCompetition Act. In light of the Tribunal’s errors, a fresh assessment of the matter was conducted. The merger herein provided negligible gains inefficiency while ensuring the continuation and strengthening of Tervita’s market monopoly in the geographic area at issue. An anti-competitive merger may not be approved under

section 96 if only marginal or insignificant gains in efficiency result from that merger.Though the anti-competitive effects of the merger in this case were not quantified, they nevertheless existed. Under an objective andreasonable offset determination, marginal and insignificant gains in efficiency cannot offset known anti-competitive effects even wherethe weight to be afforded to such effects is undetermined. For these reasons, the appeals were dismissed. STATUTES AND REGULATIONS CITED Clayton Act, 15 U.S.C. § 18 (1977). Competition Act, R.S.C., 1985, c. C-34, ss. 1.1, 92, 93(b), 96.

Competition Tribunal Act, R.S.C., 1985 (2nd Supp.), c. 19, ss. 3(2)(a),(3), 8, 9(1),(2), 12(1)(a), 13(1),(2). Competition Tribunal Rules, SOR/2008-141, rr. 36(2)(c),(d), 38(2),(a),(b),(c), 39(2), 68–74, 77, 78. Environmental Management Act, S.B.C. 2003, c. 53. Federal Courts Act, R.S.C., 1985, c. F-7, ss. 18.5, 28(2). Hazardous Waste Regulation, B.C. Reg. 63/88. CASES CITED followed: Canada (Director of Investigation and Research) v. Southam Inc., (SCC), [1997] 1 S.C.R. 748, (1997), 144 D.L.R.(4th) 1. applied: Canada (Commissioner of Competition) v.

Superior Propane Inc., 2001 FCA 104, [2001] 3 F.C. 185; BOC International, Ltd. v. FederalTrade Commission, 557 F.2d 24 (2d Cir. 1977); Canada (Commissioner of Competition) v. Superior Propane Inc., 2002 CACT 16, 2002 Comp. Trib. 16, 18 C.P.R. (4th) 417, affd 2003 FCA 53, [2003] 3 F.C. 529; Hollis v. Dow Corning Corp., (SCC), [1995] 4 S.C.R. 634, (1995), 129 D.L.R. (4th) 609. considered: Canada (Commissioner of Competition) v. Premier Career Management Group Corp., 2009 FCA 295, [2010] 4 F.C.R. 413. referred to: Air Canada v.

Canada (Commissioner of Competition), 2002 FCA 121, [2002] 4 F.C. 598; Canada (Commissioner of Competition) v.Canada Pipe Co., 2006 FCA 233, [2007] 2 F.C.R. 3; Canada (Commissioner of Competition) v. Labatt Brewing Co. Ltd., 2008 FCA 22;Nadeau Poultry Farm Ltd. v. Groupe Westco Inc., 2011 FCA 188, 419 N.R. 333; Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1S.C.R. 190; Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 S.C.R. 654;Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35, [2012] 2 S.C.R. 283;Pezim v.

British Columbia (Superintendent of Brokers), (SCC), [1994] 2 S.C.R. 557, (1994), 114 D.L.R. (4th) 385;Pushpanathan v. Canada (Minister of Citizenship and Immigration), (SCC), [1998] 1 S.C.R. 982, (1988), 160 D.L.R.(4th) 193, amended reasons, (SCC), [1998] 1 S.C.R. 1222; Dr. Q v. College of Physicians and Surgeons of BritishColumbia, 2003 SCC 19, [2003] 1 S.C.R. 226; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; Canada v. Craig, 2012 SCC43, [2012] 2 S.C.R. 489; Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74, (C.A.); Nunn v. Canada, 2006FCA 403, [2007] 2 C.T.C. 222; Labatt Brewing Co. v.

NHL Enterprises Canada, 2011 ONCA 511, 106 O.R. (3d) 677; Lubrizol Corp. v.Imperial Oil Ltd., (FCA), [1996] 3 F.C. 40, (1996), 65 C.P.R. (3d) 167 (C.A.); Barker v. Montfort Hospital, 2007ONCA 282, 278 D.L.R. (4th) 215; Colautti Construction Ltd. v. Ashcroft Development Inc., 2011 ONCA 359, 1 C.L.R. (4th) 138; PfizerCanada Inc. v. Mylan Pharmaceuticals ULC, 2012 FCA 103, 100 C.P.R. (4th) 203; Murphy v. Wyatt, [2011] EWCA Civ. 408, [2011] 1W.L.R. 2129; R. v. Keough, 2012 ABCA 14, 519 A.R. 236; Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27, [2011] 2 S.C.R.387. AUTHORS CITED Competition Bureau Canada.

Merger Enforcement Guidelines, October 6, 2011, online:<http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/cb-meg-2011-e.pdf/$FILE/cb-meg-2011-e.pdf>. Facey, B. A. and D. H. Assaf. Competition and Antitrust Law: Canada and the United States, 3rd ed. Toronto: LexisNexis Canada,

2006. Trebilcock, Michael et al. The Law and Economics of Canadian Competition Policy, Toronto: University of Toronto Press, 2002. APPEALS from a divestiture order of the Competition Tribunal (Commissioner of Competition v. CCS Corporation et al., 2012 CACT14 , 2012 Comp. Trib. 14) made pursuant to

section 92 of the Competition Act on the ground that the proposed merger waslikely to prevent competition substantially in secure landfill services in north-eastern British Columbia. Appeals dismissed. APPEARANCES John Laskin, Linda Plumpton, Dany Assaf and Crawford Smith for appellants. Nikiforos Iatrou, Jonathan Hood and Scott McGrath for respondent Commissioner of Competition. No one appearing for respondents Karen Louise Baker, Ronald John Baker, Kenneth Scott Watson, Randy John Wolsey and ThomasCraig Wolsey. SOLICITORS OF RECORD Torys LLP, Toronto, for appellants.

Competition Bureau Legal Services, Gatineau, and WeirFoulds LLP, Toronto, for respondent Commissioner of Competition. Davis LLP, Vancouver, for respondents Karen Louise Baker, Ronald John Baker, Kenneth Scott Watson, Randy John Wolsey andThomas Craig Wolsey. The following are the public reasons[i] for judgment rendered in English by [1] Mainville J.A.: These reasons concern two appeals challenging a divestiture order of the Competition Tribunal (Tribunal), datedMay 29, 2012, made pursuant to

section 92 of the Competition Act, R.S.C., 1985, c. C-34 for reasons cited as Commissioner ofCompetition v. CCS Corporation et al., 2012 CACT 14 , 2012 Comp. Trib. 14 (reasons). [2] Appeal A-302-12 was brought under subsection 13(1) of the Competition Tribunal Act, R.S.C., 1985 (2nd Supp.), c. 19, whileappeal A-457-12, dealing with questions of fact, was brought with leave of this Court under subsection 13(2) of that same statute. Theappeals were consolidated and heard together. These reasons apply to both appeals, and a copy thereof shall be included in each appealfile.

CONTEXT AND BACKGROUND [3] A detailed and precise description of the factual and contextual background to these proceedings can be found in the Tribunal’slengthy decision. For the purposes of this appeal, it is sufficient to highlight some salient aspects. [4] Oil and gas operations in north-eastern British Columbia (NE British Columbia) produce hazardous waste which must bedisposed of in accordance with a regulatory framework.

One preferred method of disposal is to truck the waste to a secure landfill.Operators of secure landfills in British Columbia must hold permits and operate under British Columbia’s Environmental ManagementAct, S.B.C. 2003, c. 53 and the Hazardous Waste Regulation, B.C. Reg. 63/88. [5] Oil and gas developers typically pay third-party trucking companies to transport the hazardous waste to a secure landfill, andthese transportation costs usually represent a substantial portion of the developers’ overall cost of disposal.

Secure landfill owners alsocharge the developers what is usually designated as a “tipping fee” to accept the waste. [6] Four permits for dedicated landfill operations have been issued for NE British Columbia. [7] Two permits are held for landfills owned or operated by the appellant, Tervita Corporation (Tervita), formerly known as CCSCorporation.

These landfills are the Silverberry and Northern Rockies landfill sites, which have permitted capacities of 6 000 000 and 3344 000 tonnes of waste respectively, and at which [omitted] and [omitted] tonnes of hazardous waste were tipped in 2010. [8] A third permit was issued for the Peejay site located in a relatively inaccessible area near the Alberta border. This site wasdeveloped by an aboriginal community to serve nearby drilling operations.

However, that secure landfill has not yet been constructed,and the Tribunal was of the view that the project may be encountering financial difficulties. [9] The fourth permit was issued for the Babkirk site located in NE British Columbia approximately 81 km northwest (or one and ahalf hours by road) of Tervita’s Silverberry secure landfill. It is the acquisition of the Babkirk site by Tervita which has triggered theCommissioner’s intervention and which is at the heart of the Tribunal’s decision.

It is thus appropriate to briefly focus on the Babkirksite and on the events which lead to its acquisition by Tervita. [10] Babkirk Land Services Inc. (BLS) was founded in 1996 by Murray and Kathy Babkirk. For approximately six years, BLSoperated the Babkirk site as a facility for the treatment and short-term storage of hazardous waste. However, in 2004 BLS stoppedaccepting waste at that site. [11] In 2006, BLS retained the services of SNC-Lavalin, an engineering and project development firm, to prepare the documentsrequired to apply for permits regarding a secure landfill at the Babkirk site.

At approximately the same time, a group composed of theindividual respondents in this appeal (Karen Louise Baker, Ronald John Baker, Kenneth Scott Watson, Randy John Wolsey and ThomasCraig Wolsey, collectively referred to in these reasons as the “vendors”) negotiated a handshake agreement to purchase all the shares ofBLS from Murray and Kathy Babkirk. Following the issuance of an environmental assessment certificate for the secure landfill at the

Babkirk site in December of 2008, the vendors acquired in April of 2008 all the shares of BLS through a new corporation, Complete Environmental Inc. (Complete). BLS thus became a wholly owned subsidiary of Complete, which was itself owned and controlled by the vendors. [ 12 ] The vendors intended to operate the Babkirk site primarily as a bioremediation facility. Bioremediation is a method for treating contaminated soil by using micro-organisms to reduce contamination. [ 13 ] Oil and gas drilling operations produce two principal types of hazardous waste: contaminated soil and drill cuttings.

The soil may be contaminated with hydrocarbons, both heavy and light end, as well as with salts and metals: reasons, at paragraphs 30 to 32. The Tribunal found that soil contaminated with heavy-end hydrocarbons is not amenable to cost effective bioremediation because it is difficult, unpredictable, and very time consuming.

Further, the Tribunal also found that waste contaminated with metals and salts cannot be effectively bioremediated with the technology currently approved for use in Canada: reasons, at paragraph 44. [ 14 ] The vendors were nevertheless confident that they could succeed with their bioremediation facility at the Babkirk site if they could complement this service with a secure landfill facility allowing for the storage of waste which was not amenable to bioremediation.

It was for this purpose that a permit for a limited capacity secure landfill facility operating alongside the bioremediation service was sought for the Babkirk site. Following the issue of the environmental assessment certificate for the secure landfill, the vendors received an operating permit. That permit was issued on February 26, 2010, and authorized a secure landfill at the Babkirk site with a maximum storage capacity of 750 000 tonnes. [ 15 ] Shortly afterwards, a company known as Integrated Resources Technologies Ltd. (IRTL) offered to purchase Complete for [omitted].

Before accepting that offer, the vendors explored the possibility of selling to other third parties. Secure Energy Services (SES) showed some limited interest, but at a lower sales price. The vendors thus decided to accept the offer from IRTL; however, that offer was withdrawn in early June of 2010 due to lack of financing. The vendors decided to try to sell one last time, and pursued various discussions with SES and Tervita, then known as CCS Corporation. They reached an understanding with CCS Corporation (Tervita) in July of 2010, and signed a letter of intent on July 14, 2010.

The sale of the vendors’ shares in Complete (comprising its wholly owned subsidiary BLS and the Babkirk site) eventually closed on January 7, 2011. [ 16 ] Prior to the closing, the Commissioner informed the parties that she opposed the transaction on the ground that it was likely to prevent competition substantially in secure landfill services in NE British Columbia. Shortly after the closing, the Commissioner applied to the Tribunal pursuant to

section 92 of the Competition Act seeking an order that the transaction be dissolved or, in the alternative, requiring that Tervita divest itself of Complete or BLS. RELEVANT LEGISLATION [ 17 ] The relevant extracts of the Competition Act are reproduced in the

Schedule to these reasons. A brief overview of these provisions is set out below. [ 18 ] When reviewing a merger under

section 92 of the Competition Act , the Tribunal primarily determines whether the merger is likely to prevent or lessen competition substantially. For this purpose, the Tribunal must determine whether the merger will create, enhance or facilitate the exercise of market power.

The factors considered for this purpose include, but are not limited to, defining the relevant product and geographic market, determining market shares and industry concentration levels, identifying effects that could result from the merger, and determining the likelihood of countervailing bargaining power by customers. [ 19 ] Some mergers are not driven by the desire to increase profits through greater market power, but rather seek to allow greater profits through gains in efficiency. These gains can be beneficial to the Canadian economy.

Subsection 92(2) of the Competition Act provides that the Tribunal cannot find that a merger prevents or lessens competition substantially solely on the basis of concentration or market share. Further,

section 96 specifically provides for a defence based on gains in efficiency. If it can be established that the gains in efficiency resulting from the merger are greater than and offset its anti-competitive effects, the Tribunal is prohibited from making an order under

section 92 . [ 20 ] The main sources of gains in efficiency in mergers “are reductions in costs through the realization of economies of scale, such as the sharing of fixed costs or greater efficiency in the deployment of some types of capital; reduced transportation costs through rationalization of shipping and distribution networks; savings attributable to the transfer of superior production techniques, know-how, or intellectual property rights from one merging party to the other; and gains in efficiency accruing to buyers from the ability to choose from a wider variety of products and services”: M.

Trebilcock, R. A. Winter, P. Collins, and E. W. Iacobucci, The Law and Economics of Canadian Competition Policy (Toronto: University of Toronto Press, 2002), at pages 145 and 146. The analysis of productive and dynamic gains in efficiency is usually the distinguishing feature of merger analysis: B. A. Facey and D. H. Assaf, Competition and Antitrust Law: Canada and the United States , 3rd ed. (Toronto: LexisNexis Canada, 2006), at page 201. THE TRIBUNAL’S DECISION (

a) The

section 92 analysis [ 21 ] The Tribunal defined the relevant product market as “‘solid hazardous waste generated by oil and gas producers and tipped into secure landfills in [NE British Columbia]’ ” : reasons, at paragraph 91. The Tribunal has traditionally considered it necessary to also define a relevant geographic market before assessing the competitive effects of a merger. In this case, the Tribunal found that, at a minimum, the area of 11 000 square kilometres identified by Tervita’s expert, Dr. Kahwaty, and designated the “Contestable Area”, was part of the relevant geographic market.

It was satisfied that a hypothetical monopolist supplying secure landfill services in that area would have the ability to impose a small but significant price increase (typically 5 percent) and sustain it for a non-transitory period of time (typically one year): reasons, at paragraph 98. [ 22 ] The Tribunal was also of the view that this Contestable Area likely understated the geographic market. However, it found that it was not necessary in this case to define precisely the geographic scope of the relevant market beyond the Contestable Area since Tervita

“would remain the sole supplier of Secure Landfill services to any reasonably defined broader group of customers”: reasons, at paragraphs 92, 93, 117 and 118. [ 23 ] The Tribunal noted that “prevention” of competition cases have been rare: reasons, at paragraph 121. Consequently, no detailed analytical framework had previously been determined for the “prevention” branch of

section 92 of the Competition Act . The Tribunal thus set out at paragraphs 122 to 125 of its reasons the analytical framework it intended to apply to “prevention” cases in general, and to the merger at hand specifically. This framework will be reviewed and discussed in the analysis

section of these reasons. [ 24 ] The Tribunal focused on the period during which the merger occurred, i.e. the period between July 2010, when the letter of intent was signed, and January 2011, when the merger transaction closed. It concluded that only two realistic scenarios existed during this period for the Babkirk site absent the merger: (

a) the vendors would have sold to SES which would have operated a secure landfill on the site; or (

b) the vendors would have operated a bioremediation facility together with a half-cell secure landfill: reasons, at paragraph 132. [ 25 ] After extensively reviewing the large amount of evidence submitted on these two scenarios, the Tribunal found that, on a balance of probabilities, SES would not have made an acceptable offer for Complete at the end of July 2010 or at any time in the summer of 2010: reasons, at paragraph 154.

It further found that the vendors would have moved forward with their own plan to develop the Babkirk site as a bioremediation facility for hazardous waste with a small incidental half cell (125 000 tonnes) secure landfill in which to move the soil that was not successfully treated: reasons, at paragraph 197. The Tribunal also found that this bioremediation facility at the Babkirk site would have been fully operational by October 2011: reasons, at paragraph 200.

This facility would not have been serious competition for Tervita’s secure landfills, since bioremediation does not compete in the same market as the supply of secure landfill services, and exercises no constraining influence on price and non-price competition in that market: reasons, at paragraphs 223 and 224. [ 26 ] The Tribunal then expanded its analysis further into the future. It found that the bioremediation facility offered at the Babkirk site would have been unprofitable since (

a) it would have attracted few customers and (

b) the tipping fees it would have charged for bioremediation would have been substantially higher than Silverberry’s tipping fees for a secure landfill: reasons, at paragraphs 201 to 204.

It further found that the vendors would not have been prepared to operate an unprofitable bioremediation facility beyond one year, i.e. from October 2011 to October 2012: reasons, at paragraphs 205 and 206. [ 27 ] Consequently, the Tribunal concluded that by October 2012 the vendors would have sought to generate additional revenues by accepting more waste into the half-cell secure landfill which would have been part of their facility. It further concluded that by the spring of 2013, the vendors would have either (

a) started to operate a full-service secure landfill operation; or (

b) sold the facility to someone who would have operated it as a full-service secure landfill.

In either scenario, the Tribunal was of the view that the Babkirk site and Tervita’s secure landfills would have become direct, serious and substantial competitors by no later than the spring of 2013: reasons, at paragraphs 207 to 209 and 215. [ 28 ] The Tribunal found that there were no other proposed new entrants in the Contestable Area, and that the barriers to entry into the relevant market were significant, as it would take a new entrant at least 30 months to open a new secure landfill: reasons, at paragraphs 216 to 222.

Finally, it also found that the customers of Tervita did not have significant countervailing power in order to significantly lower tipping fees in the absence of competition for secure landfill services: reasons, at paragraphs 226 to 228. [ 29 ] The Tribunal concluded its

section 92 analysis by finding that the impugned merger was likely to prevent competition substantially in the supply of secure landfill services in at least the Contestable Area, and by no later than the spring of 2013. The Tribunal was also satisfied that prices likely would have been at least 10 percent lower in the Contestable Area in the absence of the impugned merger. It further concluded that the merger would more likely than not maintain the ability of Tervita to exercise materially greater market power than if it did not occur: reasons, at paragraph 229. (

b) The

section 96 analysis [ 30 ] The Tribunal noted that under

section 96 of the Competition Act , it is necessary to: (

a) identify and, if possible, quantify the gains in efficiency resulting from the merger; (

b) identify and, if possible, quantify the effects resulting from the merger; and (

c) determine if these gains in efficiency exceed and offset these effects. The Tribunal further noted that the Commissioner bore the burden of proving the extent of the anti-competitive effects resulting from the merger where they are quantifiable, even if only roughly so, as well as any non-quantifiable or qualitative anti-competitive effects. On the other hand, Tervita bore the burden of establishing that the gains in efficiency resulting from the merger are likely to be greater than, or to offset, these effects: reasons, at paragraphs 232 and 233. (

i) Gains in efficiencies [ 31 ] The Tribunal eliminated most of the gains in efficiency claimed by Tervita on the basis that these would likely be attained through (

a) alternative means if the Tribunal were to make the order necessary to ensure that the merger does not prevent competition, or (

b) the merger, even if the order were made: reasons, at paragraph 264. [ 32 ] The only three gains in efficiency which remained after applying this filter were: (1) one year of transportation gains in efficiency; (2) one year of market expansion gains in efficiency, and (3) overhead gains in efficiency: reasons, at paragraph 265. [ 33 ] The Tribunal found, as a matter of law, that the one year transportation gains in efficiency and the one year market expansion gains in efficiency were not cognizable under

section 96 of the Competition Act . The Tribunal found these to be the result of delays in the implementation of its order, and concluded that it would be contrary to the purposes of the Competition Act to recognize them. Consequently, the Tribunal only recognized the overhead gains in efficiency: reasons, at paragraphs 268, 270 and 279. [ 34 ] The overhead gains in efficiency are the savings that Tervita would likely have achieved by its ability to draw on its existing administrative staff in operating a secure landfill at the Babkirk site: reasons, at paragraph 253.

These overhead gains in efficiency were marginal, and estimated to represent no more than approximately [omitted] per year: reasons, at paragraph 279.

(ii) Effects [ 35 ] The Tribunal recognized that there were no socially adverse effects: reasons, at paragraph 284. Consequently, the only effects which were to be considered were quantitative and qualitative anti-competitive effects resulting from the merger. [ 36 ] The total economic efficiency loss resulting from a monopoly is commonly described as the “deadweight loss”: The Law and Economics of Canadian Competition Policy , above, at page 53.

The Merger Enforcement Guidelines define the “deadweight loss” as the “reduction in total consumer and producer surplus in Canada”: Competition Bureau Canada, Merger Enforcement Guidelines , October 6, 2011 (MEGs), at paragraph 12.25. The Tribunal defined the “deadweight loss” as “the loss to the economy as a whole that results from the inefficient allocation of resources which occurs when (

i) customers reduce their purchases of a product as its price rises, and shift their purchases to other products that they value less, and (ii) suppliers produce less of the product”: reasons, at paragraph 244. [ 37 ] Though the Tribunal recognized that the Commissioner had failed to meet her burden of quantifying the “deadweight loss” (reasons, at paragraph 246), it nevertheless allowed the Commissioner to submit an expert reply report setting out a calculation of the “deadweight loss” resulting from the merger. Tervita objected to the use of a reply report for this purpose.

The Tribunal rejected this objection on the ground that Tervita’s own expert witness had been able to effectively attack the reply report in his oral testimony, and that consequently Tervita had not been prejudiced: reasons, at paragraphs 246 and 288. [ 38 ] The Tribunal then proceeded to adopt the approach to the calculation of the “deadweight loss” proposed by the Commissioner’s expert in his reply report, namely: (

i) that competition in the provision of secure landfill services between Silverberry and Babkirk would likely result in prices being, on average, at least 10 percent lower; (ii) that this price reduction would apply as a minimum in the Contestable Area; and (iii) that market expansion gains in efficiency would result from this lower price, i.e. the reduction in price would attract more hazardous waste to both the Babkirk site and the Silverberry secure landfill than would otherwise have been the case without the price reduction: reasons, at paragraphs 297 to 300. [ 39 ] The Tribunal was thus persuaded, on a balance of probabilities, that the approach adopted by the Commissioner’s expert and the numbers he used in reaching his estimate of the likely “deadweight loss” were reasonable for the purposes of the Tribunal’s assessment of effects under

section 96 of the Competition Act .

It added that this approach and the numbers submitted were sound, reliable and conservative: reasons, at paragraph 301. [ 40 ] The Tribunal thus accepted the estimate of [omitted] presented by the Commissioner’s expert in his reply report as being the minimum annual “deadweight loss” resulting from the merger: reasons, at paragraph 303. [ 41 ] The Tribunal acknowledged that this approach to calculating the “deadweight loss” was deficient, but it found nevertheless that the “rough” estimate produced by this approach was sufficiently reliable for its purposes [reasons, at paragraph 302]: The Tribunal acknowledges Dr.

Kahwaty’s [the expert for Tervita] testimony that, to calculate the DWL [deadweight loss], it is necessary to know the shape of the demand curve, and that, when prices are likely to differ across customers, it is necessary to have customer-specific elasticity data. However, the Tribunal is persuaded that, in the absence of such information, a reliable “rough” estimate of the likely DWL can be obtained based on information such as that which was used by Dr.

Baye in reaching his estimated annual welfare loss of approximately [ CONFIDENTIAL ]. [ 42 ] Turning to the qualitative effects resulting from the merger, the Tribunal recognized that the reduction in tipping fees resulting from competition between Silverberry and Babkirk would induce waste generators to more actively clean up legacy sites in NE British Columbia. It identified this qualitative effect as reduced site clean-up and the benefits that such remediation would confer on area residents, wildlife, and the overall environment: reasons, at paragraphs 306 and 316.

The Tribunal did not discuss why this effect had not already been captured in the “rough” “deadweight loss” calculation it had approved, and which was itself based on market expansion. [ 43 ] Second, the Tribunal also recognized as a qualitative effect the reduction in “value propositions”. It found that competition from the Babkirk site would lead Tervita to offer certain of its customers link prices on some of its other services, which would in turn lead to a lower total cost for overall waste services used by such customers.

Though these “value propositions” had not been quantified by the Commissioner’s expert, the Tribunal was satisfied, on a balance of probabilities, that competition from the Babkirk site would lead to important non-price benefits to waste generators in the form of such “value propositions”: reasons, at paragraph 307. (iii) The offset [ 44 ] The Tribunal then set out its methodology for determining whether the gains in efficiency resulting from the merger would offset its anti-competitive effects.

It stated that the appropriate method was to compare the magnitude of the gains in efficiency to the magnitude of the effects within the framework of a subjective balancing exercise: reasons, at paragraph 309. [ 45 ] In this case, the quantified anti-competitive effects exceeded the quantified gains in efficiency: reasons, at paragraphs 310 to 313. [ 46 ] As an alternative conclusion, the Tribunal was further persuaded, on a balance of probabilities, that even if no weighting at all were given to the quantitative anti-competitive effects, and even if it were to accept and give full weight to the one year transportation and market expansion gains in efficiency it had discarded, the qualitative anti-competitive effects taken together would outweigh the merger gains in efficiency under any reasonable approach: reasons, at paragraphs 314 to 316. [ 47 ] The Tribunal closed its

section 96 analysis by adding that the merger would maintain a monopolistic structure in the relevant market and also preclude benefits that may arise from competition in ways that defy prediction: reasons, at paragraph 317. [ 48 ] The Tribunal then turned to whether dissolution or divestiture was the appropriate remedy. It found that, in this case, dissolution would be intrusive, overbroad and would not necessarily lead to a timely opening of the Barkirk site as a full-service secure landfill: reasons, at paragraph 341. It consequently ordered Tervita to divest the shares or assets of BLS: reasons, at paragraphs 342 to 344.

ISSUES RAISED IN THIS APPEAL [ 49 ] Tervita and the other appellants submit that the Tribunal committed at least seven important errors. Four of these alleged errors concern the Tribunal’s analysis under

section 92 of the Competition Act , while the remaining three concern its analysis under

section 96 . [ 50 ] The alleged errors in the analysis under

section 92 may be stated as follows: 1. By extending the analysis to include the feasibility of the vendor’s bioremediation service, its eventual failure and its consequential transformation into a full-service hazardous landfill operation by the spring of 2013, the Tribunal acted on a theory of the case that had not been pleaded, thus breaching the appellants’ right to a fair hearing. 2. The Tribunal erred in law by extending the analysis of potential entry beyond the time of the impugned merger through an analysis of the feasibility of the vendor’s bioremediation service extending to the spring of 2013. 3.

This led the Tribunal to err in its assessment of the facts by engaging in speculation regarding possible future events. 4. The Tribunal compounded these errors by reversing the onus and shifting the burden of proof by requiring Tervita and the vendors to prove the economic viability of the Babkirk site bioremediation operation. [ 51 ] The alleged errors in the analysis under

section 96 may be stated as follows: 5. The Tribunal erred in law by considering the Commissioner’s “deadweight loss” quantification in the face of a finding that the Commissioner had failed to meet her burden to prove such quantification. The Tribunal compounded this error by allowing the Commissioner to submit a “rough estimate” of the “deadweight loss” in a reply report, by failing to provide the appellants with a formal opportunity to respond to this report, and by failing to recognize that the appellants’ right to a fair hearing was seriously prejudiced as a result. 6.

The Tribunal erred in law by not considering the one year transportation and market expansion gains in efficiency resulting from the merger. 7. The Tribunal erred in law by applying an offset methodology which tipped the scale in favour of anti-competitive effects on the basis of an unreasoned and subjective assessment of unquantifiable qualitative effects which could not, in any event, be considered under the scheme of the Competition Act .

THE STANDARD OF REVIEW [ 52 ] The Tribunal’s findings on questions of law are to be reviewed in this appeal on a standard of correctness, while its findings on questions of fact or of mixed law and fact are to be reviewed on a standard of reasonableness. (

a) Questions of law [ 53 ] This Court has consistently held that questions of law raised in an appeal from a decision of the Tribunal are to be reviewed on a standard of correctness: Canada (Commissioner of Competition) v. Superior Propane Inc. , 2001 FCA 104 , [2001] 3 F.C. 185 ( Superior Propane No. 2), at paragraph 68; Air Canada v. Canada (Commissioner of Competition) , 2002 FCA 121 , [2002] 4 F.C. 598, at paragraph 43 ; Canada (Commissioner of Competition) v. Canada Pipe Co. , 2006 FCA 233 , [2007] 2 F.C.R. 3, at paragraph 34 ; Canada (Commissioner of Competition) v.

Labatt Brewing Co. , 2008 FCA 22 , 289 D.L.R. (4th) 500, at paragraph 5 ; Canada (Commissioner of Competition) v. Premier Management Group Corp. , 2009 FCA 295, [2010] 4 F.C.R. 413, at paragraph 67 ; Nadeau Poultry Farm Ltd. v. Groupe Westco Inc. , 2011 FCA 188 , 419 N.R. 333, at paragraph 48 . [ 54 ] A full standard of review analysis on this issue was carried out by our Court in Superior Propane No. 2.

Where the jurisprudence has already determined, in a satisfactory manner, the degree of deference to be accorded with regard to a particular category of question, this should normally be the end of the standard of review inquiry on that matter: Dunsmuir v. New Brunswick , 2008 SCC 9 , [2008] 1 S.C.R. 190 ( Dunsmuir ), at paragraphs 57 and 62 .

However, the Supreme Court of Canada jurisprudence post- Dunsmuir has shifted towards greater deference to adjudicative tribunals when they are interpreting their enabling legislation or statutes closely connected to their functions. [ 55 ] The Supreme Court of Canada has found that, since Dunsmuir , the

interpretation by an adjudicative tribunal of its enabling statute or of statutes closely related to its functions should be presumed to be a question of statutory

interpretation subject to deference on judicial review: Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association , 2011 SCC 61 , [2011] 3 S.C.R. 654 ( Alberta Teachers’ Association ), at paragraphs 34 and 41 . That presumption may however be rebutted if it can be found that Parliament’s intent is inconsistent with its application: Rogers Communication Inc. v.

Society of Composers, Authors and Music Publishers of Canada , 2012 SCC 35 , [2012] 2 S.C.R. 283, at paragraph 15 . [ 56 ] In this case, Parliament has specifically provided that the decisions of the Competition Tribunal are subject to an appeal rather than judicially reviewed. Accordingly, the presumption set out in Alberta Teachers’ Association may not apply, but it is not necessary to decide this issue in this appeal. Indeed, I am of the view that if that presumption applies, it has been rebutted.

Consequently, in my view, Superior Propane No. 2 determined in a satisfactory manner that the standard of correctness is the appropriate standard of review on questions of law arising in an appeal from the Competition Tribunal. [ 57 ] Without repeating here the entire analysis carried out in Superior Propane No. 2, it is useful to point out that questions of law which arise in the course of proceedings before the Tribunal are determined only by the judicial members of the Tribunal sitting in those proceedings: paragraph 12(1)(

a) of the Competition Tribunal Act . These judicial members are appointed from among the members of the Federal Court: paragraph 3(2)(

a) of the Competition Tribunal Act . These decisions on questions of law are themselves subject, as of right, to appeal to this Court as if they were a judgment of the Federal Court: subsection 13(1) of the Competition Tribunal Act . As noted

by Evans J.A. in Superior Propane No. 2, at paragraph 88, “the existence of an unrestricted right of appeal on questions of law, and of amodified right of appeal on questions of fact, must be entered as a factor indicative of Parliament’s intention that the Tribunal’sdeterminations on questions of law should be reviewable on appeal on a correctness standard.” [58] To underline this point, it is useful to point out that subsection 28(2) and

section 18.5 of the Federal Courts Act, R.S.C., 1985, c.F-7 specifically exclude judicial review when

an Act of Parliament expressly provides for an appeal to the Federal Court of Appeal, inwhich case the decision is to be reviewed or otherwise dealt with in accordance with that Act. In subsection 13(1) of the CompetitionTribunal Act, Parliament has clearly and unambiguously provided for an appeal as of right to this Court from a decision of the Tribunalon a question of law “as if it were a judgment of the Federal Court.” I do not believe that it is possible for Parliament to use any clearerlanguage as to its intent.

Since judgments of the Federal Court on questions of law are reviewed in appeal on a standard of correctness,decisions from the Tribunal on such questions are also to be reviewed on the same standard. [59] The determination of the appropriate standard of review is essentially a search for legislative intent: Pezim v. British Columbia(Superintendent of Brokers), (SCC), [1994] 2 S.C.R. 557, at pages 589-590; Pushpanathan v. Canada (Minister ofCitizenship and Immigration), (SCC), [1998] 1 S.C.R. 982, at paragraph 26; Dr. Q v.

College of Physicians andSurgeons of British Columbia, 2003 SCC 19, [2003] 1 S.C.R. 226, at paragraph 21; Dunsmuir, at paragraph 30. Where, as here, thatintent is clear, the judiciary should comply unless this offends the rule of law or some other constitutional principle. (

b) Questions of fact and of mixed law and fact [60] Since the decision of the Supreme Court of Canada in Canada (Director of Investigation and Research) v. Southam Inc., (SCC), [1997] 1 S.C.R. 748 (Southam), it is clear that the findings of the Tribunal on questions of fact and on questions ofmixed law and fact from which a question of law cannot be extricated are owed particular deference on appeal: Southam, at paragraphs34 and 54.

This is so notably because Parliament has provided for a limited right of appeal on questions of fact by requiring that anappeal on such questions only lies with leave of this Court: subsection 13(2) of the Competition Tribunal Act. [61] The Tribunal holds expertise in the economic and commercial issues which are at the heart of its mandate under the CompetitionAct. This Court sitting in appeal of its decisions should thus defer to its findings on these issues, including the inferences it draws fromthe evidence.

Contrary to most trial courts, which are essentially concerned with ascertaining the facts relating to past events, theTribunal’s role under sections 92 and 96 of the Competition Act requires it to project into the future various events in order to ascertaintheir potential economic and commercial impacts. The role of the Tribunal is thus to identify and remedy market problems that have notyet occurred. This is a daunting exercise steeped in economic theory and requiring a deep understanding of the economic and commercialfactors at issue.

Because an appellate court may encounter difficulties in fully understanding the economic and commercial aspects of theTribunal’s decision, it must defer to its findings of fact and of mixed law and fact on these issues. [62] Some controversy has however developed in the case law as to the appropriate standard of deference owed to the Tribunal overquestions of fact and of mixed law and fact from which a question of law cannot be extricated: is it the “reasonableness” standard ofdeference used in judicial review or the standard of deference which applies in an appeal as described in Housen v.

Nikolaisen, 2002 SCC33, [2002] 2 S.C.R. 235 (Housen)? [63] Both the Commissioner and the appellants submit that the appropriate standard of deference in this case on questions of fact, andof mixed law and fact from which a question of law cannot be extricated, is the one which applies in appellate review as set out inHousen: Commissioner’s memorandum in appeal file A-302-12, at paragraphs 30 and 31; Commissioner’s memorandum in appeal fileA-457-12, at paragraphs 8 and 9; appellants’ memorandum in appeal file A-457-12, at paragraph 43.

This approach has also beenadopted by our Court in Canada (Commissioner of Competition) v. Premier Career Management Group Corp., above.

In that case, atparagraphs 67 and 71, Sexton J.A. applied the Housen standard on the ground that subsection 13(1) of the Competition Tribunal Actstates that an appeal from the Tribunal is treated as if the original decision were a judgment of the Federal Court, and consequently [atparagraph 67] “it makes more sense to apply the standard used to review decisions of lower courts rather than those used to reviewadministrative tribunals.” [64] There is much merit to the approach adopted by Sexton J.A. and supported by the parties in this appeal.

However, in Southam,Iacobucci J., writing for a unanimous Supreme Court of Canada, found that the applicable standard in such circumstances was that ofreasonableness simpliciter, which he also found to be closely akin to the standard applied in reviewing findings of fact by trial judges:Southam, at paragraphs 54 to 59. The reasonableness simpliciter standard has since been subsumed into the reasonableness standard, andit has consequently been considerably redefined: Dunsmuir, at paragraphs 45 to 49. I am bound by these decisions of our highest court:Canada v.

Craig, 2012 SCC 43, [2012] 2 S.C.R. 489, at paragraph 21. Consequently, the findings of fact, and of mixed law and fact fromwhich a question of law cannot be extricated, made by the Tribunal shall be reviewed in this appeal under the standard of reasonableness.For the purposes of this appeal, it is not necessary to decide the extent to which this standard of reasonableness differs from that ofoverriding and palpable error as applied to questions of fact or of mixed law and fact. (

c) The distinction between questions of law and questions of mixed law and fact [65] Though the Commissioner acknowledges in this appeal that questions of law are to be reviewed on a standard of correctness, hesubmits that the issues raised by the appellants in this case are actually questions of mixed law and fact: Commissioner’s memorandum,at paragraph 30. Consequently, it is important in this appeal to review the distinction between questions of law and questions of mixedlaw and fact within the context of a decision of the Tribunal under sections 92 and 96 of the Competition Act. The reasons of theSupreme Court of Canada in Southam, which dealt with

section 92 of the Competition Act, are most useful for this purpose. [66] As aptly noted by Iacobucci J. in Southam, questions of law and questions of mixed law and fact in the context of a determinationunder

section 92 (and by implication under

section 96) of the Competition Act may be distinguished as follows: (

a) when the Tribunal determines what the correct legal test is under the pertinent provisions of the Competition Act, or when theTribunal forges a new legal principle or legal test, then the matter is to be treated as a question of law; however, questions about whetherthe facts satisfy that legal test are deemed questions of mixed law and fact (Southam, at paragraphs 35 and 45);

(

b) if the Tribunal ignores items of the evidence that the law requires it to consider, then it errs in law; however when the Tribunalconsidered all the mandatory kinds of evidence, then its conclusion will be reviewed on a standard of reasonableness (Southam, atparagraph 41); (

c) where the Tribunal fails to consider certain factors that the law requires it to consider then it errs in law; however, the weightaccorded by the Tribunal to each factor, especially if the legal principle being applied involves a balancing test, will be reviewed on astandard of reasonableness (Southam, at paragraphs 43 and 44). [67] The questions raised in this appeal and involving procedural fairness are also to be dealt with on a standard of correctness. [68] It is with these considerations and distinctions in mind that I will proceed with the analysis of each of the grounds of appealraised by the appellants.

ANALYSIS Alleged errors in the Tribunal’s analysis under section 92 (1) Did the Tribunal base its decision on a theory of the case that had not been pleaded? [69] The Tribunal found that Tervita’s acquisition of the Babkirk site would substantially prevent competition since the vendorswould have turned the site into a competing secure landfill once their bioremediation operation would have failed. [70] The appellants allege that the Commissioner did not plead this theory, and that it was consequently an impermissible error of lawfor the Tribunal to have determined the case based on this theory.

They add that they had no reason to believe that the future viability ofthe bioremediation operation was at issue, and that they were thus precluded from adducing evidence regarding this matter. [71] In the normal course of judicial proceedings, parties are entitled to have their disputes adjudicated on the basis of the issuesjoined in the pleadings. This is because when a trial court steps outside the pleadings to decide a case, it risks denying a party a fairopportunity to address the related evidentiary issues: Rodaro v.

Royal Bank of Canada (2002), (ON CA), 59 O.R.(3d) 74 (C.A.), at paragraphs 60 to 63; Nunn v. Canada, 2006 FCA 403, [2007] 2 C.T.C. 222, at paragraphs 23 to 26; Labatt BrewingCo. v. NHL Enterprises Canada, 2011 ONCA 511, 106 O.R. (3d) 677, at paragraphs 4 to 9 and 21. [72] However, this does not mean that a trial judge can never decide a case on a basis other than that set out in the pleadings. Inessence, a judicial decision may be reached on a basis which does not perfectly accord with the pleadings if no party to the proceedingswas surprised or prejudiced: Lubrizol Corp. v.

Imperial Oil Ltd., (FCA), [1996] 3 F.C. 40 (C.A.), at paragraphs 14 to16; Barker v. Montfort Hospital, 2007 ONCA 282, 278 D.L.R. (4th) 215, at paragraphs 18 to 22; Colautti Construction Ltd. v. AshcroftDevelopment Inc., 2011 ONCA 359, 1 C.L.R. (4th) 138, at paragraphs 42 to 47. [73] A trial judge must decide a case according to the facts and the law as he or she finds them to be.

Accordingly, there is noprocedural unfairness where a trial judge, on his or her own initiative or at the initiative of one of the parties, raises and decides an issuein a proceeding that does not squarely fit within the pleadings, as long as, of course, all the parties have been informed of that issue andhave been given a fair opportunity to respond to it: Pfizer Canada Inc. v. Mylan Pharmaceuticals ULC, 2012 FCA 103, 100 C.P.R. (4th)203, at paragraph 27; Murphy v. Wyatt, [2011] EWCA Civ. 408, [2011] 1 W.L.R. 2129, at paragraphs 13 to 19; R. v.

Keough, 2012ABCA 14, 519 A.R. 236. [74] These principles also apply to contested proceedings before the Tribunal. It acts as a judicial body:

section 8 and subsection 9(1)of the Competition Tribunal Act. Though the proceedings before the Tribunal are to be dealt with informally and expeditiously, they arenevertheless subject to the principles of procedural fairness: subsection 9(2) of the Competition Tribunal Act. Accordingly, theCompetition Tribunal Rules, SOR/2008-141(Rules), provide that an application to the Tribunal must be made by way of a notice ofapplication setting out, inter alia, a concise statement of the grounds for the application and of the material facts on which the applicantrelies, as well as a concise statement of the economic theory of the case: Rules, at paragraphs 36(2)(

c) and (d). Similar provisions applyto a response and to a reply: Rules, at paragraphs 38(2)(a), (

b) and (

c) and subrule 39(2). The Rules also set out a detailed and completesystem of pre-hearing disclosures: rules 68 to 74 and 77, 78. [75] In order to resolve the first ground of appeal raised by the appellants, it must be first determined whether the pleadingsencompassed the eventual failure of the bioremediation service and the subsequent transformation of the Babkirk site into a full-servicesecure landfill.

If the pleadings did not encompass these matters, we must determine whether the appellants’ right to a fair hearing wasprejudiced by the manner in which the Tribunal proceeded. [76] In its notice of application filed with the Tribunal, the Commissioner alleged that Complete had obtained the regulatory approvalsto operate a secure landfill at the Babkirk site, that it was a “poised entrant” into the market for hazardous waste disposal into securelandfills, and that it would have competed directly with Tervita had it not been for the merger: paragraphs 1, 19 and 21 of the notice ofapplication reproduced at A.B., Vol. 1, at pages 112, 115 and 116.

The Commissioner added that “[i]f the Merger is dissolved, Completewill likely capitalize on its regulatory approvals by either converting and operating Babkirk as a Secure Landfill, or selling Babkirk toanother operator who will complete the conversion and operate Babkirk as a Secure Landfill”: paragraph 21 of the notice of applicationreproduced at A.B., Vol. 1, at page 116. [77] In their response submitted to the Tribunal, Tervita and the other appellants challenged the Commissioner’s assertion thatComplete was a “poised entrant”.

They submitted that the vendors had decided to sell to a third party and had no intention to develop theBabkirk site. They added that even if the vendors did eventually develop the site, this would not have occurred for at least two years.They also submitted that, in any event, the development would not have provided effective competition with Tervita, since thecontemplated service at the Babkirk site was a mix of both disposal and bioremediation: paragraphs 3, 28 and 29 of the appellants’response reproduced at A.B., Vol. 1, at pages 124, 125 and 131.

[ 78 ] The vendors submitted their own separate response.

They also took the position that Complete was not a “poised entrant” since the intended use of the Babkirk site was primarily for bioremediation: paragraphs 2, 18 and 35 of the vendors’ response reproduced at A.B., Vol.1, at pages 146, 149, 150 and 153. [ 79 ] The Commissioner challenged these responses, notably on the basis that bioremediation was not technically feasible or profitable in NE British Columbia, and that Complete or another company would have capitalized on the valuable regulatory approval for a secure landfill at the Babkirk site: Commissioner’s reply, at paragraphs 2, 8 and 9 reproduced at A.B., Vol. 1, at pages 164 and 166. [ 80 ] The issue of whether or not Complete was a “poised entrant” was clearly raised in the pleadings.

The temporal dimension of “poised entry” in the context of a prevention of competition case was thus plainly an issue before the Tribunal.

That issue led the Tribunal to define a “poised entry”—under the analytical framework it had developed for a “prevention” of competition case—as an “entry or expansion [that] likely would occur within a reasonable period of time”: reasons, at paragraph 123. [ 81 ] As a result of the respective positions of the parties set out in the pleadings, and taking into account the temporal dimension of “poised entry”, the feasibility and profitability of the operation at the Babkirk site of a bioremediation facility was dealt with extensively before the Tribunal.

Substantial evidence was adduced on the technical and financial feasibility of bioremediation: see notably the witness statement of Robert Andrews, A.B., Vol. 22, at pages 7388 to 7393 (in particular paragraphs 23 to 26); witness statement of Devin Scheck, A.B., Vol. 22, at pages 7497 to 7499 (in particular paragraphs 25 to 27 and 33); expert report of Mark Polet, A.B., Vol. 22, at pages 7558 to 7565; reply report of Mark Polet, Vol. 22, at pages 7580 and 7581. [ 82 ] The thrust of the Commissioner’s position before the Tribunal was that the vendors would be pursuing from the start a secure landfill operation at the Babkirk site in light of the permits they had secured.

However, the Commissioner also addressed early on in the proceedings the issue of the lack of feasibility for bioremediation at the Babkirk site. Though aware that the Commissioner was pursuing this matter, at any point during the entire proceedings the appellants or the vendors did not object or raise any form of concern whatsoever.

On the contrary, they submitted evidence concerning the feasibility of bioremediation at the Babkirk site, and forcefully disputed the submissions of the Commissioner to the contrary. [ 83 ] Taking into account the pleadings as a whole, and after reviewing the evidentiary record before the Tribunal, I am of the view that the feasibility of a bioremediation facility at the Babkirk site was squarely before the Tribunal, as was the issue of whether Complete was a “poised entrant” in the market for secure landfills once it ceased to pursue bioremediation. [ 84 ] Accordingly, the appellants’ argument must fail.

In any event, even if these issues were not included in the pleadings, the appellants have failed to convince me that they were prejudiced by the fact that these issues were considered and decided by the Tribunal.

(2) Could the Tribunal extend the

section 92 analysis beyond the date of the merger? [ 85 ] In its reasons, the Tribunal set out an analytical framework for prevention of competition merger reviews under

section 92 of the Competition Act . That framework is described at paragraphs 121 to 126 of the Tribunal’s reasons, and may be summarized as follows: a. In determining whether competition is likely to be prevented, the Tribunal assesses whether a merger is more likely than not to maintain the ability of the merged entity to exercise greater market power than in the absence of the merger, acting alone or interdependently with one or more rival. This is a form of “but for” analysis.

In the case at hand, this requires comparing a world in which Tervita owns the relevant secure landfills (Silverberry, Northern Rockies and Babkirk) with a world in which Babkirk is independently operated as a secure landfill; b. In assessing cases under the “prevention” branch, the Tribunal focuses on the new entry, or the increased competition from within the relevant market, that the Commissioner alleges was, or would be, prevented by the merger in question.

This requires the Tribunal to assess whether it is likely the new entry or expansion would be sufficiently timely, and occur on a sufficient scale, to result in: i. a material reduction of prices, or in a material increase in non-price competition, relative to prevailing price and non-price levels of competition; ii. in a significant (i.e. non-trivial) part of the relevant market; iii. for a period of approximately two years.

If so, and if the entry or expansion likely would occur within a reasonable period of time, the Tribunal will usually conclude that the prevention of competition is likely to be substantial. c. The Tribunal will also consider whether other firms would be likely to enter or expand on a scale similar to that which was prevented or forestalled by the merger, and in a similar time frame.

Where the Tribunal finds that such entry or expansion would probably occur, it is unlikely to conclude that the merger is likely to prevent competition substantially. [ 86 ] The appellants challenge the Tribunal’s view that the entry or expansion must likely occur within a “reasonable period of time”. Rather, they suggest that the Tribunal’s analysis of potential entry or expansion must be confined to the time the merger occurred. This ground of appeal must be reviewed on a standard of correctness since the correct legal test for a

section 92 prevention of competition merger review is a question of law. [ 87 ] The analysis required for the review of a merger under

section 92 of the Competition Act involving the prevention of competition is necessarily forward-looking. This flows, inter alia , from: a. The very terms of

section 92 which require the Tribunal to determine whether a merger “prevents or lessens, or is likely to prevent

or lessen, competition substantially” (emphasis added). b. Paragraph 93 (

b) of the Competition Act . That paragraph includes as a factor to consider in the

section 92 analysis the question of “whether the business ... has failed or is likely to fail”. Though this concerns the failing firm defence—i.e. the merger will not result in the removal of an effective competitor since the acquired business would have exited the market anyway—and does not apply to the circumstance reviewed here—i.e. the failure of the bioremediation business will result in the introduction of an effective competitor— the temporal concept is analogous. c.

Moreover, an important factor in merger review is whether timely future entry by potential competitors would likely occur to constrain a material price increase in the relevant market: Competition Bureau Canada, Merger Enforcement Guidelines , 2011, paragraph 7.1. All these factors require the Tribunal to take into account future events likely to occur after the date of the impugned merger. [ 88 ] The Tribunal was thus correct in concluding that while “poised entry” should be considered by taking into account the date of the merger, it need not be limited to that date.

Rather, as set out in the analytical framework adopted by the Tribunal, the analysis may require that the Tribunal look into the future to ascertain whether the entry into the market would have occurred within a reasonable period of time, given the dynamics of the firm at issue and the characteristics of the market in question. [ 89 ] But what is a reasonable period of time? As noted by Crampton C.J., at paragraph 382 of his concurring opinion, this will necessarily vary from case to case and will depend on the business under consideration.

However, certain guidelines should be followed to ascertain an appropriate temporal framework for “poised entry” in any given “prevention” case. [ 90 ] First , the time frame must be discernible. It will be insufficient to conclude that an acquired firm could have possibly entered the market at some future date. Rather, what is required is a clear and discernible time frame for market entry. This need not, however, be a precisely calibrated determination. [ 91 ] Second , the time frame for market entry should normally fall within the temporal dimension of the barriers to entry into the market at issue.

As noted in BOC International, Ltd. v. Federal Trade Commission , 557 F.2d 24 (2d Cir. 1977), at page 29, a case dealing with a similar provision contained in the U.S.

Clayton Act , 15 U.S.C. §18 (1977), “it seems necessary ... that the finding of probable entry at least contain some reasonable temporal estimate related to the near future, with ‘near’ defined in terms of the entry barriers and lead time necessary for entry in the particular industry, and that the finding be supported by substantial evidence in the record.” I accept this approach insofar as it serves as a guidepost and not as a fixed temporal rule.

There may indeed be rare situations where it may be appropriate to expand the temporal analysis of poised entry beyond the temporal dimension of the barriers to market entry. In such circumstances, the Tribunal will be required to clearly justify why the entry is still “poised” at this later date. However, in most cases the temporal dimension of market entry should serve as an appropriate guidepost.

Additional guideposts should not be excluded, but what these are, if any, is better left to be decided in other appropriate cases. [ 92 ] In this case, the Tribunal discerned a clear time frame under which the Babkirk site would enter the market for secure landfills. It identified the chain of intermediary steps required to determine this within a timeline starting from the moment the merger took place.

It further determined the timeline when each step would occur based on its assessment of the evidence submitted by the parties: at paragraphs 197 to 209 of the reasons. [ 93 ] The Tribunal found that had the merger not occurred, the vendors would have operated a bioremediation facility with a half-cell secure landfill by October 2011, but that operation would not have been pursued for more than one year: reasons, at paragraphs 200 to 206.

The Tribunal further found that by October 2012, the vendors would have begun competition with Tervita’s Silverberry secure landfill by accepting more waste into their half-cell secure landfill. The Tribunal also concluded that the vendors would have either (

a) transformed and expanded their operation at the Babkirk site in order to operate a full-service secure landfill operation at least by the spring of 2013, or (

b) sold to a third party who would have operated such an operation at least by that time: reasons, at paragraphs 207 to 209 and 215. [ 94 ] This discernible time frame for entry into the market was also well within the temporal framework of the barriers to market entry. The Tribunal found that it would take a new entrant at least 30 months to open a new secure landfill: reasons, at paragraph 222. The entry of the Babkirk site into the secure landfill market would thus have been achieved well within this time frame. The impugned merger closed in January of 2011.

The Tribunal found that approximately 21 months after the close of the merger—by October 2012— the Babkirk site would have entered the concerned market and started to compete with the Silverberry secure landfill, and that it would have been transformed into a full-service secure landfill at the latest within six months thereafter.

(3) Did the Tribunal engage in unfounded speculation regarding possible future events? [ 95 ] The appellants add in their appeal A-457-12 (dealing with questions of fact) that these findings by the Tribunal were not supported by the evidence adduced at the hearing.

The appellants submit that the Tribunal engaged in unbridled speculation about future events by expanding its analysis to include a review of the feasibility and profitability of the vendors contemplated bioremediation business; concluding that this business would fail; and further concluding that the Babkirk site would be operated as a full-service hazardous waste secure storage facility by the spring of 2013.

I disagree. [ 96 ] This ground of appeal raises questions of fact or of mixed law and fact, and is therefore to be reviewed on a standard of reasonableness. [ 97 ] The Tribunal’s findings concerning the difficulties associated with bioremediation in NE British Columbia were supported by abundant evidence, not least of which was the expert evidence of Mark Polet, an environmental biologist with specialized knowledge and 33 years of experience in environmental assessment, remediation and reclamation, as well as waste facility management development.

He testified that bioremediation is ineffective in NE British Columbia, and confirmed that it does not work on salts and metals, the types of contaminants that are typical of the hazardous waste produced through oil and gas operations: expert report of Mark Polet, A.B., Vol. 22,

at pages 7558 a

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