Director Challenges Mergers in British Columbia Marine Transport Industry

OTTAWA, March 5, 1996 — George N. Addy, Director of Investigation and Research under the Competition Act, announced today that, following an extensive review by the Competition Bureau, he has filed an application with the Competition Tribunal with respect to two mergers. Firstly, the application opposes both the October 13, 1994 merger whereby Mr. Dennis Washington, the owner of C.H. Cates & Sons Ltd. (“Cates”), indirectly acquired a significant interest in Seaspan International Ltd. (“Seaspan”), as well as Mr. Washington's proposal to acquire control of Seaspan, as announced on January 10, 1996. Secondly, the application opposes the June 30, 1995 merger whereby Mr. Washington purchased Norsk Pacific Steamship Company, Limited (“Norsk”).

The Director’s application alleges that the mergers prevent or lessen, or are likely to prevent or lessen, competition substantially in the provision of tug boat services used to berth ships in the Port of Vancouver, and in the provision of barging services in and around British Columbia’s coastal waters.

“Competition for ship berthing services in Canada’s busiest port as well as for vital barging services along British Columbia’s coast is important to the health of the West Coast marine transportation industry,” Mr. Addy said.

For years, Cates has had a virtual monopoly in the provision of ship berthing services in Burrard Inlet, the main portion of the Port of Vancouver. In September 1993, Seaspan entered the Burrard Inlet market bringing unprecedented competition. “The October 1994 transaction we are challenging eliminated the only real competition this market had seen in years,” stated Mr. Addy.

The Director's application further alleges that:

• Seaspan has been the only provider of ship berthing services since the Roberts Bank portion of the Port of Vancouver opened in 1970. However, in June 1994, in response to the new competition in Burrard Inlet, Cates announced its intention to enter the expanding Roberts Bank market in competition with Seaspan. The October 1994 merger has removed this only likely source of competition.
• Entry into the Burrard Inlet and Roberts Bank ship berthing markets is difficult and that there will not likely be entry from other Canadian or foreign companies on a scale sufficient to discipline the anti-competitive effects of the merger.
• Seaspan is also the dominant barging company in B.C. After acquiring a significant interest in Seaspan, Mr. Washington acquired Norsk, the third largest company in this market. This merger removed Norsk as a potentially independent and effective competitive force in an already highly concentrated barging market.
• Without the merger with Seaspan, Mr. Washington would likely have emerged as a vigorous and effective competitor to Seaspan by acquiring one of the other barging companies in the market, thereby providing a substantially higher level of competition in the barging market.

The Director has sought interim relief to prevent the integration of the operations of Washington and Seaspan pending ultimate resolution of this matter.

A copy of the application is available from the Competition Tribunal.

For more information, please contact:
James H. Bocking
819-953-4290