OTTAWA, April 10, 2012 — This statement summarizes the approach taken by the Competition Bureau in its review of the indirect acquisition by Transcontinental Inc. (Transcontinental) of the shares of Quad/Graphics Canada, Inc. (Quad Canada) pursuant to an agreement announced on July 13, 2011.
On February 6, 2012, the Bureau issued a No Action Letter (NAL) to Transcontinental indicating that the Commissioner of Competition (Commissioner) does not, at this time, intend to make an application under section 92 of the Competition Act in respect of the proposed acquisitionFootnote 1. Among the key considerations for the Bureau, notwithstanding the increased concentration among printers in Canada, was the observation that U.S. printers are becoming increasingly significant in the bidding process for large Canadian flyer contracts. Nonetheless, owing to the recent nature of the developments in the market with respect to U.S. printers, the Bureau will monitor competition in the retail flyer market over the next year.Footnote 2
In July 2011, Transcontinental, the largest printer in Canada, announced that it intended to acquire the assetsFootnote 3 of Quad Canada, a subsidiary of Quad/Graphics Inc. (Quad), a printer based in the U.S. Quad had acquired the former Quebecor World printing business in July 2010. Transcontinental and Quad are active in various segments of the print industry, including books, newspapers, directories, magazines, catalogues, marketing products, and retail flyers. Both companies have printing facilities located across Canada.
In Canada, the parties primarily overlap in the retail flyer market and, in particular, in the printing of high-volume retail flyers. Large Canadian retailers view retail flyers as a vitally important form of advertising and do not consider other advertising platforms to be effective alternatives.
Owing to the importance of minimizing the length of production cycles, retailers have a strong preference for flyers to be printed in relatively close proximity to the area where the flyer will be distributed. A short production cycle is very important for certain retailers, as it enables them to tailor offerings in the flyer to consumer demand and product inventories, and to react to what their competitors are offering. As such, regional retailers typically have their flyers printed at a facility in the region in which they operate. National retailers typically require a printer with a network of printing facilities located in close proximity to all regions where they distribute flyers.
As printers with only a regional presence would have difficulty competing for national flyer accounts, or for large regional accounts outside of the region in which they print, the Bureau concluded that printers without a network of printing facilities would provide only a limited degree of competitive discipline to Transcontinental, post-transaction.
There are, however, U.S. printers with printing facilities located in close proximity to the Canadian border that are imposing competitive discipline on the retail flyer market in Canada, and that are likely to provide increased competitive pressure. Evidence collected in the review of this transaction indicated that U.S. printers are, in fact, becoming increasingly significant in the bidding process for large Canadian retail flyer contracts.
As noted above, in light of the likely increased competitive significance of U.S. printers, the Bureau issued a NAL to the parties. Notwithstanding the issuance of a NAL, owing to the recent nature of these developments in the market, the Bureau has decided to monitor competition in the retail flyer market over the next year.
The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.
However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.
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