Competition Bureau statement regarding the acquisition by TransForce of Vitran

OTTAWA, April 1, 2014 — This statement summarizes the approach taken by the Competition Bureau in its review of the proposed acquisition by TransForce Inc. (TransForce) of Vitran Corporation Inc. (Vitran), pursuant to an agreement announced on December 30, 2013.

On March 24, 2014, the Bureau issued a No Action Letter (NAL) to TransForce stating that the Commissioner of Competition does not, at this time, intend to make an application under section 92 of the Competition Act (Act) in respect of the transaction. Section 97 of the Act provides for a one-year period following completion of the transaction during which the Commissioner may challenge the transaction before the Competition Tribunal.

Background:

TransForce, through its affiliates, and Vitran are active in the freight industry through the provision of road and intermodal (a combination of road and rail) freight services to Canadian and international customers. In particular, Vitran and TransForce’s affiliates are significant competitors in the supply of intermodal less-than-truckload (LTL) services between central and western Canada. On January 22, 2014, the Bureau received notification from TransForce that it intended to acquire the remaining outstanding shares of Vitran that it did not already own. The transaction is the third acquisition by TransForce of a competitor in the intermodal freight industry in the past three years (QuikX was acquired in 2012 and Clarke Transport in 2013).

In conducting its review, the Bureau interviewed and sought data from industry stakeholders, including customers and competitors to the parties, and reviewed documentary evidence and data from the parties. Ultimately, the Bureau determined that the proposed transaction is not likely to result in a substantial lessening or prevention of competition in any relevant market due to effective remaining competition.

Relevant markets

Intermodal freight service, in contrast to road-only service, uses rail transport for long portions of a journey between origin and destination points. LTL providers, in contrast to truckload (TL) providers, aggregate the loads of smaller customers who are not shipping enough goods to fill an entire trailer or shipping container. Customers of intermodal LTL freight services include small and medium sized businesses in the retail and manufacturing sectors, and many other types of businesses.

The Bureau considers LTL and TL services to be separate product markets as they are not substitutes from a customer perspective. Customers that use LTL services do not have sufficient goods to fill an entire trailer and therefore benefit from sharing trailer space with other customers. In contrast, customers with sufficiently large loads must use TL services to meet their required capacity.

TL and LTL services can be further divided into road and intermodal services. Over long distances, intermodal services tend to be significantly less expensive than road-only services. They also typically have a longer delivery time than long-distance shipments made exclusively over the road. Therefore, for long-distance shipments, customers who choose intermodal services are typically more price-sensitive and less time-sensitive than those who choose long-distance road-only services. Since intermodal services differ from road services, both in terms of cost and speed of delivery, the Bureau determined that intermodal and road-only freight constitute separate relevant markets.

The focus of the Bureau’s review was LTL intermodal services between Toronto and Montreal and western Canadian cities, where the parties are particularly large, vigorous competitors. The Bureau also considered LTL services being provided to destinations in Atlantic Canada, but determined that, among other things, the remaining competition would be sufficient to constrain a post-merger exercise of market power by the merged entity.

Effective remaining competition

While several factors informed the Bureau’s analysis of the proposed transaction, the presence of effective remaining competition was the most significant factor in assessing whether a substantial lessening or prevention of competition would be likely.

The Bureau’s review found that there will be effective remaining competitors in the market post-merger. The presence of effective remaining competition, in particular from National Fast Freight and Consolidated Fastfrate, will continue to provide competitive constraint to the merged entity post-transaction.

Conclusion

While the transaction will lead to a significant market share for the parties in the provision of LTL intermodal services between central and western Canada, the Bureau concluded that the transaction is not likely to result in a substantial lessening or prevention of competition in any relevant market given, among other things, the presence of effective remaining competition.

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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