RBC/BMO Appendix B - Criteria Used for Local Market Classification

To ensure that competition concerns in each local market in which the Banks compete are accurately identified, the Competition Bureau used the following approach.

Personal and business transaction accounts in each local market are the core of most banking relationships for consumers and businesses, consequently if the Banks’ combined market share:

- of either the personal or business transaction accounts is 45% or more, the local geographic market falls in the category of 'Will result in a substantial lessening of competition’.

- of either the personal or business transaction accounts is between 35% and 45%, or any of the following product categories – personal loans/lines of credit, residential mortgages, small- or medium-sized business operating loans – is 35% or greater, the local geographic market falls into the category of 'May result in a substantial lessening of competition’.

- of either the personal or business transaction accounts, and any of the following product categories – personal loans/lines of credit, residential mortgages, small- or medium-sized business operating loans – is below 35%, the local geographic market falls into the category of 'Will not result in a substantial lessening of competition’.

These rules have been adjusted to discount for very small changes in market share.

The detailed formula applied to each local market is set out below.

'Will result in a substantial lessening of competition’

Local geographic markets fall into this category if:

- the combined market share of the merging parties in

- either personal or business transaction accounts is 45% or more, and

- the market share being acquired as a result of the merger is 5% or more.

'May result in a substantial lessening of competition’

Local geographic markets fall into this category if:

- the combined market share of the merging parties in

- either personal or business transaction accounts is 45% or more, and

- the market share being acquired as a result of the merger is less than 5%

or

- the combined market share of the merging parties in

- either personal or business transaction accounts is between 35% and 45%, and

- the market share being acquired as a result of the merger is 5% or more

or

- the combined market share of the merging parties in

- any one of the following: personal loans/lines of credit, residential mortgages, small- and medium-sized business operating loans are 35% or greater, and

- the market share being acquired as a result of the merger is 5% or more.

'Will not result in a substantial lessening of competition’

Local geographic markets fall into this category if:

- the combined market share of the parties is below 35% in any product market

or

- the combined market share of the merging parties in

- either personal or business transaction accounts is between 35 and 45%, and

- the market share being acquired as a result of the merger is less than 5%

or

- the combined market share of the merging parties in

- any of the following: personal loans/lines of credit, residential mortgages, small- and medium-sized business operating loans are 35% or greater and

- the market share being acquired as a result of the merger is less than 5%.

Note:

These rules were followed in every case except Toronto for the proposed Royal Bank of Canada/Bank of Montreal merger. The rule initially placed the Toronto CMA in the 'will result in a substantial lessening of competition’ category for that proposed merger because the business transaction account data indicated a market share exceeding 45%. However, due to the large number of corporate accounts booked in Toronto, the high market share may be somewhat overstated for SME firms. As a result, the Toronto CMA market requires further review.