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Competition Bureau statement regarding the acquisition of Ally Canada by Royal Bank of Canada

Position statement

OTTAWA, February 8, 2013 — This statement summarizes the approach taken by the Competition Bureau in its review of the acquisition of Ally Credit Canada Limited, ResMor Trust Company, and certain Canadian affiliates thereof (collectively, Ally Canada) by Royal Bank of Canada (RBC).

On January 24, 2013, the Bureau issued a No Action Letter to RBC indicating that the Commissioner of Competition does not, at this time, intend to make an application under section 92 of the Competition Act in respect of the proposed transaction.Footnote 1 The Bureau concluded that the proposed transaction was not likely to lead to a substantial lessening or prevention of competition for several reasons, including the fact that RBC's post-transaction market shares in the relevant markets would be modest, and that there would be sufficient remaining competition. In the course of its review, the Bureau conducted numerous interviews, including with automobile dealers, automobile manufacturers, financial institutions, and other stakeholders.

The proposed transaction was also subject to federal government approvals by the Minister of Finance pursuant to the Trust and Loan Companies Act and by the Superintendent of Financial Institutions pursuant to the Bank Act. The Bureau's conclusions on the proposed transaction were requested by the Department of Finance in respect of its own review, and were provided to the department.


The proposed transaction principally involved three areas of business carried on by Ally Canada, namely, consumer automobile financing, commercial automobile financing, and personal banking. From these areas of business, the Bureau's analysis focussed on the following potential product markets: indirect consumer automobile financing; subvention financing; floor plan financing; personal core deposits; and Guaranteed Investment Certificates (GICs). These product markets were determined largely by considering, among other things: the products' intended end-uses; available substitutes; relative price (e.g. interest rate) levels; end-user switching costs; and, the views, strategies and behaviour of buyers. For the product markets involving financing, both specific end-uses of the financing and the available sources of financing were considered.

The relevant geographic market was determined to likely be Canada. In some instances, it was not necessary to reach a firm conclusion on the precise definition of certain relevant markets because it was clear that the merger would not create, preserve or enhance market power under any plausible market definition.Footnote 2

Indirect consumer automobile financing

A consumer has several financing options when acquiring a vehicle, including: (i) a cash purchase using one's own savings; (ii) a cash purchase using a loan or line of credit directly from a financial institution (i.e. direct financing); (iii) leasing from the dealer; or (iv) financing through the automobile dealership with the loan originating from a financial institution or an automobile manufacturer's in-house credit company (i.e. indirect financing). The Parties' collective share of the indirect consumer automobile financing market did not exceed the 35% threshold for unilateral effects set out in paragraph 5.9 of the Bureau's Merger Enforcement Guidelines (MEGs), and it was determined that there was effective remaining competition from major banks, other financial institutions and, where applicable, automobile manufacturers' in-house credit companies.

Subvention financing

Most automobile manufacturers from time to time offer promotional interest rates to consumers, typically on certain models of vehicles, and on a time limited basis. Subvention financing is an arrangement whereby a financial institution provides preferred lending rates to an automobile manufacturer so that the manufacturer can efficiently offer promotional interest rates to consumers. The automobile manufacturer pays the difference between the rate received from the financial institution and the promotional rate offered to consumers. Automobile manufacturers often select a few independent finance providers to ensure consistent and competitive financing rates, as well as efficient decision-making on credit applications and funding of loans. The Bureau concluded that, post-transaction, RBC would continue to face effective competition in this market from several major banks.

Floor plan financing

Floor plan financing is effectively a line of credit extended to an automobile dealership to enable it to purchase vehicles for inventory. With floor plan financing, the dealer pays back the borrowed funds for the vehicle as soon as the vehicle is sold, or at the end of a pre-determined payback period. Floor plan financing is unique relative to other forms of financing, as it involves significant amounts of capital, and typically requires lenders to possess a specialized knowledge base and appropriate systems for the management of credit repayments as a dealer's vehicle inventory is turned over. As above, the Parties' collective share of this market did not exceed the 35% threshold set out in the MEGs; moreover, the Bureau concluded that, post-transaction, effective competition would remain from several major banks.

Personal core deposits and GICs

Personal core deposits and GICs were the only material areas of overlap between the parties' respective personal banking businesses. For the purposes of the Bureau's analysis, "personal core deposits" included personal savings accounts (including tax-free savings accounts) and chequing accounts; meanwhile, "GICs" included GIC products of varying terms (e.g. 30 days, 1 year, 5 years, etc.). While each of personal core deposits and GICs may form part of separate broader product markets, the Bureau considered that even if each were treated as a distinct product market, the incremental increases in RBC's shares for these products would be insignificant, and that there would continue to be effective competition post-transaction.

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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