Competition Bureau statement regarding the Hillman Companies' acquisition of H. Paulin and Co.

Position statement

OTTAWA, February 14, 2013 — This statement summarizes the approach taken by the Competition Bureau in its review of the proposed acquisition by The Hillman Companies, Inc. of H. Paulin and Co., Limited as announced on December 18, 2012.

On February 7, 2013, the Bureau issued a No Action Letter (NAL) to Hillman and Paulin 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's review focussed on the competitive effects of the merger on the sourcing and wholesale distribution of retail hardware, including fasteners and other hardware-related accessories, to retail stores in Canada. Although the Bureau found that Hillman and Paulin held moderate market shares in a number of geographic markets, it was ultimately concluded that a substantial lessening or prevention of competition resulting from the merger was unlikely for numerous reasons, including effective remaining competition, countervailing power held by large retail customers, and potential entry of U.S. firms.


On December 18, 2012, Hillman and Paulin announced that they had entered into an agreement whereby Hillman would acquire all of the issued and outstanding shares of Paulin. Both companies are wholesale suppliers of retail hardware to retail stores. Retail hardware consists of many types of fasteners, such as screws, nuts, bolts, and washers, as well as other hardware-related accessories like door and cabinetry hardware, brackets, and hooks. These products are typically found in retail hardware stores and building supply stores.

The Bureau's review focused on whether the proposed transaction would provide Hillman with the market power to increase prices to its customers, mainly retail stores. In conducting its review, the Bureau contacted market participants, including major customers of Hillman and Paulin, in order to gather information regarding the potential competitive effects of the proposed transaction.

Companies such as Hillman and Paulin provide a number of primary services to their customers. These include sourcing and importing retail hardware products; wholesale distribution and inventory management; and merchandising, which involves the design and implementation of how products are arranged and displayed. Based on the information available, the Bureau concluded that the relevant product market was the wholesale supply of retail hardware products to retail stores, which includes the associated services of sourcing, distributing and merchandising.

Both Hillman and Paulin provide wholesale supply services across Canada and generally serve their customers through regional distribution centres. These centrally located facilities reduce transportation costs and allow the merging parties and their competitors to provide effective in-store support to retail stores. Accordingly, the Bureau concluded, based on the information available, that the geographic markets are regional in scope.

In conducting its review, the Bureau examined the extent to which effective competition would remain following the merger. The Bureau found that there are two significant and larger competitors, Richelieu Hardware and National Hardware (owned by Stanley Black & Decker), as well as a number of smaller regional competitors that will likely remain a significant source of competition to Hillman. Another key factor in the Bureau's analysis was the extent of countervailing power held by large customers. The Bureau found that many of the customers were large, sophisticated companies that were able to source their supply of retail hardware products directly from manufacturers, and had considered doing so. Additionally, these manufacturers are increasing their marketing efforts to secure these customers directly. Lastly, the Bureau concluded that the threat of entry by large U.S. competitors was high and that the industry had shown a history of such entry, both by expansion directly into Canada or by combining with smaller Canadian firms.

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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