The Competition Bureau announced today that it has reached an agreement to address competition concerns with the merger of two of Canada's largest pulp and paper manufacturers - Karta Halten B.V. (Paper Excellence) and Domtar Corp.
A Bureau review concluded that the proposed transaction would likely lessen competition substantially for the purchase of wood fibre - a key input in the manufacture of pulp - from the Thompson/Okanagan region of British Columbia.
The Bureau determined that the proposed transaction is anti-competitive because it would provide Paper Excellence with monopsony power in a large part of southern British Columbia. This would enable Paper Excellence to pay lower than competitive prices to sawmills and other suppliers of wood fibre in a region of British Columbia where Paper Excellence already has a high concentration of pulp mills.
To resolve the Bureau's concerns, Paper Excellence has agreed to sell Domtar's pulp mill in Kamloops, BC, following its acquisition. The sale will be made to an independent purchaser to be approved by the Commissioner of Competition.
The Commissioner is satisfied that the sale of the Kamloops mill will resolve the competitive issues arising from the proposed transaction. The complete agreement will be available on the website of the Competition Tribunal shortly.
Quick facts
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On May 11, 2021, Paper Excellence and Domtar entered into a definitive agreement whereby Paper Excellence would purchase Domtar for $55.50 per share, a consideration of approximately $3 billion.
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Monopsony power is essentially a 'mirror image' of monopoly power. Where a monopolist leverages market power to maintain prices of a product it sells above competitive levels, a monopsonist leverages market power to maintain prices of a product it purchases below competitive levels - resulting in reduced output.
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Consent agreements generally contain remedial measures that the Commissioner has determined are appropriate to address a proposed transaction's likely anti-competitive effects.
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A consent agreement has the force and effect of a court order once it is registered with the Competition Tribunal.
