Blair's And FCL: A Refresher On Vertical Mergers

It is widely recognized and accepted that vertical mergers are generally pro-competitive or benign. For example, the Competition Bureau (the "Bureau") has stated in its Merger Enforcement Guidelines (the "MEGs") that vertical mergers "may not entail the loss of competition between the merging firms in a relevant market" and "frequently create significant efficiencies", such as efficiencies related to quality improvements, increased innovation, the creation of maverick firms and the elimination of double-marginalization (or double markups in price by cutting out the middle-person in a supply chain). That being said, as is evident from the Bureau's recent review of the proposed joint venture between Federated Co-operatives Limited ("FCL") and Blair's Family of Companies ("Blair's") (the "Proposed Transaction"), vertical mergers can raise competition concerns in some circumstances, such as where they result in a competing firm being foreclosed from the market.