On November 15, 2013, Reynolds Consumer Products, Inc. (Reynolds) agreed to acquire the North American division of Novelis Foil Products for $35 million. Six months later, on May 26, 2014, the Competition Bureau (Bureau) allowed the acquisition by issuing a No Action Letter to Reynolds and announcing that the merger would be unlikely to cause a substantial lessening or prevention of competition.
Transaction Background
Both parties manufacture and supply aluminum foil wrap and semi-rigid aluminum containers. Novelis operates two manufacturing plants and three distribution facilities in Canada, while Reynolds manufactures in the U.S. and distributes to Canada through its two Canadian distribution facilities.
The Bureau’s Analysis
The Bureau conducted separate analysis for aluminum foil wrap and semi-rigid aluminum containers.
The Bureau held that the merger would not affect the level of competition in the aluminum foil wrap market sufficiently to warrant an application under section 92 of the Competition Act (Canada). Using information submitted by the parties as well as from third parties, like major grocery stores, the Bureau examined whether branded aluminum foil and private label aluminum foil are in the same product market, and suggested that they may not be. However, the Bureau determined that Reynolds’ presence in Canada did not have a noticeable impact on the price at which Novelis supplied aluminum foil wrap to Canadian retailers. As a result of that conclusion, the Bureau determined that it did not need to reach a definitive conclusion on the question of whether branded and private label aluminum foil are in the same product market. This approach highlights the highly evidence-based approach being adopted by the Bureau as traditionally branded and private label goods were routinely considered to be part of the same market.
When assessing the level of competition in the semi-rigid aluminum containers market, the Bureau looked at the number of existing competitors and their respective market share. The Bureau concluded that there are enough players remaining in the market to reduce the potential market harm the merger may cause. Additionally, the Bureau determined that there were low barriers to entry for U.S. based competitors aiming to enter the Canadian product market. Therefore, given the strong presence of the remaining competitors and low barriers to entry, it was determined that the merger would not have likely resulted in a substantial lessening of competition in the semi-rigid aluminum containers market either.
The author wishes to thank Lucy Liu, summer student, for her assistance in preparing this legal update.
