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On this page:
- The Parties
- Market definition
- Competitive effects
- Barriers to entry
- Conclusion and remedy
On October 29, 2021, the Commissioner of Competition entered into a consent agreement with MacEwen Petroleum Inc. (MacEwen) and Grant Castle Corp. related to their proposed acquisition of 51 Quickie convenience stores, 22 of which include gas stations, in Ontario and Québec (the Proposed Transaction). The Commissioner concluded that the consent agreement is necessary to remedy the likely substantial lessening of competition with respect to the supply of gasoline to retail customers in Kemptville, Ontario.
The Bureau relied on the merging parties’ strategic and pricing documents, data analysis, and its framework and market specific knowledge developed during prior retail gas reviews to carry out its investigation. Through these efforts and the cooperation of the parties, the Bureau was able to quickly narrow the focus of the investigation to key issues.
The Bureau and the parties were able to achieve early resolution prior to compliance with the Supplementary Information Request, given the parties’ cooperation and willingness to resolve the Bureau’s concerns.
MacEwen is an independent fuel and retail convenience store operator with operations based in Ontario, Québec and Manitoba. It is headquartered in Maxville, Ontario and was founded in 1976. Grant Castle Corp. is an affiliate of MacEwen that holds the real estate associated with MacEwen’s retail gas business.
Founded in 1973, Quickie Convenience Stores Corp. (Quickie) was a privately-owned fuel retailer and convenience store operator headquartered in Ottawa, Ontario.
The Bureau conducted an analysis consistent with the framework established in previous retail gasoline mergers,Footnote 1 including an assessment of the impact of the Proposed Transaction through unilateral and coordinated effects. As in those previous retail gas cases, the Bureau determined the relevant product market was the retail sale of gasoline, as vehicle operating specifications constrain consumers in their ability to switch to other fuels. The Bureau considered that the relevant geographic market was generally local, given transport and opportunity costs associated with purchasing at more distant stations.
The Bureau conducted an analysis of several local markets in Ontario and Québec to determine which stations should be included in a given local market. In this regard, the Bureau relied on strategic and pricing documents provided by the parties, data analysis, and the framework and market-specific knowledge developed during prior retail gas reviews.
The Bureau’s analysis ultimately led it to conclude that the Proposed Transaction would likely result in a substantial lessening of competition in Kemptville.
The Bureau determined that the parties account for a significant proportion of retail gasoline sales in Kemptville and that the Proposed Transaction would result in market shares well above the 35% threshold established in the Merger Enforcement Guidelines. Furthermore, while certain local competitors will remain posttransaction, the Bureau found that prices in Kemptville are largely determined by local competitive dynamics and that a posttransaction price would therefore not likely be constrained by stations within or outside Kemptville.
As in previous cases, the Bureau also considered the impact of the Proposed Transaction on the ability and incentives of competitors in the relevant market to more effectively coordinate on pricing, having regard to a number of factors, including the reduced and limited number of competitors, the similarity of products offered and the transparency of pricing and of other market information.
As a result of its analyses, the Bureau found that, following the Proposed Transaction, MacEwen would have the ability, as well as an increased economic incentive, to raise prices at its stations in Kemptville.
Barriers to entry
Consistent with prior reviews, the Bureau determined that significant barriers to entry and expansion exist in the relevant market, including, but not limited to, high fixed costs as well as the need for environmental and regulatory approvals. The Bureau found that constructing a new retail gas station can cost from $3.2 to $4.6 million and that the process may take 20 to 36 months, including financing, regulatory approvals and construction.
Conclusion and remedy
Based on the significant concentration resulting from the Proposed Transaction and the substantial barriers to entry, among other factors, the Bureau concluded that the merger was likely to substantially lessen competition through a unilateral exercise of market power. The Bureau also concluded that the transaction was likely to increase the level of concentration in the retail supply of gasoline such that the extent, likelihood, frequency and duration of tacit coordination may be increased.
The Bureau, MacEwen and Grant Castle Corp have entered into a Consent Agreement that requires MacEwen to sell the retail gas station that was owned and operated by Quickie in Kemptville, Ontario before the merger. Selling the gas station in Kemptville eliminates any increase in concentration resulting from the Proposed Transaction.
The Commissioner of Competition has approved the sale of the station to Centex Petroleum, an independent retail gas site operator headquartered in Calgary, Alberta with over 100 sites in Canada. Centex is a new entrant to the Kemptville market.
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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