Competition Bureau’s remedy assessment letter to the Minister of Transport for Bunge’s proposed acquisition of Viterra

November 27, 2024

Table of contents:

• Background
• Overview of Concerns and Proposed Undertakings
• The Proposed Undertakings Do Not Accord with Principles of Merger Remedy Design
• Conclusion
• Appendix A: Competition Bureau matters in the agriculture industry requiring structural remedies
• Footnotes

Letter to the Minister of Transport: Assessment of the adequacy of proposed undertakings as required by subsection 53.2(6) of the Canada Transportation Act regarding the proposed acquisition of Viterra by Bunge

Dear Minister Anand:

In accordance with section 53.2(6) of the Canada Transportation Act (the “CTA”), I am writing to provide my assessment of the adequacy of the undertakings proposed by Bunge Limited (“Bunge”) and Viterra Limited (“Viterra”) (collectively “the Parties”) to address the competition concerns that are likely to occur due to the proposed acquisition of Viterra by Bunge (the “Merger”). In short, my conclusion is that the undertakings proposed do not remedy the competitive harm that is likely to result from the Merger. Were these undertakings to be proposed to the Bureau in the normal course of a merger review I would not accept them.

As set out in detail in my report sent to Minister Rodriguez on April 22, 2024 (the “Report”), I concluded that the Merger is likely to harm competition in agricultural markets in Canada. In particular, I identified the following significant concerns:

1. Bunge can materially influence the G3 group of companies ("G3") through its 25% shareholding (“minority interest”) in G3 Global Holdings Limited Partnership. G3 is also a Canadian grain company who competes with Viterra. The ability of the combined Bunge-Viterra business to access G3’s competitively-sensitive information and influence G3’s behaviour poses significant competition concerns.
2. The Merger is likely to substantially harm competition for the purchase of canola from farmers in the areas of Bunge’s Altona, Manitoba and Nipawin, Saskatchewan canola crushing facilities.
3. The Merger is likely to result in a substantial lessening of competition with respect to the sale of canola oil to customers in Eastern Canada who cannot receive canola oil by rail.

These conclusions were based upon analysis of a broad range of sources of information, including extensive stakeholder consultation, review of internal records produced by Bunge, Viterra and G3, data analysis, and independent expert economic and corporate governance analysis.

Since sending the Report in April 2024, the Competition Bureau (the “Bureau”) engaged with the Parties on the Report, collected information from the Parties and stakeholders and got updated views from the economic and corporate governance experts that considered new information. None of this additional information or analysis changed the conclusions set out in the Report.

The type and scope of remedies that the Bureau would typically expect to resolve the competition concerns in Canada would be similar to those offered by the Parties to remedy competition concerns with respect to the Merger in foreign jurisdictions, including the sale of significant assets. For example, to fully address competition concerns related to oilseeds found by the competition agency in Europe, the Parties have agreed to sell Viterra's entire oilseed businesses in Hungary and Poland.^{Footnote 1}

In Canada, the Parties propose the following undertakings to address the concerns identified in the Report:

1. To address Bunge’s ability to materially influence G3, the Parties propose various commitments to:
   1. replace Bunge-appointed directors on G3’s board with directors Bunge claims will be independent,
   2. waive Bunge’s shareholder veto rights in certain situations, and
   3. restrict Bunge’s access to certain types of confidential information of G3.
2. To address the concerns identified in the areas of Bunge’s Altona and Nipawin crushing facilities, the Parties propose to sell four grain elevators in the Altona area, and two grain elevators in the Nipawin area. The Parties’ proposed undertakings regarding G3, summarized above, are also relevant to the areas surrounding Altona and Nipawin, since G3 operates several elevators in both areas.
3. Finally, to address the concern about the sale of canola oil in Eastern Canada, the Parties propose limited price control commitments.

The Bureau has significant experience in remedy design and implementation across numerous industries in Canada, including in the agriculture sector. Over the last 15 years, the Bureau has implemented over 60 merger consent agreements across all industries. In addition, the Bureau’s reviews relating to the agriculture sector include several applications to the Competition Tribunal (the “Tribunal”) under the merger provisions (section 92) of the Competition Act, as well as several extensive investigations under the abuse of dominance provisions (sections 78 and 79) and competitor collaboration provisions (section 90.1) of the Competition Act.^{Footnote 2}

Under the Competition Act, the Bureau aims to address competition concerns in all markets where a likely substantial lessening or prevention of competition has been identified. Historically, Supreme Court jurisprudence has held that "the appropriate remedy for a substantial lessening of competition is to restore competition to the point at which it can no longer be said to be substantially less than it was before the merger (the “Historical Remedy Standard”)."^{Footnote 3} More recent amendments to the Competition Act have specified that remedies must go further and preserve the level of competition that would prevail but for the merger (the “New Remedy Standard”).

The Parties’ proposed remedial undertakings will not fully address the substantial harm to competition that is likely to occur due to the Merger, and will be extremely burdensome to implement and monitor for compliance.

I have found that:

1. The undertakings related to G3 do not effectively remedy Bunge’s ability to materially influence G3 post-Merger. Bunge will continue to have the ability to access G3’s competitively sensitive information and influence G3’s behaviour. This will likely decrease the intensity of the competitive rivalry between G3 and the combined Bunge-Viterra;
2. The grain elevators that the Parties propose to sell are not a viable and effective remedy that meets the New Remedy Standard in the areas of Bunge’s Altona and Nipawin canola crushing facilities. In the Altona area, the grain elevators the Parties propose to sell also do not even meet the less onerous Historical Remedy Standard of removing the substantial harm to competition likely to result from the Merger. In the area of Bunge’s Nipawin crusher, the Parties have proposed to sell two grain elevators,                                       . Depending on the identity of the buyer, the sale of this elevator would address some of the harm likely to occur in that area. But it does not fully remove the harm or preserve the level of competition that would exist but for the Merger in that area.
3. The price control undertakings related to the sale of canola oil in Eastern Canada are limited and insufficient to meet either the Historical Remedy Standard or the New Remedy Standard. The Merger reduces the number of competing suppliers in the area to only two – Bunge and Archer-Daniels-Midland Company (“ADM”).

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Background

Statutory framework

The Report concluded that the Merger is likely to result in a substantial lessening of competition for the purchase of canola in the areas around Bunge’s Altona and Nipawin crushing facilities, as well as in the supply of canola oil to customers in Eastern Canada who cannot receive oil by rail.

The Report also found that Bunge can materially influence the economic behaviour of G3 and can access G3’s competitively-sensitive confidential information. The Merger will increase Bunge’s incentive to use this material influence and access to competitively-sensitive information in ways that are likely to result in harm to competition in agricultural markets in Canada.

Section 53.2(6) of the CTA requires that prior to making a recommendation to the Governor in Council regarding the Merger you obtain my assessment of the adequacy of any undertaking proposed by the Parties to address my competition concerns and the effects of any proposed revisions to the Merger on those concerns.

This letter is my assessment of the competition undertakings proposed by the Parties as of November 8, 2024, which I understand have also been provided to you.

The Bureau’s approach to merger remedies

The Bureau’s Information Bulletin on Merger Remedies in Canada describes the Bureau’s approach to viable and effective remedy design, evaluation and implementation.^{Footnote 4} In addition, recent amendments to the Competition Act in 2024 now require that remedies go further and preserve the level of competition that would have existed but for the merger. The New Remedy Standard signals Parliament’s intent to take a stronger position when remedying anti-competitive transactions, by enshrining in legislation a “higher bar” than previous guidance from the Supreme Court of Canada.^{Footnote 5} Under the Historical Remedy Standard, remedies only needed to go as far as removing the substantiality of the competitive harm to be effective (sometimes referred to as “eliminating the substantial lessening or prevention of competition”). Some harm to competition was still allowed.

In designing remedies under the Competition Act, the Bureau aims to address competition concerns in all markets where a likely substantial lessening or prevention of competition has been identified. The Information Bulletin on Merger Remedies in Canada outlines the criteria the Bureau applies to ensure that remedies to anti-competitive mergers be effective in addressing competition issues, including that the assets being sold are both viable and sufficient to address the competitive harm, and that any buyer of divestiture assets have an ability and intention to compete in the markets of competitive concern.

Remedies must also be enforceable and capable of timely implementation. To that end, remedial terms must be clear, compliance with the terms must be well defined and transparently observed, and monitoring of compliance must be enforceable.

The Bureau has applied this framework in over 60 merger consent agreements it has implemented in the last 15 years. The Commissioner has applied these same principles in assessing the various undertakings proposed by the Parties to address the competition concerns identified in my Report.

The proposed undertakings do not fully remedy the competitive harm likely to result from the Merger and deviate significantly from fundamental principles of effective remedy design.

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Overview of Concerns and Proposed Undertakings

The grain supply chain is a critical part of Canada's economy, generating economic growth and international trade, and ensuring Canada's domestic food supply. In the 2022-2023 crop year Canadian farmers grew over 90 million tonnes of grain, including wheat, canola, soybeans, barley, corn, oats, and rye.^{Footnote 6} Maintaining healthy competition in the grain supply chain is vital to the interests of Canadians.

The Report identified the following significant competition concerns likely to result from the Merger:

1. Bunge is able to materially influence G3 through its minority interest in G3 Global Holdings Limited Partnership. G3 is also a Canadian grain company who competes with Viterra. The ability of the combined Bunge-Viterra business to access G3’s competitively-sensitive information and influence G3’s behaviour is a competition concern.
2. The Merger is likely to substantially harm competition for the purchase of canola from farmers in the areas of Bunge’s Altona and Nipawin crushing facilities.
3. The Merger is likely to result in a substantial lessening of competition with respect to the sale of canola oil to customers in Eastern Canada who cannot receive canola oil by rail.

The Bureau found that other competitors were unlikely to enter or expand in a way that would constrain the market power of Bunge-Viterra after the Merger. Barriers to entry for the construction or expansion of grain elevators are high, as discussed in recent Tribunal jurisprudence.^{Footnote 7} Potential entrants face challenges including limited availability of appropriate sites for an elevator, access to transportation networks to move the grain onward, and high capital costs. While there are markets where entry or expansion of oilseed crushing facilities are anticipated, they will not affect the Bureau’s conclusions with respect to the markets identified above due to the locations of these projects.

The Parties propose the following undertakings to address the concerns identified in the Report:

1. To address Bunge’s ability to materially influence G3, the Parties propose various commitments to:
   1. replace Bunge-appointed directors on G3’s board with directors Bunge claims will be independent,
   2. waive Bunge’s shareholder veto rights in certain situations, and
   3. restrict Bunge’s access to certain types of confidential information of G3 that it otherwise would have had access to because of its minority interest.
2. To address the concerns identified in the areas of Bunge’s Altona and Nipawin canola crushing facilities, the Parties propose to sell four grain elevators in the Altona area, and two grain elevators in the Nipawin area. The Parties’ proposed undertakings regarding G3, summarized above, are also relevant to the areas surrounding the Altona and Nipawin crushers, since G3 operates several grain elevators in both areas.
3. Finally, to address the concern about the sale of canola oil in Eastern Canada, the Parties propose limited price control commitments.

There are significant problems associated with the undertakings proposed. I will address each of these in turn.

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The Proposed Undertakings Do Not Accord with Principles of Merger Remedy Design

The Bureau is guided by its policy on remedy design detailed in its Information Bulletin on Merger Remedies in Canada as well as its significant experience. The Bureau’s approach to remedy design is based on its experience implementing more than 60 merger remedies over the past 15 years, including several competition remedies relating to mergers in the agriculture sector.

In addition, the Bureau has considered recent amendments to the Competition Act in 2024 requiring that remedies preserve the level of pre-merger competition. The New Remedy Standard is a higher bar than the Historical Remedy Standard, which was that a remedy need only remove the substantiality of the lessening of competition.^{Footnote 8}

Remedies to anti-competitive mergers must be effective in addressing the competition issues identified. Under both the New Remedy Standard and the Historical Remedy Standard, this requires:

• assets being sold must be viable and sufficient to address the competitive harm;
• the buyer must be independent and have the ability and intent to compete in the impacted markets;
• the sale process must occur in a timely way that avoids or minimizes competitive harm between the closing of a merger and the final sale of the remedy assets;
• terms must be clear, and compliance with the terms must be well defined and transparently observed; and
• monitoring of compliance must be enforceable and not be burdensome for the merging parties, third parties or the Bureau.

The proposed undertakings do not fully remedy the competitive harm likely to result from the Merger. In key respects the undertakings also deviate significantly from internationally recognized fundamental principles of merger remedy design.

In the markets where the Report identified a substantial lessening of competition, the proposed undertakings do not meet the New Remedy Standard. The proposed undertakings do not meet the Historical Remedy Standard in the area of Bunge’s Altona crusher, or with respect to the sale of canola oil to customers who cannot receive oil by rail in Eastern Canada. The Parties have proposed one asset for divestiture that may meet the Historical Remedy Standard in the area of Bunge’s Nipawin crusher, but this would depend on the identity of the divestiture buyer.

Proposed undertakings related to concern that Bunge will be able to materially influence G3

As the Report describes, Bunge is likely able to materially influence G3 through its minority interest. Bunge holds significant shareholder veto rights over decisions that relate to core elements of G3’s competitive strategy. Bunge’s director nominees on G3’s board also hold director veto rights and receive competitively sensitive information, including board and governance materials. These materials include detailed financial, strategic, and competitive information. Other employees of Bunge who are not G3 directors have also received such information. Following the Merger, the potential for competitive harm resulting from Bunge’s minority interest will be greatly amplified given Viterra and G3 compete in a number of markets in the agricultural supply chain in Canada.

Bunge’s proposed behavioural undertakings involve commitments to:

1. replace Bunge-appointed directors on G3’s board with directors Bunge claims will be independent,
2. waive Bunge’s shareholder veto rights in certain situations, and
3. restrict Bunge’s access to certain types of confidential information of G3.

The Parties’ proposed undertakings related to these concerns are behavioural, rather than structural, in nature. Rather than selling its interest in G3, which would permit G3 to operate as an independent business, Bunge proposes to change the way it engages with G3.

As is noted in the Information Bulletin on Merger Remedies in Canada, behavioural remedies are typically less effective than structural remedies as they do not address the lasting structural change to the market that results from a merger – in this case the elimination of Viterra as a competitor. Effective structural remedies that are viable and sufficient serve to replace the competition that would otherwise be lost in the market through the sale of assets. Competition authorities prefer structural remedies over behavioural remedies because:

• the viability and effectiveness of the assets being sold can be more readily assessed than behavioural commitments,
• the assets being sold will be operated by an independent purchaser that is approved to ensure their ability and intention to use the assets to compete in the relevant market,
• they have clear terms,
• they are less costly to administer, and
• they are readily enforceable.

Behavioural remedies impose an ongoing burden on authorities and market participants, including the merged entity, rather than providing a permanent solution to a competition problem. As a result, the Bureau will typically not accept a behavioural remedy where an effective structural remedy is possible.

Even if such a behavioural remedy is designed in clear and workable terms, it is likely to be less effective as it is not possible to foresee and address all potential future changes to a market and similarly, it is difficult to predict how a business may evolve making it more difficult to enforce than a structural remedy.

The vast majority of the remedies negotiated by the Bureau are structural. On average, for mergers, the Bureau negotiates 4-5 remedies per year, and it has been almost a decade since it last accepted a standalone behavioural remedy. With respect to the agriculture industry specifically, in the last 15 years, the Bureau has implemented nine remedies. In all instances these remedies have consisted of structural sales of assets. A summary of key Bureau reviews in the agricultural sector requiring structural remedies such as the sale of grain elevators or terminals, standalone retail locations, and complete business units is provided in Appendix A. These asset sales are similar to remedies that the Parties have agreed to in foreign jurisdictions to remedy competition concerns with respect to the Merger. For example, to fully address competition concerns raised by the European Commission, the Parties have agreed to sell the entirety of Viterra's oilseed businesses in Hungary and Poland.^{Footnote 9}

The Bureau may determine a behavioural remedy is effective where the following conditions exist:

• it consists of short term measures to support a structural remedy;
• it requires minimal or no ongoing monitoring by the Bureau; and
• it is enforceable by the Tribunal or a court.

In this case, the proposed undertakings are not short-term measures to support a structural remedy and monitoring Bunge’s compliance with them will be burdensome and time consuming.

While the proposed undertakings do provide for oversight by a Monitor, that Monitor will be appointed by Bunge. Generally, Monitors are appointed by the Bureau to ensure independence, and should have the required skills and capacity to carry out their obligations. In this case, the Monitor to be appointed by Bunge will have limited ability to monitor all relevant communications related to Bunge’s relationship with G3. This will limit the Monitor’s ability to confirm that the restrictions on the sharing of competitively-sensitive information are being followed, and may also result in breaches that go undetected. This means that the Monitor will not be able to effectively monitor Bunge’s compliance or detect breaches.

The undertakings as proposed also suffer from significant additional limitations:

• Bunge-appointed directors will still be representatives of Bunge, and it would be typical for them to communicate with Bunge to understand Bunge's strategic goals for G3. This provides a channel through which Bunge may influence G3. These directors may also obtain influential positions on G3 board committees.
• Bunge has an incentive to influence the director selection process in ways that would result in the selection of directors who are aligned with Bunge's interests, or to promise directors future opportunities with Bunge.
• While Bunge will waive certain of its shareholder veto rights, the waiver is limited to a specific set of business activities. Bunge would retain the ability to veto other decisions. Bunge will not waive director veto rights. Given the concerns identified above about director independence, the remaining veto rights create an additional possible channel of influence.
• There are no restrictions on Bunge receiving information about G3 from sources other than through Bunge’s shareholder rights. Bunge may still have access to this information through Bunge’s commercial agreements with G3, or from other shareholders of G3 like the Saudi Agricultural and Livestock Investment Company (“SALIC”). There are no restrictions on Bunge’s ability to discuss its views on G3’s business strategy and operations with SALIC.

Proposed undertakings related to competition concerns in the areas of Bunge’s Altona and Nipawin crushing facilities

As described in the Report, the Merger is likely to result in a substantial lessening of competition for the purchase of canola from farmers in the areas of Bunge’s Altona and Nipawin crushing facilities. The evidence supports that Viterra is a vigorous and effective competitor to Bunge and G3 with significant operations in Western Canada. In particular, Viterra is the licensed operator with respect to 65 of the 335 licensed primary grain elevators in Western Canada, more than any other company.

To address this concern, the Parties propose to sell four grain elevators in the Altona area, and two grain elevators in the Nipawin area. The Parties also claim that the proposed behavioural commitments with respect to G3 (discussed above) ensure that, going forward, the G3 elevators will operate as independent, vigorous competitors in these two areas. For the reasons set out in the preceding section discussing the proposed undertaking related to the concern that Bunge will be able to materially influence G3, the Bureau disagrees, and so the analysis here focuses on whether the sale of the grain elevators alone will remedy the competitive harm.

The Bureau has reviewed the proposed elevators for sale and concluded that they do not meet the criteria for an acceptable remedy. As noted in the Information Bulletin on Merger Remedies in Canada, the assets chosen for sale must be both viable and sufficient, and the sale must occur in a timely manner.

The Bureau reviewed documentary evidence and feedback obtained from key stakeholders, including farmers in the relevant markets and grain companies. Based on the analysis of the evidence and information received, I have concluded that five of the six elevators proposed for sale are not a viable remedy.

As described in the Report, primary grain elevators typically purchase grain from farmers and store it until it can be taken by rail to its next destination, which may be a processing facility (such as an oilseed crushing facility) or port terminal for export. Oilseed crushing facilities also purchase grain directly from farmers. One of the features that is important for a grain elevator is the number of “rail car spots” they have along the siding for loading railcars with grain. Newer elevators may have “loop tracks”, which can load grain onto trains without decoupling the cars from the locomotive. This can significantly increase the efficiency of an elevator when loading grain.

The information reviewed by the Bureau indicates that a grain elevator’s characteristics, such as grain storage and handling capacity, have a significant impact on its ability to compete for the purchase of canola in the relevant markets, and its desirability as an asset to be sold.

The facilities buying canola in the areas of Altona and Nipawin are a mixture of

1. canola crushers;
2. high throughput grain elevators, typically with high capacity and 100+ rail car spots; and
3. low throughput grain elevators, typically with low capacity and 56 or fewer rail car spots.

 

The Parties own a mixture of asset types in each of these areas, including two canola crushers in the Altona area and one in the Nipawin area.

Most newly-built or recently renovated grain elevators have higher capacity and more rail car spots than older grain elevators. These high throughput grain elevators with 100+ rail car spots can effectively compete for the purchase of a grain such as canola.

As noted in my Report, canola crushers are particularly significant competitors in setting canola prices and competing for the purchase of canola in the relevant areas.

Less modern, low throughput grain elevators purchase grain less efficiently and may offer an inferior delivery experience for farmers. Grain elevators with fewer rail car spots are deprioritized by railways and receive less competitive rail rates. For these reasons, they cannot compete as effectively as standalone assets for the production of canola. In Canada (Commissioner of Competition) v Parrish & Heimbecker, Limited, the Tribunal acknowledged that if an elevator’s rail capacity had been expanded from 56 to 112 cars, that elevator would have been a more vigorous competitor in the markets at issue in that application.^{Footnote 10}

Of the six grain elevators the Parties are proposing to sell, only one, in the Nipawin area, has a storage capacity of greater than 30,000 metric tonnes (MTs) and more than    rail car spots. This elevator was generally considered by stakeholders to be a relatively modern elevator capable of efficiently competing to purchase canola.

The remaining five grain elevators the Parties are proposing to sell were described by stakeholders as less modern and less efficient assets. Specifically:

• The second elevator in the Nipawin area has a capacity of less than 3,000 MTs. Stakeholders described it as very small                                                                                                     
                                                                                                      
                                          
                               .
• Three of the elevators in the Altona area have capacities of approximately 10,000 MTs or less, and    or fewer rail car spots. These elevators were described by stakeholders as being smaller and less efficient. This could result in longer wait times for farmers delivering grain. Farmers indicated that long wait times can negatively impact them financially because they affect the number of deliveries that can be made in a day.
• The remaining elevator in the Altona area has a capacity greater than 30,000 MTs, but only    rail car spots. More significantly, it has not been operational for over two years, and Viterra has opened a new high-throughput elevator nearby.                                                                                                     
                                                                                                      
                                                                                                      
                                                                                                      
                           

                                                                                                    
                                                                                                    
                                                                                    

In summary, feedback from relevant stakeholders indicates                                                                                                     
                                              There are other newer, more effective elevators in the Altona and Nipawin areas, including modern high-throughput elevators owned by Viterra and G3. G3 is known for its network of high-throughput elevators with loop track rail connections, and the majority of Viterra’s grain elevators have more than 100 rail car spots and capacities greater than 30,000 MTs.

Even if there was a purchaser interested in purchasing the other proposed divestiture elevators, based on the characteristics of those elevators a buyer may not be interested in using them to purchase canola.                                                                                                     
                                                                                                   

As described in the Information Bulletin on Merger Remedies in Canada, under the Bureau’s approach to identifying an acceptable buyer,

• the sale of the asset to the proposed buyer must not itself adversely affect competition;
• the buyer must be independent (i.e., at arm’s length) from the vendor;
• the buyer must have the managerial, operational, and financial capability to compete effectively in the markets of concern; and
• the buyer must have the intention to use the assets to compete in the markets of concern post divestiture.

A buyer who would not use these elevators to compete against the combined Bunge-Viterra for the purchase of canola would not be an acceptable buyer.

Based on the information reviewed by the Bureau, many of the grain elevators that the Parties propose to sell                                                                                                     
                                                                          
Information collected by the Bureau indicates that the time and cost to upgrade elevator capacity and rail car spots are significant. Depending on the grain elevator’s location and available land, it may not be possible.                                                                                                     
                                                    
As is noted in the Information Bulletin on Merger Remedies in Canada, divestitures must include all assets necessary for the buyer to be an effective long term competitor who will preserve competition in the relevant market.

Based on the above, I am of the view that five of the six elevators the Parties have proposed to sell are not desirable for effectively competing against the combined Bunge-Viterra for the purchase of canola and                                                                                                     
                                                                                                    
                                                                                                    
                                                                                                    
                                   

The Bureau also considered whether the proposed divestitures would meet either the New Remedy Standard or the Historical Remedy Standard in the markets where harm is likely to occur. The Report outlines that the Bureau investigation found that the Parties’ market shares in the Altona and Nipawin areas would be significant and concluded that this would lead to likely material decreases in prices paid to farmers for their canola, which would result in significant lost farm revenues. The Report noted that market shares likely exceed 45% in the Nipawin area and 60% in the Altona area.

The impact of selling the grain elevators proposed by the Parties on increased concentration and price effects resulting from the Merger is not sufficient to fully remedy the Bureau’s competition concerns.                                                                                                     
                                                                                                    
    

Even assuming these sales occur, the Merger would still give Bunge-Viterra the ability to exercise market power to the detriment of canola farmers in the Nipawin and Altona areas. The negative impact of this concentration will be made worse given the presence of G3 in these markets, and my conclusion above regarding the ineffectiveness of the behavioural undertakings proposed to address Bunge’s material influence on G3.

The sales of the grain elevators proposed by the Parties are not enough to meet the New Remedy Standard in the Nipawin and Altona areas. In the Altona area, the proposed elevators are also not enough to meet the Historical Remedy Standard. Substantial harm to competition is still likely to occur and farmers are likely to get materially lower prices for their canola.

As described above, the Parties have proposed one grain elevator for divestiture in the Nipawin area                               . Depending on the identity of the buyer, the sale of this elevator would address some of the harm likely to occur in that area. While it may meet the Historical Remedy Standard, it does not meet the New Remedy Standard. Farmers are still likely to face lower prices for their canola in the Nipawin area.

In summary, the elevators the Parties have proposed to sell are not sufficient to fully address the competition concerns identified in the Nipawin and Altona areas. They are neither                           nor sufficient to preserve competition in the relevant markets.

It is my view that there are various structural remedy options to address the competition concerns of the Merger. A remedy that meets the New Remedy Standard, such as by eliminating the overlap between the Parties in the relevant areas, (e.g., by selling Bunge’s or Viterra’s assets in the Altona and Nipawin areas) would also reduce the uncertainty around whether the divestitures are viable and sufficient. As noted in my Report, canola crushers are seen as particularly significant competitors, and are considered to have a large influence on pricing across an entire area which may contain a number of grain elevators. They are therefore considered more attractive assets to potential purchasers wishing to compete for the purchase of canola.

To resolve competition concerns with respect to the Merger in foreign jurisdictions, the Parties have agreed to significant sales of assets. For example, to fully remedy competition concerns raised related to oilseeds found by the competition agency in Europe, the Parties have agreed to sell Viterra's entire oilseed businesses in Hungary and Poland.^{Footnote 11} In Canada, the undertakings proposed by the Parties do not involve the sale of the entirety of either the Bunge or Viterra assets in the Altona or Nipawin areas. The proposed undertakings include the sale of a mix of Bunge and Viterra grain elevators,                                                                                                     
                                                                        

Proposed undertakings related to competition concerns with respect to the sale of canola oil in Eastern Canada to customers who cannot receive oil by rail

As noted in the Report, the Merger is likely to result in a substantial lessening of competition with respect to the sale of canola oil to customers in Eastern Canada who cannot receive oil by rail.

Oilseed crushing facilities like those operated by the Parties produce commodity oils from canola and/or soybeans. Oilseeds are a very significant part of Canada’s agricultural industry and canola represented approximately 20% of the grain grown in Canada in the 2022-2023 crop year. Oils produced in Canada are destined for a variety of uses including food, biofuel, industrial products, or export. Bunge owns more oilseed crushing facilities than any other grain company in Canada, including a crusher in Ontario which competes with a Viterra crusher in Quebec.

In Eastern Canada, the Merger will result in the removal of a significant competitor in an already concentrated market, and bring the number of remaining competitors who own crushers from three to two – Bunge and ADM.

To address this concern, the Parties have proposed limited commitments to supply bulk canola oil to certain customers in Eastern Canada at protected prices for five years.

These undertakings are entirely behavioural in nature. As such, my comments above related to the ineffectiveness of behavioural remedies apply here.

Price control measures do not replicate the outcomes of a competitive market. They also prevent the merged entity from efficiently responding to changing market conditions because they will be constrained by obligations under the price control undertakings. It is also difficult to determine how long the price control should last since it is challenging to gauge how long it will take for new entry or expansion to be established. In the present case, no new entry or expansion is anticipated within a foreseeable time frame.

The Parties propose that these commitments be offered to a limited set of customers. This means that the proposed undertaking is not intended to address all affected customers who may be subject to anticompetitive outcomes and increases the difficulty of administering and monitoring the commitments.

The Tribunal held that price protection commitments such as those proposed by the Parties are irrelevant to merger analysis. In its decision in Canada (Commissioner of Competition) v Rogers Communications Inc and Shaw Communications Inc the Tribunal confirmed that the Commissioner's concern in determining whether there is a substantial lessening or prevention of competition is whether the Parties have an enhanced ability to increase prices, and commitments not to do so are irrelevant to that analysis. Specifically, to the extent that merging parties are found to have a greater ability to increase prices materially, the test for a likely substantial prevention or lessening of competition would be met, regardless of any commitment that might be made not to exercise that market power.^{Footnote 12}

An effective structural remedy also exists to address the concerns the Report identified in this market. The sale of one of the Parties’ crushers would eliminate the overlap between them in this market and fully remedy the competition concerns.

In summary, the Merger will result in the removal of a significant competitor in an already concentrated market in Eastern Canada and bring the number of remaining competitors from three to two (a duopoly). The price control undertakings proposed by the Parties do nothing to change the fact that only two competitors will remain post-transaction. Moreover, the proposed undertakings will be offered only to a limited set of customers and therefore will not address all customers who may be subject to anticompetitive outcomes following the Merger.

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Conclusion

For these reasons set out above, it is my assessment that the undertakings proposed by the Parties do not address the competition concerns likely to result from the merger of Bunge and Viterra. As I stated at the outset of this letter, were these undertakings to be proposed to the Bureau in the normal course of a merger review I would not accept them.

Yours truly,

Matthew Boswell
Commissioner of Competition

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Appendix A: Competition Bureau matters in the agriculture industry requiring structural remedies

Over several decades, the Bureau has performed numerous reviews relating to the agriculture sector, including several resulting applications to the Competition Tribunal under the merger provisions (section 92) of the Competition Act, and many registered consent agreements.

Select examples of the Bureau’s reviews in this sector where structural remedies were obtained are summarized below.

United Grain Growers Limited / Agricore Cooperative Ltd. – Merger

In November 2001, United Grain Growers Limited acquired Agricore Cooperative Ltd. and began carrying on business as Agricore United. The Bureau concluded that this transaction was likely to prevent or lessen competition substantially in the purchasing and handling of grain in certain local markets in Western Canada and canola oil-seed purchasing and processing in Canada, as well as in the market for port terminal grain handling services. The Bureau and the merging parties entered into two separate consent agreements pursuant to sections 92 and 105 of the Competition Act to resolve the Bureau’s concerns in these markets. The consent agreements required divestitures including a grain terminal at the Port of Vancouver and grain elevators in Western Canada.

Saskatchewan Wheat Pool / United Grain Growers Limited – Merger

In November 2006, SWP announced its intention to make an unsolicited bid to acquire all of the outstanding securities of United Grain Growers Limited, carrying on business as Agricore United. Following its review, the Commissioner concluded that the transaction was likely to result in a substantial lessening and/or prevention of competition in the market for port terminal grain handling services on the West Coast of Canada and in certain markets for grain handling services in Western Canada. In March 2007, the Commissioner and Saskatchewan Wheat Pool entered into a consent agreement pursuant to which SWP agreed to sell nine inland grain elevators and a port terminal elevator in the Port of Vancouver to Cargill Ltd.

James Richardson International Limited / Agricore United – Merger

In June 2007 the Commissioner concluded that JRI’s acquisition of certain Agricore United grain elevators from SWP would result in a substantial lessening and/or prevention of competition in certain markets for grain handling services in Western Canada. The Commissioner and JRI entered into a consent agreement pursuant to which JRI agreed to sell its primary grain elevator located in Glossop, Manitoba and Agricore United’s primary grain elevator in Swan River, Manitoba in order to resolve the likely substantial lessening of competition in these local markets.

Dow / DuPont – Merger

In December 2015, E.I. du Pont de Nemours and Company (“DuPont”) and The Dow Chemical Company (“Dow”) entered into an Agreement and Plan of Merger. After conducting a review, the Commissioner concluded that the merger was likely to result in a substantial lessening and/or prevention of competition in the supply of certain products, including agriculture products (cereal broadleaf herbicides and cereal burndown herbicide additives) in Canada. In June 2017, the Commissioner, Dow and DuPont entered into a consent agreement pursuant to which the parties agreed to sell certain assets and businesses related to these herbicides used by Canadian farmers in the cultivation of cereal crops, including wheat, oats and barley.

Bayer AG / Monsanto – Merger

In September 2016, Bayer AG (“Bayer”) and Monsanto Company (“Monsanto”) entered into an agreement under which Bayer proposed to acquire Monsanto. The Bureau conducted an extensive review and concluded that this acquisition would likely substantially lessen and prevent competition in the supply of canola seeds and traits, soybean seeds and traits, nematicidal seed treatments, and carrot seeds. In May 2018, the Commissioner and Bayer AG entered into a consent agreement pursuant to which Bayer agreed to sell assets including its canola seed and traits business, soybean seed and traits business, carrot seed business, nematicidal seed treatment business, glufosinate-ammonium herbicide business, canola traits including the LibertyLink herbicide tolerance trait, assets related to the Centurion herbicide, and digital farming business in Canada.

BASF / Bayer AG - Merger

In 2017, BASF SE (“BASF”) proposed to purchase certain agricultural assets from Bayer following Bayer’s acquisition of Monsanto. The Bureau concluded that this acquisition would likely substantially lessen or prevent competition in the supply of canola seeds and traits in Canada. In June 2018, pursuant to a consent agreement between the Commissioner and BASF, BASF agreed to sell its Clearfield Production System for Canola to a purchaser acceptable to the Commissioner.

La Coop fédérée / Cargill – Merger

In March 2018, Cargill announced that it would sell its Ontario grain business, retail crop inputs business and a 50% equity interest in South West Ag Partners, Incorporated to La Coop fédérée (“LCF”). The Bureau concluded that the transaction was likely to result in a substantial lessening of competition in the retail supply of fertilizer and crop protection products in certain local markets in Ontario. In November 2018, the Commissioner entered into a consent agreement with the parties pursuant to which LCF agreed to divest Cargill’s retail locations in Alliston, Harrow, Tilbury and Waterford to a purchaser acceptable to the Commissioner.

Federated Co-operatives Limited / Blair’s Family of Companies – Merger

In February 2021, FCL and the Blair’s Family of Companies (“Blair’s”) announced that they would enter into a joint venture. The Bureau concluded that the transaction was likely to result in a substantial lessening or prevention of competition in the supply of crop inputs (such as fertilizer, crop protection products, and seeds) in the Lipton, Saskatchewan area. In July 2021, the Commissioner entered into a consent agreement with the parties pursuant to which FCL and Blair’s agreed to divest Blair’s Lipton retail location, together with two satellite facilities, to a purchaser acceptable to the Commissioner.

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