New global playing field: Transactional firms loading up on top- tier competition talent

Here is a not-so-secret secret: Competition lawyers don’t really like competition. Oh, they have to pay it lip service, to be sure. A competition lawyer’s favourite cliche is the apposite: “You’ve got to love competition as a competition lawyer, right?”

They utter it repeatedly as they do battle with Canada’s Competition Bureau on behalf of corporations pursuing mergers, acquisitions, strategic alliances and the like; they say it even more frequently as they battle each other in beauty contests to grab those competition mandates. But they don’t really mean it — particularly as it pertains to them.

Canadian competition lawyers are still getting used to competition among themselves as transactional firms realize they must have top-tier competition ability or perish.

A decade ago, Canadian competition law was dominated by a handful of marquee names, mostly former Competition Bureau henchmen and a couple of crack Competition Tribunal litigators.

Today, in Toronto at least, every law firm that wants to be considered a business law firm is home to capable competition law practitioners, or frantically searching for them.

And it’s not just because competition issues are on the agenda of just about every deal of note (although they are). It’s Bay Street’s new reality: If the other firm has competition capability and you don’t, who’s to say they’re going to stop at doing the competition piece of the client’s work?

“If you want to be a strong transaction firm it makes a lot of sense for the business model to have a strong competition group,” says Paul Collins, head of the competition group at Stikeman Elliott.

“What you don’t want is the leakage of any work. While some of the best files we have worked on the competition side have been organic to the firm, the flip side is also true. Some of the best files have come to us just for the competition work, especially on the international side. That’s an opportunity for us to cross-sell our corporate group.”

That means either getting the inside track with an international client who may not have Canadian counsel, or wooing a client away from its existing Canadian counsel.

The result is not just intense competition for competition work but a brisk trade in competition practitioners, particularly those with Competition Bureau experience, and a significant boost in the prestige of competition lawyers. Suddenly, competition law is sexy.

Weirded out? Blame globalization.

“We have been eliminating trade barriers around the world for many years now,” says Yves Beriault, a senior partner with McCarthy Tetrault in Montreal and arguably Quebec’s most highly regarded competition lawyer.

“When you do away with barriers between countries, when you open up your borders, you force Canadian business to compete with businesses — at least in certain industry sectors — that are not in Canada.

“If you are a barber shop in Thunder Bay, globalization and trade liberalization are irrelevant, but both have a significant impact if you are a large manufacturing unit that has been protected by tariff barriers previously,” he says.

Like all competition lawyers who spend their working days negotiating with the Competition Bureau, Mr. Beriault believes competition is good. Ditto for globalization.

“We have pursued trade liberalization because we think competition is a good thing. And when you think about globalization and its relationship to competition law, the first thing to say is that globalization and free trade have the same objective as competition law.”

That objective is more competition of the global, or at least as per NAFTA, the North American kind.

One of the responses to the globalization of competition has been a dramatic increase in competition-antitrust authorities around the world, notes Cal Goldman, head of the competition group at Blake Cassels & Graydon and a former director of competition (as the title then was) of the Competition Bureau from 1986-1990.

When Canada’s Competition Act became law in 1986, making many of its provisions civil rather than criminal, Canada was one of maybe two dozen countries with competition laws and, as Mr. Goldman notes, “most were not enforced in a strong manner.”

Today, competition authorities of more than 100 national jurisdictions co-operate to varying degrees through organizations such as the Competition Law and Policy Committee of the OECD (Organization for Economic Co-operation and Development) and the International Competition Network.

“The importance of the role of competition authorities in many economies has only grown as has the need for them,” says Mr. Goldman. A paradox? Mr. Goldman thinks not; if anything, he casts strong competition laws as enablers of globalization.

Mr. Beriault agrees.

“It wouldn’t help us very much if we had free trade and we did not have strong competition law,” he says. “There is no point in abolishing trade barriers and then letting people do anti- competitive things because you don’t have strong competition laws.”

He points to the European Union, which accompanied its economic integration with extremely strong antitrust and competition provisions and has kabashed some of the largest and most “synergistic” mergers in the world. Remember Alcan’s first run to be the world’s largest aluminum company? Or the GE-Honeywell marriage approved by Washington and thwarted by Brussels? Or Time Warner- EMI?).

The impact of globalization has not gone unnoticed by its competition authorities.

As Sheridan Scott, the Commissioner of Competition, put it in a 2005 speech: “Not that long ago, the Bureau could fulfill [its] mandate with only a passing interest in global affairs. Sure, we would have the occasional cross-border merger; and every so often, an international cartel. But our interests for the most part stopped at the border. Now the question we find ourselves asking is: ‘Which border?’ ”

All these developments have been good for Canada’s competition lawyers. Although market size rules and, as such, Ottawa is rarely the defining role in the Ottawa-Washington-Brussels “triangle” as Mr. Goldman dubs it, any global deal that has even a small Canadian component has Canadian competition work that can and has led to bigger and better things.

Globalization is sneaking into even the most domestic of deals, and Ms. Scott is on record as saying that the Competition Bureau recognizes the playing field of much of today’s business is global.

In the wake of the 2003 Federal Court of Appeal decision in the Superior Propane Inc.-ICG Propane Inc merger, she reaffirmed that the fabled efficiency defence (under which efficiencies resulting from a merger may offset anti-competitive effects) is alive and well and may not require four years of litigation before the Competition Tribunal.

That doesn’t mean the door is open to anti-competitive domestic mergers or that bank mergers — every Canadian corporate lawyer’s ambition — are around the corner.

“Wrapping yourself in the Canadian flag will not help you with the bureau,” says Mr. Collins.

Still, the bureau’s increasing awareness that even domestic competition issues have a broader context is cheering news for the bar because many of their clients like the limitations of competition law about as much as the competition bar likes competition for competition work.

It’s not hard to see why: The deals with the best synergies are often at least a little anti-competitive. “Those mergers that tend to be most anti-competitive tend to be the ones that produce the most synergies,” acknowledges Mr. Collins. “They’re anti- competitive because of the synergies.”

Desirable because of the synergies. Desirable because they’re anti-competitive? The same phenomenon that has vaulted competition lawyers from a specialized sub-group of geeks to essential players on the biggest and most critical transactions helps them argue these synergies aren’t really anti-competitive but are good for competition — globally if not domestically.

Sometimes the Bureau agrees but sometimes it mires deals down in years of litigation before the Competition Tribunal. When it chooses, Canada’s competition watchdog has real teeth: It took Superior Propane four years of litigation to get its merger with ICG approved.

That’s why competition lawyers matter, and why competition capability will ultimately be one of the key differentiators between those Canadian law firms that survive globalization of business and professional services, and those that will be reduced to second or third-tier regional players.

“Within a law firm, it is essential that lawyers in the competition group are recognized as first class if the law firm itself is going to be held as first class in the field of mergers and acquisitions,” says Mr. Goldman. “We have found ourselves called to beauty contests where we present our credentials and the corporate counsel who will make the decision regarding who gets the work has pulled out international rankings of competition groups and compared how the people on our team compare relative to others they were considering.”

Things have come a long way from the 1990s when the field centred almost exclusively on practices built around former captains of the bureau such as Mr. Goldman or Lawson Hunter, the Stikeman Elliott alumnus who is now an executive vice-president at Bell Canada), as well as a smattering of competition litigators.

Recent rankings suggest the top transactional law firms are outpacing their competitors in competition law as much as they are in pure M&A, although the Toronto litigation boutique Affleck Greene Orr remains in a class of its own on the litigation side of the game. But lure over a top competition practitioner or two and you’re in the game. “We’re people — you move people, you instantly have a practice,” says Mr. Collins. “I don’t think it’s too late, and that is why you have seen so much mobility in the area. There have been a lot of people coming and going.”

Probably the most notable moves in the field have involved the exchange of former competition captains among Blakes, Davies Ward Philips & Vineberg and Osler Hoskin & Harcourt, all top business law firms with deep competition capability. “But to be fair, McCarthys, Torys, Faskens and others all have competition lawyers — they are very capable firms,” says one senior player. “If those firms wanted to make a concentrated effort to beef up in that area … well, we are not complacent in our position.”

Truth is, the real competition’s just getting started.

(Copyright National Post 2006)