Canadian COMPETITION & ANTITRUST LAW

On October 30, 2009 the Competition Bureau (the “Bureau”) announced that British Airways plc has pleaded guilty in the Federal Court of Canada and been fined Cdn. $4.5 million for participating in an air cargo cartel with effects on Canada.  British airways admitted to fixing certain surcharges on the sale and supply of international air cargo exported on certain routes from Canada between April, 2002 and February, 2006.

In its news release, the Bureau stated:

“The fines obtained as a result of our investigation into the air cargo price-fixing conspiracy reflect the serious nature of this behaviour,” said Melanie Aitken, Commissioner of Competition. “The Bureau is committed to uncovering such anti-competitive agreements that harm Canadians, and taking criminal action against the conspirators.”

The latest fine in this case brings the total fines to more than Cdn. $14.6 million (Air France, KLM, Martinair and Qantas all previously pleaded guilty to fixing air cargo surcharges for shipments on certain routes from Canada).  This latest case is a reminder that criminal cartels remain an enforcement priority for the Bureau.

Under the federal Competition Act (the “Act”), which governs Canadian competition law, agreements between competitors to fix prices, divide markets, boycott competitors or restrict output can currently result in penalties of fines up to Cdn. $10 million per count and/or imprisonment for up to five years.

As a result of recent sweeping amendments to the Act, however, effective next March, the maximum penalties for offences under the criminal conspiracy provisions of the Act will be significantly increased to Cdn. $25 million per count and/or imprisonment for up to fourteen years.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy,  Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal,  Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging, Canadian Competition Law Resources, Competition Law Links or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to clients across Canada and internationally.  For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us at +1 604 687 0555 or +1 778 867 5558.

DISCLAIMER

The materials and information on CANADIAN COMPETITION LAW are provided as legal information about Canadian competition law.  Reading and accessing this information does not create a lawyer-client relationship.  The information on our blog does not constitute legal advice or a legal opinion on any issue.  In addition, the information and materials on this website will change based on new competition law developments and, as such, may not be current as of the date of access.  As such, we take no responsibility for the accuracy or currency of the competition law information or materials on our blog, which should not be relied upon without receiving legal advice from competent legal counsel

Steve Szentesi will be speaking at the World Council for Corporate Governance International Competition Law Conference in Delhi, India on 6-7 November, 2009.

He will be presenting a paper on Canada’s new merger control regime entitled “Convergence and Canada’s New Merger Control Regime”.  The paper will examine Canada’s recently amended merger control regime, parallels to U.S. merger control and recent Competition Bureau activities in the merger control area.

The Conference is being hosted by the International Academy of Law together with UK’s World Council for Corporate Governance and India ’s Institute of Directors.  The theme of the conference is “Competition Law: an Effective Tool for Making Markets Work for Inclusive Growth.”

The conference will be attended by Indian and International companies, Indian and International law firms, Chambers and industry associations, academics and students, competition law authorities, representatives from the judiciary in a number of countries and other regulatory bodies. 

For more information on the conference and the conference brochure, visit the WCCG website at www.wcfcg.net.   More more details about attending the conference, contact Sushil at sushil@iodonline.com.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy,  Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal,  Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging, Canadian Competition Law Resources, Competition Law Links or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to clients across Canada and internationally.  For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us at +1 604 687 0555 or +1 778 867 5558.

DISCLAIMER

The materials and information on CANADIAN COMPETITION LAW are provided as legal information about Canadian competition law.  Reading and accessing this information does not create a lawyer-client relationship.  The information on our blog does not constitute legal advice or a legal opinion on any issue.  In addition, the information and materials on this website will change based on new competition law developments and, as such, may not be current as of the date of access.  As such, we take no responsibility for the accuracy or currency of the competition law information or materials on our blog, which should not be relied upon without receiving legal advice from competent legal counsel

CANADIAN MERGER CONTROL

I.  Overview

The pre-merger notification provisions of the federal Competition Act (the “Act”) require both parties to specified types of transactions that exceed the statutory monetary thresholds under the Act to file pre-merger notification filings with the federal Competition Bureau (the “Bureau”).

In addition, regardless of size, any transaction that falls within the statutory definition of “merger” under the Act is potentially subject to substantive review by the Bureau to determine whether it is likely to result in a substantial prevention or lessening of competition in a relevant market or markets.

In other words, while the Act contains statutory monetary thresholds requiring that notification be made for transactions exceeding a certain size, mergers that fall below the statutory thresholds are also potentially subject to substantive review by the Bureau.

For mergers that exceed the statutory monetary thresholds, notification is mandatory and failure to notify is a criminal offence.

II.  Pre-merger Notification

In order for a transaction to be notifiable in Canada it must: (i) involve the acquisition of an “operating business” in Canada, (ii) be one of five specified types of transactions, (iii) exceed the statutory monetary thresholds and (iv) not fall within one of the statutory exceptions in the Act.

(a)         Canadian Operating Business

In order for a transaction to be notifiable in Canada, it must involve the acquisition of an “operating business” in Canada, which is defined under the Act as a business undertaking in Canada to which employees employed in connection with the undertaking ordinarily report for work.  In this regard, the Bureau has taken the position that employees may include both independent contractors and part time employees.

(b)      Types of Transactions

The five types of transactions that require pre-merger notification filing, assuming all of the other requirements are met, are: (i) asset acquisitions, (ii) share acquisitions, (iii) amalgamations, (iv) non-corporate combinations and (v) acquisitions of interests in non-corporate combinations.

(c)       Thresholds

A transaction must exceed the “size of parties” and “size of transaction” thresholds under the Act, which are cumulative. 

With respect to the size of parties threshold, the parties and their affiliates’ Canadian assets (or gross revenues from sales in, from or into Canada) must exceed CDN $400 million.  With respect to the size of transaction threshold, the book value of the target’s assets in Canada (or annual gross revenues from sales in or from Canada generated by those assets) must exceed CDN $70 million.

For share acquisitions, there is an additional threshold.  For the acquisition of public companies, the acquisition must result in the acquirer holding more than 20% of the voting shares (more than 50% if more than 20% is already held).  For the acquisition of private companies, the acquisition must result in the acquirer holding more than 35% of the voting shares (more than 50% if more than 35% is already held).

(d)      Exceptions

The Act also contains a number of exceptions from the pre-merger notification requirements, including certain ordinary course acquisitions of real property and goods, an underwriting exception, transactions between affiliates and where an Advance Ruling Certificate (”ARC”), which is one form of pre-merger clearance under the Act, is obtained.

III.  Who Must Notify

Both parties to a transaction (i.e., both the acquirer and the target) are required to file a pre-merger notification filing.  Parties may request that an ARC or “no action” letter be issued.  Parties will also often file a separate competitive effects brief with a pre-merger notification filing setting out the reasons why the proposed transaction is unlikely to prevent or lessen competition substantially in the relevant market(s).

IV.  Waiting Periods

Canada is a “suspensory” jurisdiction (i.e., parties to a notifiable transaction are not permitted to complete a transaction after filing unless the applicable waiting period has expired or clearance has been received).  Following recent significant amendments to the Act, Canada now has a U.S. style two-stage merger review process.

Under the new regime, filing triggers an initial 30 calendar day waiting period during which the parties to a transaction are not permitted to complete unless clearance has been received (either by receipt of a no action letter or ARC).

During this initial 30 day waiting period the Bureau may advise the parties to the transaction that it does not intend to challenge the transaction.  Alternatively, where the Bureau takes the position that there are potential issues, it may make a supplementary information request (the equivalent of a U.S. second request).  If the Bureau does so, the waiting period stops until a complete response has been filed whereby a second 30 day waiting period begins in which the parties are not permitted to close (again, unless clearance is received).

Under the new regime, there is no limit as to how long the second request process can take.  This is because the burden is on the merging parties to complete the request and, where a second request is made, the “clock” will not start again until the order has been fully complied with (compared to the lesser standard of substantial completion in the U.S). 

In addition, while parties are free to complete a transaction after 30 days of complying with a second request, the Bureau is not required to have finished its review by that time.  As such, parties may either opt to wait for the Bureau to complete its review or close and assume the risk that the Bureau may challenge the transaction post-closing.

The recently amended Act also now gives a court or the Competition Tribunal new powers relating to non-compliance with the statutory waiting periods.  These include, for a proposed transaction, the power to issue an interim injunction or compel the filing of information and, for a completed transaction, the power to order that the merger be dissolved, an order for the divestiture of shares or assets or “administrative monetary penalties” (essentially civil fines) of up to CDN $10,000 for each day of non-compliance.

V.  Clearance

Parties may complete a transaction when: (i) an ARC is received, which is the strongest form of clearance under the Act and typically issued in non-complex transactions where there are few or no issues and no overlap, (ii) a “no action letter” is received stating that the Commissioner does not, at that time, intend to apply to the Tribunal for remedies or (iii) the applicable statutory waiting period have expired.

It is worth noting, however, that the Bureau has the power to continue to review a transaction after the applicable waiting periods have expired if clearance has not been received.

VI.  Hostile Transactions

There are special rules under the Act for hostile transactions.  Under these rules, the initial 30 day review period begins on receipt of a complete filing from the bidder and the Bureau will notify the target that a filing has been received from the bidder and give the target 10 days to file from the date the target is notified.

In addition, the second 30 day waiting period, where a supplementary information request has been issued, begins when the Bureau receives the requested information from the bidder (i.e., regardless of when the target complies), which is intended to prevent targets from stalling a transaction by delaying filing.

VII.  Filing a Merger Notification

The Bureau’s Merger Notification Unit (“MNU”) is responsible for all pre-merger notifications in Canada. The MNU also gives guidance to parties regarding timing and information requirements for merger notification filings and enforces compliance with the pre-merger notification provisions of the Act.

VIII.  Substantive Review

Broadly speaking, the substantive review of a merger involves an analysis as to whether a proposed transaction is likely to prevent or lessen competition substantially in one or more relevant markets post-merger (i.e., to assess what the potential anti-competitive effects of a merger may be).  Whether a merger is likely to prevent or lessen competition substantially in a relevant market turns largely on whether the merged firm will be able to exercise a materially greater degree of market power in a relevant market(s) post-merger.

The framework to analyze the potential anti-competitive effects of a transaction includes evaluative criteria in the Act, Competition Tribunal (“Tribunal”) merger decisions and the Bureau’s Merger Enforcement Guidelines (“MEGs”).

In assessing potential competition issues associated with a merger, the Bureau considers both “unilateral effects” (i.e., whether the merged firm alone is likely to be able to exercise market power post-merger) and “coordinated effects” (i.e., whether a group of firms together are likely to be able to exercise market power post-merger).

This analysis of market power involves, among other things, the review of a number of factors including the estimated market shares of the parties, concentration in the relevant market (or markets), barriers to entry and other so-called “evaluative criteria” including effective remaining competition, foreign competition and countervailing power of customers.

Where the Bureau takes the position that a proposed merger is likely to prevent or lessen competition substantially, the Commissioner may seek remedial orders from the Tribunal including an order to block the merger (in the case of a proposed merger) or an order for the dissolution of assets of shares (in the case of a completed merger).  The Bureau has also sought injunctions in the past to allow more time for substantive review.

With respect to market shares, the Bureau takes the position in the MEGs that it will generally not challenge a merger on the basis of a concern of a unilateral exercise of market power where the post-merger share is less than 35% and will not generally challenge a merger on the basis of a concern of a coordinated exercise of market power if: (i) the combined post-merger share of the four largest firms in the relevant market (CR4) is less than 65% or (ii) the post-merger share of the merged entity is less than 10%.

IX.  Challenging a Merger

The Bureau has exclusive jurisdiction to challenge mergers under the Act and may challenge a merger either before or after closing.  The Bureau may seek an injunction to prevent closing or make applications to the Tribunal for remedial orders.

Remedial orders that the Tribunal may make include an order to block the merger, an order for the dissolution of the merger or for the disposition of assets or shares.  The Bureau may also challenge a transaction for up to one year after closing (which has recently been shortened from the previous three years).

However, while the Commissioner has the power to make applications to the Tribunal for remedial orders, contested merger proceedings are relatively rare in Canada with the majority of issues being resolved by way of negotiated settlements (i.e., consent agreements). 

OUR CANADIAN MERGER CONTROL SERVICES

We practice federal competition law, have provided competition law and compliance advice to clients across Canada and internationally and provide a full range of competition law services in relation to the criminal conspiracy, merger, abuse of dominance, misleading advertising and deceptive marketing provisions of the federal Competition Act.  We have provided pre-merger notification and foreign investment advice in relation to numerous domestic and cross-border mergers.  Our Canadian merger control and foreign investment services include:

- Advice on the application of the Competition Act to mergers.
- Application of the Investment Canada Act to foreign investment in Canada.
- Preparing pre-merger notification filings and submissions.
- Drafting transaction documents.
- Merger-related compliance guidelines (pre-merger conduct memoranda).
- Coordinating and advice in relation to multi-jurisdictional merger review.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy,  Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal,  Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to Canadian and international clients.  For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us on +1 604 687 0555 or +1 778 867 5558.

I.      CANADIAN MERGER CONTROL:  OVERVIEW

As in many other major jurisdictions, Canada has a well established merger control regime.  The pre-merger notification provisions of Canada’s federal Competition Act (the “Act”) require parties to specified types of large transactions that exceed the relevant statutory monetary thresholds under the Act to pre-notify the federal Competition Bureau (the “Bureau”).

In addition, regardless of size, transactions that fall within the statutory definition of “merger” under the Act, which is broad and includes both de jure acquisitions of control as well as acquisitions of a “significant interest”, are also potentially reviewable by the Bureau.

As a result of sweeping amendments to the Act earlier this year, significant changes were made to Canada’s merger control regime which now means that Canada’s law is more closely aligned with the merger notification process in the U.S. under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR Act”).  While beyond the scope of this paper, together with the changes to Canada’s merger control rules a new foreign investment regime and national security test were also introduced.

This paper discusses Canada’s previous merger control regime, the significant recent amendments, areas of convergence with other major jurisdictions and some of the key impacts for domestic and international companies.

II.     CANADA’S NEW MERGER CONTROL REGIME

As a result of sweeping amendments to the Act earlier this year, fundamental changes were made to Canada’s competition law. 

Some of the key amendments include: (i) introduction of a U.S. style per se criminal conspiracy rule (for price fixing, market allocation and output restrictions) with expanded potential civil liability, (ii) increased penalties for cartels consistent with international jurisdictions (fines up to Cdn. $25 million per count and imprisonment up to 14 years), (iii) decriminalization of the price discrimination and predatory pricing provisions, (iv) repeal of the former per se criminal price maintenance provision, (v) introduction of significant fines for abuse of dominance in line with other major jurisdictions such as the EU (up to Cdn $10 million and Cdn. $15 million for repeat contraventions), (vi) increased penalties for misleading advertising and (vii) introduction of a private right of access for civil resale price maintenance.

With respect to merger clearance, Canada has adopted a two-track merger notification and review regime that aligns Canadian law with the U.S. under the HSR Act.

Some of the specific key changes to Canada’s merger control regime include: (i) increasing the “size of transaction” threshold for notification, (ii) introducing a new U.S.-style two-stage waiting period process, (iii) giving the Bureau the power to issue U.S.-style second requests, (iv) reducing the post-closing period during which the Bureau may challenge a completed transaction and (v) new rules for hostile bids.

The introduction of Canada’s new merger control regime is based on recent recommendations of a federal Government Competition Policy Review Panel (the “Competition Review Panel”) which issued a report last year which, in addition to making a number of recommendations to update core areas of Canadian competition law, also made recommendations to more closely align Canada’s merger control regime with the U.S.:

“In assessing the effectiveness of Canadian competition law and policy, the Panel believes that it is desirable to conform Canadian legal requirements with those of the U.S., where practicably feasible, with a view to minimizing unnecessary procedural or substantive differences, given the high level of integration of business operations in the two countries.”

While the recent changes to Canada’s merger control laws are the most significant in two decades, they follow several years of increased merger control policy activity by the Bureau, which has led to increased convergence with other major jurisdictions, notably the U.S. and EU, and as well an increasingly formalized approach by Canada’s regulator (the Competition Bureau) to merger control.

Some of the key recent initiatives of the Bureau in this regard include the adoption of new merger review process guidelines, a template consent agreement for negotiated settlements, guidelines on merger remedies, guidelines on the role of efficiencies in merger review and a report on dynamic efficiencies in the context of mergers.

(a)          INCREASED SIZE OF TRANSACTION THRESHOLD

In order for a transaction to be notifiable in Canada it must, in addition to involving the acquisition of an “operating business” in Canada and falling into one of five specified types of transactions, also exceed statutory monetary thresholds set out in the Act.  In this regard, a transaction must exceed both the “size of parties” and “size of transaction” thresholds.

With respect to the size of parties threshold, for share and asset acquisitions, the parties and their affiliates’ Canadian assets (or total gross revenues from sales in, from or into Canada) must exceed CDN $400 million.

As part of the recent amendments, the size of transaction threshold was increased such that in order for a transaction to be notifiable the book value of the target’s assets in Canada, or annual gross revenues from sales in or from Canada generated by those assets, must now also exceed CDN $70 million (increased from the former CDN $50 million).  Consistent with the U.S., this threshold will now be increased annually based on inflation.

For share acquisitions, there are additional thresholds.  For the acquisition of public companies, the acquisition must also result in the acquirer holding more than 20% of the voting shares of the target (more than 50% if more than 20% is already held).  For the acquisition of private companies, the acquisition must result in the acquirer holding more than 35% of the voting shares of the target (more than 50% if more than 35% is already held).

(b)          U.S. STYLE TWO-STAGE WAITING PERIOD PROCESS

The most significant change to Canada’s merger control regime is the introduction of a new U.S.-style two stage merger review process, together with new provisions for second requests and amplified penalties for failure to comply with the pre-merger notification provisions.

Under Canada’s former merger notification regime, transactions that triggered the statutory thresholds were prohibited from being completed before the expiry of a single statutory waiting period of either 14 or 42 days, which depended on the type of filing that was made (i.e., a short form or long form filing) which was based on the level of complexity of the transaction.

In addition to these prescribed statutory waiting periods, the Bureau had also adopted three different non-statutory “service standard periods” for its review of a transaction which ran on a parallel but distinct timetable.  Like the statutory periods, which review period applied depended on the complexity of the transaction and could range from two weeks (for non-complex transactions) to over five months (for very complex transactions).

The former system of waiting and review periods was highly confusing for clients, challenging to apply in many instances (e.g., in determining how to file and negotiations with the Bureau as to the time to review a transaction) and out of step with more straightforward and transparent systems, notably in the U.S.  Moreover, the Bureau’s non-binding service standard periods, under which the Bureau would routinely require five months to review what it considered to be very complex cases, had no legal force and were criticized by merging parties and their counsel.

Canada’s new two-stage merger control process arose as a result of recent recommendations made by the Competition Review Panel, again to bring Canada’s system more in line with international norms:

“Given the identification of these issues and the importance of our merger review process being better harmonized with that of the U.S, the Panel is of the view that it would be beneficial to adjust our merger review process into a two-stage regime that would more closely align our procedures with those in the U.S.  This change would separate merger cases into two categories: those cases that are concluded (and effectively cleared) within 30 days of the initial filing and ‘second stage’ cases that raise complex competition issues.  So-called ‘second-stage’ cases would be subjected to an additional review period that would terminate 30 days following full compliance with a ‘second request’ for information.”

Under the new regime, following notification, there is an initial 30 calendar day waiting period during which parties to a transaction are not permitted to complete (unless clearance has been received).  During the initial waiting period, the Bureau may advise the parties that it does not intend to challenge the transaction or, alternatively, issue second request for information where it takes the position that there are potential issues.

The Bureau’s approach to the new two-stage review regime is set out in its new Merger Review Process Guidelines, in which it indicates that it will only issue a second request “when a proposed transaction raises significant competition issues and additional information is required.”

Notably, the recent amendments also give Canadian courts and the Competition Tribunal (the “Tribunal”) new powers for non-compliance with the pre-merger notification provisions.  These include, for proposed transactions, the power to issue interim injunctions or compel the filing of information and, for completed transactions, the power to order that a merger be dissolved, divestiture orders and “administrative monetary penalties” (essentially civil fines) of up to CDN $10,000 for each day of non-compliance.

The introduction of a two-stage waiting period process and increased penalties for failure to comply with the merger notification provisions are two further aspects of Canadian merger control that have now been aligned with other major jurisdictions notably the U.S. and Europe.

Where the Bureau decides to challenge a transaction, the process has not changed: the Bureau may bring an application before the federal Competition Tribunal (the “Tribunal”) for a remedial order and also has the power to seek an interim injunction preventing merging parties from completing. In practice, however, contested merger proceedings are rare in Canada, and the vast majority of issues are resolved through negotiated settlements.

Similarly, while the waiting periods under the Act have changed, the circumstances during which parties may close have not.  Parties to a transaction may complete a transaction when an Advance Ruling Certificate (“ARC”) is received (the strongest form of clearance under the Act), (ii) a “no action letter” is received or (iii) the applicable statutory waiting period has expired.

(c)          U.S. STYLE SECOND REQUESTS

Together with the introduction of a U.S.-style two-phase waiting period process, the recent amendments to the Act have also given the Bureau to power to issue supplementary information requests (the new Canadian equivalent to U.S. second requests).

Under Canada’s former merger control regime, in cases where the Bureau wanted additional time to review a transaction, it was required to either seek compulsory production orders under section 11 of the Act or seek an interim injunction to prevent the parties from completing.

As with many of the other recent amendments, the decision to introduce U.S.-style second requests also arose from the recommendations of the Competition Review Panel, which was concerned that in some instances, where the Bureau wanted more time to review a problematic transaction, it had to either seek a compulsory production order or an injunction.  The addition of second requests to the Bureau’s choice of information gathering options also practically arose as a result of a recent high profile case in which the Bureau sought (and was refused) a Tribunal order preventing Labatt from completing its take-over bid for rival brewer Lakeport.

The Bureau’s position with respect to its former information gathering powers is that the previous regime provided inadequate tools and time to review problematic mergers and that the new system provides both increased transparency and more closely aligns Canada’s merger clearance regime with the U.S.

Under the new second request provisions, the Bureau has wide discretion as to scope of information it may request.  In this regard, the only statutory requirement is that the requested information must be “relevant” to a competitive assessment of a proposed transaction.  As such, the new regime gives the Bureau an additional tool to extend the timetable for review and gives it significantly broader powers than it formerly had.

Where a second request is issued, the waiting period stops until a complete response has been filed upon receipt of which a second 30 day waiting period begins during which the parties are again prohibited from closing (unless clearance is received).  As the burden under the new regime is on the merging parties to complete the request and, where a second request is made, the “clock” will not start again until the order has been fully complied with, the result is that there is no fixed time limit for a second stage review.

It is also worth noting that, in contrast to the U.S., the new Canadian second request process is more stringent than that in the U.S. in that merging parties must fully comply with the second request (as opposed to “substantial compliance”) before the clock will resume again.  In addition, while parties are free to complete a transaction after 30 days of full compliance with a second request, the Bureau is not required to have finished its review by the end of the second waiting period.

Some of the impacts of the new U.S.-style second request process may include the increased adoption of timing agreements (addressing, for example, closing and production requirements) and forcing parties to determine whether to opt to wait for the Bureau to complete its second stage review or assume the risk that the Bureau may challenge the transaction post-completion.  Moreover, merging parties may also consider implementing some U.S.-style strategies in some cases to avoid the issuance of a second request, such as withdrawing and refilling pre-merger notification filings.

(d)          POST-CLOSING REVIEW & HOSTILE BIDS

Two final noteworthy changes to Canada’s merger control regime are in relation to post-closing review and hostile bids. 

In this regard, as a result of the amendments, the time period during which the Bureau may challenge a transaction post-completion has now been reduced to one year from the former three years.  This change arose based on a debate as to whether the Bureau in practice required a three-year window in which to challenge completed mergers and as well a desire to bring post-closing review of Canadian mergers in line with the U.S. and EU.  In reality, however, this change is unlikely to have much impact on Canadian mergers, as in more than twenty years of formal merger review the Bureau has never challenged a merger transaction within the three year period following an initial determination that the transaction did not raise competition concerns.

With respect to hostile bids, there were formerly special notification rules for hostile transactions (i.e., unsolicited take-over bids) that provided that, where the Bureau received a notification from the bidder, it would notify the target giving the target ten days to file a notification.  This former system has remained intact, with adjustments that provide that both the initial and second 30 day waiting periods begin on receipt of a complete filing from the bidder (i.e., regardless of when the target complies with the request to file).  This new rule is intended to prevent targets from stalling a hostile transaction by delaying its filing(s).

IV.    IMPACTS FOR CANADIAN & INTERNATIONAL FIRMS

As a result of the recent amendments, merger clearance in Canada has changed significantly.  Some of the key impacts for Canadian and international firms may include:

- Reducing post-closing uncertainty based on the shorter post-closing challenge period.
- Leading parties in some cases to close transactions without clearance.
- Increasing the time to review some complex mergers beyond the previous review periods.
-  The adoption of strategies to avoid the issuance of second requests.
- Adopting closing conditions in Canada that parallel those used in U.S. transactions.
- Increasing compliance costs for merging parties (where second requests are issued).

OUR CANADIAN MERGER CONTROL SERVICES

We practice federal competition law, have provided competition law and compliance advice to clients across Canada and internationally and provide a full range of competition law services in relation to the criminal conspiracy, merger, abuse of dominance, misleading advertising and deceptive marketing provisions of the federal Competition Act.  We have provided pre-merger notification and foreign investment advice in relation to numerous domestic and cross-border mergers.  Our Canadian merger control and foreign investment services include:

- Advice on the application of the Competition Act to mergers.
- Application of the Investment Canada Act to foreign investment in Canada.
- Preparing pre-merger notification filings and submissions.
- Drafting transaction documents.
- Merger-related compliance guidelines (pre-merger conduct memoranda).
- Coordinating and advice in relation to multi-jurisdictional merger review.

CANADIAN COMPETITION LAW LINKS

For more information about Canadian competition law or our competition law services visit our Blog Homepage, Competition Law Services, Canadian Competition Law, Competition Act Amendments, Merger Control, Merger Control FAQs, Abuse of Dominance, Conspiracy,  Advertising and Marketing, Promotional Contests, Trade Associations, Refusal to Deal,  Investment Canada Act, Canadian Competition Law Compliance, Private Actions, Bid Rigging or Global Competition Law and Policy pages or visit our website at www.NortonStewart.com.

CONTACT US

We provide Canadian competition law services to Canadian and international clients.  For more information about our Canadian competition law and consulting services contact us at steve@nortonstewart.com, info@competitionlawcanada.com or call us on +1 604 687 0555 or +1 778 867 5558.