Canadian COMPETITION LAW

June 3, 2010

On June 2, 2010 the Competition Bureau (the “Bureau”) published its new Policy on Hostile Transactions (the “Hostile Bid Policy”).  According to the Bureau, the Hostile Bid Policy “describes the Bureau’s general approach to communicating information to a bidder and target during the course [of a merger review by the Bureau].”

The Bureau’s new Hostile Hostile Bid Policy is the most recent in a series of new or updated merger-related guidelines and reports that the Bureau has recently issued following the recent adoption in Canada of a new two-track, U.S.-style merger control regime.  Other recently issued merger-related guidelines and reports that the Bureau has issued in the past week include its new Merger Review Performance Report (analyzing notified transactions since its last Merger Review Performance Report in 2007) and its Draft Fee and Service Standards Handbook for Merger-Related Matters, which has been issued for public comment.

Highlights of the Bureau’s new Hostile Bid Policy include:

–  The Bureau confirms that, generally speaking, in providing information (including in the context of a hostile transaction) it is governed by section 29 of the Competition Act (the “Act”) (which provides for the communication of information in four circumstances: (i) to a Canadian law enforcement agency, (ii) for the purposes of the administration or enforcement of the Act, (iii) where information has been made public or (iv) when authorized by the person who provided the information).

– The Bureau also confirms that the Act places “limited” obligations on the Bureau to disclose information to the parties to a hostile transaction (section 114(3) requires the Bureau to immediately advise a target of the date upon which the Bureau receives a filing from the bidder).

– Having “considered the sensitivities” involved in sharing information with both parties in the context of hostile bids, the Bureau will, where it shares “pertinent information” with one party, endeavour to disclose that information “equitably with the other party” subject to restrictions on disclosure of confidential information under section 29 of the Act.  “Pertinent information” may include its complexity designation, anticipated timing for review, the date upon which the other party has certified completeness of any SIR response, its preliminary and final views on market definitions and relevant section 93 factors (section 93 of the Act sets out a list of non-exhaustive factors that the Competition Tribunal may consider in determining whether a proposed transaction is likely to prevent or lessen competition substantially; practically speaking, merging parties, their counsel and the Bureau also look to the section 93 factors to assess both the complexity of a proposed transaction and whether a transaction is likely to raise any significant issues).

– The Bureau also states that it “acknowledges that hostile transactions can give rise to particularly complex considerations that may impact the straightforward application of the foregoing policy on disclosure of pertinent information” (e.g., in the context of competing bids) and that, accordingly, it will be “mindful of such considerations in determining on a case-by-case basis how [its hostile transaction policy] is applied.”

It is also worth noting that Canada has special rules 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 then must 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, in the event a supplementary information request (“SIR”) is issued by the Bureau, begins when the Bureau receives the requested information from the bidder (i.e., regardless of when the target complies).  (This new mechanism is intended to prevent targets from stalling a transaction by delaying filing.)

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