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Select Topics
Relevant legislation and authorities
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  1. Is a merger control regulation in force?
  1. Which authorities enforce the merger control regulation?
  1. Relevant regulations and guidelines with links:
  1. Does general competition regulation apply to mergers or ancillary restrictions?
  1. May an authority order a split-up of a business irrespective of a merger?
  1. Other authorities that also require merger filing or may prohibit transaction
    (Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)
  1. Are any parts of the territory exempted or covered by particular regulation?
Voluntary or mandatory filing
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  1. Is merger filing mandatory or voluntary?
Types of transactions to file – what constitutes a merger
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  1. Is there a general definition of transactions subject to merger control?
  1. Is "change of control" of a business required?
  1. How is "control" defined?
  1. Acquisition of a minority interest
  1. Joint ventures/joint control – which transactions constitute mergers?
Thresholds that decide whether a merger notification must be filed
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  1. Which thresholds decide whether a merger notification must be filed?
  1. Special thresholds for particular businesses
  1. Rules on calculation and geographical allocation of turnover
  1. Special rules on calculation of turnover for particular businesses
  1. Series of transactions that must be treated as one transaction
Exempted transactions and industries (no merger control even if thresholds ARE met)
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  1. Temporary change of control
  1. Special industries, owners or types of transactions
  1. Transactions involving only foreign businesses (foreign-to-foreign)
  1. No overlap of activities of the parties
  1. Other exemptions from notification duty even if thresholds ARE met?
Merger control even if thresholds are NOT met
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  1. May a merging party file voluntarily even if the thresholds are not exceeded?
  1. May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?
Referral to and from other authorities
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  1. Referral within the jurisdiction
  1. Referral from another jurisdiction
  1. Referral to another jurisdiction
  1. May the merging parties request or oppose a referral decision?
Filing requirements and fees
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  1. Stage of transaction when notification must be filed
  1. Pre-notification consultations
  1. Special rules for acquisitions on stock exchanges and public takeover bids
  1. Forms available for completing a notification
  1. Languages that may be applied in notifications and communication
  1. Documents that must be supplied with notification
  1. Filing fees
Implementation of merger before approval – "gun jumping" and "carve out"
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  1. Is implementation of the merger before approval prohibited?
  1. May the parties get permission to implement before approval?
  1. Due diligence and other preparatory steps
  1. Veto rights before closing and “Ordinary course of business” clauses
  1. Implementation outside the jurisdiction before approval – "Carve out"
  1. Consequences of implementing without approval/permission
The process – phases and deadlines
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  1. Phases and deadlines
Assessment and remedies/decisions
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  1. Tests or criteria applied when a merger is assessed
  1. May any non-competition issues be considered?
  1. Special tests or criteria applicable for joint ventures
  1. Decisions and remedies/commitments available
Publicity and access to the file
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  1. How and when will details about the merger be published?
  1. Access to the file for the merging parties and third parties
Judicial review
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  1. Who can appeal and what may be appealed?

 
CANADA

Paul Collins
Competition and Foreign
Investment Department Head

pcollins@stikeman.com

Tel: +(416)-869-5577

Susan Hutton
Competition and Foreign
Investment Partner

shutton@stikeman.com

Tel: +(613) 566 0530

Michael Kilby
Competition and Foreign
Investment Partner

mkilby@stikeman.com

Tel: +(416) 869 5282

Michael Laskey
Competition and Foreign
Investment Senior Associate

mlaskey@stikeman.com

Tel: +(416) 869-5541

No new regulation adopted or proposed

Note that relevant regulations may be changed before your contemplated transaction is completed. Mergerfilers.com and our national experts keep information on regulations up to date and even provide alerts on adopted or proposed changes that have not come into force yet but may come into effect before the transaction is completed. When this field is green, we have no knowledge of such imminent changes to the relevant regulations.

Relevant legislation and authorities

1) Is a merger control regulation in force?

Yes. The merger control regulation is contained in the federal Competition Act

2) Which authorities enforce the merger control regulation?

The Commissioner of Competition (“Commissioner”) is charged with the administration and enforcement of the Competition Act. The Commissioner heads the Competition Bureau (“Bureau”), an independent federal law enforcement agency based in Gatineau, Quebec, which enforces the merger control regulation.

3) Relevant regulations and guidelines with links:

Links to the relevant legislation, guidelines and forms are listed below. The guidelines do not have the force of law but reflect the Bureau’s interpretation of the Competition Act.

Official English version

The federal Competition Act (the merger control regulation is primarily contained in sections 91-123)

Merger Enforcement Guidelines

Merger Review Process Guidelines

Pre-Merger Notification Interpretation Guidelines

Notifiable transactions - Form and certificate

4) Does general competition regulation apply to mergers or ancillary restrictions?

No activity is exempt from general competition regulation only by virtue of it taking the form of a merger, and purported merger agreements may be investigated under other provisions where appropriate. For example, in late 2017, two major Canadian newspaper publishers agreed to a “swap” of 41 daily and community newspapers and on the same day announced plans to close 36 of these 41 publications. The Bureau raided the publishers’ offices in March 2018 and announced that it was investigating the deal under both the merger provisions and the criminal conspiracy provisions of the Competition Act. While the Bureau did not challenge the merger itself, it did continue to conduct an investigation under the conspiracy provisions.

5) May an authority order a split-up of a business irrespective of a merger?

The abuse of dominant position provisions of the Competition Act grant the Competition Tribunal (“Tribunal”) broad discretion to make remedial orders, including orders requiring asset or share divestitures, where it finds that merely prohibiting the abusive practice will not be sufficient to overcome the effects of the practice in a market. However, this provision has never been used to order a split-up of a business and the Bureau’s Abuse of Dominance Enforcement Guidelines emphasize that the Bureau would only seek such an order in exceptional circumstances, such as where a practice has removed effective pre-existing competitors from a market where barriers to entry (that are not created or enhanced by the abuse of dominance) have increased over time with the result that new entry is not feasible.

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

In addition to the Bureau, there do exist other political and regulatory bodies that may need to be notified or may be empowered to suspend or prohibit a merger transaction under certain circumstances. This should for instance be considered with respect to mergers involving a transportation business, certain heavily regulated industries, such as telecommunicationsaviation and banking and generally with respect to foreign investments in Canada

Foreign investments in Canada

Where an investment by a non-Canadian results in the establishment of a new Canadian business or the acquisition of control of a Canadian business, filings may need to be made pursuant to the Investment Canada Act to Innovation, Science and Economic Development Canada (or, in the case of foreign investments involving cultural businesses, to the Department of Canadian Heritage). The Investment Canada Act may also apply to trigger a separate national security review where an investment by a non-Canadian could be injurious to national security. Although the competitive effects of a proposed investment can be relevant to a review under the Investment Canada Act, the foreign investment control review of a proposed investment does not affect the Competition Bureau’s review of the same transaction.

7) Are any parts of the territory exempted or covered by particular regulation?

No.

Voluntary or mandatory filing

8) Is merger filing mandatory or voluntary?

A pre-merger notification filing is mandatory when certain financial thresholds are exceeded (see topic 14). Pursuant to section 65(2) of the Competition Act, failure to make a required notification is a criminal offence. However, the Bureau may waive the requirement to make a formal notification in situations where it receives sufficient information from the parties to complete its review and issue an “advance ruling certificate” or “no-action letter” before the formal filing is submitted. In such circumstances, the parties typically file a detailed letter requesting clearance supported by extensive factual evidence relevant to the review of the transaction.

Types of transactions to file – what constitutes a merger

9) Is there a general definition of transactions subject to merger control?

Yes. The Competition Act defines a “merger” as “the acquisition or establishment, direct or indirect, by one or more persons, whether by purchase or lease of shares or assets, by amalgamation or by combination or otherwise, of control over or significant interest in the whole or a part of a business of a competitor, supplier, buyer or other person.” Mergers that exceed certain financial thresholds are subject to pre-merger notification, as described in topic 14.

10) Is "change of control" of a business required?

No. The definition of “merger” incorporates the concept of “the acquisition or establishment” of control over, or significant interest in, the whole or a part of a business. The acquisition of a significant interest in a business may occur without a change of control. See topic 12.

11) How is “control” defined?

Subsection 2(4) of the Competition Act sets out a technical definition of “control” that varies depending on the types of entities involved. In general, control of a corporation is established through direct or indirect ownership of more than 50% of voting shares and control of an entity other than a corporation is established through direct or indirect interests entitling the holder to receive more than 50% of the entity’s profits or more than 50% of its assets on dissolution.

12) Acquisition of a minority interest

The acquisition or establishment of a “significant interest” in the whole or a part of a business constitutes a merger for the purposes of the Competition Act. In some cases, a minority interest can constitute a “significant interest”. 

The term “significant interest” is not defined in the Competition Act. The Bureau explains in the Merger Enforcement Guidelines that in its view a “significant interest” is one that gives the acquirer the ability to materially influence the economic behaviour of the target business, including with respect to decisions relating to pricing, purchasing, distribution, marketing, investment, financing and the licensing of intellectual property rights. 

The Merger Enforcement Guidelines set out the following factors that the Bureau may consider in its analysis of whether a particular minority interest constitutes a significant interest:

  • voting rights attached to the acquirer's shareholdings or interest in a combination;
  • the status of the acquirer of partnership interests (e.g., general or limited partner) and the nature of the rights and powers attached to the partnership interest;
  • the holders and distribution of the remaining shares or interests (whether the target business is widely or closely held, and whether the acquirer will be the largest shareholder);
  • board composition and board meeting quorum, attendance and historical voting patterns (whether the acquirer will be able to carry or block votes in a typical meeting);
  • the existence of any special voting or veto rights attached to the acquirer's shares or interests (e.g., the extent of shareholder approval rights for non‑ordinary‑course transactions);
  • the terms of any shareholder or voting agreements;
  • the dividend or profit share of the minority interest as compared to the acquirer's equity ownership share;
  • the extent, if any, of the acquirer's influence over the selection of management or of members of key board committees;
  • the status and expertise of the acquirer relative to that of other shareholders;
  • the services (management, advisory or other) the acquirer is providing to the business, if any;
  • the put, call or other liquidity rights, if any, that the acquirer has and may use to influence other shareholders or management;
  • the access the acquirer has, if any, to confidential information about the business; and
  • the practical extent to which the acquirer can otherwise impose pressure on the business's decision-making processes.

13) Joint ventures/joint control – which transactions constitute mergers?

In general, joint ventures that exceed the relevant financial thresholds (see topic 14) are subject to pre-merger notification and to the substantive provisions of the Competition Act

However, section 112 of the Competition Act creates an exemption from pre-merger notification for joint ventures (that are not incorporated) if:

  1. a written agreement among all the participants in the joint venture imposes on one or more of them an obligation to contribute assets and governs a continuing relationship between those parties;
  2. no change in control over any party would result from the joint venture; and
  3. the agreement referred to in paragraph (1) restricts the range of activities that may be carried on by the joint venture and contains provisions that would allow for its orderly termination.

Although the statute is silent on this point, the Bureau’s view is that this exemption is available only in the case of a joint venture that is an unincorporated entity (see Pre-Merger Notification Interpretation Guideline Number 4: Exemption for Combinations that are Joint Ventures (Section 112 of the Act)).

There is also a related provision that exempts certain research and development joint ventures from the substantive provisions of the Competition Act (see topic 46).

Thresholds that decide whether a merger notification must be filed

14) Which thresholds decide whether a merger notification must be filed?

a) Turnover thresholds

The pre-merger notification rules in the Competition Act are complex. A general “size of parties” threshold of C$400 million (not subject to indexation) applies to all types of transactions. An additional “size of target” threshold that is currently C$96 million (adjusted annually) applies differently depending on the type of transaction in question. In addition, share ownership thresholds apply to acquisitions of voting shares and profit or assets on dissolution entitlement thresholds apply to unincorporated combinations, as described below. There are no market share or transaction value thresholds that are relevant to the analysis.

Please also see topic 16 with respect to what may be considered revenue “in, from or into” Canada and what may be considered Canadian assets. 

Note that two entities are “affiliates” if one controls the other or if they are controlled by the same parent, according to the Competition Act control rules described in topic 11.

Asset acquisitions: 

Notification is required if:

  • The book value of the Canadian assets being acquired or the target’s gross revenues in or from Canada generated from the acquired assets exceeds C$96 million (as adjusted); and
  • The book value of both parties’ (together with their affiliates’) Canadian assets or both parties’ (together with their affiliates’) combined revenues from sales in, from or into Canada exceeds C$400 million.

Acquisition of voting shares: 

Notification is required if:

  • As a result of the proposed acquisition, the acquirer’s (together with its affiliates’) ending share ownership would exceed 20% (if the target is public) or 35% (if private) of the voting shares of the target or, if the acquirer’s (together with its affiliates’) share ownership was already above these thresholds, its ending share ownership would exceed 50% of the target; and
  • The book value of the target’s (and its subsidiaries’) Canadian assets or the target’s (and its subsidiaries’) gross revenues in or from Canada exceeds C$96 million (as adjusted); and
  • The book value of both parties’ (together with their affiliates’) Canadian assets or both parties’ (together with their affiliates’) combined revenues from sales in, from or into Canada exceeds C$400 million.

Amalgamation of two or more entities:

Notification is required if:

  • At least two of the merging parties (together with their affiliates) have Canadian assets or gross revenues in or from Canada generated from the acquired assets exceeds C$96 million (as adjusted); and
  • The book value of the target’s (and its subsidiaries’) Canadian assets or the target’s (and its subsidiaries’) gross revenues in or from Canada exceeds C$96 million (as adjusted); and
  • The book value of both parties’ (together with their affiliates’) Canadian assets or both parties’ (together with their affiliates’) combined revenues from sales in, from or into Canada exceeds C$400 million.

Unincorporated combination, such as a non-corporate joint venture:

Notification is generally required if:

  • As a result of the proposed combination, the acquirer’s (together with its affiliates’) ending entitlement to the combination’s profits or assets on dissolution would exceed 35% or, if the acquirer’s (together with its affiliates’) entitlement was already above 35%, its ending entitlement would exceed 50%; and
  • The book value of the target’s (and its subsidiaries’) Canadian assets or the target’s (and its subsidiaries’) gross revenues in or from Canada exceeds C$96 million (as adjusted); and
  • The book value of both parties’ (together with their affiliates’) Canadian assets or both parties’ (together with their affiliates’) combined revenues from sales in, from or into Canada exceeds C$400 million.

b) Market share thresholds

N/A

c) Value of transaction thresholds

N/A

d) Assets requirements

See topic 14a.

e) Other

As stated in topic 14a, a general “size of parties” threshold of C$400 million (not subject to indexation) applies to all types of transactions. An additional “size of target” threshold that is currently C$96 million (adjusted annually) applies differently depending on the type of transaction in question.

15) Special thresholds for particular businesses

N/A

16) Rules on calculation and geographical allocation of turnover

Note that the notification analysis can be nuanced, and it is always advisable to seek counsel to avoid inadvertently failing to make a required notification. Geographically segmented revenue information produced for accounting purposes may not always reflect revenues from sales “in or from” or “in, from or into” Canada to be taken into account for the purposes of the different thresholds described in topic 14a. 

Revenues “in or from” Canada means sales within Canada or sales outside Canada of products or services produced in Canada, whereas revenues “in, from or into” Canada also includes sales from outside Canada to Canadian purchasers.

Canadian assets” can include financial assets, goodwill and any other intangible assets on the books of the Canadian business, and IP held in Canada.

For the purposes of the threshold analysis, gross revenues must be determined as of the last day of the most recently completed annual period for which audited financial statements exist, unless such day is more than 15 months before the date the notification is made or, if a notification is not made, more than 15 months before the day that is 30 days before closing. If audited financial statements do not exist, the gross revenues may be calculated based on unaudited statements for the last day of the most recent annual period for which revenues can be reasonably determined, unless such day is more than three months before the date the notification is made or, if a notification is not made, more than three months before the day that is 30 days before closing.

Conversion to Canadian dollars must be based on the noon exchange rate quoted by the Bank of Canada on the date on which the revenues must be determined in accordance with the Notifiable Transactions Regulations.

17) Special rules on calculation of turnover for particular businesses

N/A

18) Series of transactions that must be treated as one transaction

The Competition Bureau’s policy with respect to a series of proposed transactions is set out in Pre-Merger Notification Interpretation Guideline Number 2: Number of Notices—Multiple Step or Continuous Transactions (Section 114 of the Act). In brief, a series of proposed transactions may be regarded as one continuous, multiple step transaction for which only one notice and fee is required if all steps in the series constitute a sufficiently connected sequence of events. To demonstrate a sufficiently connected sequence of events, the legal documents providing for the events must show clearly, comprehensively and unequivocally that each event in the series may proceed only if each previous event in the series has been completed and that the entire series will be completed within one year from the day on which the pre-merger notification is made.

Exempted transactions and industries (no merger control even if thresholds ARE met)

19) Temporary change of control

See topic 18.

20) Special industries, owners or types of transactions

Pursuant to section 94 of the Competition Act, the Tribunal does not have substantive jurisdiction to block or impose conditions on certain mergers in the financial sector or transportation sector which are reviewed pursuant to other statutory processes with the Commissioner’s input. However, notification is still required in such cases, with the exception of a merger under the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act or the Trust and Loan Companies Act in respect of which the Minister of Finance has certified to the Commissioner that the merger is or would be in the public interest, as set out in section 113(a.1) of the Competition Act.

21) Transactions involving only foreign businesses (foreign-to-foreign)

All mergers that meet the thresholds are notifiable under the Competition Act. However, notification is not required where the target business does not carry on (or control) an “operating business” in Canada, defined as “a business undertaking in Canada to which employees employed in connection with the undertaking ordinarily report for work”. 

The limits of the Bureau’s substantive jurisdiction with respect to purely foreign-to-foreign merger with competitive effects in Canada have not been fully tested, but the general view is that such mergers could, in theory, be challenged.

22) No overlap of activities of the parties

There are no exceptions to mandatory pre-merger notification based on a lack of effects. 

23) Other exemptions from notification duty even if thresholds ARE met?

In addition to the exemptions discussed in other topics, transactions between affiliates are except from notification, as are certain acquisitions of real property or goods in the ordinary course of business and certain creditor acquisitions.

Merger control even if thresholds are NOT met

24) May a merging party file voluntarily even if the thresholds are not exceeded?

Irrespective of whether thresholds are exceeded, merging parties may submit a competitive impact brief requesting that the Commissioner issue an advance ruling certificate exempting the proposed transaction from substantive review pursuant to section 102 of the Competition Act (commonly referred to as an “ARC request”), although this is rare in practice. Where such a certificate is issued and the proposed merger is completed within one year, the Commissioner may not challenge the transaction solely on the basis of information that is the same or substantially the same as the information on the basis of which the certificate was issued. If the information in the brief was inaccurate or becomes outdated, the Commissioner may, in theory, challenge the merger within a year of closing.

While the ARC request may, at the parties’ option, contain some or all of the information that would be required for a formal notification (for example, in many cases it will be advisable to provide customer contact information to facilitate the Bureau’s review), it is not possible to submit a formal notification and start the statutory waiting period in respect of a transaction that is not notifiable.

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

Yes. The Bureau has the jurisdiction to substantively review and oppose a merger for up to a year from the date on which the merger is substantially completed, whether or not a pre-merger notification was required or submitted.

Although the Bureau may not request a merger notification where no notification is required, it is empowered under section 11 of the Competition Act to seek a court order requiring a party to produce documents or written responses or attend for examination.

Referral to and from other authorities

26) Referral within the jurisdiction

N/A

27) Referral from another jurisdiction

N/A

28) Referral to another jurisdiction

N/A

29) May the merging parties request or oppose a referral decision?

N/A

Filing requirements and fees

30) Stage of transaction when notification must be filed

Where pre-merger notification is required, a proposed transaction may not be implemented until 30 days from the date of the notification is made or, if a supplementary information request is issued, until 30 days from the date of compliance with the supplementary information request, unless a waiver or an advance ruling certificate is issued. As for when a pre-merger notification must be filed, this lies within the full discretion of the parties.

31) Pre-notification consultations

Pre-notification discussions are encouraged by the Bureau (but not required) and may be initiated at the merging parties’ option. In some cases, it may be strategically advisable to make initial contact or submit a competitive impact brief (commonly referred to as an “ARC letter” – see topic 24) before pre-merger notification in order to provide the reviewing officers with more time before they must decide whether to issue a supplementary information request, as described in more detail in topic 43.

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

Special rules apply in the context of an unsolicited or “hostile” takeover bid transaction. When the Bureau receives a pre-merger notification from the bidder prior to receiving the notification of the target, the Commissioner is required to immediately notify the target that it has received a notification from the bidder. The target must then provide the Commissioner with a pre-merger notification within ten days after being so notified. In contrast to the normal rule, under which the initial 30-day waiting period does not begin until both parties’ notifications are received, under these circumstances, the initial 30-day waiting period begins only after the bidder’s notification is received. This ensures that the target is not able to affect the commencement of the waiting period. For more information regarding hostile takeover rules, please see Hostile Transactions Interpretation Guideline Number 1: Bureau Policy on Disclosure of Information and Hostile Transactions Interpretation Guideline Number 2: Bureau Policy on Running of Subsection 123(1) Waiting Periods.

No special rules apply to friendly public takeover bids.

33) Forms available for completing a notification

The Bureau has provided a template notification form and an accompanying certificate as to the completeness of the filing, which must be sworn by a director or senior officer of the notifying party (or, if the notifying party is an individual, by that individual) and included pursuant to section 118 of the Competition ActPlease see Notifiable transactions—Form and certificate.

34) Languages that may be applied in notifications and communication

Parties may communicate with the Bureau in English or French. Pre-existing documents need not be translated, although English or French summaries, extracts or translations should be provided if they already exist. Foreign language documents submitted in response to a supplementary information request must be translated into English or French.

35) Documents that must be supplied with notification

The content of the notification is set out in section 16 of the Notifiable Transactions Regulations and in the template form available from Notifiable transactions—Form and certificate.

In brief, the following information is required:

  • A description of the proposed transaction and the business objectives intended to be achieved as a result of it;
  • A copy of each legal document, or the most recent draft of that document if it is not yet executed, that is to be used to implement the proposed transaction;
  • A list of the foreign competition or antitrust authorities that have been notified of the proposed transaction by the parties and the date on which each authority was notified;
  • The full name, principal office addresses, and material affiliates of the notifying party;
  • In respect of the party and each material affiliate, the most recent annual report, a description of the principal businesses and principal categories of products, a statement regarding the geographic region of sales for each principal business, and lists of the 20 most important customers and suppliers in respect of each principal category of products, including the value of sales to or purchase from such customers and suppliers and the value of sales to or purchases from each of these customers and suppliers in respect of each principal category of products;
  • All studies, surveys, analyses and reports that were prepared or received by an officer or director of the party of affiliate for the purpose of evaluating or analyzing the proposed transaction with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into new products or geographic regions and, if not otherwise set out in such documents, the names and titles of the individuals who prepared the document and the date on which it was prepared.

It is possible to exclude information from the notification on the basis that it is privileged, not known or reasonably obtainable, not relevant or previously supplied. However, these exclusions must be asserted with care, as they can affect the completeness of the notification and delay the commencement of the waiting period.

36) Filing fees

A filing fee of $73,584 (adjusted annually) applies to each merger review, whether initiated by a pre-merger notification or by a request for an advance ruling certificate.

Implementation of merger before approval – “gun jumping” and “carve out”

37) Is implementation of the merger before approval prohibited?

Where pre-merger notification is required, the merger may be implemented 30 days after the complete notification is made, unless the Commissioner chooses to i) issue a supplementary information request (in which case a second 30-day waiting period begins after the response to the supplementary information request is submitted) or ii) to apply to the Tribunal for an order or injunction preventing closing. Implementing the merger before the end of the relevant waiting period may be subject to injunction, administrative fines of up to $10,000 per day or criminal conspiracy sanctions.

38) May the parties get permission to implement before approval?

In some cases, the Bureau may permit parties to close a transaction while “holding separate” some or all of the relevant assets pending the conclusion of a review. This decision will be made on a case-by-case basis and permission will generally only be given pending the implementation of a remedy involving the divestiture of the held separate assets. For example, where a remedy requires a particular business to be divested, the Bureau may consent to the completion of the transaction before the divestiture is completed, subject to the proviso that the business to be divested must be held separate.

39) Due diligence and other preparatory steps

It is accepted that parties must conduct due diligence and integration planning before closing. In order to ensure that such information sharing does not constitute early implementation or “gun-jumping”, it is important to ensure that the information exchanged and the individuals who can access such information is carefully restricted. In particular, information should be shared with the smallest possible “clean team”, the members of which should be subject to written confidentiality obligations, and not with operational personnel involved in ongoing business decisions. 

Information should be exchanged only for the purposes of evaluating or negotiating the terms of the potential merger. Information regarding pricing, bids, cost of goods sold, margins, and strategic plans may all be commercially sensitive and to the extent such information must be shared, it should be aggregated and time-delayed where possible. 

No commercially sensitive information should flow from the buyer to the seller.

40) Veto rights before closing and "Ordinary course of business" clauses

General provisions requiring the target to conduct its business in accordance with the ordinary course and past practice or prohibiting actions that would result in a material adverse effect are not problematic from a competition law perspective in Canada. 

More specific provisions may be permissible, but only where they do not meaningfully restrict the target’s ability to continue to operate as a vigorous and independent competitor given the facts of the particular marketplace. 

For example, it may be acceptable to prevent the target from tying up significant capacity in a new large or long-term customer contract, but if purchases in the relevant market are frequently made on that basis, the target should retain the latitude to make such decisions on its own. Similarly, restrictions on large capital investments or the commencements of large supply agreements may be acceptable but may also be problematic if such investments or agreements are necessary to continue to conduct business in the ordinary way. Restrictions on any kind of pricing decision, even pricing outside the normal course, should be avoided.

If a buyer veto is used, extreme care must be exercised regarding the subject matter of the veto and, in particular, the information that is shared in connection with its use. Detailed discussions regarding the approval an investment or agreement contemplated by the target may be viewed as evidence of illegal coordination or preemptive integration. The best practice, if a veto must be used, is to keep proposals extremely brief and highly aggregated and ensure that they are never shared with operational decision-makers within the buyer organization. 

41) Implementation outside the jurisdiction before approval – "Carve out"

There has never been a case in which Canadian assets were held separate in Canada in order to permit closing outside Canada pending the conclusion of the Canadian review, but in principle this could be possible with the Bureau’s consent.

42) Consequences of implementing without approval/permission

Pursuant to section 123 of the Competition Act, if parties implement a notifiable transaction during an applicable waiting period, they may be subject to an order dissolving the merger and/or administrative monetary penalties of $10,000 for each day the breach persists. 

The process – phases and deadlines

43) Phases and deadlines

Phase

Duration/deadline

Pre-notification:

There are no formal rules on pre-notification consultations.

No set duration or deadline

Investigation during waiting period:

With respect to notifiable transactions, the submission of a complete pre-merger notification triggers an initial 30-day waiting period during which the merger cannot close. 

During this 30-day period, a review will be initiated and may even be completed, in which case the Commissioner will issue a statutory advance ruling certificate or no-action letter which terminates the waiting period and permits the transaction to close. 

Alternatively, the Commissioner may extend the waiting period by issuing a supplementary information request. Unless an advance ruling certificate or no-action letter is issued, closing is not permitted until the expiry of a second 30-day waiting period, which commences when the response to the supplementary information request is provided. 

As explained below, if the waiting period expires and no advance ruling certificate or no-action letter has been issued, the parties may close the transaction, but the Commissioner may still challenge the transaction up to a year after closing.

30 working days waiting period 

Extension: 

The waiting period may be extended for a second 30-day waiting period, which commences when the response to the supplementary information request is provided

Investigation after waiting period:

Because there is no deemed approval in Canada, the Commissioner retains the right to challenge a transaction within a year following closing even if the relevant waiting period has expired, unless an advance ruling certificate has been issued. Accordingly, in some cases merging parties will choose not to close until an or advance ruling certificate or no-action letter has been issued, instead entering into one or more “timing agreements” assuring the Bureau that the transaction will not be closed without specified notice.

1 year from closing

Assessment and remedies/decisions

44) Tests or criteria applied when a merger is assessed

The substantive test which the Commissioner must meet on application to the Tribunal to block a proposed merger, and accordingly the test which the Bureau applies when reviewing a proposed transaction, is whether or not the merger will, or is likely to, result in a substantial lessening or prevention of competition. 

As described in the Merger Enforcement Guidelines, this requires an assessment of the effects of the proposed merger on the merged entity’s market power, which is defined as the ability of a firm or group of firms to profitably maintain prices above the competitive level for a significant period of time. The jurisprudence establishes that it is the ability to raise prices, not whether a price increase is likely, that is determinative. When a merger is not likely to have market power effects, it is generally not possible to demonstrate that the transaction will likely prevent or lessen competition substantially.

Additionally, section 96 of the Competition Act sets out an affirmative defence that is available to parties where “the merger or proposed merger in respect of which the application is made has brought about or is likely to bring about gains in efficiency that will be greater than, and will offset, the effects of any prevention or lessening of competition that will result or is likely to result from the merger or proposed merger and that the gains in efficiency would not likely be attained if the order were made.” In practice, where the merging parties assert that significant efficiencies will be attained as a result of the transaction, consideration of such efficiencies will form an important part of the Bureau’s review. 

45) May any non-competition issues be considered?

The purpose of the Competition Act is set out in section 1.1: “The purpose of this Act is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.” 

The Commissioner is required to consider all of these factors when evaluating a merger. However, the Commissioner is otherwise “apolitical” with respect to labour or industrial policy issues and in practice standard economic logic guides the Competition Bureau’s approach to merger review. 

As noted in topic 6, the foreign investment control review of a proposed investment does not affect the Bureau’s review of the same transaction.

46) Special tests or criteria applicable for joint ventures

Pursuant to section 95 of the Competition Act, the Tribunal has no substantive jurisdiction to make an order in respect of a proposed non-corporate joint venture formed to pursue a specific project or program of research and development that meets several criteria, including the following:

  • The project or research and development program would not have been likely to take place in the absence of the joint venture;
  • No change in control over any participant will result from the joint venture;
  • All the persons who formed the joint venture are parties to an agreement in writing that imposes on one or more of them an obligation to contribute assets and governs a continuing relationship between those parties;
  • The agreement restricts the range of activities that may be carried on by the joint venture, and provides that the agreement terminates on the completion of the project or program; and
  • The joint venture is not likely to prevent or lessen competition except to the extent reasonably required to undertake and complete the project or program.

47) Decisions and remedies/commitments available

The review of a notifiable merger may end in one of several ways. First, the Bureau may issue an advance ruling certificate or a no-action letter terminating the waiting period (if one has commenced) and ending the notification requirement (if a notification has not already been made). The parties may then close. 

Second, the Bureau may allow the relevant waiting period to expire without issuing an advance ruling certificate or a no-action letter. In this case, the parties may close, but with the risk that the Bureau may apply to the Tribunal to “unwind” the transaction for up to one year following closing. 

Third, the Commissioner may bring an application to the Tribunal seeking either a temporary injunction against closing pending the completion of the review or an order preventing closing or permitting closing on such terms as the Tribunal deems necessary to prevent the substantial lessening or prevention of competition. In this case, the parties may contest the Commissioner’s application and, if necessary, pursue appeals, as described in topic 50. As litigation is generally slow, however, merging parties generally abandon the transaction or negotiate a remedy at this stage. 

Finally, at any time during the process, the parties may enter into a remedy that the Commissioner judges sufficient to prevent the substantial lessening or prevention of competition. Generally, the Bureau prefers structural to behavioural remedies, but behavioural elements such as firewalls may be used. When a remedy is agreed upon, it is formalized in a consent agreement that is registered with the Tribunal, whereupon it gains the force of an order. Violations of a consent agreement may be subject to contempt proceedings.

Publicity and access to the file

48) How and when will details about the merger be published?

The Bureau publishes a complete monthly report of concluded reviews in respect of mergers for which either a notification or an ARC request was submitted and a filing fee paid. This list is available here. Only the names of the parties, the four-digit industry classification code, and the result (no-action letter, ARC, consent agreement, or judicial decision) are provided.

The Bureau also publishes news releases and, on occasion, position statements regarding particularly significant concluded merger reviews.

When the Bureau chooses to challenge a merger, or when a remedy is agreed upon and a formal consent agreement is registered with the Tribunal, such documents are made available to the public (with necessary redactions) here.

49) Access to the file for the merging parties and third parties

The merging parties:

The merging parties have no right to access the Bureau’s file, except in the context of discovery in a contested application before the Tribunal.

Third parties:

Section 29 of the Competition Act places strict confidentiality obligations on the Bureau and prevents the unauthorized disclosure of any non-public information “except to a Canadian law enforcement agency or for the purposes of the administration or enforcement of this Act”. The Bureau’s Information Bulletin on the Communication of Confidential Information Under the Competition Act bulletin describes the Bureau’s interpretation of its rights and obligations under this provision, including the circumstances that constitute disclosure “for the purposes of the administration or enforcement of this Act”.

Section 36 provides a right of private access to the Tribunal in respect of certain anti-competitive conduct. The Bureau’s Requests for information from private parties in proceedings under section 36 of the Competition Act bulletin describes how the Bureau will generally respond to requests for information from private parties seeking to access the Tribunal. In brief, the Bureau’s policy is to refuse voluntary requests and, when served with a subpoena, to advise the party whose information is the subject of the subpoena and seek to oppose the subpoena or obtain protective orders when appropriate.

Judicial review

50) Who can appeal and what may be appealed?

The Commissioner cannot prohibit a merger. Instead, he or she may bring an application to the Competition Tribunal for an order prohibiting the merger. This is a quasi-judicial process in which the merging parties have an opportunity to obtain documentary discovery, submit evidence, cross-examine expert witnesses, etc.

Decisions of the Tribunal may be appealed as to questions of law (and, with leave, as to questions of fact) to the Federal Court of Appeal. Decisions of the Federal Court of Appeal may themselves be appealed, with leave, to the Supreme Court of Canada. 


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