A Guide to Canada’s Merger Review Regime: Timelines and Outcomes

By: Xenos Chu, Bobbi-Ann Wallace

In our previous article, we provided an introduction to Canada’s merger review regime and the criteria set out in the Competition Act, R.S.C., 1985, c. C-34 and the regulations thereunder (collectively, the “Act”) for determining whether a proposed merger may require pre-closing notification to the Competition Bureau.

This piece provides an overview of the process that follows after a proposed merger is determined to be a notifiable transaction.

ARC Request and Notification Package

The primary objective of the parties is to obtain an Advanced Ruling Certificate (“ARC”). It is confirmation by the Commissioner of Competition (the “Commissioner”) that the Competition Bureau does not intend to challenge the proposed merger.

Legal counsel to the parties typically collaborate to prepare a confidential letter to the Commissioner that includes a competitive impact analysis, which explains why the proposed merger will not substantially prevent or lessen competition and requests issuance of an ARC.

Save for the clearest of cases where the ARC request alone is expected to be sufficient, each party to the proposed merger will also prepare a notification package containing materials that the Commissioner will use to assess whether the proposed merger is likely to substantially prevent or lessen competition. This is a data-intensive process. Each party to the transaction will ideally have personnel dedicated to gathering the required information for its legal counsel.

Examples of required information include, but are not limited to:

  • Description of the proposed transaction
  • Consideration to be given and received
  • Copy of the transaction documents
  • Corporate structure
  • Party to the transaction and its affiliates, and for each of them:
    • Description of the business of the party and its affiliates
    • Annual reports and financial statements
    • Principal categories of products
    • Total sales for each principal category of products
    • Top 20 customers for each principal category of products, including sales figures and contact information
    • Total purchases for each principal category of products
    • Top 20 suppliers for each principal category of products, including purchase figures and contact information
    • Geographic regions of sales
  • Foreign antitrust authorities who have been notified
  • Relevant completed studies or reports regarding competition, market share, etc.

Experienced legal counsel will assist the parties with explaining the nature of their respective businesses, product categories, and their objectives to avoid misunderstandings by the Competition Bureau and demonstrate that the proposed merger will not substantially prevent or lessen competition in the Canadian market.

The Competition Bureau will conduct its assessment of the proposed merger using information contained in the notification package from each party. Coordination between legal counsels for the parties is therefore crucial to providing the Competition Bureau with a clear and coherent picture.

Waiting Period

The parties to the transaction are prohibited from completing the proposed merger until 30 days following the submission by each party of a completed notification package certified under oath.

The Competition Bureau may also issue a supplementary information request (“SIR”) where it requires additional information from the parties to complete its assessment. Where a SIR is issued, the parties cannot complete the proposed merger until 30 days after their compliance with the SIR.

Given that delays to closing can be costly for parties to the transaction, it is important to engage experienced legal counsel to ensure the initial submission satisfies all regulatory requirements. In some cases, legal counsel may use other means to trigger an initial review of the transaction by the Competition Bureau before submission of the full notification package so that preliminary assessment work will have been done by the Competition Bureau before the 30-day waiting period begins.

Possible Outcomes

If the Competition Bureau determines not to take action against the proposed merger following its review of the submitted material, the Commissioner may issue an ARC (which prevents the Competition Bureau from challenging the proposed merger on the basis of information submitted, provided the proposed merger is substantially completed within 1 year of the ARC being issued) or a No Action Letter (which indicates the Commissioner has decided not to challenge the proposed merger at that time, but reserves the right to do so within 1 year after closing of the transaction).

Where the Competition Bureau decides to challenge the proposed merger, it may bring an application to the Competition Tribunal. That process is beyond the scope of this article.

This article is not legal advice and any person considering entering into a notifiable transaction should engage legal counsel to determine the steps to be taken in their specific case to ensure compliance with the Act. 

 

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