This chapter provides an overview of the merger control regime in Canada, highlights noteworthy developments in 2016 and offers case and enforcement insights and strategies for the upcoming year.
Over the past year, five major themes emerged in the Bureau's review of mergers. First, the Bureau continued to show a willingness to resolve merger issues through consent agreements and provided guidance regarding the key terms it will expect in such agreements. Second, the Bureau elaborated on the factors it will consider in determining whether a prospective purchaser is acceptable in the context of divestitures. Third, the Bureau continued to closely coordinate its enforcement efforts in cross-border transactions with its international antitrust counterparts, particularly those in the United States. Fourth, the Bureau continued to react and adapt to the effects of a 2015 Supreme Court of Canada (Supreme Court) decision on merger efficiencies (described below), allowing, for the first time, an otherwise anticompetitive merger to proceed on the basis of efficiencies. Finally, the Bureau further developed its approach to mergers in the gasoline industry, imposing remedies in two mergers.
II YEAR IN REVIEW
In fiscal year 2015-2016, the Bureau reviewed a total of 203 mergers (compared to 225 merger reviews in the previous fiscal year).2 Of these, 65 (or 32 per cent) were designated ‘complex' and 138 (or 68 per cent) were designated ‘non-complex.' In fiscal year 2016-2017, a total of 222 mergers were reviewed. Of these, 53 (or 24 per cent) were designated ‘complex' and 169 (or 76 per cent) were designated non-complex. In 2015-2016, the average review time was 36.40 days for complex mergers and 10.85 days for non-complex mergers. In 2015-2016, the average review time was 50.78 for complex mergers and 10.51 for non-complex mergers. In 2016-2017, there were 14 complex matters for which the Bureau's (non-binding) service standards were not met; of these, nine involved supplementary information requests (SIR)(described below) and five involved international coordination which impacted review time.
In 2016-2017, a no-action letter (NAL) was issued in 32 per cent of all non-complex reviews and an advance ruling certificate (ARC) was issued in 68 per cent of all non-complex reviews, both of which are brief notices to the parties that their deal may proceed as planned. In the case of a NAL, the Commissioner of Competition (Commissioner)3 retains the right to challenge the merger within one year of closing. In the case of an ARC, the Commissioner may challenge the merger if it is not substantially completed with one year after the ARC is issued or if new information arises that differs substantively from the information provided in the ARC.
In terms of sector breakdown, oil and gas and real estate together accounted for approximately 38 per cent of all Bureau reviews (each accounting for 19 per cent of reviews) in 2016-2017. Other sectors that had more than four reviews in 2016-2017, included electric power generation, transmission and distribution; gasoline stations; depository credit intermediation; traveller accommodation; insurance carries; community care facilities for the elderly; support activities for mining and oil and gas extraction; and petroleum and petroleum products merchant wholesalers.
Fiscal year 2016-2017 was the second consecutive record year for the number of mergers resolved by way of consent agreements (eight in total compared to seven in 2015-2016). Similarly, the Bureau issued position statements articulating its approach in record 33 per cent of complex reviews.
The major merger and enforcement themes from 2016 are discussed in further detail below.
i Greater clarity on consent agreements
In 2016-2017, eight allegedly anticompetitive mergers were resolved by way of consent agreements. Moreover, the Bureau has identified only a limited number of scenarios where prohibition is likely to be the only means of addressing the anticompetitive effects arising from a proposed merger: (1) where there is a substantial lessening or prevention of competition in every market where the merging parties operate; (2) where assets beyond the markets of concern must also be divested to ensure a viable and effective remedy; (3) where the transaction is no longer commercially viable because of remedies required to resolve competition concerns and the parties voluntarily abandon the transaction; and (4) where a behavioural remedy is not acceptable and a full structural divestiture is necessary to adequately remedy the harm.
In September 2016, the Bureau issued a consent agreement template to provide guidance and insight into its expectations when negotiating measures to address competitive issues likely to arise from a proposed merger. The key provisions of the template include:
- a obligations to complete divestitures within prescribed time periods;
- b divestiture trustee sale process;
- c requirement for approval of divestiture by commissioner of competition;
- d obligations to hold certain assets of merger separate;
- e behavioural commitments and transitional support obligations;
- f relations with and obligations to employees;
- g consequences for failure of divestiture;
- h appointment of monitor re compliance with consent agreement;
- i ongoing compliance obligations;
- j duration of agreement; and
- k preservation of divestiture assets.
Although the Bureau noted that it plans to adjust the template over time based on ongoing experience with negotiated merger consent agreements, early experience suggests that only in rare circustances is the Bureau is prepared to depart from its precedent language. This lack of flexibility in practice may give rise to issues in global mergers where common remedies are negotiated across multiple jurisdictions. The resulting divergences among various consent agreements (e.g., different divestiture sale periods, reporting obligations, scope of confidential information, etc.) may exacerbate parties' compliance-related costs and efforts rather than relieve them.
ii Guidance on acceptable divestiture purchasers
In addition to the above-noted guidance with respect to consent agreements, the Bureau has also provided more clarity relating to the factors it will consider in determining whether a prospective divestiture purchaser is acceptable.
In December 2016, the Bureau entered into a consent agreement with Abbott Laboratories to resolve concerns related to its proposed acquisition of St. Jude Medical, Inc (St. Jude) requiring the sale of St. Jude's vessel closure devices business. The Bureau approved Terumo Corporation as an acceptable purchaser, noting that the identification of an upfront buyer helped to ensure the timeliness of the sale and the viability of the assets to be divested.
In March 2016, the Bureau entered into a consent agreement with Iron Mountain Inc in connection with its acquisition of Recall Holdings Ltd, requiring the sale of record management assets in all six cities where the parties overlapped. In January 2017, the Bureau approved Summit Park LLC's (Summit) acquisition of these assets. As part of its approval process, the Bureau reviewed applicable management presentations, financial projections and strategy documents and gave particular weight to business plans and the rigorousness of Summit's assessment of the assets to be acquired.
In April 2016, the Bureau entered into a consent agreement with Crop Production Services (Canada) Inc (CPS) in connection with its proposed acquisition of WendlandAg Services Ltd's (Wendland) agri-product retail stores. The consent agreement required CPS to divest one retail store and two stand-alone anhydrous ammonia assets and to continue to supply anhydrous ammonia to any purchaser of the divested assets for up to two years at prices not to exceed those charged to its retail outlets in Saskatchewan, at the purchaser's option).4 The Bureau noted that in determining whether a divestiture purchaser is acceptable, it would take into account market contacts' feedback that it is important for an agri-product retailer to be able to provide additional products, beyond anhydrous ammonia, to compete effectively with other retailers. As a result, the Commissioner would consider whether the proposed purchaser of a divested anhydrous ammonia tank has effective complementary retail facilities nearby prior to approving a proposed divestiture.
Another nuance to the Bureau's approach regarding acceptable divestiture purchasers is reflected in the February 2017 consent agreement entered into with BCE Inc (Bell) and Xplornet Communications Inc (Xplornet) relating to Bell's acquisition of Manitoba Telecom Services (MTS). Under the terms of the consent agreement, the Bureau approved a divestiture of six retail stores, 24,700 subscribers and 40MHz of spectrum to Xplornet, in addition to a number of behavioural remedies including providing Xplornet with expedited access to Bell's towers in Manitoba for five years. Notably, the consent agreement included a condition requiring Bell to complete a previously announced transaction with TELUS Corporation (TELUS) pursuant to which Bell would sell to TELUS a significant number of the post-paid wireless subscribers that Bell acquires from MTS and assign to TELUS approximately one-third of the MTS dealer locations. In effect, Xplornet appears to be an added divestiture purchaser to satisfy the Bureau's concerns not sufficiently addressed by Bell's original fix-it-first solution involving TELUS.
Overall, these recent experiences shed light on the factors that will be considered by the Bureau in determining whether a prospective divestiture purchaser has the requisite managerial, financial and operational capability to compete in the industry at issue.
iii Coordination with international antitrust authorities in resolving merger concerns
As in previous years, several key mergers involved international cooperation and the Bureau continued to emphasise the increasing and important role of international coordination in Canadian merger reviews and remedies.
Most recently, in May 2017, the Bureau reached a consent agreement with the Sherwin-Williams Company (Sherwin-Williams) in connection with its acquisition of the Valspar Corporation (Valspar). The Bureau determined that this acquisition would likely result in a substantial lessening of competition for customers that require a long-term supply of large batch shipments of industrial wood coatings in and into Canada, resulting in higher prices. To remedy this concern, the consent agreement requires the sale of Valspar's assets in Canada and the United States used exclusively or primarily in support of the supply of industrial wood coatings in Canada including manufacturing plants, research and development assets, intellectual property and customer contracts. Throughout its review, the Bureau conferred with antitrust regulators in other jurisdictions, including the United States, Europe, China and Australia. As the relevant assets being sold are located in Canada and the United States, to ensure an effective remedy, the Bureau worked closely with the United States FTC to ensure an effective remedy, including the appointment of the same monitor.
Similarly, in the Iron Mountain/Recall merger referred to above, the Bureau noted that it cooperated with the United States DOJ, the Australian Competition and Consumer Commission and the UK Competition and Markets Authority in the course of its review.
In May 2016, the Bureau issued a NAL with respect to the proposed acquisition by Anheuser-Busch InBev SA/NV (AB InBev) of SABMiller plc (SABMiller) and the concurrent divestiture of certain SABMiller brands to Molson Coors Brewing Company. The Bureau noted its close cooperation with the United States DOJ as well as its counterparts in other jurisdictions. Notably, in addition to the sale of certain SABMiller brands to Molson Coors, AB InBev agreed to sell SABMiller's Peroni, Grolsch and Meantime brand families and related businesses to Asahi Group Holdings, Ltd, as well as SABMiller's business in central and eastern Europe, including the Pilsner Urquell, Tyskie, Kozel, Lech and Żubr brands sold in Canada, to a third-party purchaser pursuant to a commitment made to the European Commission.
Further, the Bureau emphasised that it worked closed with both the United States FTC and the European Commission throughout its review of the Abbott/St. Jude merger noted above. The Bureau's cooperation with the former, in particular, ensured a coordinated and effective resolution in both Canada and the United States. This included the appointment of the same monitor in both jurisdictions to ensure the completion of the sale of the relevant business and the transfer of all related intellectual property, including Health Canada approvals.
This trend of international cooperation between the Bureau and other antitrust regulators, which facilitates and expedites international merger reviews and remedies across jurisdictions, is likely to continue in the coming years.
iv Continued quantification of anticompetitive effects and consideration of efficiencies
On 22 January 2015, the Supreme Court provided guidance on the test for prevention of competition and the efficiencies defence in Commissioner of Competition v. Tervita Corporation.5 The Supreme Court determined that in order for the assessment of efficiencies to be as clear and objective as possible, the Commissioner must, as a first step, quantify all quantifiable effects of a merger and then weigh them against quantified efficiencies to be able to determine whether the merger efficiencies will outweigh the anticompetitive effects to meet the defence.6
Since this decision, the Bureau has shown an ongoing commitment to using advanced econometric analyses to quantify anticompetitive effects and efficiencies. For example, in the Iron Mountain/Recall merger noted above, the Bureau's quantitative analysis included calibrating a merger simulation model in an auction market context to assess competitive effects in an industry characterised by long-term contracts. In connection with its review of the AB InBEV/SABMiller merger, the Bureau used sales data from the parties to calculate upward pricing pressures and illustrate the potential price effects using estimates of the parties' ability to pass increased costs to their customers. In the Bell/MTS merger, the Bureau conducted a thorough pricing analysis using confidential internal company data and concluded that the cognisable likely efficiencies of the proposed transaction did not outweigh the significant likely anticompetitive effects.
A significant development in the past year is the Bureau's review of the proposed acquisition by Superior Plus Corp (Superior) of Canexus Corporation (Canexus), the first time, based on the Tervita decision, that the Bureau cleared an otherwise anticompetitive merger on the basis of the efficiencies defence. The Bureau had concluded that the proposed acquisition would likely result in a substantial lessening of competition for the supply of sodium chlorate in both eastern and western Canada and for the supply of chlor-alkali chemicals in western Canada. However, Superior provided detailed analyses prepared by an expert to support its claims of efficiency gains resulting from the proposed transaction including the elimination of overhead costs, freight optimisation and the elimination of duplicate corporate services. The Bureau retained an external economic expert to model the likely effects of the proposed merger and, in particular, to estimate the deadweight loss (allocative inefficiency) that would likely result from the merger, as well as an external efficiencies expert to evaluate Superior's claims. In June 2016, the Bureau issued a NAL in connection with the proposed transaction on the same day that the United States FTC filed an administrative complaint challenging the transaction. (Superior subsequently abandoned the merger.)
The Bureau's experience with the efficiencies defence in the previous year indicate that it is still adjusting to the Supreme Court's decision in Tervita and it appears to be laying the groundwork for proposals to either amend or repeal this defence.
v Close scrutiny of gasoline industry
The Bureau has continued to pay particularly close attention to mergers in the gasoline industry since its consent agreement with Parkland Fuel Corporation (Parkland) in connection with its acquisition of Pioneer Energy LP (Pioneer) in April 2016. In that case, the Bureau concluded that Parkland would have the ability and incentive post-merger to (1) raise retail prices at its corporate stations and (2) materially influence the retail pricing of the majority of stations in a market due to its vertical wholesale supply relationships with third-party gasoline stations in that market. While the Bureau did not contest the fact that Parkland did not have the ability to directly control fuel prices at these third-party stations, the Bureau did not accept Parkland's argument that it is constrained in its ability to increase wholesale prices (and thereby indirectly increase retail prices at the third-party stations it supplies) due to the highly competitive nature of the upstream wholesale market.
Over the last year, the Bureau applied this framework for retail gasoline mergers in two other transactions. First, in June 2016, the Bureau entered into a consent agreement with Le Groupe Harnois Inc (Harnois) in connection with its proposed acquisition of Distributions pétrolières Therrien Inc's (DPT) gasoline supply arrangements. The Bureau concluded that divestitures were required in two overlap markets where only one additional competitor would remain post-merger and the parties would have the ability and incentive to materially influence the retail pricing of the majority of the stations, either through direct retail price control at Harnois' corporate stations or through the vertical relationships that Harnois and DPT have with the dealers that they supply.
In September 2016, the Bureau required two divestitures in connection with Couche-Tard Inc's (Couche-Tard) proposed acquisition of 293 retail gasoline sites in Ontario and Quebec from Imperial Oil (IOL). However, because Couche-Tard does not distribute wholesale gasoline to third-party retailers and the proposed transaction did not involve the acquisition of gasoline distribution contracts, the distribution of gasoline to third-party stations by the parties was not a focus of the Bureau's analysis in this case.
The Bureau's approach to retail gasoline mergers differs from its approach to other retail mergers in which wholesale customers' shares are not attributed to suppliers (who also compete at the retail level through separate corporate stores). For example, in May 2016, the Bureau cleared Lowe's Companies, Inc (Lowe's) acquisition of RONA Inc (RONA). RONA also operates a wholesale distribution business that supplies both its retail network, including dealer-owned RONA stores, and other third-party wholesale customers. Rather than attributing the sales of wholesale customers to RONA, the Bureau considered whether the proposed acquisition raised any vertical concerns and concluded that many buying groups, alternative wholesalers and competing retail banners are, and would remain readily available to supply, RONA's wholesale customers with home improvement products.
The Bureau is currently reviewing a number of retail gasoline mergers that will likely provide further insight on the Bureau's approach in this context.
Overall, the trends identified above are likely to continue to shape the competition law enforcement landscape in Canada in 2017.
III THE MERGER CONTROL REGIME
The Bureau, headed by the Commissioner, is an independent government agency responsible for the enforcement of the Competition Act. All mergers are reviewable by the Commissioner to determine their competitive impact, but only those that exceed certain thresholds require pre-merger (PMN) notification to the Commissioner. These thresholds include a ‘size-of-parties' test and a ‘size-of-transaction' test, both of which must be satisfied to trigger the PMN requirement, as well as a third test that applies in respect of a proposed acquisition of any of the assets in Canada of an operating business or in respect of an acquisition of voting shares.
If these PMN thresholds are exceeded, the parties to the transaction must comply with the PMN framework in the Competition Act, which requires parties to notify the Commissioner prior to completing the merger, to provide specified information and to wait a specified period of time before completing the transaction. In addition, there are non-binding policies that the Bureau generally follows, such as merger review timelines, and certain practices that parties are encouraged to follow, such as cooperation and transparency.
Section 109 of the Competition Act sets out the ‘size-of-parties' test, which requires that the aggregate Canadian assets of the parties to the transaction (together with their affiliates) exceed C$400 million or that the aggregate Canadian turnover of the parties exceed C$400 million. Section 110 of the Competition Act sets out the ‘size-of-transaction' test, which changes yearly and which, in 2017, requires the Canadian assets or revenues, or both, of the target (together with its affiliates) to exceed C$88 million. Section 110 of the Competition Act also sets out the third component of the test that triggers the PMN requirement, and it describes the acquisition event, generally, as the acquisition of assets, or the acquisition of 20 per cent of the voting shares of a publicly traded company or 35 per cent of the voting shares of a privately held company (or more than 50 per cent if the acquirer already owns between 20 and 50 per cent).
Irrespective of whether a transaction triggers the requirement to notify or if the Commissioner has issued an NAL, the Commissioner retains the statutory authority to challenge a merger. In the case of a non-notifiable transaction or where an NAL has been issued under Section 114 of the Competition Act, Section 97 of the Competition Act provides that the Commissioner may bring a challenge within one year after the transaction has been substantially completed if it raises competition concerns. In the case of an ARC, Section 103 of the Competition Act provides that the Commissioner may not challenge a merger based on the same facts if the merger is substantially completed with one year after the ARC is issued.
Section 111 provides for several narrow exemptions from the PMN requirement, the applicability of which must be assessed on a case-by-case basis. Parties can be exempted from the PMN requirement if the Commissioner issues an ARC pursuant to Section 102 of the Competition Act or where, for example, the parties to the transaction are all affiliates. A number of other exemptions to the requirement to notify are also provided for in the CA, including certain types of joint ventures and acquisitions of:
- a real property or goods in the ordinary course of business;
- b shares or interests for the purpose of underwriting;
- c receivables (or an acquisition forming a part of any debt work-out); and
- d Canadian resource property.
In 2015, the Bureau published guidance on the circumstances in which a proposed acquisition of loans, mortgages or receivables will be notifiable.7 For the purpose of the paragraph 111(a) exemption, the word ‘goods' includes intangible goods where the acquiror, as a result of the transaction, will hold all or substantially all of the assets of a business or of an operating segment of a business. On the other hand, an acquisition will not be notifiable where it is an acquisition of real property or goods in the ordinary course of business (e.g., original equipment manufacturers switching commercial finance providers for dealer programmes or commercial finance providers buying and selling accounts receivable and loan portfolios more generally).
iii PMN forms and ARC applications
Subsection 114(1) of the Competition Act provides that parties to a notifiable transaction are required to notify the Commissioner and supply the prescribed information set out in Section 16 of the Notifiable Transactions Regulations and reflected in the Bureau's template form (PMN form). For a PMN form to be complete, each party is required to certify under oath or solemn affirmation that the information it has supplied is correct and complete in all material respects pursuant to Section 118 of the Competition Act, and explain if information cannot be supplied.
In straightforward transactions, the merger parties can request an exemption from filing the PMN form by applying for an ARC, which is a letter describing the transaction and the parties and explaining why there are no substantive competition law concerns. Most ARC applications are processed within the Bureau's two-week ‘non-complex' service standard period (described below). Parties can close with relative comfort by receiving either an ARC (typically for non-complex matters) or an NAL (typically for complex matters).
iv Filing fee and non-compliance
Section 65(2) of the Competition Act imposes a C$50,000 fee for an ARC application and a PMN (the fee is the same whether one or both are filed). Failure to comply with the PMN requirement ‘without good and sufficient cause' is a criminal offence that carries a C$50,000 fine. Parties would also be in contravention of Section 123 of the Competition Act, which prohibits completing a merger before the expiry of the applicable statutory waiting period. The Commissioner could respond to such breach by seeking an order to prohibit the implementation of a merger or requiring the dissolution of a completed merger, as well as imposing a monetary fine of up to C$10,000 for each day that the parties are in breach of the waiting period.
v Non-notifiable mergers
A merger can be reviewed by the Bureau under Part VIII of the Competition Act even if it is not notifiable. The Bureau monitors non-notifiable transactions to ensure compliance with substantive competition laws. Non-notifiable mergers that are reviewed are detected mainly through complaints from market stakeholders (e.g., customers, suppliers and competitors) or market monitoring (e.g., media sources and mergers and acquisitions databases). Under Section 9 of the Competition Act, the Bureau can be compelled to conduct an inquiry into a merger if six Canadian residents initiate a complaint, although the Commissioner retains the discretion to decide whether to commence a challenge before the Tribunal. Additionally, parties themselves may voluntarily notify the Bureau by way of an ARC request to have written confirmation that the Commissioner will not take action with respect to an upcoming merger.
vi Statutory waiting period
Under Part IX of the Competition Act, once parties to a proposed transaction have submitted completed PMN filings, an initial statutory 30-day waiting period commences during which time the parties are prohibited from closing. The Commissioner has discretion to effectively terminate the waiting period early if he does not intend to make an application to the Tribunal by issuing an ARC or NAL.
Conversely, the waiting period can be extended where the Bureau requires more information to review the proposed transaction. In such circumstances, the Bureau issues an SIR under Section 114(2) of the Competition Act. The waiting period is suspended upon the issuance of an SIR, and a new 30-day waiting period commences from the date the SIR is certified complete. The Commissioner can seek to prevent a transaction from closing by applying to the Tribunal for an order to that effect, if he chooses to challenge it.
vii Cooperation and collaboration
Regular and open dialogue and cooperation with the Bureau can help expedite the merger review process. Voluntarily providing additional information that is requested, supplying competitive analyses and working proactively with the Bureau to resolve any potential concerns will generally provide for a more efficient review. For example, in transactions involving purchasers that are private equity funds, counsel can expedite the process by confirming whether the fund holds an interest of 10 per cent or more in a competing business. In complex matters, parties may agree to an additional 30-day waiting period upfront to give the Bureau case team additional time, particularly in a document-heavy file. This will assist the Bureau case team and potentially avoid an SIR issuance.
viii Merger review policies
Once a filing is received, the Bureau designates the case as ‘non-complex' or ‘complex'. In non-complex cases, the Bureau aims to complete its review within 14 days of receiving the filing and provide an ARC or NAL that effectively terminates or waives the waiting period. For complex cases, the period is 45 days. However, where an SIR is issued, the service standard is an additional 30 days from the date on which the Commissioner has received a complete response to the SIR from all recipients. This results in overall review periods in the range of four months or longer where SIRs have been issued.
While these are not statutory timelines, the Bureau has generally met its service standard in over 90 per cent of concluded matters. Unless the Commissioner issues a SIR, parties are legally permitted to close their transaction without comfort and at their own risk once the initial 30-day waiting period has expired. In such circumstances, parties would continue to be subject to the risk that their transaction could be challenged by the Commissioner, who maintains the right to seek a court injunction to prevent closing and, within one year following closing, to challenge it under Section 97.
SIRs are only issued in a minority of matters, as most matters are dealt with through informal information requests, questions and dialogue during the review process. In fiscal 2015-2016, the Bureau issued 18 SIRS, representing 8.1 per cent of all matters reviewed. In fiscal 2016-2017, 21 SIRs have been issued, representing 8.8 per cent of all matters reviewed. Post-issuance discussions with the Bureau may narrow the scope of the requested information and may limit the number of custodians and search terms (for electronic searches) required to satisfactorily respond to the SIR.
x Merger registry
In 2012, the Bureau introduced a publicly available online merger registry that lists the names of the parties and other information relating to concluded transactions, despite concerns raised by the Canadian Bar Association about publicly identifying merger parties in non-public cases. In exceptional cases, where the publication may result in material harm, parties may request that the information be kept private, and the Bureau may oblige on a case-by-case basis.
xi Merger Enforcement Guidelines (MEGs)
The MEGs provide helpful guidance in determining what information should be provided to the Bureau to assist in its review of a merger. The objective of the MEGs is to set out current Bureau practice as well as its legal and economic thinking.
IV OTHER STRATEGIC CONSIDERATIONS
i The efficiencies defence
As noted above, in the wake of the Tervita case, the Bureau cleared an otherwise anticompetitive merger on the basis of the efficiencies defence for the first time in 2016. The Bureau encourages parties intending to make efficiencies claims to approach the Bureau early on in the process with a detailed efficiencies submission that includes supporting documents and data. Where relevant, merging parties should anticipate being asked to provide detailed and progressively more specific information on efficiencies to enable the Bureau to conduct its own analysis. The Bureau has also signalled a willingness to obtain information through such means as additional questions in SIRs or issuing Section 11 orders8 to merging parties after SIRs have been issued, something that it has not previously done. The Bureau has also indicated that where it is not clearly the case that claimed efficiencies significantly outweigh relevant anticompetitive effects, it will likely seek to adjudicate the matter before the Competition Tribunal.
ii Staggering international reviews
As noted above, there has been an increased emphasis placed by the Bureau on negotiating parallel consent agreements in the cross-border context. In fact, the Commissioner has noted that approximately one quarter of the Bureau's complex merger reviews involve a significant level of cooperation with at least one international antitrust counterpart.9 As a result, to coordinate the negotiation of a Canadian resolution within international mergers where there are similar substantive considerations, parties may wish to sequence Canadian and foreign reviews to have the Canadian review benefit from the lead agency's analysis. Such an approach, particularly involving US antitrust authorities, may help to ensure that remedies are aligned and resolution timing is coordinated.
iii Enforcement action where parties fail to notify
In May 2015, perhaps as a signal to other merging companies that meet the thresholds under the Competition Act but fail to notify, the Bureau took enforcement action against Parrish and Heimbecker, Limited (P&H), an agribusiness company that failed to notify the Bureau of two proposed acquisitions. In light of P&H's voluntary reporting once management learned of the failure to notify, the Bureau was of the view that P&H should adopt a compliance programme to ensure it complies with the Competition Act in the future. The compliance programme requires P&H to ensure that employees are familiar with the Competition Act, appoint two senior executives as compliance officers to be responsible for the development, implementation and maintenance of the programme, seek a legal opinion on all proposed transactions exceeding C$5 million in value to determine if they are subject to premerger notification and inform the Bureau of the progress being made on the implementation of the compliance programme. Accordingly, merger parties should be aware that the Bureau monitors and is prepared to take enforcement action where parties have failed to notify.
V OUTLOOK & CONCLUSIONS
i Evolving approach to the efficiencies defence
The Bureau will likely continue to adapt to the consequences of the Tervita decision described above in connection with efficiencies. Reflecting on the post-Tervita merger review landscape, the Bureau has noted that the complexity of merger review (and therefore the Bureau's costs) has increased, resulting in longer reviews for complex mergers and a potential need to reconsider the current filing fee amount (C$50,000). In addition, the Bureau cleared the first anticompetitive merger on the basis of the efficiencies defence last year (Superior/Canexus, discussed above), perhaps laying the groundwork for a proposal to amend or repeal the defence. Overall, the Bureau is currently updating its approach to efficiencies claims in merger reviews and its approach is likely to evolve in the coming years.
ii Continued and increasing international cooperation
In 2016, the Bureau continued its practice of signing cooperation instruments with a number of law enforcement agencies to promote international cooperation in the areas of competition policy and law. In 2016-2017, the Bureau signed two new cooperation agreements with its international partners (a memorandum of understanding with the Hong Kong Competition Commission and a second-generation cooperation arrangement with the New Zealand Commerce Commission), bringing the total number of agreements in place to 14.10 These MOUs will help to further develop communication among agencies and will facilitate further technical and enforcement cooperation.
iii Bureau's Strategic Vision for 2017
The Bureau has identified safeguarding Canadians against anticompetitive conduct through active enforcement and increasing collaboration, openness and transparency as its key priorities for the upcoming year. Accordingly, a number of trends that have emerged in 2016 are likely to continue and evolve in the upcoming year.
DANY H ASSAF
Dany Assaf is co-chair of the competition and foreign investment review practice at Torys LLP in Toronto, Canada. He is recognised as a leading expert in competition law, including being named as one of the world's ‘Top 40 Competition Lawyers Under 40' by Global Competition Review.
He has extensive domestic and international advisory experience, and has been involved in many of Canada's highest-profile transactions and investigations in all areas of competition law. He has appeared at all levels of court including the Supreme Court of Canada. He provided testimony on proposed amendments to the Competition Act before the Canadian Senate and on the Investment Canada Act to the Canadian Parliamentary Committee on Industry, Science and Technology. He is a former adjunct professor of competition law and co-author of Competition and Antitrust Law: Canada and The United States (4th edition) for LexisNexis Butterworths (2014). He served as a private sector adviser to the International Competition Network and is past chair of the economics committee of the Canadian Bar Association's competition law section. He holds a BComm (with distinction) from the University of Alberta and an LLB from the University of Toronto.
Zirjan (Zee) Derwa's practice focuses on competition law. He provides advice to clients on all aspects of Canadian competition law in connection with complex mergers, acquisitions, joint ventures and other strategic alliances. Zee's practice also includes advising on potentially anticompetitive business practices as well as compliance under the Competition Act. He assists clients in the navigation of multi-jurisdictional criminal antitrust investigations and the defence of associated parallel civil class actions. Zee has acted for clients in abuse of dominance proceedings as well as many major national cartel cases.
Marina Chernenko's practice focuses on all aspects of competition and antitrust law. She assists clients on matters under the Competition Act and the Investment Canada Act. Her experience includes both domestic and complex, multi-jurisdictional competition matters.
She holds a JD from Osgoode Hall Law School, York University and a BA (with honours) from the University of Toronto.
79 Wellington Street West, Suite 3000
Box 270, TD South Tower
Tel: +1 416 865 0040 / +1 416 865 7303
Fax: +1 416 865 7380
1 Dany H Assaf is practice co-chair and Zirjan Derwa and Marina Chernenko are associates at Torys LLP.
2 Figures in this section are drawn from the Competition Bureau's Merger Review Performance Report: Update on Key Performance Statistics (presented at the Canadian Bar Association Competition Section Annual Roundtable Meeting on 26 May 2017).
3 The current Commissioner of Competition is John Pecman.
4 Notably, the CPS/Wendland transaction was notifiable both under the Bureau's pre-merger notification threshold and as a result of provisions in a 2013 consent agreement relating to the purchase of a number of agri-product retail stores from Viterra Inc. In effect, that consent agreement required Agrium to notify the Bureau of any acquisitions within 35 kilometres of any divested retail locations or anhydrous ammonia businesses for a period of three years.
5 Tervita Corp. v. Canada (Commissioner of Competition) 2015 SCC 3.
6 Ibid at paragraph 147.
7 Pre-Merger Notification Interpretation Guideline No. 16: Definition of ‘Goods' (Paragraph 111(a) of the Act).
8 Section 11 under the Act permits the Commissioner to apply for court orders to gather information to assist in his inquires.
9 Remarks by John Pecman, Commissioner of Competition, ‘Better Together - The Importance of Cooperation Amongst Competition Authorities' (21 May 2015), North American Antitrust Authorities Conference (Mexico City).
10 The Bureau has negotiated cooperation instruments, which include MOUs with 12 jurisdictions, including Australia, Brazil, Chile, China, the European Union, Hong Kong, India, Japan, Mexico, New Zealand, the Republic of Korea, Taiwan ROC, the United Kingdom and the United States.