Finance Minister Joe Oliver tabled the 2015 federal budget before the House of Commons on April 21, 2015. The budget highlighted recent policy changes in competition law and foreign investment review, including new powers for the Competition Bureau to investigate cross-border price gaps and new thresholds for World Trade Organization (WTO) investors under the Investment Canada Act.

INVESTIGATING CROSS-BORDER PRICE DISCRIMINATION

On December 9, 2014, the Price Transparency Act (PTA) was introduced in the House of Commons. If passed, the Competition Bureau will be empowered to investigate and publicly report on instances of cross-border price discrimination (i.e., where products or services are sold in Canada at unjustifiably higher prices than similar goods or services in the United States). The budget allots C$5-million over five years to the Competition Bureau to pursue investigations under the PTA.

The allotment in the budget specifically to this issue highlights the government’s intention to enact the PTA and commit significant resources to investigating cross-border price gaps. Businesses, especially consumer-facing ones, with operations in Canada and the United States are at risk of facing subpoenas if their prices are different in each country. Although the Competition Bureau will not yet have any powers to take enforcement action, the investigative process can be burdensome as company documents and data may be required to be turned over by court order to the Competition Bureau.

For more information, see our December 2014 Blakes Bulletin: New Legislation Would Enhance Powers to Investigate U.S.-Canada Price Differences.

UPDATED FOREIGN INVESTMENT REVIEW THRESHOLDS

Recognizing the importance of foreign investment for the Canadian economy, specifically in the energy sector, the government recently made changes to the country’s foreign investment framework. These changes, described in our March 2015 Blakes Bulletin: New Investment Canada Act Thresholds and National Security Review Periods, alter how the monetary threshold is calculated for WTO investors.

Amended regulations, which take effect on April 24, 2015, provide that investments by private-sector foreign investors from WTO-member countries will only be reviewable on “net benefit to Canada” grounds where the “enterprise value” of the Canadian target business exceeds C$600-million. This amount will rise progressively until the threshold reaches C$1-billion in 2019.

Replacing the current threshold—C$369-million in book value of assets—with an enterprise value threshold is meant to more accurately capture the value of intangible assets of modern, knowledge-based businesses. The threshold has not changed for acquisitions by foreign state-owned enterprises or acquisitions of Canadian cultural businesses.

For private-sector investors, the change to the monetary threshold should be welcome news, particularly as it increases to C$1-billion in four years’ time. The threshold change should signal the government’s openness to foreign investment and its intention to restrict “net benefit to Canada” reviews to very large transactions.

Changes to the national security review timelines announced last month, which potentially affect any investment in Canada no matter the size, are already in force.