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Under what circumstances is a transaction caught by the legislation? Section 91 of the Competition Act defines a ‘merger’ as being 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 a significant interest in the whole or part of the business of a competitor, supplier, customer or other person. Therefore, mergers are broadly defined.
Section 92 of the Competition Act provides that mergers – as defined – which are likely to give rise to a substantial prevention or lessening of competition may be challenged by the commissioner of competition before the Competition Tribunal. There is no de minimis size threshold to possible challenges.
In addition to the ability to challenge mergers of any size if they give rise to a substantial prevention or lessening of competition, the legislation also provides that specific types of transaction that rise above prescribed size thresholds require notification to the Competition Bureau before their implementation. There is no substantive aspect of the test as to whether a transaction is notifiable, so many completely innocuous transactions must be notified. Reciprocally, the fact that a transaction requires no notification does not mean that it cannot or will not be challenged. The commissioner of competition has up to one year post closing to challenge any transaction, whether or not notification needs to be given.
Do thresholds apply to determine when a transaction is caught by the legislation? While any transaction constituting a merger may be subject to substantive review, only specified transactions are subject to advance notification. The notification rules, found in Part IX of the Competition Act, are reasonably complex and should be consulted in specific cases. Acquisitions of assets or shares, or amalgamations, or combinations or acquisitions of interests in a combination may be notifiable if the relevant size thresholds are exceeded.
While the thresholds operate slightly differently in respect of different types of transaction (eg, acquisition of shares versus amalgamations versus combinations) there is a size-of-parties test that captures the parties on both the size of a transaction and their affiliates, and also a size-of-transaction test that focuses on the firm or assets to be acquired. Although each case needs to be examined on its facts, as a general rule transactions are notifiable when the size of parties exceeds C$400 million in assets in Canada or in sales to, in or from Canada, and when the size of transaction exceeds the annual prescribed amount – C$87 million for 2016 – in assets in Canada or sales in or from Canada.
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