Parties to transactions that are subject to the pre-merger notification requirements contained in Part IX of the Competition Act must submit the prescribed pre-merger notification and await the expiry of an initial 30-day waiting period before being able to complete their transaction. Parties seeking additional comfort from the Competition Bureau may also, when submitting the notification, request that the commissioner of competition confirm at the conclusion of her review that she does not intend to challenge the proposed transaction before the Competition Tribunal. It has been the usual practice of merging parties in Canada to seek such comfort. This form of clearance letter, which is not prescribed by the act, is known as a 'no-action letter'.
On August 8 2011 the bureau announced that it will change the language used in no-action letters for transactions entered into after September 1 2011. The change will more closely align the language used in the letter with the language found in the act and reflect the distinction between an advance ruling certificate (described below) and a no-action letter. Previously, no-action letters typically referred to there being insufficient grounds on which to challenge the proposed transaction. Going forward, no-action letters will specify that "the Commissioner does not, at this time, intend to make an application under section 92 in respect of the proposed transaction".
Therefore, merging parties - and their counsel - should ensure that this new language is reflected in purchase agreements or other transaction documents that contain a condition precedent related to act clearance or approval.
For transactions that are unlikely to raise significant competition law issues, the parties may still request an advance ruling certificate, which is a different form of clearance letter. The advance ruling certificate request typically consists of a letter from the purchaser describing the parties and the transaction, and explaining why the transaction will not result in a substantial lessening or prevention of competition. A benefit of receiving an advance ruling certificate is that once issued, the commissioner cannot challenge a transaction as long as it is substantially completed within one year and the factual basis on which the advance ruling certificate was based remains unchanged. In all other cases the commissioner has the ability to challenge the transaction for up to one year after it has been substantially completed. The risk associated with requesting only an advance ruling certificate is that doing so does not trigger the 30-day statutory waiting period. If timing certainty is important, consideration should be given to submitting both an advance ruling certificate request and a notification; once again, this has often been the practice of merging parties in Canada. The bureau's August 8 2011 announcement does not change the language typically used by the commissioner in issuing an advance ruling certificate.
Because the issuance of an advance ruling certificate is within the commissioner's discretion, merging parties that submit only an advance ruling certificate request typically ask that if the commissioner declines to issue the advance ruling certificate, she instead issue a no-action letter and waive the obligation of the parties to submit a pre-merger notification, which she is entitled to do under Section 113(c) of the act.
For further information on this topic please contact Kevin Ackhurst at Norton Rose OR LLP's Toronto office by telephone (+1 416 216 4000), fax (+1 416 216 3930) or email ([email protected]). Alternatively, contact Denis Gascon at Norton Rose OR LLP's Montreal office by telephone (+1 514 847 4747), fax (+1 514 286 5474) or email ([email protected],).