All questions

Merger review

Merger enforcement is one of the main tasks of the Bureau and has been a major source of competition enforcement cases.

The Bureau's Mergers and Monopolistic Practices Branch reviews a wide range of mergers across all markets in or in relation to Canada to determine whether a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially. The Commissioner has up to one year after a merger is substantially completed to challenge such mergers by filing an application with the Competition Tribunal for remedial relief, such as dissolution of the merger or divestiture of assets or shares or, with the consent of the merging parties, any other action.

The merger provisions of the Act apply to the acquisition of control over, or significant interest in, the whole or part of a business. Significant interest means the ability to materially influence the economic behaviour of the target company. The definition of 'merger' is broadly based to include the acquisition of shares or assets, amalgamations or combinations.

With limited exceptions, parties to a proposed merger of a certain size (summarised below) are required to file with the Commissioner certain information required by the Act, and wait a certain period of time before being in a legal position to close their proposed merger. It should be noted, however, that even in cases involving mergers below the statutory thresholds (summarised below) there is still jurisdiction under the Act for such smaller mergers to be subject to review under the merger provisions, whether or not those mergers were the subject of voluntary notification to the Bureau.

The merger notification provisions of the Competition Act contain a size of parties threshold and a size of transaction threshold, both of which must be met before advance notification of a proposed merger is required. For the size of parties threshold, the parties to the proposed merger, together with their respective affiliates, must either have assets in Canada that exceed C$400 million in aggregate value, or have had gross revenues from sales in the previous year in, from or into Canada that exceed C$400 million in aggregate value.

In 2019, the size of transaction threshold with respect to the acquisition of assets in Canada of an operating business is that either the aggregate value of the assets in Canada being acquired exceeds C$96 million in aggregate value, or the gross revenues from sales in or from Canada generated from the assets in Canada exceeds C$96 million. The dollar threshold of C$96 million is adjusted annually to account for inflation.

With respect to the acquisition of shares, the financial thresholds discussed above apply, and in addition a shareholding threshold must be crossed. The shareholding threshold is that as a result of such proposed acquisition the buyer together with its affiliates would hold more than 20 per cent of the voting shares of a company whose shares are publicly traded, or more than 35 per cent of the voting shares of a company whose shares are not publicly traded. If the buyer already holds more than 20 or 35 per cent of the voting shares as applicable, but as a result of the proposed transaction would acquire more than 50 per cent of the voting shares of the target company, that proposed transaction would also be subject to merger notification if the financial thresholds above are met and the exemptions to merger notification do not apply.

The initial waiting period for a proposed merger subject to merger notification is 30 days after the required information is submitted to the Commissioner. This initial waiting period can be extended if the Commissioner issues a supplementary information request (SIR) to the parties to the merger before the expiry of the initial waiting period. If an SIR is issued, the new waiting period becomes 30 days after full compliance with the SIR by both parties. An SIR will likely be issued in cases requiring a very detailed examination to determine if significant competition issues arise from the proposed merger. Such requests can be extensive in nature.

i Significant cases

The Bureau continues to maintain a busy docket of merger reviews, including in respect of transactions among Canadian companies and of non-Canadian companies with significant assets or sales in Canada. Many of these reviews resulted in consent agreements requiring the sale of assets or behavioural commitments. Recent notable cases include the following:

In May 2018, the Commissioner entered into a consent agreement with Metro Inc in respect of its proposed acquisition of the Jean Coutu Group. As these companies offer pharmacy distribution and franchise services, the Commissioner was concerned that, following the implementation of the transaction, Metro would have an incentive to materially increase upstream prices charged to pharmacists, decrease the quality of banner services provided to pharmacists, or impact retail prices at pharmacies. To remedy the Commissioner's concern that the transaction was likely to substantially lessen competition in eight markets in Quebec, Metro agreed to sell a number of its properties or leases to an alternate supplier of distribution and banner services and terminate its pharmacy-related franchise and distribution agreements in the contested markets.

In May 2018, the Commissioner entered into a consent agreement with Bayer AG in connection with its proposed acquisition of Monsanto Company. The Commissioner alleged that the loss of competition between Bayer and Monsanto would impact prices and innovation in the canola seeds industry, and that the merged entity would have an incentive to increase royalty rates to competing seed companies. In particular, the Bureau was concerned that the transaction was likely to substantially lessen and prevent competition for the supply of canola seeds and traits, soybean seeds and traits, seed treatments that protect crops against nematodes, and carrot seeds. Pursuant to the consent agreement, Bayer agreed to sell the affected businesses, and proposed BASF SE as the purchaser. The Bureau subsequently reviewed the BASF SE acquisition. Prior to granting competition clearance, the Commissioner entered into a consent agreement with BASF SE, whereby BASF SE was required to divest a herbicide trait systems.

In November 2017, although it was not notifiable, the Commissioner began investigating a transaction between Torstar Corporation and Postmedia Network to exchange 41 community newspapers' properties and commuter daily newspapers. On the date of closing, Postmedia Network and Torstar Corporation subsidiary Metroland Media Group Ltd. announced that 36 of the 41 newspapers would be closed following the deal. Ultimately, the Commissioner decided not to challenge the transaction before the Competition Tribunal.

ii Trends, developments and strategies

The Bureau's acceptance of efficiency claims in an increasing number of merger reviews demonstrates the power of this defence under Canadian law, and the importance of the efficiencies defence as a tool for companies seeking to engage in important strategic transactions. Obtaining the benefit of the efficiencies defence, however, requires careful and early planning, as well as the assistance of experts able to organise and marshal the evidence necessary to support such efficiencies claims.

In addition, the Bureau's continued close cooperation with agencies in other jurisdictions – particularly the United States Federal Trade Commission and the Antitrust Division of the Department of Justice – highlights the importance of ensuring close collaboration between counsel in different jurisdictions charged with obtaining clearance for the same merger.

iii Outlook

The Bureau can be expected to continue treating the review of mergers as one of its most important priorities, particularly as the number of strategic mergers in the economy remains high. Unfortunately, it remains the case that the Bureau's efforts are conducted amid a relative dearth of jurisprudence from the Tribunal on the subject of mergers. This is driven by various factors, including the fact that parties involved in mergers are typically under significant time pressure to close their transactions, and the process before the Tribunal does not at present accommodate the expedited consideration of mergers challenged by the Commissioner. This places a premium on 'getting the deal done', which can sometimes be at the expense of a detailed competition analysis. The Bench and Bar Committee of the Canadian Bar Association's Competition Law Section has set up a Merger Process Fast Track Working Group to look into, and make recommendations for, how the review of challenged mergers can be expedited, to allow for the Competition Tribunal's consideration of challenged mergers on a timeline more commensurate with the commercial realities of mergers. In January 2019, the Competition Tribunal released a Practice Direction on an expedited proceeding process that will improve the efficiency and effectiveness of Tribunal proceedings for appropriate matters.