On May 10, 2013, Blakes hosted the Canadian Competition Bureau's Annual Merger Roundtable on behalf of the Canadian Bar Association (CBA). In attendance were a large number of Bureau officials, including senior management, economists and case officers, as well as members of the bar and business community. The Bureau made several policy announcements related to how it currently assesses merger transactions and how it will conduct merger reviews going forward.
These new policies provide useful information to prospective merging parties in terms of: the type of information the Bureau will require for its review of certain transactions; the Bureau's use of supplementary information requests and court-issued production orders to gather information; and the frequency with which the Bureau will complete its review in accordance with its published, but non-binding, time-frames. Such guidance from the Bureau enhances predictability – in terms of timeliness, informational requirements and risks of delays – for businesses (and the lawyers who advise them), which can allow for more effective and efficient transaction planning.
In general, these policy statements reflect the Bureau's approach towards principled enforcement of the merger provisions using fact-based assessments premised on collaboration, co-operation and dialogue with the merging parties throughout the merger review process – themes that were emphasized by Kelley McKinnon, Senior Deputy Commissioner of the Mergers Branch in her opening remarks.
Key aspects of the Bureau's policy statements are summarized below.
- Merger Reviews and State-Owned Enterprises (SOEs). A common issue that arises in transactions involving SOEs is the extent to which SOEs from the same jurisdiction would be considered affiliates for purposes of the notification provisions and the substantive analysis. The Bureau confirmed that for notification purposes, foreign governments are not "persons" and therefore SOEs held by the same foreign government, but in different lines of control, are not affiliates for purposes of determining the relevant financial thresholds. Hence, such affiliates need not be described in the parties' pre-merger notification forms. The Bureau will, however, require information about entities in which an SOE (or its affiliates) holds a significant interest (10% or more) or which compete in the relevant industry. While not required for the purposes of notification, such information may be relevant for the Bureau's substantive analysis. Written guidance on the treatment of SOEs is expected later this year.
- Reduced Information Requirements in Upstream Oil and Gas Transactions. Since 2010, the Bureau has requested information from parties about their ownership interests in field assets, including batteries and compressors, no matter how small the asset or the interest, in addition to extensive contact information for third parties that also have interests in or use those assets. These requests increased the information burden on parties. Following public consultations, the Bureau announced that it will no longer request third-party contact information or other details about field assets, except where the asset is a gas plant. This means that parties engaged in upstream oil and gas transactions may decide to proceed with their merger review without having to collect and provide this information to the Bureau.
- Use by Bureau of Merger Position Statements. Over thepastyear, the Bureau has increased the number of "position statements" issued following the conclusion of its merger reviews, including 14 statements issued in the past fiscal year, and nine in the last six months alone. Through these statements, the Bureau explains its analytic approach, outlines the evidence it has reviewed, and provides reasons for the conclusions it reached. This practice is expected to continue on a going-forward basis.
- New Pre-Merger Notification Interpretation Guidelines Expected. In the spring of 2012, the Bureau published three draft pre-merger notification interpretation guidelines for consultation relating to: (a) when new filings would need to be submitted where a proposed transaction is subsequently amended; (b) calculating revenues arising from a proposed transaction between affiliates (e.g., whether amounts may be deducted owing to duplication); and (c) considerations in calculating the relevant asset and revenue figures in the context of the transaction thresholds. The CBA provided extensive comments to the Bureau on the draft guidelines and the Bureau has been taking these into consideration. The Bureau announced that final guidelines can be expected to be issued later this year in connection with at least two of the three draft guidelines. Although the Bureau's interpretation guidelines are not legally binding documents, these additional pre-merger notification guidelines will be useful in providing businesses with greater predictability concerning the Bureau's approach to these issues.
- Use of Econometrics in Merger Cases. The Bureau is engaging economists more frequently in merger review (including in the preparation of supplementary information requests) and at earlier stages of the process. Econometric tools would not be employed in all cases, but rather in appropriate cases and where data is readily available.
- Timeliness of Bureau Review. In the past fiscal year, the Bureau concluded more than 95% of merger reviews classified as "non-complex" (according to the Bureau's internal classification system) within 14 days. This demonstrates, for prospective merging parties, the Bureau's willingness to complete merger reviews quickly in transactions that do not raise serious substantive competition law concerns. Approximately 80% of merger reviews classified as "complex" are completed within 45 days after the relevant information is provided.
- Supplementary Information Requests (SIRs). Statistics provided about SIRs issued since 2009 reveal that the number of SIRs issued is small relative to the number of reviews conducted and the average time required for compliance has decreased over that time. The Bureau maintained that it will issue an SIR where it requires additional information to complete its review (i.e., to determine whether the proposed transaction is likely to result in a substantial lessening or prevention of competition) and such determinations will be made on a case-by-case basis.
- No Change on When Section 11 Orders Will Be Sought in Merger Cases. The Bureau's policy with respect to the use of formal court-issued production orders (termed "section 11 orders") in the context of merger cases has not changed. Specifically, the Bureau will obtain information from the merging parties through voluntary information requests and the issuance of SIRs, and is unlikely to use section 11 orders to obtain additional information, except in limited circumstances such as where a transaction is hostile or not subject to mandatory pre-merger notification; during a protracted review; where information from third-parties may be required; and for post-closing assessments.
Practical Tips for Merger Success
- Plan early
- Consider meeting with the Bureau at an early stage in the transaction
- Considering using economic data, where appropriate
- Work with the Bureau to narrow the scope of review as soon as possible