Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
The Competition Act (the Act) does not set out deadlines for filing. The timing for submission of a notification is a decision of the parties; however, a transaction that is notifiable may not be consummated until the applicable statutory waiting period has expired.
Failure to comply with the pre-merger notification requirements in the Act constitutes a criminal offence, with possible fines of up to C$50,000 as well as the possibility of civil penalties of up to C$10,000 per day. The Competition Bureau (the Bureau) monitors financial press accounts of transactions and may also be made aware of transactions through competitor, customer or supplier complaints.
Although, to date, there have been no convictions or penalties imposed for failure to notify (other than agreements to implement compliance programmes), this provision of the Act may be enforced vigorously unless the failure to notify was inadvertent, in which case a decision not to prosecute or other resolution might be negotiable with the Commissioner of Competition (the Commissioner) and the Director of Public Prosecutions.
Which parties are responsible for filing and are filing fees required?
Generally, both parties to the transaction have the obligation to file. For share acquisitions and acquisitions of an interest in a combination, the Act deems the target entity, not the vendor, to be a party to the transactions. In hostile or unsolicited takeover bids, the bidder makes an initial filing (which commences the waiting period), and the Commissioner then requisitions the counterpart filing from the target (which must be filed within 10 days).
The filing fee for a notification is currently C$77,452.36. This fee will likely be in effect until 2023, when it once again will be subject to an adjustment for inflation. The same filing fee applies to a voluntary notification by way of an application for an advance ruling certificate. There is also ongoing consideration of structuring filing fees based on transaction size, but that amendment has not yet been introduced.
The filing fee is often paid by the acquirer, but this is a matter of negotiation between the parties. Where filings have been submitted by both parties, the Bureau considers both notifying parties to be jointly and severally liable for the filing fee. If only a request for an advance ruling certificate is submitted for a proposed transaction, the requesting party is solely responsible for the fee.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
There is a 30-day no-close waiting period from the day the filing is certified complete (usually the same day as the filing by the last of the parties occurs). In hostile or unsolicited takeover bids, the 30-day no-close waiting period begins on the date that bidder’s filing is certified as complete.
The Commissioner may, within the initial 30-day waiting period, issue a supplementary information request (SIR) (similar to a US ‘second request’), requiring the parties to submit additional information that the Commissioner believes to be relevant to his or her assessment of the proposed transaction.
If the Commissioner issues a SIR, a second no-close waiting period is established, which expires 30 days after the day that the required information has been received by the Commissioner and certified complete by the parties (except in the context of hostile or unsolicited takeover bids, where the second no-close waiting period commences once the Commissioner receives the certified complete SIR response from the bidder).
While the issuance of a SIR is a formal process established by the Act, requests by the Commissioner during the initial waiting period for the voluntary disclosure of additional information are common and do not affect the statutory waiting period.
Consummation of the transaction is not permitted during the waiting periods. The Act provides for early termination of either waiting period by the Commissioner. This can be expected to occur if the review has been completed but not when the review is ongoing.
If the parties proceed by way of an application for an advance ruling certificate instead of filings, there is not a fixed timeline. The no-close period effectively runs until the Commissioner has either issued such a certificate or provided a ‘no action’ letter confirming the Commissioner’s lack of intention, at that time, to make an application under section 92 of the Act in respect of the proposed transaction together with a waiver of the filing requirements.
In complex cases, reviews may extend beyond the statutory waiting periods. In those cases, the Commissioner sometimes simply requests that the parties refrain from closing their transaction until the review is complete, or seeks undertakings from the parties that they will not close the transaction without providing the Commissioner with an agreed amount of advance notice. There is no obligation to accommodate such a request, but merging parties often do so, typically in an effort to ensure that the Commissioner remains focused on assessing the evidence related to the transaction, rather than preparing for litigation or seeking an injunction.
Formal timing agreements between the parties and the Bureau may also be used to confirm that a transaction will not be closed for a period after the expiry of the statutory waiting period. In particular, if the parties plan to raise an efficiencies defence, the Commissioner has provided guidance indicating an expectation that the parties and the Bureau will enter into a model timing agreement to allow the Bureau sufficient time to evaluate the parties’ claimed efficiencies.
The Commissioner can seek a temporary injunction to prevent the transaction from closing for a further 30 (extendable to 60) days to allow the Bureau to complete its review.
If the Commissioner decides to challenge a transaction, another provision of the Act allows the Commissioner to seek an interlocutory injunction to prevent the transaction from closing in whole or in part, pending the resolution of the Commissioner’s challenge on the merits. To obtain an interlocutory injunction, the Commissioner must prove that there will be ‘irreparable harm’ if the injunction is refused and that the ‘balance of convenience’ favours delaying the closing of the transaction.
The 2016 Parkland case clarified that irreparable harm includes harm to consumers and harm to the broader economy resulting from the transaction, where the harm cannot be undone by an order of the Competition Tribunal (the Tribunal) under the merger provisions of the Act. The Commissioner must provide ‘sufficiently clear and non-speculative’ evidence of market definition and concentration and likely harm to competition to meet this test.
The recent SECURE/Tervita case has also established that the Competition Tribunal may grant an interim injunction to allow time for the filing of an interlocutory injunction, in appropriate circumstances.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
Closing prior to expiry of the applicable waiting period is a criminal offence that can be subject to a fine of C$50,000 and also a civil penalty of up to C$10,000 for each day of non-compliance. While there have been no reported cases of prosecutions, and while some leniency has been shown in cases of inadvertence, the Commissioner is likely to enforce this provision vigorously if it appears that the non-compliance was intentional.
There is also the possibility that coordination undertaken prior to closing that amounts to gun jumping could be subject to a prosecution for conspiracy or bid rigging (given that the parties would not (yet) benefit from the affiliates exception from these criminal offences).
Even if the waiting period has expired, closing before the Commissioner has completed reviewing the matter carries the risk of the Commissioner challenging the merger post-closing, if he or she concludes that the merger is likely to lessen or prevent competition substantially. He or she may seek a divestiture or dissolution order up to one year after the date of closing.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
To be subject to the Canadian notification provisions, and therefore subject to a no-close period in Canada, there must be a local nexus, including an ‘operating business’ in Canada. While foreign-to-foreign transactions with no on-the-ground Canadian nexus may be subject to substantive review if there are expected to be substantive effects in Canada, likely by way of diminished import competition to Canada, if there is no operating business in Canada, the transaction is not subject to notification and consequently not subject to a suspension period.
Subject to crafting a local hold-separate resolution (which is extremely rare), if the transaction is notifiable in Canada, the penalties for early closing outlined above would apply to foreign-to-foreign transactions.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
The parties may proceed with closing if the no-close waiting periods have expired but the review process is ongoing, and the Commissioner has not obtained an injunction or entered into a timing agreement with the parties.
The Commissioner will focus primarily on Canadian issues in all cases. In a foreign-to-foreign merger, the Bureau (and the Tribunal) will typically be receptive to local divestiture or possibly behavioural remedies as long as they are sufficient to address the domestic anticompetitive effects.
Local hold-separate arrangements pending resolution of a Bureau review or Tribunal proceeding have occasionally been employed in the past; however, the Bureau’s Remedies Bulletin indicates that the circumstances in which the Bureau will consider agreeing to the use of such hold-separate agreements are narrow.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
Rules exist to ensure that targets of hostile or unsolicited takeover bids supply their initial notification in a timely manner. In such a case, the 30-day no-close waiting period commences upon the submission of the acquirer’s filing, even if the target has not yet submitted its information.
The Act provides for mechanisms to require the target of an unsolicited transaction to file information within 10 days.
For hostile or unsolicited takeover bids that result in SIRs being issued by the Commissioner, the second 30-day no-close waiting period commences upon the Commissioner’s receipt of a certified response to the SIR from the acquirer.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
The information required for a pre-merger notification filing is set out in the Act and in regulations promulgated pursuant to the Act. The main requirements of the pre-merger notification filing are:
- an overview of the transaction structure;
- an executed copy of the legal documents to be used to implement the proposed transaction (or the latest draft thereof, if not yet finalised);
- a description of the business objectives of the transaction;
- a list of the foreign antitrust authorities that have been notified of the proposed transaction;
- a summary description of the principal businesses carried on by each party (on an affiliate-by-affiliate basis) and of the principal categories of products (or services) supplied by such businesses in their various markets, including contact information for the top 20 customers and suppliers for each such product category;
- basic financial information for each party;
- business, product, customer, supplier, financial and geographic scope of sales information of each of the party’s principal businesses;
- all studies, surveys, analyses and reports prepared or received by an officer or director for the purpose of evaluating or analysing the proposed transaction that contain market-related or competition-related information (similar to the ‘4(c)’ documents under the US Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the HSR Act)); and
- similar information related to each affiliate of the notifying party with significant Canadian assets or sales.
If the Bureau concludes during the initial 30-day review period that a more detailed review is warranted, it may issue a SIR requiring the production of additional documents and data. The Bureau’s (non-binding) guidelines related to the merger review process state that, in all but exceptional cases, the Bureau will limit the number of custodians to be searched in preparing a response to a SIR to a maximum of 30 individuals.
The default search period for hard copy and electronic records in the possession, custody or control of a party will generally be the year-to-date period immediately preceding the date of issuance of the SIR and the previous two full calendar years. The Bureau will also generally limit the relevant period for data requests to the year-to-date period immediately preceding the date of issuance of the SIR and the previous three full calendar years.
Where parties operate on a North American basis, and where the transaction does not raise Canada-specific concerns, the Bureau may, in appropriate cases, work with the parties to try to limit the list of custodians (to the extent possible) to a list of custodians that the US authorities have agreed to in connection with a second request under the HSR Act.
An officer or other person who has been duly authorised by the board of directors of the notifying party is required to certify on oath or solemn affirmation that, to the best of that person’s knowledge and belief, all information provided in the pre-merger notification filing and in a response to a SIR (if applicable) is correct and complete in all material respects. Knowingly providing incorrect information could result in criminal prosecution for perjury in connection with swearing a false certificate.
The Act also contains an obstruction offence that applies where any person impedes or prevents or attempts to impede or prevent any inquiry or examination under the Act. Knowingly withholding or providing misleading information could be seen as impeding or attempting to impede an examination by the Commissioner.
There has also been one reported case where the Bureau advised merging parties (identities not disclosed) that it would rescind the previously issued clearance because the information received in connection with the merger notification was materially misleading.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
After notifications have been filed, the Bureau will typically have follow-up questions as it conducts its investigation. In transactions that give rise to a prima facie overlap or where it is not clear to the Bureau whether there is overlap based on information provided by the merging parties, Bureau staff will usually contact customers set out in the parties’ filings (as well as other market participants) to solicit information from them regarding the proposed transaction. In addition, the Bureau may request that the parties to the merger provide additional information, documents or data, such as estimates of market shares.
If the Commissioner plans to issue a SIR, the scope of this request will be discussed with the merging parties very shortly before the expiry of the initial 30-day waiting period and these discussions may continue after the request is issued. The SIR will typically involve compulsory production of large volumes of documents and data. Subpoenas may also be issued to third parties to produce relevant documents or data. The provision of compulsory testimony through depositions before a hearing officer is possible but rarely used in practice.
Most complex mergers will involve face-to-face or videoconference meetings with Bureau staff and federal Department of Justice lawyers. Regardless of complexity, regular communication between the Bureau staff and the parties’ counsel is the norm.
What is the statutory timetable for clearance? Can it be speeded up?
There is a 30-day no-close statutory waiting period from the day the filing is certified complete.
The Commissioner may, within the initial 30-day waiting period, issue a SIR requiring the parties to submit additional information that is relevant to the Commissioner’s assessment of the proposed transaction. If the Commissioner issues a SIR, a second no-close statutory waiting period continues until 30 days after the day that the required information has been received by the Commissioner and certified complete by each of the parties.
In most straightforward cases, the Commissioner’s review is concluded in less than two weeks; however, in more complex cases, the Bureau’s review process may be substantially longer.
Although it is non-binding, the Bureau’s Fee and Service Standards Handbook sets out the following ‘service-standard’ periods to which the Bureau will attempt to adhere in its review process:
- 14 days for non-complex mergers;
- 45 days for complex mergers, except where a SIR is issued; and
- 30 days after compliance with a SIR, for complex mergers where a SIR is issued (this last service-standard period is coextensive with the statutory no-close waiting period following compliance with a SIR).
The Bureau informs notifying parties of the commencement of its service standards within five business days of receiving sufficient information to assign a complexity rating, as outlined in its Competition Bureau Fees and Service Standards Handbook for Mergers and Merger-Related Matters; however, service standards are intended to be maximums, and the Bureau may (and often does, in non-complex cases) complete cases in less than the full service-standard period.
It is possible to speed up the timetable for clearance if the Bureau’s substantive inquiries can be satisfied before the statutory waiting or the service-standard periods (or both) expire. The Commissioner can terminate the waiting periods early – within the initial 30-day period or within the no-close period following the issuance of a SIR – if he or she is satisfied that there is not a competitive concern. Parties and their counsel will usually provide additional information as requested by the Bureau on a voluntary basis and often submit detailed ‘competitive impact’ analyses to the Bureau to expedite completion of the review process.
If the parties proceed by way of an application for an advance ruling certificate, the no-close period effectively runs until the Commissioner has either issued such a certificate or provided a ‘no action’ letter confirming the Commissioner’s lack of intention, at that time, to make an application under section 92 of the Act in respect of the proposed transaction together with a waiver of the filing requirements.
In cases in which a formal filing has been made and the 30-day period has expired but the Commissioner needs more time for his or her review, the Commissioner sometimes simply requests that the parties refrain from closing their transaction until the review is complete. There is no obligation to accommodate that request, but merging parties often do so; however, there have been a number of recent cases where merging parties have chosen to close their transactions once the waiting periods have expired but prior to the Bureau finishing its review. This includes:
- the Parrish & Heimbecker/Louis Dreyfus grain elevator sale that closed in December 2019 and that the Commissioner has challenged before the Competition Tribunal (case under reserve by the Competition Tribunal at the time of this writing);
- the Thoma Bravo/Aucerna deal that closed in May 2019 and that the Commissioner subsequently challenged, ultimately resulting in a divestiture pursuant to a consent agreement;
- the Tervita/Newalta deal that closed in July 2018, with the Commissioner opting to let the one-year deadline to challenge the transaction expire; and
- the Pembina/Veresen deal that closed in October 2017, with the Commissioner’s decision not to challenge the transaction not being made until September 2018.
Formal timing agreements between the parties and the Bureau may also be used to confirm that a transaction will not be closed for a period after the expiry of the statutory waiting period, or for a period after the parties give the Commissioner notice of their intention to close. In particular, if the parties plan to raise an efficiencies defence, the Commissioner has provided recent guidance indicating an expectation that the parties and the Bureau will enter into a model timing agreement to allow the Bureau sufficient time to evaluate the parties’ claimed efficiencies.
Alternatively, the Commissioner can seek a temporary injunction to prevent the transaction from closing for a further 30 (extendable to 60) days to allow the Bureau to complete its review.
Given the foregoing, for simple transactions, the review period is typically about two weeks; however, for the most complex transactions, the review period can extend to 150 days, or even longer.