Broader Affiliation Rules Now in Force
Amendments to the Competition Act that expand the affiliation rules came into force on May 1, 2018. Whereas rules for control and affiliation had historically treated corporations and non-corporate business organizations differently, the new amendments essentially extend the same control and affiliation rules to all “entities”, including corporations, partnerships, sole proprietorships, trusts or other unincorporated organizations. These changes will have a ripple effect across various aspects of business activities impacted by the Competition Act, in particular with respect to mergers and cartel enforcement.
Under the new affiliation rules, all corporate and non-corporate entities under common direct or indirect control will be treated as “affiliates”. The new affiliation rules may result in a greater number of transactions being subject to pre-merger notification because a key threshold test as to whether a transaction is notifiable depends upon the “size of parties”, which is an aggregate calculation determined with reference to the transacting parties and their respective affiliates. Non-corporate entities under common control will now be included in the notifiability analysis. This change may be of particular importance in a private equity context involving partnerships. On the other hand, certain internal reorganizations involving non-corporate entities which may have previously triggered mandatory notification will now be able to benefit from the notification exemption applicable to transactions involving affiliated parties.
The new affiliation rules broaden the criminal cartel exception, which was previously limited to agreements or arrangements between affiliated corporations. The exception now applies to all affiliated “entities” and therefore provides greater flexibility for agreements between affiliated partnerships and other unincorporated entities.
Filing Fee for Merger Review Increased to C$72,000
On May 1, 2018, the Competition Bureau’s filing fee for merger reviews increased to C$72,000 (from C$50,000) and will be adjusted annually for inflation. This is the first increase to the fee since 2003. The Bureau’s reasons for the increase include rising operating and salary costs, an increase in the number of merger transactions requiring more complex work, and increasing volumes of documents requiring sophisticated analysis.