The recently issued updates to the (i) Fees and Service Standards Policy for Mergers and Merger-Related Matters, (ii) Fees and Service Standards Handbook for Mergers and Merger-Related Matters and (iii) Procedures Guide for Notifiable Transactions and Advance Ruling Certificates Under the Competition Act are intended to reflect the changes to the Bureau’s existing practices necessitated by the significant amendments made to the merger review process in March 2009.
The more notable changes to the Bureau’s merger review policies, procedures and service standards include:
- Consolidating the previous “complex” and “very complex” service standards for merger review into a single “complex” category, with a corresponding shorter 45-day review period. The 14-day “non-complex” service standard remains unchanged. Also, where the Bureau issues a supplementary information request (“SIR”), the service standard has been aligned with the statutory waiting period under the Competition Act (i.e., service standard will terminate 30 days after the parties’ compliance with the SIR).
- Clarifying the relationship between the parties’ post-merger market share and the Bureau’s complexity designation as follows:
- transactions resulting in a post-merger market share of less than 10% will be classified as “non-complex;
- transactions resulting in a post-merger market share of between 10% and 35% will be considered “non-complex” or “complex”, depending on the presence of complicating factors; and
- transactions resulting in a post-merger market share of 35% or more will, generally, be classified as “complex.”
- Significantly expanding the scope of the information required to be submitted to the Bureau to trigger the commencement of the applicable service standard. Key changes include having to provide:
- information regarding interlocking directorships and minority holdings and how they may impact the competitive analysis of the proposed transaction for all mergers;
- copies of the legal documents used to implement the proposed transaction for all mergers; and
- marketing, business and strategic plans for “complex” mergers.
- Requiring parties to respond to the Bureau’s request for additional information in complex” mergers within five days to avoid having the service standard extended (previously, parties had two or three weeks under the old “complex” and “very complex” service standard, respectively).
- No longer requiring an additional filing fee for a subsequent filing where a notification is pulled and re-filed, provided that certain conditions are satisfied. (Note that parties are at liberty to pull and re-file as many times as they want. However, they may benefit from the fee waiver only once).
In practice, we believe that most changes will have no or very little practical impact on merging parties. To the extent that the changes will have any practical effect, they will likely increase the time and effort required to obtain merger clearance.
While at first blush some changes appear to be helpful, upon closer examination, they have no real impact. For example, the consolidation of the “complex” and “very complex” categories into a single “complex” category is unlikely to make a significant difference to existing practice, since the new “complex” category encompasses the characteristics previously attributed to “complex” and “very complex” mergers.
Similarly, the seemingly drastic reduction in the service standard review period (from 10-weeks for “complex” and five months for “very complex” mergers previously down to 45 days) is unlikely to have any real impact on the time within which a proposed merger is reviewed. Where the Bureau feels it is not able to complete its review within the applicable service standard, its practice has always been to ask the merging parties not to close the transaction until the Bureau completed its review. There is no reason to expect that this practice will change now.
In fact, as a practical matter, our view is that if a merger presents any material issues, the parties should not expect the Bureau to complete its review within the 45-day period and should be prepared to enter into some form of a timing agreement with the Bureau, unless they decide to close the transaction after the expiry of the 30-day statutory waiting period and accept the risk that it may be challenged after closing (obviously, this issue disappears if parties receive a SIR, since the service standard is aligned with the statutory waiting period in cases where a SIR is issued).
On the other hand, more information is now required from the parties to trigger the 45-day review period. Although the Bureau has indicated that it will not require all information to be submitted in all cases to commence the service standard, the determination as to the submission’s completeness is entirely in the Bureau’s discretion. As a practical matter, where a merger is time-sensitive, it will be prudent to submit all the required information, rather than risk not triggering the service standard and potentially significantly jeopardizing closing. Consequently, more work will have to be done on more files to achieve essentially the same result.
In our view, where there is a possibility of a merger being classified as “complex,” parties need to consider whether to engage in pre-filing discussions with the Competition Bureau as soon as possible, to ensure they provide the Bureau with all the necessary information to commence the service standard and do not jeopardize closing.