On September 29, 2016, the Competition Bureau released a template for merger consent agreements.
As part of its enforcement mandate, the Bureau reviews certain proposed transactions to determine whether they will likely result in a substantial lessening or prevention of competition in a market. If the Bureau determines that the proposed transaction is likely to result in substantial anti-competitive effects, the Commissioner of Competition has the option to challenge the proposed transaction before the Competition Tribunal or negotiate appropriate remedial measures with the merging parties to address the proposed transaction’s likely anti-competitive effects. Such negotiated remedial measures are typically implemented by way of a consent agreement. Once registered with the Tribunal, the consent agreement has the force and effect of a court order. The Bureau, as well as merging parties, generally prefers to pursue negotiated consent agreements rather than formal litigation before the Tribunal, as Tribunal litigation is more costly, time-consuming and uncertain for both the Bureau and the merging parties.
Merger remedies can be generally categorized into two types: divestiture of assets (i.e., structural remedies) and requirements prohibiting or mandating certain conduct (i.e., behavioural remedies). The template consent agreement published by the Bureau contains key provisions that may be expected to appear in a consent agreement, with a focus on structural remedies:
- Obligations to complete divestitures of certain assets within prescribed time periods;
- Prescribed divestiture trustee sale process;
- Requirement for Commissioner’s approval of divestitures;
- Requirement to hold certain assets of a merger separate pending divestiture;
- Requirement to preserve divestiture assets pending divestiture;
- Ongoing behavioural commitments and transitional support obligations;
- Relationship with employees of divested businesses;
- Consequences for failure to complete a divestiture;
- Appointment of a monitor to ensure compliance with the consent agreement;
- Ongoing compliance and reporting obligations.
The precise nature and terms of the negotiated remedial measures will differ depending on the nature of the transaction at issue and the nature of the Bureau’s concerns in respect of the transaction. Not all of the above provisions will appear in every consent agreement.
According to the Bureau’s press release, its publication of the template consent agreement is intended to “provide Canadian legal and business community with better insight into the Bureau’s expectations” in merger remedy negotiations and the Bureau will continue to “adjust the consent agreement template over time, based on its ongoing experience with negotiated merger consent agreements.” While recognizing the benefit of increased transparency and predictability, the published template consent agreement may serve to rigidly limit the scope for merging parties to negotiate remedies that may fall outside of the standard terms of the template consent agreement. Based on a number of consent agreements resolving allegations of deceptive marketing practices in recent years, it could be argued that the Bureau may have a tendency to rigidly follow a template without adequately taking into account the different prevailing market practices in different industries.