Canada’s Competition Bureau (Bureau) and the Investment Review Division of Innovation, Science and Economic Development Canada (IRD) are increasingly cooperating and communicating when reviewing large foreign investments into Canada. To this end, on April 6, 2018, the two agencies released an Administrative Note formalizing a number of key procedural considerations for foreign investors.

Under the Investment Canada Act (ICA), controlling investments by non-Canadians in Canadian businesses are reviewable when they exceed the applicable financial thresholds. When conducting a review of these investments, IRD and the Minister of Innovation will consider, among other factors, the effect of the investment on competition, the contribution of the investment to Canada’s ability to compete globally, and the compatibility of the investment with Canada’s industrial and economic policies. The investment will be approved if the Minister concludes it is of “net benefit” to Canada.

Here are the highlights from the Administrative Note:

  • The Bureau will share its analysis and conclusions with IRD for the purposes of the “net benefit to Canada” assessment
  • Both agencies will keep each other informed of the status of their respective reviews and findings
  • IRD will generally not make a recommendation to the Minister until the Bureau completes its analysis.

KEY TAKEAWAYS

Foreign investors need to carefully consider the interplay between the Competition Act and ICA processes.

  • Although the ICA review process contemplates a 45 to 75-day timeline, if IRD will not complete its review until the Bureau completes its analysis, the review process under the ICA could extend well beyond 75 days where the Bureau issues a supplementary information request (second request or SIR). In such cases, the parties will need to decide whether to consent to an extension or risk the Minister denying approval under the ICA.
  • Remedies or undertakings offered to one agency could impact the decision of the other. For example, certain commitments made to secure “net benefit to Canada” approval may impact the merging parties’ ability to demonstrate efficiencies from their transaction. Alternatively, a commitment to divest a business unit to address a competition issue may impact the “net benefit to Canada” assessment.
  • In the rare cases where an investment is reviewable under the ICA but not notifiable under the Competition Act, parties may want to consider proactively approaching the Bureau regarding why the investment is not likely to impact competition.