Competition Bureau Releases New Merger Review Guidelines
Earlier this month, the Competition Bureau published new Guidelines for its review process under the federal Competition Act. These Guidelines describe the Bureau’s general approach to administering its review process.
In general, where a proposed transaction surpasses the “party-size” and “transaction-size” thresholds parties are required to notify the Commissioner prior to completing the proposed transaction. Following notification, there is a two-stage review process.
First, there is an initial thirty day waiting period during which the Bureau will assess whether the proposed transaction threatens a “substantial lessening or prevention of competition”. In those relatively few instances where this test is triggered the Bureau may issue a “supplementary information request” or “SIR”, for additional relevant information. In these instances, the issuance of a SIR triggers a second thirty day waiting period, commencing when the Commissioner has received a certified complete response to all information requests set out in the SIR from each SIR recipient. A proposed transaction may not be completed until the expiry of the applicable waiting period, subject to termination of the waiting period by the Bureau.
The revised Guidelines include a number of interesting developments to this review process:
1. Emphasis on Communication
The new Guidelines focus particular attention on the dialogue between the Bureau and the transacting parties during the various stages of the review process. The goal of early consultation, according to the Guidelines, is to provide the Bureau with the appropriate context and information on a voluntary basis, and to identify issues requiring further examination.
Prior to issuing a SIR, the Bureau will generally provide an advanced draft to the recipient parties and consult with its representatives regarding the information requested. This is intended to ensure that the parties understand the information requested, determine the sources of that information, and discuss methodology or impairments that might affect the ability of the party to comply with the SIR. Once the SIR is formally issued, the Bureau will again open a channel for dialogue to help prioritize the information to be supplied by the party, confirm the requirements of the SIR, and to discuss strategies for obtaining the necessary information.
The Guidelines also highlight an internal appeal procedure. Any party seeking to contest the scope of a SIR, or the Bureau’s determination that the party’s response to a SIR is incomplete, is able to contest the decision and seek review within the Bureau.
2. Hostile Transactions
Under the revised Guidelines, the target in a hostile transaction is prevented from using the review process and, specifically, the pre-notification filings which trigger the mandatory waiting periods from delaying the progress of a deal. In a hostile transaction, the initial waiting period and second waiting period are triggered by the bidder’s filings and without reference to the filings of the target. In order to ensure that it receives SIR responses from the target on a timely basis, the Guidelines state that the Bureau will typically issue a SIR in combination with a timing agreement and/or a court order pursuant to section 11 of the Act.
3. Time Periods and the Requirement to Refresh
Where an SIR is issued, the default search periods under the revised Guidelines is the year-to-date period immediately preceding the date of issuance of the SIR and the previous two full calendar years. The time period for data requests is also generally limited to the year-to-date period immediately preceding the date of issuance of the SIR and the previous three full calendar years. Each of these default search periods may be adjusted, as circumstances demand, to accommodate the particular facts of each review.
In addition to the information provided above, the revised Guidelines state that the Bureau will require that a party produce “refreshed” information where the period between the date of issuance of the SIR and the date of certification of a complete response exceeds, typically, 90 days. This “refreshed” information will not be required where a party has engaged in rolling production and the Bureau has indicated in writing that it has received sufficient information with respect to a particular SIR specification.
4. Timing Agreements and Sample SIR Instructions
The revised Guidelines provide some additional information on the applicability of “timing agreements”, which provide a more flexible substitute to issuing a conventional SIR.
These Guidelines also include sample instructions to assist parties to complete the review process. These instructions address: (i) procedures for production of information that is responsive to the SIR; (ii) the format for electronic records; and (iii) the correct procedure for certifying compliance with the SIR.
It will be interesting to witness how these new developments are implemented and the impact they will have on the merger review process. In a future blog post we will address some of the important strategies to keep in mind when addressing a transaction that might attract review under these new Guidelines or any other regulatory review legislation.
See our previous post, New Thresholds for Foreign Direct Investment Review.
Competition Act merger review