The majority of mergers that are notified pursuant to the Competition Bureau (Bureau) pre-merger notification regime under Canada’s Competition Act do not raise substantive competition concerns. Of the 1,654 merger reviews conducted between April 2013 and March 2020, the Bureau concluded its review with no enforcement action in 1,590, or 96 per cent of all completed reviews. The Bureau required a remedy or challenged the merger in only 45 cases, or 2.7 per cent of all completed merger reviews. It is this small number of transactions that raise competition concerns that poses the greatest challenge to competition law counsel and their clients.
This chapter provides a practical guide for counsel and their clients facing a complex merger review in Canada. First, we provide a brief overview of the Canadian merger review framework. Second, we discuss the types of remedies typically required by the Bureau. Finally, we provide strategies and considerations for remedy negotiations and formation in Canada.
Overview of the Canadian merger review process
Certain classes of merger transactions that exceed prescribed financial and, in the case of equity transactions, equity thresholds are subject to mandatory pre-merger notification under Part IX of the Competition Act. Part IX requires each party to the transaction to file a notification form that provides information about the party and its Canadian operations, including the names and contact information of the top 20 customers and suppliers for each relevant principal category of product, and for both the notifying party and each affiliate that has a connection to Canada. Parties also customarily submit a joint White Paper (called an ARC request) to the Bureau describing the transaction and its rationale, and the reasons why the transaction will not result in a substantial prevention or lessening of competition, and requesting that the Bureau issue either an advance ruling certificate (ARC) or a no-action letter (NAL) in lieu thereof.
The filing of the notification form triggers a 30-day suspensory waiting period under Section 123(1)(a) of the Competition Act. As a matter of law, the parties may close the transaction after the expiry of the 30-day waiting period, unless the Bureau issues a supplementary information request (SIR). An SIR – an extensive request for documents and data similar to a Second Request under the Hart–Scott–Rodino Antitrust Improvements Act of 1976 – extends the waiting period until 30 days after both parties substantially comply with the SIR.
The parties are legally in a position to close after the expiry of the relevant waiting period, whether or not the Bureau has completed its review. This means the Bureau has no right to unilaterally block a merger or impose a remedy. Rather, should the Bureau determine that a merger or proposed merger ‘prevents or lessens, or is likely to prevent or lessen, competition substantially’ (SPLC), the Bureau may apply to the Competition Tribunal (Tribunal), which is a specialised competition court, for an order under Section 92 of the Competition Act. The Bureau may apply to the Tribunal to obtain such an order before or within one year after the merger has been substantially completed.
The Competition Act enumerates the types of orders that may be made by the Tribunal in respect of a proposed or completed merger. Where the merger has been completed, the Tribunal may order dissolution of the merger or disposal of assets and shares; where a merger has not yet been completed, the Tribunal may order the parties not to complete the merger in whole or in part, and may impose additional post-completion obligations that are necessary to ensure the merger does not prevent or lessen competition substantially. That is, in a contested case the Tribunal’s ability to order behavioural remedies is limited.
Alternatively, the Bureau and the merging parties may consensually agree upon a remedy to address the SPLC, and that agreement can be memorialised in a consent agreement that is registered with the Tribunal. A registered consent agreement has the same force in law as a court order. Where the Bureau and parties are able to agree upon the terms of a consent agreement, there is a great deal more leeway to design a remedy than what is otherwise available to the Tribunal.
As set out in Section 92 of the Competition Act, the legal standard for a merger challenge is that the merger will or is likely to result in an SPLC. Section 93 of the Competition Act sets out the factors to be considered when making a determination that a merger will result in an SPLC, including, among others, effective domestic and foreign remaining competition; the extent to which acceptable substitutes are available; barriers to entry; likelihood that the merger would remove a particularly vigorous and effective competitor; and change and innovation effects. The Competition Act also sets out a unique ‘efficiencies defence’ that provides that the Tribunal may not make an order in respect of a merger where the merger ‘has brought about or is likely to bring about gains in efficiency that will be greater than, and will offset, the effects of any prevention or lessening of competition . . . and that the gains in efficiency would not likely be attained if the order were made’.
The Bureau’s approach to merger review under Section 92 of the Competition Act is set out in greater detail in its Merger Enforcement Guidelines.
Once the Bureau has determined that a transaction is likely to result in an SPLC, the merging parties must consider whether they can – and want to – address the Bureau’s concerns through a remedy or otherwise litigate the merger before the Tribunal on the merits. In Canada, the legal test for a merger remedy is that ‘the appropriate remedy for a substantial lessening of competition is to restore competition to the point at which it can no longer be said to be substantially less than it was before the merger.’ That is, the remedy need not address all competitive harm that may be caused by the transaction, but must reduce it to the point where it is no longer ‘substantial’. However, the remedy must entirely address the substantial harm to competition, as stated by the Supreme Court of Canada: ‘if the choice is between a remedy that goes farther than is strictly necessary to restore competition to an acceptable level and a remedy that does not go far enough even to reach the acceptable level, then surely the former option must be preferred. . . . If the least intrusive of the possible effective remedies overshoots the mark, that is perhaps unfortunate, but from a legal point of view, such a remedy is not defective.’
The structure of a remedy will largely depend on the facts of the case and the Bureau’s theory of harm. The Bureau’s approach to remedies is set out in its Information Bulletin on Merger Remedies in Canada. Regardless of the structure of the remedy, the Bureau requires that the ‘terms must be clear and measures must be sufficiently well defined’, both to facilitate timely implementation and to allow for enforcement by the Bureau and the Tribunal.
In the context of a merger review, the Bureau has demonstrated a willingness to limit the remedy to the concern arising from the merger itself and not to broader concerns unrelated to the merger. In such circumstances, the Bureau may initiate an investigation separate from the merger while agreeing to a remedy to eliminate the SPLC. For example, when the Bureau raised non-merger-related Competition Act concerns about pricing strategies and programmes used by Loblaws, a national Canadian grocer, after reviewing documents in the context of the Loblaws/Shoppers Drug Mart merger, the Bureau negotiated a remedy to address concerns relating to the merger and, post-merger, opened a separate investigation into Loblaws’ practices under the abuse of dominance provision of the Competition Act.
Types of remedies
Consistent with the general approach adopted by antitrust agencies worldwide, the Bureau has stated a preference for structural remedies (i.e., those that change the structure of the market, commonly through the sale of assets), noting that they are typically more effective, do not run the risk of potentially constraining pro-competitive behaviour from the merged firm and do not require extended monitoring by the Bureau. As stated in the Remedies Bulletin, ‘[s]tandalone behavioural remedies are seldom accepted by the Bureau.’ However, the Bureau has remained willing to implement even a stand-alone behavioural remedy where it is ‘sufficient to eliminate the substantial lessening or prevention of competition, and there is no appropriate structural remedy’.
Structural remedies are most often implemented in horizontal mergers, where the increase in concentration as a result of the merger can be remedied by carving certain assets out of the merged company and selling them to a third party. The key consideration for a structural remedy is that the divested assets remain in the market to act as a competitive constraint on the merged firm. For this reason, the Bureau requires that (1) the assets must be viable competitive assets and the divestiture sufficient to eliminate the SPLC (and cannot itself result in an SPLC); (2) the divestiture must be timely; and (3) the assets must be sold to an independent buyer, who intends to remain in the market and has the ability to be an effective competitor.
A viable divestiture package may include all or a part of a stand-alone operating business, but in all cases must include ‘all assets necessary for the buyer to be an effective long-term competitor who will preserve competition in the relevant market(s)’. The extent of the assets to be divested will depend on the nature of the business. In certain cases involving a stand-alone business, this could require the merging parties to divest management, personnel, administrative functions and supply arrangements, etc., required for the operating business to function; other cases, such as those involving divestiture of discrete assets that can be easily integrated into the divestiture buyer’s existing business, may not require such an extensive remedy. Where a proposed divestiture package involves less than a stand-alone business, or involves a combination of assets from both merging parties, the Bureau will typically give the proposed package greater scrutiny to ensure that the package will be a viable business. In some cases, this may involve ‘market testing’ of the proposed divestiture package through consultation with competitors, customers and suppliers, and industry experts. For this reason, merging parties may want to consider proposing the divestiture of a stand-alone business or business line from one party rather than a ‘mix and match’ package.
As described above, the Bureau’s preference is not to accept stand-alone behavioural remedies. The Bureau is typically more willing to accept ‘combination’ remedies that include behavioural elements alongside divestitures. Such behavioural commitments are intended to ensure that the divestiture remedy is effective, typically by providing the buyer with the ability to operate effectively as soon as possible post-acquisition. A recent example of a combination remedy is McKesson/Katz Group, in which the Bureau required the purchaser to divest pharmacies in 26 markets and imposed restrictions on the transmission of competitively sensitive information between the purchaser’s pharmaceutical wholesale business and the target’s retail business.
Behavioural remedies will depend on the circumstances of the case and the Bureau’s theory of harm. The following are examples of behavioural commitments the Bureau has accepted as stand-alone or combination remedies:
- short-term supply arrangements for the buyer of the assets to be divested;
- a waiver by the merged entity of restrictive contract terms to facilitate entry;
- restrictions on anticompetitive bundling;
- requirements to appoint independent directors to the board of the combined company or restrictions on board participation in competing companies; and
- restrictions on pricing or margin.
Other behavioural commitments are typically included as boilerplate in most divestiture consent agreements, such as obligations to facilitate hiring of affected employees by the divestiture purchaser; requirements to notify the Bureau of acquisitions in the affected product or geographic markets, even if notification is not required under Part IX of the Competition Act; and restrictions on acquiring any interest in the divestiture assets for a period of time.
The Bureau has been willing to implement stand-alone behavioural remedies in a limited number of cases, in particular in vertical mergers or other scenarios (such as joint ventures) where there is no, or limited, horizontal overlap but there is a risk of coordinated effects through flow of confidential information between the parties. Most often, these remedies take the form of administrative firewalls. In BCE/Rogers/Glentel, for example, the Bureau’s consent agreement imposed administrative firewalls between the two purchasers, who were telecoms competitors, and the target, a wireless services retailer, to ensure that competitively sensitive information did not flow between the telecoms competitors. In Coca Cola/Coca Cola Bottling, the purchaser agreed to restrictions on access to information of competing soft drink companies that was held by the target bottling company.
The Bureau will allow a behavioural remedy only where it requires either no or minimal future monitoring by the Bureau. In certain cases, the Bureau will appoint a third-party monitor to ensure compliance with the behavioural remedy. The Bureau’s continued willingness to consider behavioural remedies (whether stand-alone or combination) where the competitive issues cannot be addressed through divestiture alone differs somewhat from the approach in the United States, where recent public statements suggest some scepticism from enforcers on the utility of behavioural remedies.
In appropriate cases, the Bureau may also accept a ‘quasi-structural’ remedy, which changes the structure of the market without requiring the merging party to divest ownership of a given asset. Examples of quasi-structural remedies given in the Remedies Bulletin include ‘licensing intellectual property’, ‘removing anti-competitive contract terms’ and ‘granting non-discriminatory access rights to networks’. An example of a quasi-structural remedy in practice is Ontera/Bell Aliant, in which the purchaser, a telecom company, was required to lease facilities along a significant portion of the target’s network to a third party, and to grant a third party a 20-year indefeasible right of use to the telecommunications ring south of Kapuskasing, Ontario.
In complex transactions, the parties will often be able to anticipate that a remedy will be required. The earlier the parties consider antitrust issues, the better able they will be to allocate antitrust risk and plan for an effective remedy process at the appropriate time. Prior to signing, experienced antitrust counsel should review precedent cases, in particular those in the same or similar industries, and provide benchmarks against which to compare the case at hand. In Canada, the best resources for precedents are consent agreements from prior transactions and the Bureau’s published position statements. Because consent agreements under Section 105 of the Competition Act do not require the Bureau to provide a competitive impact statement or other summary of its analysis, these resources may be relatively fewer and less detailed than precedents in other jurisdictions. For this reason, precedents from other jurisdictions, in particular the United States and the European Commission, also may be persuasive authority for risk analysis and submissions to the Bureau.
A key initial consideration is which party will bear the antitrust risk posed by the transaction. In most cases, the purchaser will want both post-closing certainty against a future challenge and to protect the value of the business by preserving its right to terminate the agreement if the Bureau requires significant remedy commitments, or otherwise limiting the extent to which it must agree to divestitures or other restrictive merger remedies. The vendor, by contrast, is likely to want to ensure that the transaction is completed regardless of the outcome of the Bureau’s review, at least in an all-cash transaction.
In Canada, the parties’ statutory ability to close upon expiry of the relevant waiting period, notwithstanding an ongoing substantive review, means that negotiation of the closing condition can be an effective tool to shift antitrust risk. Most purchasers will want to receive substantive comfort in the form of an ARC or NAL prior to closing, so that there is minimal risk of a post-closing review or challenge. Vendors, by contrast, may wish to require the purchaser to close the transaction as soon as it is legally permissible (even in the face of threatened litigation by the Bureau).
Merging parties in Canada (as in other jurisdictions) may also shift risk by way of transaction covenants that relate to the parties’ obligations in respect of remedies. In many cases a purchase agreement will require general ‘reasonable efforts’ by the purchaser to close a transaction, without specific reference to antitrust remedies; in other cases, parties may negotiate an open-ended ‘hell or high water’ covenant whereby a purchaser must take all necessary steps to eliminate impediments to closing and obtain all required regulatory clearances, or instead may specify the extent to which a purchaser must agree to a remedy if required by the Bureau to avoid a challenge. Other means of shifting risk include reverse break fees, which require the purchaser to pay a specified dollar amount to the target if the transaction is not completed because of failure to obtain antitrust approvals, and ‘ticking fees’, or penalty fees that increase with the length of time taken by the antitrust review.
It is important to note that these considerations apply not only to transactions that are subject to a mandatory pre-closing review under the Competition Act; the Bureau is increasingly devoting greater resources to identifying and investigating non-notifiable transactions that could potentially result in an SPLC. Accordingly, even where a transaction is not notifiable in Canada, counsel should consider whether substantive issues may arise, and ensure that risk is appropriately allocated pre-signing.
Consent agreements and undertakings
Most merger remedies are implemented by way of consent agreement between the Bureau and the purchaser or merging parties. Consent agreements are governed by Section 105 of the Competition Act, which states that the consent agreement ‘shall be based on terms that could be the subject of an order of the Tribunal against that person’. In Commissioner v. Kobo, the Tribunal found that for a consent agreement to meet this standard, the consent agreement must (1) sufficiently identify the elements of the relevant statutory test, and (2) explain how the elements were met, and include a statement that the Bureau and the parties to the consent agreement agree that these elements are met, or that the Bureau has determined that these elements are met and the parties do not contest this conclusion. However, Section 105 does not require the Bureau to provide the court with a competitive impact statement or other summary of the basis for the Bureau’s conclusion.
Less commonly, the Bureau may accept an undertaking or other commitment without requiring a consent agreement (according to the Bureau Statistics Reports, the Bureau has accepted alternative case resolutions, including undertakings, in nine of the 50 identified ‘cases with issues’). Where the Bureau accepts an alternative solution, such as an undertaking or commitment, typically it will issue a qualified NAL. In GardaWorld/G4S Canada, the NAL issued to the parties was on the basis of commitments by GardaWorld to alter certain contracting practices. The NAL also noted the Bureau’s intention to monitor competitive dynamics post-merger. However, the Bureau’s strong preference is to require a consent agreement enforceable as a court order.
Timing of remedy negotiations
As described above, the Bureau has no ability to unilaterally order a remedy or block a merger under the Competition Act. Where the Bureau has identified that a transaction will likely cause an SPLC, therefore, it will typically try to negotiate a remedy with the merging parties to avoid the cost and delay associated with litigation.
In past practice, the Bureau would be willing to engage in a ‘dual-track’ review, in which it would concurrently advance its substantive review of the proposed transaction while engaging with the parties with regard to remedies. In recent experience, however, the Bureau may not be willing to engage in remedy negotiations with parties until the case team has completed its substantive review. Even if merging parties identify to the Bureau the specific assets that they are willing to divest at the outset of a case – even where the parties plan to divest one party’s entire overlapping business in Canada – the Bureau will conduct a thorough review of the transaction. In Holcim/Lafarge, for example, the parties publicly announced assets they were willing to divest pursuant to the antitrust review process, including divesting Holcim’s entire business in Canada. The Bureau conducted a thorough review of the transaction to determine: (1) whether the transaction would result in an SPLC; and (2) whether the initial remedy package was sufficient to address the Bureau’s concerns. The Bureau determined that Holcim’s operations in Canada relied heavily on certain US assets, and required Holcim to divest an additional plant in the United States.
This example demonstrates why parties cannot rely on an upfront divestiture offer to ‘short-circuit’ the review process or to avoid an SIR in Canada. It is important to note that the Bureau will not allow parties to close into a ‘hold separate’ solely to facilitate the completion of the Bureau’s review after closing. Accordingly, merging parties will want to leave sufficient time for the Bureau to conduct a thorough review and to negotiate remedies prior to the planned closing date. This may be of particular importance in global transactions where timing of filings in multiple jurisdictions will have to be considered, so that timing in Canada does not delay the global transaction.
In addition, it may benefit the parties to refrain from proposing remedies until the Bureau has had time to review documents and data requested in the SIR and the parties better understand the Bureau’s concerns. In particular, for merging parties wishing to raise an efficiencies defence, allowing the Bureau to conduct a thorough analysis, including reviewing data and the parties’ submissions and expert evidence in respect of competitive effects and efficiencies, can reduce the scope of a remedy. In Superior Plus/Canexus, the Bureau determined that the transaction would result in an SPLC but cleared the transaction with no remedy on the basis that the gains from efficiency resulting from the transaction ‘would be clearly greater than the likely significant anticompetitive effects of the transaction’. In Superior Plus/Canwest, the Bureau engaged in a local-market-by-local-market competitive effects analysis and concluded that no remedy was required in the 10 local markets where ‘the efficiency gains resulting from the transaction were likely to clearly and significantly outweigh the likely anti-competitive effects in these markets’; the Bureau required a divestiture remedy on the remaining 12 local markets in which competitive effects were not outweighed by efficiency gains.
Fix-it-first versus post-closing remedies
The Bureau requires remedies to be implemented in a timely manner, to reduce uncertainty and ‘[ensure] that competition is preserved as quickly as possible’. The Bureau’s stated preference is for fix-it-first remedies, in which an upfront buyer is identified and the divestiture is executed prior to or simultaneously with the merger. However, in practice, the Bureau typically will not require an upfront buyer, absent unique circumstances (such as concern about identifying a suitable buyer, or the case where the divestiture is something less than an operating business and consists primarily of IP or other limited categories of assets). In cases where an upfront buyer is identified and a purchase agreement executed prior to completion of the merger, the Bureau will not always require the parties to execute a consent agreement.
The Bureau typically will allow parties to close the transaction under an agreement to ‘hold separate’ certain assets to facilitate a post-closing divestiture. Such provisions are desirable for the merging parties, as they can complete the transaction and begin integration of the remainder of the businesses that will not be subject to the divestiture, and for the Bureau as they ensure that the assets for divestiture will be preserved for the eventual buyer, and that the merging parties will not integrate systems or share information that will make it difficult to ‘unscramble the eggs’ once the merger has been completed.
In certain scenarios, the Bureau will not require a full ‘hold separate’ but may allow the parties to maintain or preserve the assets that may make up the divestiture package. Under such a ‘preservation order’, the vendor remains responsible for providing administrative support, honouring material contracts, and taking other actions that maintain the profitability and value of the assets to be divested. A preservation order is typically appropriate where the assets are discrete enough to be readily identifiable when the divestiture is implemented and when there is a minimal risk of disclosing competitively sensitive information (which may be accomplished through provisions of the consent agreement).
Elements of the divestiture process
Where the Bureau allows parties to close into a hold separate, the Bureau will require the parties to memorialise the agreement in a consent agreement that sets out in detail when and how the remedy will be implemented. First, the divestiture vendor must provide reasonable commercial representations and warranties to increase the attractiveness of the divestiture package.
Second, the consent agreement typically will provide the vendor an initial sale period of three to six months to sell the remedy package. If the vendor fails to complete the divestiture within the initial sale period, the Bureau typically will appoint a trustee to complete the divestiture, with no minimum price, and subject only to approval by the Bureau. There is, therefore, a significant incentive for the merged entity to maximise value for divestiture assets by completing the sale within the initial sale period. Where there is uncertainty as to whether the remedy will be completed, the Bureau may designate an additional package of assets as part of the remedy (often referred to as a ‘crown jewel’ or ‘backstop’), whose inclusion may be triggered during the trustee period to make it more likely that the remedy will be implemented.
Other key elements of divestiture consent agreements include provisions for an independent manager to operate assets to be divested, pending sale of the assets; reporting requirements for the vendor to keep the Bureau informed of the status of the divestiture process; a requirement to obtain any necessary third-party consents; and appointment of a monitor to monitor compliance by the merging parties. Finally, the Bureau also must approve the divestiture buyer.
Approval is based on the following criteria:
•the divestiture of the assets to the proposed buyer must not itself adversely affect competition;
•the buyer must be independent (i.e., at arm’s length) from the vendor;
•the buyer must have the managerial, operational and financial capability to compete effectively in the relevant market or markets; and
- the asset or assets being divested must be used by the buyer to compete in the relevant market or markets post-divestiture.
The Bureau also may approve multiple buyers if the divested assets are in multiple local or regional markets, or if multiple products must be divested.
The Competition Bureau’s International Affairs Directorate is tasked with supporting international collaboration, in particular by building relationships with foreign competition agencies. In the merger review context, the Bureau often asks the parties to provide a confidentiality waiver to other reviewing agencies to facilitate cooperation in multi-jurisdictional merger reviews. Such cooperation may take place through joint conference calls with the merging parties or third parties; discussing industry dynamics and approaches to market definition and competitive effects analysis; sharing documents and other information; and coordinating on merger remedies. Given the close geographic and economic relationship between Canada and the United States, the Bureau is especially likely to coordinate with the US antitrust agencies on merger reviews that involve operations in both countries; indeed, in some cases the Bureau and the reviewing US agency may hold joint meetings. In the Bureau’s guidance on cooperation in merger investigations with US agencies, for example, the Bureau notes that ‘both [agencies] have an interest in reaching, insofar as possible, consistent analyses and outcomes’.
In light of this approach, in certain cases the Bureau has not required a Canadian consent agreement where the remedies required by other authorities would also resolve the competition issues in Canada. In United Technologies/Raytheon, for example, the Bureau issued a NAL, the terms of which were subject to the implementation of the settlement agreement between the parties and the US Department of Justice, as well as the European Commission Directorate-General for Competition. In GlaxoSmithKline/Novartis, the Bureau cooperated with both the US Federal Trade Commission (FTC) and the European Commission, and issued a NAL in respect of the transaction on the basis that the consent agreement between the parties and the FTC, in particular, the divestiture of assets to Array BioPharma, was implemented. However, in cases where the Bureau is not satisfied that a foreign remedy would resolve competition issues in Canada, the Bureau may impose a separate Canadian remedy. Similarly, in certain cases differences between the substantive provisions of foreign and Canadian antitrust legislation can result in divergent outcomes, as in Superior/Canexus, which was cleared in Canada on the basis of the efficiencies defence, but was ultimately abandoned in the face of a challenge by the FTC.
In most cases in Canada, a remedy will not be required in order to obtain an ARC or NAL or to otherwise avoid litigation. However, in the few cases that do raise substantive competition concerns, counsel can expect that the Bureau will conduct a thorough analysis to determine the scope of the SPLC that will result from the transaction and, if there is a resulting SPLC, the scope of the remedy necessary to address the substantial harm to competition likely to result from the merger. This process requires a well-considered strategy to manage timing and other considerations (particularly in global deals). Experienced competition counsel can help smooth the road for merging parties facing remedy negotiations in Canada.
1 Jason Gudofsky and Debbie Salzberger are partners, and Kate McNeece is a senior associate, at McCarthy Tétrault LLP.
2 Under the Competition Act, the Commissioner of Competition (Commissioner) heads the Bureau and it is the Commissioner who has the statutory ability to review and challenge mergers. For clarity, we collectively refer to the Commissioner and the Bureau as ‘the Bureau’.
3 RSC 1985, c 19 (2nd Supp).
4 Competition Bureau Performance Measurement & Statistics Report for the period ending 31 March 2020, www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04508.html (2014–2020 statistics); Competition Bureau Quarterly Report for the period ending 31 March 2015, www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03784.html (2013–2014 statistics) (collectively, the Bureau Statistics Reports).
5 Per the Bureau Statistics Reports, 16 transactions (1 per cent) were abandoned either due to competition issues or for reasons other than the Bureau’s position on the merger.
6 The classes of transactions that may be subject to pre-merger notification are described in Section 110 of the Competition Act: asset acquisitions; voting share acquisitions; amalgamations; formation of non-share joint ventures; and acquisitions of an interest in a non-corporate entity (e.g., a partnership).
7 The relevant monetary thresholds can be found on the Competition Bureau’s website at www.canada.ca/en/competition-bureau/news/2020/04/pre-merger-notification-transaction-size-threshold-to-remain-at-96m-in-2020.html.
8 An ARC exempts the parties from having to submit a notification under Part IX and, once issued, prohibits the Competition Tribunal from issuing an order in respect of the merger on substantially similar grounds upon which the ARC was issued. As a practical matter, the Bureau will issue an ARC in only those transactions that raise no actual or potential concerns and where the Bureau has sufficient information about the parties and relevant markets to arrive at that conclusion.
9 In a NAL, the Bureau will confirm that it does not intend, at that time, to apply for an order to block the merger, but reserves its statutory right to do so within one year of closing. In practice, a NAL provides a high degree of comfort to the merging parties.
10 It is also possible that the parties may elect to not file a notification to start the waiting period and rather file an ARC Request asking for either an ARC or, in lieu thereof, a NAL and a waiver under Paragraph 113(c) of the Competition Act of the parties’ obligation to file a formal notification. This strategy is typically reserved for non-complex mergers (i.e., where there is no or limited competitive overlap) and where timing is not of the essence, since a waiting period is not started under this strategy.
11 See Competition Act, Section 123(1)(b). Note that the Bureau may terminate either the initial waiting period or the post-SIR waiting period early.
12 Notwithstanding the legal ability to close, merging parties often contract to require substantive clearance from the Bureau in the form of an ARC or NAL.
13 See Competition Act, Sections 92(1)(e)–(f).
14 Note that under Section 92 the Bureau may challenge any merger within one year after closing, whether or not pre-merger notification is required under Part IX. A notable recent example is Commissioner of Competition v. CCS Corporation et al, 2012 Comp Trib 14, in which the Bureau challenged a completed (non-notifiable) merger between two providers of hazardous waste disposal services in north-eastern British Columbia. The Tribunal found that the completed merger was likely to prevent competition substantially for the supply of secure landfill services for solid hazardous waste in that area, and ordered the divestiture of a subsidiary of the acquired company. The Tribunal’s decision was later overturned by the Supreme Court of Canada on the basis of the efficiencies defence under Section 96 of the Competition Act. More recently, in 2019, the Bureau challenged the acquisition of Wrangler Holdings Inc by Thoma Bravo LLC, alleging a merger to monopoly and seeking a divestiture of all interests in one of Thoma Bravo’s or Wrangler’s reserve valuation and reporting software businesses and all related assets. While that transaction was notifiable, the parties had closed at the end of the applicable waiting period, such that the Bureau’s challenge was made post-closing. In August 2019, the Bureau entered into a consent agreement with Thoma Bravo in which Thoma Bravo agreed to sell one of the overlapping software businesses to a purchaser acceptable to the Commissioner. See www.canada.ca/en/competition-bureau/news/2019/08/competition-preserved-in-the-supply-of-oil-and-gas-reserves-software-in-canada.html. In 2020, the Bureau also entered into a consent agreement requiring a divestiture in the Evonik/Peroxychem transaction, indicating in its position statement that it learned about the transaction from a complaint. See Competition Bureau statement regarding Evonik’s proposed merger with PeroxyChem (28 January 2020), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04519.html.
15 Competition Act, Sections 92(1)(e)–(f).
16 Competition Act, Sections 92(e)(iii) and 92(f)(iii).
17 Competition Act, Section 92(1).
18 Competition Act, Section 93. Section 92(2) of the Competition Act also explicitly provides that the determination that a merger will or is likely to cause an SPLC may not be made solely on the basis of concentration or market shares. Competition Act, Section 92(2).
19 Competition Act, Section 96(1).
20 Competition Bureau Canada: Enforcement Guidelines – Merger Enforcement Guidelines (2011), available at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/cb-meg-2011-e.pdf/$FILE/cb-meg-2011-e.pdf.
21 Canada (Dir of Investigation and Research) v. Southam Inc  1 SCR 748 at Paragraph 85.
22 Southam at Paragraph 89.
23 Competition Bureau, Information Bulletin on Merger Remedies in Canada (22 September 2006), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02170.html (Remedies Bulletin).
24 Remedies Bulletin at Paragraph 8. See also Commissioner of Competition v. Parkland, 2015 Comp Trib 4 at Paragraph 43. (‘To accomplish their purpose, remedies in merger matters should be couched in clear terms and be sufficiently well defined to be effective and enforceable.’).
25 See Lisa Wright, ‘Competition Bureau steps up probe into Loblaw’s dealings with suppliers’, Toronto Star (17 November 2014), www.thestar.com/business/2014/11/17/competition_bureau_steps_up_probe_into_loblaws_dealings_with_suppliers.html. More recently, the Bureau announced in March 2018 that it had commenced a review under the merger provisions of the Competition Act of a (non-notifiable) deal involving the transfer of 41 community and daily newspapers between Postmedia and Torstar, and that it was separately investigating alleged anticompetitive conduct contrary to the conspiracy provisions of the Competition Act arising from the same transaction. Statement from the Commissioner of Competition regarding searches in the greater Toronto area (12 March 2018), www.canada.ca/en/competition-bureau/news/2018/03/statement-from-the-commissioner-of-competition-regarding-searches-in-the-greater-toronto-area.html.
26 Remedies Bulletin at Paragraph 10.
27 Remedies Bulletin at Paragraph 49.
28 Remedies Bulletin at Paragraph 50.
29 Remedies Bulletin at Paragraph 13.
30 Remedies Bulletin at Paragraph 14.
31 Remedies Bulletin at Paragraph 17.
32 Remedies Bulletin at Paragraph 20.
33 Remedies Bulletin at Paragraph 47.
34 Competition Bureau statement regarding McKesson’s acquisition of Katz Group’s healthcare business (16 December 2016), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04174.html. Similarly, in Loblaws/Shoppers Drug Mart, which concerned the acquisition by a national grocery store of a national pharmacy and drugstore chain, the purchaser was required to divest locations in 27 local markets, and in addition to maintain pharmacy businesses in affected stores, and to cease certain conduct towards existing suppliers. Commissioner v. Loblaw Companies Limited, CT-2014-003 (Consent Agreement).
35 In Transcontinental/Quebecor, Transcontinental was required to supply distribution and printing services to any potential purchaser for a specified period to maximise the newspapers’ viability. Competition Bureau statement regarding the acquisition by Transcontinental of Quebecor Media’s community newspapers in Quebec (28 May 2014), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03740.html. In Suncor/PetroCanada, the merged company was required to supply wholesale gasoline to independent marketers after the merger. Commissioner of Competition v. Suncor Energy Inc and Petro-Canada, CT-2009-011 (Consent Agreement) at Paragraph 24.
36 See Commissioner of Competition v. Superior Plus Corp and Superior Plus LP, CT-2017-015 (Consent Agreement) (Superior Plus/Canwest) at Paragraph 43 (requiring merging parties not to enforce contract terms providing for automatic renewal, exclusive supply or minimum volume requirements, or equipment removal or other termination fees).
37 See Commissioner of Competition v. Ticketmaster Entertainment Inc and Live Nation Inc, CT-2010-001 (Consent Agreement), at Paragraph 26.
38 See Commissioner of Competition v. Suncor Energy Inc and Petro-Canada, CT-2009-011 (Consent Agreement), at Paragraph 66.
39 See Commissioner of Competition v. Quebecor Media Inc, CT-2005-010 (Consent Agreement), at Schedule A.
40 See Competition Bureau statement regarding Le Groupe Harnois Inc’s proposed acquisition of Distributions pétrolières Therrien Inc.’s gasoline supply arrangements (23 June 2016), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04106.html.
41 See Competition Bureau Mergers Consent Agreement Template (29 September 2016), Sections VIII and XI, www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02310.html.
42 Competition Bureau Statement regarding BCE and Rogers’ acquisition of GLENTEL (14 May 2015), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03924.html.
43 See Commissioner of Competition v. The Coca-Cola Company, CT-2010-009 (Consent Agreement) (Coca Cola/Coca Cola Bottling).
44 Remedies Bulletin at Paragraph 50.
45 See Commissioner of Competition v. BCE Inc and Rogers Communications Inc, CT-2015-005 (Consent Agreement), Section V.
46 See, e.g., Assistant Attorney General Makan Delrahim Delivers Keynote Address at American Bar Association’s Antitrust Fall Forum, Washington, DC (16 November 2017), www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-keynote-address-american-bar (‘I believe the Division should fairly review offers to settle but also be skeptical of those consisting of behavioral remedies or divestitures that only partially remedy the likely harm. We should settle federal antitrust violations only where we have a high degree of confidence that the remedy does not usurp regulatory functions for law enforcement, and fully protects American consumers and the competitive process.’).
47 Remedies Bulletin at Paragraph 42.
48 See Competition Bureau statement regarding the proposed acquisition of Ontera by Bell Aliant (1 October 2014), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03823.html.
50 Unlike in the United States, the Bureau is not required to issue a competitive impact statement in respect of reviewed transactions, but from time to time the Bureau posts a position statement summarising its approach to a complex review on the its website, www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_00173.html.
51 Technically the Tribunal can order dissolution; though, as a practical matter, this may not be available in many cases.
52 Under the Competition Act and associated regulations, the merging parties are required to provide the Bureau with a copy of the transaction documents as part of the formal notification filing. In the authors’ experience, concerns that transaction covenants that describe the remedy a purchaser must offer to the Bureau will reduce negotiating leverage are exaggerated. In the case that the parties are able to identify particular assets or areas that raise significant competition issues, these will likely become plain to the Bureau with or without a ‘roadmap’ in the transaction agreement. Moreover, in many cases the Bureau will require no remedy, or require a remedy that is less extensive than that agreed to by the parties. For example, the Bureau did not require a remedy in the recent Enbridge/Spectra or Pembina/Veresen transactions, despite hell or high water commitments in the transaction agreements. See Agreement and Plan of Merger Among Spectra Energy Corp, Enbridge Inc and Sand Merger Sub Inc (5 September 2016) at Section 6.6(d), www.sec.gov/Archives/edgar/data/1373835/000119312516701430/d247969dex21.htm; Arrangement Agreement Between Pembina Pipeline Corporation and Versen Inc (1 May 2017) at Section 5.3(d), www.sedar.com/GetFile.do?lang=EN&docClass=36&issuerNo=00030521&issuerType=03&projectNo=02621465&docId=4108313.
53 Competition Bureau enhances information-gathering efforts on non-notifiable mergers (17 September 2019), www.canada.ca/en/competition-bureau/news/2019/09/competition-bureau-enhances-information-gathering-efforts-on-non-notifiable-mergers.html. As noted above, the Bureau sought remedies in at least two non-notifiable transactions in 2019–2020.
54 Competition Act, Section 105.
55 Rakuten Kobo Inc v. Commissioner of Competition, 2016 Comp Trib 11 at Paragraphs 51–52.
56 Competition Bureau statement regarding the acquisition by GardaWorld of G4S Canada (13 March 2014), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03695.html.
58 Competition Bureau statement regarding the proposed acquisition by Holcim of Lafarge (4 May 2015), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03920.html.
59 As discussed below, the Bureau will allow parties to close into a hold separate to facilitate a post-closing divestiture or to facilitate litigation.
60 The Bureau’s approach to considering efficiencies was set out in a draft guideline document, ‘A practical guide to efficiencies analysis in merger reviews’, which was published for public consultation between 20 March and 3 May 2018 (‘Parties asserting an efficiency defence are encouraged to provide their initial efficiencies submissions and available supporting information at an early stage, recognizing that additional information will be required as the Bureau’s analysis progresses. This will allow the Bureau sufficient opportunity to analyse potential effects and efficiencies concurrently.’). In May 2020, the Bureau released a model timing agreement for merger reviews in which merging parties wish to resolve efficiencies claims pre-closing (whether in service of remedy negotiations or otherwise), which set out timed stages for engagement with the Bureau to ensure the Bureau is given sufficient time to conduct its efficiencies analysis. See Model Timing Agreement for Merger Reviews involving Efficiencies, www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04531.html. The Bureau utilised the (then-draft) model timing agreement for the first time in its review of the Canadian National Railway Company’s (CN) acquisition of H&R Transport Limited (H&R), which commenced in 2019. The Bureau’s review concluded that the proposed transaction would likely result in an SPLC for full truckload refrigerated intermodal services in eight relevant markets in Canada; however, the Bureau ultimately concluded that ‘the efficiency gains would be greater than the likely anticompetitive effects of the transaction’, and discontinued its investigation. See Competition Bureau outlines its assessment of CN’s acquisition of H&R (22 April 2020), www.canada.ca/en/competition-bureau/news/2020/04/competition-bureau-outlines-its-assessment-of-cns-acquisition-of-hr.html.
61 See Competition Bureau statement regarding Superior’s proposed acquisition of Canexus (28 June 2016), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04111.html.
62 See Competition Bureau statement regarding Superior Plus LP’s proposed acquisition of Canwest Propane from Gibson Energy ULC (28 September 2017), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04307.html (‘As noted in the Merger Enforcement Guidelines, in appropriate cases and when provided with timely information validating claimed efficiencies, the Bureau will consider efficiencies internally and will not necessarily resort to the Tribunal for adjudication of the issue.’).
63 Remedies Bulletin at Paragraph 27.
64 Remedies Bulletin at Paragraphs 28–29.
65 The Bureau issued a NAL in the ABInbev/SABMiller transaction after reviewing the concurrent proposed divestiture of certain brands to Molson Coors. Competition Bureau statement regarding Anheuser-Busch InBev’s proposed acquisition of SABMiller and the concurrent divestiture of certain Miller Brands to Molson Coors (31 May 2016), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04097.html.
66 Remedies Bulletin at Paragraph 24.
67 See, e.g., Parkland at Paragraphs 40–43 (endorsing the Bureau’s refusal to accept proposed divestiture commitments that lack the detail typically found in a consent agreement). The Bureau’s template consent agreement can be found on its website. See Competition Bureau Mergers Consent Agreement Template (29 September 2016), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02310.html.
68 Remedies Bulletin at Paragraph 26.
69 Remedies Bulletin at Paragraph 33.
70 Remedies Bulletin at Paragraph 34.
71 Remedies Bulletin at Paragraph 36.
72 Remedies Bulletin at Paragraph 52.
73 Remedies Bulletin at Paragraph 54.
74 Template Consent Agreement at Sections VI (third-party consents) and X (monitor).
75 Merging parties should note that the Competition Act does not exempt from the requirements of Part IX acquisitions pursuant to a consent agreement with the Bureau; if a divestiture transaction exceeds the applicable thresholds, the divestiture buyer and vendor will be required to comply with the pre-merger notification regime.
76 Remedies Bulletin at Paragraph 58.
77 Examples include Metro/PJC, in which property rights to five pharmacies were transferred to Familiprix, with the remaining pharmacies subject to the consent order transferred to McKesson. Competition Bureau approves transfer of interests in 10 Quebec pharmacies from Metro to Familiprix, McKesson (18 February 2019), www.canada.ca/en/competition-bureau/news/2019/02/competition-bureau-approves-transfer-of-interests-in-10-quebec-pharmacies-from-metro-to-familiprix-mckesson.html. In Abbott/Alere, one business was divested to Siemens AG and one business was divested to Quidel Corporation. Competition Bureau statement regarding the acquisition by Abbott of Alere (28 September 2017), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04308.html.
78 The Bureau takes the position that Section 29 of the Competition Act allows communication with other enforcers, under the provision allowing communication for ‘administration or enforcement’ of competition legislation, and therefore typically will not require or accept a confidentiality waiver from the parties to the Bureau.
79 See OECD Policy Roundtable on Remedies in Cross-Border Merger Cases, DAF/COMP(2013)28, www.oecd.org/daf/competition/Remedies_Merger_Cases_2013.pdf.
80 Canada–US merger working group – Best practices on cooperation in merger investigations (25 March 2014), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03704.html.
81 Competition Bureau will not oppose merger between United Technologies and Raytheon (30 March 2020), www.canada.ca/en/competition-bureau/news/2020/03/competition-bureau-will-not-oppose-merger-between-united-technologies-and-raytheon.html. The Competition Bureau took the same approach in Harris/L3 (Competition Bureau will not oppose merger between defence contractors Harris Corporation and L3 Technologies (21 June 2019), www.canada.ca/en/competition-bureau/news/2019/06/competition-bureau-will-not-oppose-merger-between-defence-contractors-harris-corporation-and-l3-technologies.html); in UTC/Rockwell Collins (Competition Bureau statement regarding United Technologies Corporation’s acquisition of Rockwell Collins, Inc. (1 October 2018), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04395.html); and in Continental/Veyance (Competition Bureau statement regarding the acquisition by Continental of Veyance (11 December 2014), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03861.html).
82 Competition Bureau statement regarding the three-part inter-conditional transaction between GlaxoSmithKline plc and Novartis AG involving their consumer healthcare, vaccines and oncology businesses (23 February 2015), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03874.html.
83 For example, in Praxair/Linde, the Bureau’s consent agreement required the divestiture of Linde’s entire Canadian business, which formed part of the parties’ divestiture package in the Americas, including assets in the US that were subject to a consent agreement with the United States Federal Trade Commission (FTC). Competition Bureau statement regarding the proposed merger between Linde AG and Praxair, Inc. (26 October 2018), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04400.html. Similarly, in Dow/Dupont, the Bureau’s consent agreement required divestiture of certain facilities that were also the subject of divestiture commitments with the US and European agencies. Competition Bureau statement regarding the merger between Dow and Dupont (27 June 2017), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04247.html. Similarly, in Novartis/Alcon, the Bureau determined in cooperation with European and US authorities that different competitive conditions existed in different jurisdictions. As a result, each jurisdiction required a different set of divestitures, and the Bureau entered into a Canadian consent agreement with the parties. OECD Policy Roundtable on Remedies in Cross-Border Merger Cases, DAF/COMP(2013)28, www.oecd.org/daf/competition/Remedies_Merger_Cases_2013.pdf.
84 See Competition Bureau statement regarding Superior’s proposed acquisition of Canexus (28 June 2016), www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04111.html (‘In conducting its review, the Bureau cooperated closely with the FTC. Each authority reviewed the effects of the transaction under its distinct legal framework. On 27 June 2016, the FTC filed an administrative complaint challenging the transaction.’). The converse occurred in Evonik/Peroxychem, in which the Bureau entered into a consent agreement with Evonik requiring the divestiture of a Canadian productive asset. See Competition Bureau reaches agreement with Evonik to address concerns raised by acquisition of PeroxyChem (28 January 2020), www.canada.ca/en/competition-bureau/news/2020/01/competition-bureau-reaches-agreement-with-evonik-to-address-concerns-raised-by-acquisition-of-peroxychem.html. The FTC also brought an action in US federal court to block the transaction, which was dismissed in part on the grounds that the Competition Bureau’s divestiture remedy fully resolved the competition issues in one geographic market. See FTC v. RAG-Stiftung, Case No. 19-2337 (D.D.C., 2020) (Memorandum Opinion) 39, available at https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2019cv2337-150.