Merger Control 2023 Comparisons

The relevant merger control legislation is contained in the Competition Act (Act), a federal statute of general application that applies across Canada. There is extensive additional guidance from the Competition Bureau (Bureau) in the form of guidelines, bulletins and policy statements, including, most importantly, the Merger Enforcement Guidelines (MEGs).

The MEGs and other applicable guidance are available on the Bureau’s website.

Other potentially relevant legislation for foreign investment transactions or transactions relating to particular sectors is set out below. The Bureau works closely with the agencies responsible for enforcing this foreign investment and sector-specific legislation, although each agency exercises its mandate separately.

Investments by Non-Canadians

Investments by non-Canadians to acquire control of Canadian businesses are either reviewable according to a “net benefit to Canada” test, or merely notifiable under the Investment Canada Act (ICA). Whether an investment is subject to net benefit review or notifiable depends on several factors, including the structure of the transaction, the nationality of the investor, whether the investor is a state-owned enterprise, and the nature and value of the assets or business being acquired.

A transaction that is subject to net benefit review cannot be completed unless the Minister of Innovation, Science and Industry (in the case of non-cultural investments) or the Minister of Canadian Heritage (in the case of cultural investments) is satisfied that the investment is likely to be of net benefit to Canada. The Minister’s net benefit analysis takes into account a number of factors, including the competitive effect of the investment. The administrators of the ICA rely on the Bureau to assess competitive effects.

The ICA also includes provisions allowing for the review of investments by non-Canadians that “could be injurious to national security”. Significantly, in contrast to “net benefit” reviews, both controlling and non-controlling investments are potentially subject to national security review.

Canada Transportation Act (CTA)

Transactions that “involve a transportation undertaking” and that are subject to pre-merger notification under the Act must also be notified to the Minister of Transport (as well as the Canadian Transportation Agency if the proposed transaction involves an air transportation undertaking). The Minister of Transport has 42 days from such notification to determine whether the proposed transaction “raises issues with respect to the public interest as it relates to national transportation.” Where the transaction is considered to raise such issues, a potentially lengthy review is triggered and any order in respect of the transaction is made by the Minister of Transport under the CTA and not under the Act (the Commissioner’s role in this case is limited to providing a recommendation to the Minister of Transport).

Broadcasting and Communications

Transactions involving broadcasting undertakings that are subject to review under the merger provisions of the Act may also be subject to review and approval by the Canadian Radio-television and Telecommunications Commission. Similarly, transactions involving radiocommunication licence holders that are subject to review under the Act may also be subject to review by the Minister of Innovation, Science and Industry under the Radiocommunication Act.

Financial Institutions

With respect to mergers under the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act or the Trust and Loan Companies Act, where the Minister of Finance certifies, to the Commissioner of Competition (Commissioner), who heads the Bureau, the names of the parties and that the proposed merger is in the public interest, the Competition Tribunal (Tribunal), and therefore the Commissioner, no longer have jurisdiction over that merger.

The Commissioner is responsible for the administration and enforcement of the Act. However, the Commissioner must refer matters that warrant criminal prosecution to the Director of Public Prosecutions (DPP). Civil reviewable matters – including mergers, abuse of dominance, competitor collaborations and various types of price and non-price vertical restraints – are reviewed by the Tribunal on application by the Commissioner or, in certain instances, by private parties with leave of the Tribunal. Criminal prosecutions are brought by the DPP before the courts. Private civil actions (often in the form of class actions) are brought by individuals, corporations and other entities before the courts.

Please refer to 1.2 Legislation Relating to Particular Sectors with respect to the ICA, the CTA, broadcasting and communications legislation and financial institution legislation.

The pre-merger notification provisions in Part IX of the Act provide that the parties to a proposed transaction of a specified type, and exceeding specified thresholds, must, subject to certain exceptions, provide the Commissioner with advance notice of, and specified information with respect to, that transaction.

There are several exemptions to the pre-merger notification provisions included in Sections 111 to 113 of the Act, such as where all the parties to the proposed transaction are affiliates, the Commissioner has issued an advance ruling certificate (ARC) or the Commissioner has waived the obligation to notify.

Parties to a transaction may also seek formal clearance from the Commissioner in the form of an ARC or a no-action letter (NAL), even where the transaction is not subject to pre-merger notification. Such clearance will typically be sought in a non-notifiable transaction only where material competition issues exist and/or complaints are expected to be made by customers, suppliers or other market participants.

Failure to file a pre-merger notification (without “good and sufficient cause”) when one is required is a criminal offence, punishable by a fine of up to CAD50,000. Where a corporation commits the offence, any officer, director or agent of the corporation who directed, authorised, assented to, acquiesced in or participated in the commission of the offence is a party to and guilty of the offence, and is liable to the punishment provided for the offence whether or not the corporation has been prosecuted or convicted.

In addition, failure to comply with the mandatory waiting period (without “good and sufficient cause”) can result in a range of court orders, including orders:

• to supply information required pursuant to a Supplementary Information Request (SIR) if one has been issued;
• prohibiting any conduct directed at completion or implementation of the transaction;
• ordering the dissolution of a completed transaction or the disposition of assets or shares; and
• imposing an administrative monetary penalty of up to CAD10,000 for each day that the party failed to comply with the mandatory waiting period.

Part IX of the Act requires parties to provide a pre-merger notification to the Commissioner in respect of the following types of transactions, where specified thresholds are exceeded:

• acquisition of assets or voting shares;
• amalgamation of entities;
• formation of a combination to carry on business other than through a corporation (for example, a partnership or an unincorporated joint venture); and
• acquisition of an interest in a combination.

Notification is required only where an operating business is the subject of the transaction, whether directly or indirectly. An operating business is defined in the Act to mean a business undertaking in Canada to which employees employed in connection with the undertaking ordinarily report for work.

Transactions that do not involve the acquisition of an operating business or do not fall within the categories described above are not subject to pre-merger notification.

The Act includes provisions that define the concept of “control”. In particular, for the purposes of the Act, a corporation is deemed to be controlled by an entity or individual that directly or indirectly holds securities of the corporation to which are attached more than 50% of the votes that may be cast to elect directors of the corporation and which, if exercised, would be sufficient to elect a majority of the directors of the corporation. Similarly, an entity other than a corporation – such as a partnership, trust or other unincorporated organisation capable of conducting business – is deemed to be controlled by an entity or individual that directly or indirectly holds an interest in the entity that entitles it to receive more than 50% of the profits of that entity or more than 50% of its assets on dissolution. 

The pre-merger notification provisions contain two thresholds: a size of parties threshold and a size of transaction threshold. Both these thresholds must be exceeded for the transaction under consideration to be subject to mandatory pre-merger notification. The jurisdictional thresholds set out below apply to all sectors. However, as noted in 2.1 Notification, there are several exemptions to the pre-merger notification provisions included in Sections 111 to 113 of the Act.

Size of Parties Threshold

The size of parties threshold is exceeded if the parties to the transaction, together with their affiliates, (i) have assets in Canada that exceed CAD400 million in aggregate book value; or (ii) have annual gross revenues from sales in, from or into Canada that exceed CAD400 million.

Size of Transaction Threshold

The size of transaction threshold is exceeded if the value of the assets in Canada being acquired, or the annual gross revenues from sales in or from Canada generated by those assets, exceeds CAD93 million (2023 threshold). The size of transaction threshold is typically changed annually according to a GDP-based indexing mechanism set out in the Act. However, the threshold for a year may be established by regulation or may be left unchanged from the prior year. For 2023, the Minister decided to leave the threshold unchanged from 2022.

There are aspects of this threshold that vary, depending on the type of transaction, as follows: 

Asset acquisition

Pre-merger notification is required in respect of a proposed acquisition of any of the assets in Canada of an operating business where the aggregate book value of the assets proposed to be acquired, or the annual gross revenues from sales in or from Canada generated from those assets, exceeds CAD93 million (2023).

Share acquisition

Pre-merger notification is required in respect of a proposed acquisition of the voting shares of a corporation that carries on an operating business, or controls an entity that carries on an operating business, where the target corporation and any entities controlled by that corporation have assets in Canada with an aggregate book value, or have annual gross revenues from sales in or from Canada generated from those assets, exceeding CAD93 million (2023).

In addition to exceeding the CAD93 million (2023) threshold, acquisitions of shares must exceed thresholds relating to the percentage of the voting shares of the target that the acquirer acquires to be subject to pre-merger notification. In the case of public companies, the transaction is only notifiable if, following the transaction, the acquirer will own shares carrying more than 20% of the votes attached to all outstanding voting shares of the corporation. If the acquirer already owns more than 20%, then the transaction is notifiable only if the transaction will increase the acquirer’s interest to more than 50% of the votes. In the case of non-public companies, the thresholds are more than 35% of the votes, or if the acquirer already owns more than 35%, more than 50% of the votes. The interest owned by the acquirer includes any interest owned by any of the acquirer’s affiliates.

Amalgamation

Pre-merger notification is required in respect of a proposed amalgamation of two or more entities where (i) one or more of those entities carries on an operating business, or controls an entity that carries on an operating business, where the aggregate book value of the assets in Canada that would be owned by the continuing entity that would result from the amalgamation or by entities controlled by the continuing entity, or the annual gross revenues from sales in or from Canada generated from such assets, exceeds CAD93 million (2023); and (ii) each of at least two amalgamating entities, together with its affiliates, has assets in Canada or annual gross revenues from sales in, from or into Canada in excess of CAD93 million (2023).

Combination

Pre-merger notification is required in respect of a proposed combination of two or more persons to carry on business other than through a corporation where one or more of those persons propose to contribute to the combination assets that form all or part of an operating business carried on by those persons, or entities controlled by those persons, and where the aggregate book value of the assets in Canada that are the subject matter of the combination, or the annual gross revenues from sales in or from Canada generated from those assets, exceeds CAD93 million (2023).

Acquisition of an interest in a combination

Pre-merger notification is required in respect of a proposed acquisition of an interest in a combination that carries on an operating business other than through a corporation where the aggregate book value of the assets in Canada that are the subject matter of that combination, or the annual gross revenues from sales in or from Canada generated from those assets, exceeds CAD93 million (2023) and, as a result of the proposed acquisition, the persons acquiring the interest, together with their affiliates, would hold an aggregate interest in the combination that entitles the persons to receive more than 35% of the profits of the combination, or more than 35% of its assets on dissolution, or, where the persons acquiring the interest are already so entitled, to receive more than 50% of such profits or assets.

The asset and revenue thresholds discussed in 2.5 Jurisdictional Thresholds are to be determined based on the aggregate book value of the assets and the annual gross revenues reported in the most recent audited financial statements of the parties and, as applicable, their affiliates, provided the end of the period covered by the statements is not more than 15 months prior to the reference date for the transaction. The “reference date” is the date on which a notification is filed in respect of the transaction or, if no notification is filed, the 30th day preceding the date on which ownership of any property that is the subject of the transaction is transferred, or, in the case of an amalgamation, articles of amalgamation are filed. Assets and revenues determined based on the most recent financial statements are subject to adjustment to reflect any subsequent transactions or events that would affect whether notification is required.

If audited financial statements are not available, assets and revenues must be determined in accordance with the books of the person, adjusted as necessary to comply with generally accepted accounting principles, and for the most recent date that the amounts can reasonably be determined, provided that the date is within three months of the reference date.

Amounts reported in foreign currency are to be converted to Canadian dollars, based on the noon exchange rate quoted by the Bank of Canada for the date on which the value of the assets is determined, or the last day of the annual period used to determine revenues. (As the noon exchange rate is no longer available on the Bank of Canada’s website, the practice is to use the Daily Exchange Rate quoted by the Bank of Canada.)

Application of the size of parties and size of transaction thresholds discussed in 2.5 Jurisdictional Thresholds requires consideration of the assets and revenues of the parties and their affiliates, the amalgamated entity or combination and, in some cases, the entities they control.

Entities are affiliated if one is a subsidiary of the other, they are subsidiaries of the same entity, they are both controlled by the same entity or individual, or they are affiliated with the same entity at the same time. The Act defines subsidiaries in terms of control. Please see 2.4 Definition of “Control” for a discussion of the concept of “control”.

Foreign-to-foreign transactions are subject to notification only if the thresholds relating to assets in Canada, or sales in, from or into Canada, are satisfied. If these thresholds are not satisfied, the Commissioner could nonetheless seek a remedy should they determine that the merger has resulted in, or is likely to result in, a substantial lessening or prevention of competition in any relevant market that includes all or part of Canada.       

Market share is not employed to establish notifiability in Canada.

A joint venture may trigger mandatory pre-merger notification depending on how it is structured. For example, a joint venture that involves the acquisition of assets or shares may be subject to pre-merger notification where both the size of parties and the size of transaction thresholds specified in 2.5 Jurisdictional Thresholds are exceeded. Furthermore, a joint venture that involves a sufficiently large combination may trigger mandatory pre-merger notification where the thresholds specified in 2.5 Jurisdictional Thresholds are exceeded.

Note, however, that a combination is exempt from pre-merger notification if: 

• all the persons who propose to form the combination are parties to an agreement in writing that imposes on one or more of them an obligation to contribute assets and governs a continuing relationship between those parties; 
• no change in control over any party to the combination would result from the combination; and 
• the agreement restricts the range of activities that may be carried on pursuant to the combination and contains provisions that would allow for its orderly termination.

Joint ventures that do not trigger mandatory pre-merger notification may nonetheless be subject to the substantive merger review provisions. However, certain joint ventures that are non-corporate combinations (including partnerships and trusts) created pursuant to agreements that provide for the termination of the joint venture at the end of a project are also exempt from remedial orders by the Tribunal under the merger provisions of the Act.

Both notifiable and non-notifiable joint ventures may also be subject to substantive review under Section 90.1 of the Act, which deals with competitor collaborations. Under those provisions, the Commissioner may apply to the Tribunal for an order prohibiting any person from doing anything under an existing or proposed agreement or arrangement between competitors or potential competitors that prevents or lessens, or is likely to prevent or lessen, competition substantially in a market. This is the same substantive test as the one applied to mergers. As in the case of mergers, the Act provides that the Tribunal cannot make an order under the civil competitor collaboration provisions if it finds that the agreement or arrangement has brought about, or is likely to bring about, gains in efficiency that will be greater than, and will offset the effects of, the prevention or lessening of competition that will result or is likely to result from the agreement or arrangement, and that the gains in efficiency would not have been attained if the order had been made or would not likely be attained if the order were made.

In limited circumstances, joint ventures between competitors may be subject to review and challenge under the criminal conspiracy provisions of the Act.

Subject to specified exceptions, all transactions that fall within the definition of “merger” may be reviewed under the substantive merger provisions of the Act. The Commissioner has the power to investigate and challenge any merger captured by the Act, whether subject to pre-merger notification or not, up to one year after the merger has been substantially completed.

Transactions subject to pre-merger notification may not be completed before the expiration or waiver of the applicable waiting period. 

Please refer to 2.2 Failure to Notify.

There are no general exceptions to the statutory waiting periods for transactions that are subject to pre-merger notification. The Commissioner may waive the notification period and will do so if the Bureau concludes that the proposed transaction is not likely to prevent or lessen competition substantially in any relevant market that includes all or part of Canada. (See also the discussion in 3.8 Review Process regarding the administrative schedule followed by the Bureau in reviewing mergers.)

As discussed above, transactions subject to pre-merger notification may not be completed prior to expiry of the applicable waiting period without waiver by the Commissioner. Following expiry of the waiting period, parties may close a transaction subject to any timing agreement with the Commissioner and except where the Commissioner has obtained an order under the Act enjoining closing of the transaction.

Consent agreements to address anti-competitive effects of a merger identified by the Commissioner may include a hold separate requirement, pending completion of the agreed remedy or, in some cases, the determination of the appropriate remedy, and may be employed to permit a global closing even though the remedy in Canada has not been implemented or, in some cases, even determined.

Unless an ARC or NAL is issued, a transaction that is subject to mandatory pre-merger notification may not be completed until the 30-day waiting period has expired, and then only if the Commissioner has not issued an SIR that triggers a new 30-day waiting period commencing upon compliance with the SIR. An SIR is usually issued only where a proposed transaction raises significant competition issues and additional information is required.

Notwithstanding the statutory waiting periods provided in the Act, the Bureau utilises non-binding administrative service standards in relation to the conduct of its merger review. Service standards represent the maximum time within which the Bureau will endeavour to advise parties of the Bureau’s position in respect of a particular transaction, assuming co-operation from the parties. The length of the service standard depends on whether the Bureau has classified the transaction as “non-complex”, in which case the service standard is 14 days, or “complex”, in which case the service standard is 45 days if an SIR has not been issued. The service standard commences on the day on which sufficient information has been received by the Commissioner to assign complexity. If an SIR has been issued, the service standard is 30 days, commencing on the date that the SIR has been complied with. Actual review periods may involve less or more time than the applicable service standard.

The complexity level of a transaction is based on various factors, including, for example, market shares, concentration levels and the existence of barriers to entry.

A binding agreement is not required prior to pre-merger notification being made. Parties may file on the basis of, for example, a letter of intent or memorandum of understanding. That said, there is some risk that if the transaction that is ultimately agreed to varies materially from the transaction in respect of which notification is made, a further notification and filing fee will be required.

The filing fee in respect of an ARC application or pre-merger notification is CAD82,719.12  (2023). If an ARC application and a pre-merger notification are submitted in respect of the same transaction, only the fee for an ARC is payable.

The persons responsible for filing are the parties to a transaction. In the case of a share purchase, the parties are the acquirer and the target. In asset purchase transactions, the parties are the acquirer and the vendor. In the case of an amalgamation, the parties are the amalgamating entities. In the case of a combination, the parties are the persons proposing the combination. In the case of an acquisition of an interest in a combination, the parties are the acquirer and the combination whose interest is to be acquired.

The “acquiring party” in the case of a share purchase, an asset purchase or an acquisition of an interest in a combination consists of one person, or two or more persons acting pursuant to an agreement or arrangement.

Section 16 of the Notifiable Transactions Regulations sets out the requirements of a notification. They include the following:

• a description of the proposed transaction and its business objectives;
• a copy of each legal document to be used to implement the transaction (or the most recent drafts thereof if not yet executed);
• a list of foreign competition authorities that have been notified of the transaction;
• in respect of each party and its affiliates with either significant assets in Canada or significant gross revenues from sales in, from or into Canada, a description of their principal businesses, including principal categories of products, along with:
1. their most recent annual reports or financial statements;
2. the 20 most important suppliers and customers for each principal category of product;
3. the total annual volume or Canadian dollar value of purchases from and sales to all suppliers and customers for each principal category of product;
4. geographic regions of sales; and
5. all studies, surveys, analyses and reports that were prepared or received by an officer or director for the purpose of evaluating or analysing the proposed transaction with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into new products or geographic regions.

Although not prescribed, a competitive impact statement is almost universally filed in notifiable transactions. Often, it takes the form of a request for an ARC or an NAL. The statement is an advocacy document submitted by the parties explaining why, in their view, the transaction is unlikely to result in a substantial prevention or lessening of competition in any relevant market that includes all or part of Canada.

A pre-merger notification filing, as well as materials filed in response to an SIR, must be certified for correctness and completeness on oath or solemn affirmation by an officer of the corporation or a person authorised by the board of directors of the corporation that is making the filing, or, if the filing is by a non-corporate entity, by an individual who serves in a capacity similar to a corporate officer or other individual authorised by the governing body of the entity.

If the parties submit an incomplete notification, the initial 30-day period during which the parties cannot close the proposed transaction will not begin to run.

An officer or other person duly authorised on behalf of the notifying party must certify that, to the best of that individual’s knowledge and belief, all information contained in the notification is correct and complete in all material respects. If the notifying party is determined to have supplied information that is incorrect or incomplete in a material respect, that party could be found to be preventing or attempting to impede or prevent an inquiry or examination under Section 64 of the Act, the penalty for which is a fine at the discretion of the court and/or imprisonment for a term not exceeding ten years (indictable); or a fine not exceeding CAD100,000 and/or imprisonment for a term not exceeding two years (summary). That party could also face criminal prosecution for knowingly swearing a false certificate. In practice, such cases are rare.

Note that an ARC is effective only if the facts are the same or substantially the same as those on which the ARC was issued. 

Parties to a proposed transaction are precluded from completing the transaction until the expiration or waiver of the applicable statutory waiting period under the Act. In particular, a completed notification filing triggers an initial 30-day waiting period during which time the parties to the proposed transaction are precluded from completing the transaction. The Commissioner may, within the initial 30-day waiting period, issue an additional request for information through an SIR. The issuance of an SIR to one or more of the parties triggers a second 30-day waiting period, which commences only when the Commissioner has received from each SIR recipient a certified completed response to the SIR. During the second 30-day waiting period, the parties are precluded from completing the transaction.

Requests for information, whether through an SIR or informally, are common and can be time-consuming to respond to.

As noted above, the Bureau has non-binding service standards, within which it will endeavour to complete its review of a proposed transaction (described in 3.1 Deadlines for Notification).

The Bureau encourages pre-notification discussions with parties. Pre-notification discussions allow parties to provide informal notice to the Bureau that a notification is forthcoming. Parties may also engage with the Bureau on a “names” or “no-names” basis to seek initial guidance about a proposed merger. However, the Bureau will generally not provide any substantive guidance until the parties have submitted an ARC request or filed notifications.

Subject to certain limited exceptions, the Act requires that all non-public information provided to or obtained by the Bureau remains confidential, unless the party that provided the information consents otherwise. The exceptions allow the Bureau to share non-public information with Canadian law enforcement agencies, or for the purposes of administration or enforcement of the Act. The Bureau takes the view that this latter exception permits it to share information with relevant foreign competition authorities, even in the absence of a waiver from the parties. The exceptions also allow the Bureau to share non-public information with the Minister of Transport for the purposes of administration of certain sections of the CTA and the Minister of Finance for the purposes of allowing the Minister to make a decision in respect of a merger or proposed merger subject to the financial institution legislation referred to in 1.2 Legislation Relating to Particular Sectors. In the context of pre-notification discussions with the Bureau, the risk of disclosure of confidential information is low.

The Bureau commonly issues written information requests during its review process. Parties must respond within three business days (for transactions the Bureau has designated non-complex), or within five business days (for transactions the Bureau has designated complex). If the parties do not respond before expiration of the applicable three-day or five-day period, the Bureau may, on the following day, pause the non-binding service standard period (discussed in 3.1 Deadlines for Notification) until receipt of the information requested.

As discussed in 3.1 Deadlines for Notification, the Bureau has non-binding service standards that represent the maximum time within which the Bureau will endeavour to advise parties of the Bureau’s position in respect of a particular transaction. The service standards vary according to the complexity of the merger and assume co-operation from the parties. The Bureau aims to provide a response to notifications and ARC requests within these service standard periods.

In practice, where circumstances permit (for example, a relatively straightforward transaction combined with the absence of substantive competition issues), the Bureau has cleared transactions more swiftly than the service standard period, but early clearance cannot be assumed. Early outreach to the Bureau is advisable in cases where early clearance is necessary.

Under the Act, the Tribunal may, on application of the Commissioner, issue an order in respect of a proposed or completed merger where it is found to have substantially prevented or lessened competition (SPLC) or is likely to do so. The MEGs state that this test is satisfied by a merger only when it is likely to create, maintain or enhance the ability of the merged entity to exercise market power.

As noted in the MEGs, market power can be exercised unilaterally or in co-ordination with other competitors. A unilateral exercise of market power arises when a merger enables the merged entity to raise prices profitably or profitably influence other dimensions of competition without relying on any accommodating response from its competitors. Conversely, a co-ordinated exercise of market power arises where a merger reduces competitive vigour in a market due to accommodating responses from other competitors.

Factors Giving Rise to an SPLC

The Act expressly states that an SPLC cannot be found to exist based merely upon evidence of concentration or market share. In this regard, the Act identifies a non-exhaustive list of factors that the Tribunal (and hence the Bureau) may consider in evaluating whether a merger gives rise to an SPLC. Several of these factors, and others identified in the MEGs, are set out below.

The existence of barriers to entry and the effect of the transaction on such barriers

A key component of the Bureau’s analysis is whether timely entry by potential competitors would likely occur on a sufficient scale and with sufficient scope to constrain a material price increase or other change in the relevant market as a result of the merger. Entry can come from a variety of sources, including expansion by firms already in the market, entry by firms on the fringe of the market that have assets that can be readily converted into producing and selling the relevant products, firms selling the relevant products in adjacent geographic markets, and de novo entry. Other relevant factors include the need to incur sunk costs and regulatory requirements or controls.

Whether there will be effective competition remaining after the merger

The collective influence of all sources of competition in the market is assessed to determine whether they will be able to act as a constraining factor against the exercise of market power by the merged entity acting unilaterally or interdependently with other participants in the market. If the merging parties are key competitors of one another, it may be that effective competition remaining after the merger will be imperilled.

Whether the proposed transaction will eliminate a vigorous and effective competitor

Among other things, the acquired firm will be analysed for any uniquely competitive (namely, “maverick”) attributes, such as whether it is innovative in some way, is known for aggressive pricing strategies, has a history of not following price leadership, is a disruptive force in an otherwise interdependent environment, offers unique service or warranty benefits, or appears to have made impressive gains in market share. Acquisition of a maverick by a leading competitor will, all other things being equal, be regarded as more problematic than an acquisition of a less vigorous and effective competitor.

Whether one of the merging firms can be characterised as a “failing or exiting firm”

Consideration is given to whether one of the merging entities would fail or exit the industry if the merger were not to occur. A firm’s likely failure or exit from a market will influence the determination of whether an SPLC will arise because the loss of the failing firm as a competitor cannot necessarily be attributed to the merger.

The extent to which foreign products or foreign competitors provide, or are likely to provide, effective competition to the business of the merging parties

The presence and viability of foreign competition to counter the increased market power of the merged entity is examined with regard to factors such as the existence of tariffs, regulations and other impediments for foreign businesses in Canada.

The nature and extent of change and innovation in a relevant market

While change and innovation are considered in relation to other evaluative criteria, a separate analysis is also undertaken with respect to the general impact that change (for example, technological change) and innovation may have on competition. This has become an increasingly important factor in the Bureau’s analysis over the past several years.

Countervailing market power of buyers

Buyers may constrain the merged entity’s market power if, among other things, they can immediately switch to other suppliers, they can vertically integrate their operation into the upstream market and there are potential suppliers not already in the market who may be enticed into entry by orders from buyers switching from the merged entity. 

The MEGs also identify possible harm to competition resulting from vertical mergers, namely supplier and customer foreclosure, and increased likelihood of co-ordinated effects.

According to the MEGs, the Bureau does not assume that the merging parties operate in the same relevant market(s), even when there appears to be some overlap between their products and the geographic areas in which they conduct business. Market definition is based on substitutability and focuses on demand responses to changes in relative prices after the merger. The ability of competing suppliers to respond to a price increase is also important when assessing the potential for the exercise of market power, but the Bureau examines such responses later in the analysis, either when identifying the participants in the relevant market or when examining entry into the relevant market.

Conceptually, a relevant market is defined as the smallest group of products, including at least one product of the merging parties, and the smallest geographic area, in which a sole profit-maximising seller (a “hypothetical monopolist”) would impose and sustain a small but significant and non-transitory increase in price above levels that would likely exist in the absence of the merger.

The Bureau has established the following thresholds to identify and distinguish mergers that are unlikely to have anti-competitive consequences from those that require more substantive analysis.

• The Commissioner generally will not challenge a merger on the basis of a concern related to the unilateral exercise of market power when the post-merger market share of the merged firm would be less than 35%.
• The Commissioner generally will not challenge a merger on the basis of a concern related to a co-ordinated exercise of market power when:
1. the post-merger market share accounted for by the four largest firms in the market would be less than 65%; or
2. the post-merger market share of the merged firm would be less than 10%.

With respect to multi-jurisdictional merger reviews, the Bureau often co-operates extensively with foreign agencies, including discussing approaches to market definition. This aside, foreign case law can be persuasive before the Bureau and the Tribunal, particularly where there is no or limited Canadian jurisprudence in relation to the relevant market.

The Bureau will investigate all relevant theories of competitive harm, including those based on unilateral effects and co-ordinated effects in relation to horizontal mergers, vertical foreclosure in relation to vertical mergers and portfolio effects in relation to conglomerate mergers. That said, portfolio effects rarely, if ever, give rise to significant concerns. See 4.1 Substantive Test.

The Act provides that the Tribunal may not make an order in respect of a merger if it finds that the merger 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 that will result, or is likely to result, from the merger, and that the gains in efficiency would not likely be attained if the order were made.

The Bureau requires that parties intending to lead an efficiencies defence enter into a timing agreement which establishes timed stages for parties to engage with the Bureau, including the production of information and evidence regarding their efficiencies claims. A model timing agreement was published by the Bureau and has been used in some instances.

The purpose of the Act is to maintain and encourage competition in Canada in order to achieve a number of goals that are broadly consistent with the promotion of competition. Consistent with this, intervention under the Act with respect to mergers is limited to those mergers that prevent or lessen, or are likely to prevent or lessen, competition substantially in a market. This is the only test that the Commissioner is permitted to apply under the Act and, in practice, is the only test that is applied, save that (i) in the application of the efficiencies defence, socially adverse effects of a merger may be considered and export gains and import substitution are taken into account; and (ii) public interest tests may be invoked and override the test under the Act where a public interest review is triggered under the CTA and where a financial institution merger is found to be in the public interest by the Minister of Finance.

The Act does not contain rules for foreign direct investment in Canada. Rather, as discussed in 1.2 Legislation Relating to Particular Sectors and 9.1 Legislation and Filing Requirements, some transactions (including those involving foreign direct investment) may be subject to notification or review under the ICA and/or sectoral legislation that requires the consideration of other public interest issues, including industrial and cultural policy and national security.

Joint ventures are assessed with reference to the criteria identified above, including whether the proposed joint venture is likely to result in an SPLC in a relevant market. Please refer to 2.10 Joint Ventures.

In the case of a proposed merger, the Tribunal has authority under the Act, on application of the Commissioner, to order the merging parties or any other person not to proceed with all or part of the proposed merger and to prohibit any act or matter that is necessary to ensure that the merger does not result in an SPLC. In the case of a completed merger, the Tribunal may order dissolution of the merger or direct the disposition of designated assets or shares.

In addition, with the consent of the person against whom the order is directed and the Commissioner, the Tribunal may order any party to a proposed or completed merger or other person to take any other action.

The Commissioner has negotiated and obtained a broad range of remedies to address expected competitive harm through consent agreements, including structural remedies (generally asset divestitures) and quasi-structural or behavioural remedies (such as licensing of IP rights and non-discriminatory access to facilities or supply).

The Commissioner can also seek an interim order delaying the completion or implementation of the proposed merger for a certain period to allow the Bureau to complete its review. In addition, if the Commissioner commences an application challenging a proposed merger, the Commissioner can seek an interim order preventing the completion of a proposed merger, in whole or in part, pending the disposition of the application.

Typically, if the Bureau determines that a merger has resulted, or is likely to result, in an SPLC, it will seek to negotiate a consent agreement that addresses the SPLC through remedies. A consent agreement that is registered with the Tribunal has the same force and effect as a Tribunal order.

Where a negotiated resolution cannot be achieved, the Commissioner may file an application with the Tribunal for a remedy in respect of the merger. The Commissioner must establish that the merger has resulted, or is likely to result, in an SPLC. As discussed in 4.5 Economic Efficiencies, it is open to the merging parties to defend the merger on the grounds that it is likely to bring about gains in efficiency that are greater than and will offset any SPLC.

The standard for achieving an acceptable remedy is set out by the Supreme Court in Canada (Director of Investigation and Research) v Southam Inc. In this case, the Supreme Court concluded 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.”

Eliminating an SPLC sometimes means that the remedy must go beyond that which is necessary to restore competition to an otherwise acceptable level. To this end, the Supreme Court, in Southam, emphasised the importance of ensuring that the remedy fully eliminates the SPLC: “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. At the very least, a remedy must be effective. 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.”

There are two broad types of merger remedies: structural remedies and behavioural remedies. Structural remedies directly intervene in the competitive structure of a market, such as dissolution and divestiture. In contrast, behavioural remedies modify or constrain the behaviour of the merging firms. They are normally ongoing and may require monitoring and enforcement.

The Bureau generally prefers structural remedies over behavioural remedies, as structural remedies provide long-lasting or permanent change in the relevant market. That said, it is not uncommon for structural remedies to be complemented with behavioural remedies (eg, interim supply arrangements) and/or quasi-structural remedies (eg, licence agreements). 

Parties can seek to negotiate remedies with the Bureau as soon as they advise the Bureau of a proposed transaction. As a practical matter, however, the Bureau will seek to negotiate remedies with the merging parties as soon as the Commissioner concludes that the merger is likely to result in an SPLC. Negotiated remedies are invariably reflected in a consent agreement registered with the Tribunal, which must indicate either that the parties agree that the proposed merger will likely result in an SPLC or that the Commissioner has concluded that the proposed merger will likely result in an SPLC. Once registered, a consent agreement has the force of a Tribunal order.

If competition concerns cannot be resolved between the Commissioner and the merging parties, the Commissioner will typically commence an application before the Tribunal to challenge the merger under Section 92 of the Act. In such circumstances, the Commissioner may also seek interim relief pending the disposition of the application.

An effective remedy is based on the specific circumstances of the case and theory of competitive harm as determined by the Commissioner or, in contested cases, by the Tribunal. Further, remedies must be enforceable and capable of timely implementation so that the SPLC can be eliminated as quickly as possible. Accordingly, in the case of a divestiture (which is the most common form of remedy), an acceptable buyer of the divested assets is generally provided with the assets necessary to eliminate the SPLC as quickly as possible. In the case of a consent agreement, the divested assets and an acceptable buyer (or a process for determining an acceptable buyer) are provided for in the consent agreement. If the merging parties are unable to divest the required assets within the agreed timeframe, a trustee will be appointed to do so (at the cost of the merging parties).

The Bureau advises the merging parties of the Commissioner’s conclusions regarding a proposed merger. Except where the Tribunal or other court issues a decision in respect of a contested proceeding, no formal decision is issued. However, the Bureau routinely issues “position statements” in respect of noteworthy mergers it reviews. Such position statements summarise the issues the Bureau has identified and explain its rationale for the ultimate disposition of the merger.

The Bureau often requires remedies in relation to foreign-to-foreign transactions, particularly where there are Canadian-specific issues that will not be fully addressed through the remedies provided to competition authorities in other jurisdictions. For example, the Bureau required remedies in connection with Bayer AG’s acquisition of Monsanto Company, Elanco Animal Health’s acquisition of Bayer Animal Health, Evonik Industries AG’s acquisition of PeroxyChem Holding Company LLC and Sika AG’s acquisition of MBCC Group. In contrast, the Bureau relied on undertakings mandated by the United States Federal Trade Commission and European Commission to remedy the Canadian competition concerns arising from United Technologies Corporation’s acquisition of Raytheon.

Where ancillary restraints form part of the merger transaction, they must be disclosed and are taken into account by the Bureau in its assessment of the transaction and may affect any remedy that is ultimately agreed or imposed. Separate notifications of ancillary restraints forming part of the merger transaction are not required.

As discussed in more detail in the Bureau’s Competitor Collaboration Guidelines, where parties enter into any agreements that go beyond the acquisition, amalgamation or combination agreement, whether within or outside such agreement, the Bureau may decide to consider such ancillary agreements under the non-merger provisions of the Act.

Any person may apply to the Bureau, with supporting information, for an opinion on the applicability of any provision of the Act to conduct or a practice that the person seeking the opinion proposes to engage in, including ancillary restraints. If the material facts provided to the Commissioner are accurate, the Commissioner’s written opinion is binding on the Commissioner so long as the material facts on which the opinion was based remain substantially unchanged and the conduct or practice is carried out substantially as proposed.

The Bureau generally solicits comments on a proposed transaction from third parties – including customers, suppliers and/or competitors – and will consider comments or complaints submitted by third parties. Third parties have no access to information that has been filed by the parties or others, or that is otherwise received by the Bureau for the purposes of its analysis, and have no right to participate in meetings or discussions between the Bureau and parties. If the Commissioner files an application with the Tribunal, third parties may seek intervenor status in the proceeding and may participate in the proceeding in accordance with any directions of the Tribunal granting intervenor status. The test for intervenor status requires demonstration of a direct interest in, and unique or distinct perspective on, the proceeding.

The Bureau typically reaches out to third-party “market contacts” for the purposes of assessing the competitive impact of a proposed merger and market testing remedies offered by the parties. The outreach by the Bureau usually takes the form of emails and telephone calls.

The Bureau takes the position that the waiting period does not commence until it is permitted to make such third-party market contacts. 

The Bureau publishes a merger review register on its website, which lists completed merger reviews and is currently updated on a monthly basis. The information included in the merger review register is limited to the names of parties to the transaction, the applicable four-digit code pursuant to the North American Industry Classification System 2017 and the result of the merger review (that is, whether the review resulted in the issuance of an ARC, an NAL, the registration of a consent agreement or a judicial decision).

Information obtained or provided pursuant to a pre-merger notification or ARC application is afforded confidential treatment. This confidentiality protection does not apply to the communication of such information by the Bureau to a Canadian law enforcement agency or for the purposes of the administration or enforcement of the Act. Information that has been made public also loses confidential treatment. Importantly, the Bureau takes the view that it does not require a waiver to supply information it receives to the competition authorities of other jurisdictions.

The Bureau operates under a number of co-operation arrangements with foreign competition authorities to facilitate the exchange of information and the co-ordination of investigations and remedies sought by the authorities in respect of mergers involving multiple jurisdictions. In these cases, the Bureau often requests waivers permitting it to access confidential information filed with foreign authorities. As noted above, the Bureau takes the view that it does not require the consent of merging parties to share information obtained by the Bureau from such parties with foreign authorities.

Decisions of the Tribunal are subject to appeal to the Federal Court of Appeal (the “FCA”) as of right on issues of law and jurisdiction, and with permission of the court on issues of fact. Further appeals can be made to the Supreme Court of Canada with leave.

Appeals arising from decisions of the Tribunal are generally disposed of approximately 8 to 16 months from the date the Tribunal made its decision. 

Pursuant to the Competition Tribunal Act, any person may, with leave of the Tribunal, intervene in any proceedings before the Tribunal, other than proceedings under Part VII.1 of the Competition Act (deceptive marketing practices), to make representations relevant to those proceedings in respect of any matter that affects that person.

In addition, pursuant to the Competition Act, a third party directly affected by a consent agreement may apply to the Tribunal within 60 days after the registration of the agreement to have one or more of its terms rescinded or varied. The Tribunal may grant the application if it finds that the person has established that the terms could not be the subject of an order of the Tribunal.

Canada has a mechanism under the ICA for the notification and, where specified thresholds are exceeded, net benefit review of foreign direct investment. In addition, the ICA includes a mechanism for the review of foreign direct investment that “could be injurious to [Canada’s] national security”. Please refer to 1.2 Legislation Relating to Particular Sectors for additional information regarding the foreign direct investment in Canada.

On 23 June 2022, pursuant to the Budget Implementation Act, a number of amendments to the Competition Act became law, including, of relevance to mergers, amendments that:

• expand the scope of the Competition Bureau’s evidence gathering powers (ie, Section 11 orders);
• expand the list of factors that may be considered when assessing the prevention and lessening of competition for merger review; and
• establish an anti-avoidance provision that deems transactions to be subject to pre-merger notification if they were designed to avoid pre-merger notification.

According to the government, the amendments to the Act implemented by the Budget Implementation Act were meant to address issues “where solutions to shortcomings were readily identifiable”. On 17 November 2022, the Minister of Innovation, Science and Industry initiated a public consultation for further amendments to the Act “to improve the framework more fundamentally”. The public consultation period closed 31 March 2023. On 15 March 2023, in a submission entitled “The Future of Competition Policy in Canada”, the Bureau submitted its recommendations for amendments to the Act. Of specific relevance to mergers, the Bureau’s submission includes recommendations to revise pre-merger notification rules to better capture mergers of interest, to extend the limitation period for merger challenges (eg, from one year to three years following closing), to establish structural presumptions, to ease conditions for interim relief, and to repeal the efficiencies defence, among others.

In 2022, the Commissioner challenged Rogers Communications Inc.’s proposed acquisition of Shaw Communications Inc. In particular, the Commissioner alleged that the proposed transaction would result in an SPLC for the supply of wireless services to consumers and business customers in British Columbia, Alberta and Ontario. The Tribunal dismissed the Commissioner’s application on 31 December 2022, after concluding that a revised transaction, pursuant to which Shaw would divest its Freedom Mobile business to Videotron Ltd. before Rogers acquired Shaw, would not result in an SPLC. The FCA upheld the Tribunal’s decision on 24 January 2023.

The Tribunal also issued decisions in two other contested merger cases over the last year. First, on 31 October 2022, the Tribunal dismissed the Commissioner’s application challenging Parrish & Heimbecker, Limited’s acquisition of a grain elevator near Virden, Manitoba. This case is significant because the Tribunal held that the “value-added” approach to product market definition proposed by the Commissioner “failed on the facts, from a precedential and legal standpoint, and from a conceptual and economic perspective”, and thus refused to apply the approach outlined in the United States Horizontal Merger Guidelines. Second, on 3 March 2023, the Tribunal granted the Commissioner’s application challenging Secure Energy Services Inc.’s acquisition of Tervita Corporation. This case is significant as it is the first time the Commissioner was successful in a case involving a properly argued efficiencies defence. 

In 2021-22, of the 256 merger reviews that were commenced, four were resolved by consent agreements and three were abandoned due to competition concerns.

In 2020–21, of the 193 merger reviews that were commenced, two were resolved by consent agreements and three were abandoned due to competition concerns.

In 2019–20, of the 243 merger reviews that were commenced, two were resolved by consent agreements.

Current concerns continue to include non-notifiable mergers that “fly under the radar” and avoid scrutiny before the expiration of the one-year limitation period (following substantial completion of the transaction).

Notable trends include:

• continued focus on enforcement in sectors of the economy that are vital to Canada’s long-term economic well-being, such as online marketing, telecommunications, financial services, health and infrastructure; 
• targeting anti-competitive conduct that makes everyday life less affordable for Canadians;
• taking steps to enhance litigation readiness for not only fully contested proceedings, but also for seeking court orders, such as injunctions, pending a full hearing or decision from the Tribunal; 
• using the expertise of the Digital Enforcement and Intelligence Branch to strengthen the Bureau’s work at every stage of investigation; and
• continued support for the government of Canada’s review and update of the Act, including with respect to the merger review process.

Another important development in recent years is the use of public interest reviews pursuant to the CTA. As part of these reviews, the Commissioner is required to provide the Minister of Transport (Minister), and the parties to the proposed transaction, with a report on any competition concerns that may arise as a result of the proposed transaction. This report is one of the many factors considered by the Minister in determining whether a proposed transaction is likely to raise issues with respect to the public interest as it relates to national transportation in Canada.

Public interest reviews occurred in 2019 in connection with the proposed merger between Canadian North Inc. and Bradley Air Services Limited, in 2020 in connection with Air Canada’s proposed acquisition of Transat A.T. and in 2022 in connection with WestJet Airlines Ltd.’s proposed acquisition of Sunwing Vacations and Sunwing Airlines. The Bureau concluded that each of these transactions would result in an SPLC. However, the Minister ultimately approved the Canadian North/Bradley Air and Air Canada/Transat transactions subject to certain terms and conditions. The Minister has not yet issued a decision in respect of the WestJet/Sunwing transaction. 

Please refer to 1.2 Legislation Relating to Particular Sectors with respect to transactions related to transportation undertakings.