In a recent news release, the Competition Bureau (“Bureau”) made official its intention to increase the resources it devotes to the identification and review of non-notifiable merger transactions. The announcement focuses on the expansion of the designation of the Mergers Notification Unit at the Bureau. The recast Merger Intelligence and Notification Unit (“MINU”) has an expanded mandate to focus on active intelligence gathering in respect of transactions which do not surpass the applicable financial thresholds pursuant to Part IX of the Competition Act. By combing through the media and trade press, as well as being open to contacts from third parties, the Bureau aims to detect – and ultimately investigate – any transactions that could give rise to anti-competitive effects, but which would not be otherwise reported through standard notification procedures.
This development is consistent with Commissioner Matthew Boswell’s speech to the Canadian Bar Association in May 2019, during which he mentioned the Bureau’s efforts to detect those non-notifiable merger transactions that could raise competition concerns. Indeed, the McCarthy Competition/Antitrust & Foreign Investment Group has witnessed a significant uptick in the incidence of reviews initiated by the Bureau into non-notifiable transactions. In these instances, the Bureau typically seeks to first determine whether the transaction is notifiable under the Competition Act, and second, if not notifiable, to undertake a preliminary competition assessment of the transaction. In some cases, these preliminary inquiries turn into fully-fledged merger reviews, with a similar level of complexity to the review of a notifiable transaction. Despite continuing to focus its enforcement efforts on the digital economy, the Bureau has thus far been agnostic as to the industries that are the subject of inquiries. Transactions involving traditional manufacturing and services companies have received inquiries in addition to those in the digital sector.
It is important to note that this new activist approach has always been within the Bureau’s purview; but until recently much more rarely acted upon. Mergers in Canada, regardless of size or sector, may be subject to review by the Bureau under section 92 of the Competition Act. Any such transaction is reviewable for up to one year following its closing in order to determine if the transaction is likely to lessen or prevent competition substantially. Should the Bureau reach that conclusion at the end of its review, the Commissioner may apply to the Competition Tribunal to challenge the transaction and/or begin negotiations with the merging parties to conclude a suitable remedy package.
While broadly confirmatory of recent developments in this area, the news release is nonetheless significant. It is a formal warning to companies of the Bureau’s more expansive approach to non-notifiable transactions; and in particular that its reviews will not discriminate based on the size of the transaction or the size of the parties involved.
There are several points of importance in relation to the Bureau’s recent news release:
- First, the Bureau is using this announcement as a warning of the increased resource that has been devoted to mergers intelligence gathering, both in the press and crucially by welcoming information from third parties regarding non-notifiable transactions that raise potential issues.
- Second, there has been a clear increase in the initiation of inquiries into these transactions in recent months, with the Bureau reaching out proactively to confirm whether a transaction is notifiable and, where not notifiable, in a number of cases the Bureau has asked for information to make a preliminary assessment. While it has been reported that the Bureau is focusing on making inquiries into smaller transactions in the digital sector, it is important to note that the uptick in Bureau activity has covered a broad range of industries, including traditional manufacturing and services companies as well as those participating in the digital sector.
- Third, in a small number of those cases, the inquiries have led to significant investigations, including, in at least one transaction (the proposed acquisition by PSAV of Encore Event Technologies), the Commissioner of Competition applying to the court under section 11 of the Competition Act to require the merging parties to make substantial production to the Bureau.
Viewed as a whole, these developments represent a significant shift in the Bureau’s behaviour and emphasize the importance of firms contemplating transactions involving potentially substantive overlaps to be prepared for the possibility of Bureau intervention, even where their deal falls below the applicable thresholds.
By Michael Caldecott and Erin Keogh