Managing Risks - Competition & Investment, November 8, 2001


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Canada’s competition and foreign investment laws are now enforced with more vigour than ever -- the Blakes Competition, Antitrust & Foreign Investment Group provides practical guidance on how to get regulatory approval for mergers, strategic alliances and joint ventures in this increasingly challenging enforcement environment.

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Managing Risks - Competition & Investment, November 8, 2001

  1. 1. Seminar Agenda A Practical Guide to Managing Risks and Getting Deals Done under the Competition Act and the Investment Canada Act Tuesday, November 8th, 20117:30 to 8:00 a.m. Breakfast8:00 to 8:10 a.m. Welcome and Overview8:10 to 8:50 a.m. Panel Discussion8:50 to 9:00 a.m. Questions and Answers
  2. 2. Seminar Index A Practical Guide to Managing Risks and Getting Deals Done under the Competition Act and the Investment Canada Act Tuesday, November 8th, 2011 TABPresentation...............................................................................................................1Substantive Materials.................................................................................................2 Top Five Things Every Corporate Counsel Needs to Know About Canadian Competition Law Merger Checklist for Corporate Counsel Blakes BulletinsBlakes Competition, Antitrust & Foreign Investment Group .......................................3 Competition Product Sheet Competition Litigation Product Sheet Accolades Bios
  3. 3. Tab 1
  4. 4. A Practical Guide to Getting Deals Done Under the Competition Act and the Investment Canada Act Competition, Antitrust & Foreign Investment Group November 8, 2011 2 Overview of Presentation• The Hypothetical Merger• Three Stages 1. Before Signing 2. After Signing and Before Closing 3. Post-Closing• Conclusions 3 The Hypothetical Merger 1
  5. 5. 4 The Target Just Soy Inc.• Canadian public company• 70% “market share” of soy products• Activist shareholders want to sell the company quickly for the most $$• Concerned about timing and execution 5 The Buyer Fantasy Dairy• A non-Canadian buyer• Leading processor and distributor of dairy products• Small player in soymilk with 15% market share• Huge synergies in potential merger with Just Soy 6 Stage One: Before Signing 2
  6. 6. 7 What’s Going On at Just Soy (Target/Vendor)?• Document control• Develop realistic strategic plan• Internal due diligence: know thyself 8 What’s Going On at Just Soy (Target/Vendor) (cont’d)• Draft agreement with vendor-friendly regulatory conditions• Marshall internal resources 9 What’s Going On at Just Soy (Target/Vendor)? (cont’d)• Approach depends on likely purchaser - Conduct risk analysis under new MEGs - Consider possible complications under ICA 3
  7. 7. 10 So Now What?• Decide on buyer• Advising the Board• Can we get buyer to take all the regulatory risk? If not all, how much? 11 What’s Going On At Fantasy (Buyer)?• Additional buyer-side issues• Investment Canada issues• Defend the deal. How?• Remedy the deal. How? 12 What’s Going On At Fantasy (Buyer)? (cont’d)• Regulatory conditions in draft agreement• Government/public relations expertise• Economic experts• Marshall internal resources 4
  8. 8. 13 What’s Going On At Fantasy (Buyer)? (cont’d)• Convince vendor deal can close• Buyer’s toolbox – Covenants/joint defence agreement • Reverse break fees • “Hell or high water” clause • Hold separate arrangements - Agree to/publish ICA undertakings in advance 14 Stage Two: After Signing and Before Closing 15 Stage Two: After Signing and Before Closing (cont’d)• Call to regulators• Media releases and key messages• Inform key stakeholders 5
  9. 9. 16 Stage Two: After Signing and Before Closing (cont’d)• Meetings with regulators expected• Parties prepare filings• Parties prepare submissions 17 Stage Two: After Signing and Before Closing (cont’d)• Document requests: formal and informal• Computer searches, hard copy office searches, etc.• Dealing with Bureau/IRD• Pre-closing integration and gun jumping 18 Stage Three: Post-Closing• Approvals/consent agreement/litigation?• Are we done now?• IRD approval – Undertakings? – periodic review and assessment 6
  10. 10. 19 Take-Aways• Competition Bureau’s has more vigorous approach to enforcement – New Merger Enforcement Guidelines• Investment Canada Act enforcement – High profile businesses – State-owned enterprises – National security 20 Questions ? 7
  11. 11. Tab 2
  12. 12. Top 5 Things Every Corporate Counsel Needs to Know About Canadian Competition Law• Today, competition law issues are both • Detect criminal violations at an early 4. Monitoring, Auditing, and Reporting fluid and multifaceted. Moreover, they or even nascent stage—which may Mechanisms: Monitoring, auditing, may often involve high-stakes issues, enable a company to prevent issues, and reporting mechanisms help prevent such as public stigma, criminal penalties, be a first-in immunity applicant, or and detect misconduct, educate staff, or unneeded complications arising in the receive greater leniency under the and assess the effectiveness of the middle of a well-intentioned strategic Bureau’s Immunity Program or Draft compliance program. merger—things your shareholders, and Leniency Program.3 5. Consistent Disciplinary Procedures therefore your CEO, care about. • Avoid litigation—the existence of a and Incentives: The compliance• While there are a myriad of rules to compliance program may persuade the program should explicitly state that keep track of, which vary by industry and Bureau to accept a settlement in lieu of disciplinary action may be taken if an by company, we attempt in this paper more formal and serious proceedings, employee contravenes the Competition to highlight the top five things every or, as noted, may allow you to stop Act. corporate counsel needs to know about proposed conduct before it crosses the • Compliance programs can also assist in Canadian competition law. line. controlling the creation of misleading or • The Bureau’s Corporate Compliance unruly documents. In an investigation,Point One: Competition Programs Bulletin identifies five elements only privileged documents will be “fundamental” to a proper compliance exempt from Bureau review, therefore,Compliance Programs are program 5. They are as follows: it is important as a component of anyEssential compliance policy that you: 1. Senior Management Involvement and• The Canadian Competition Bureau Support: Senior management must play • Establish protocols to carefully identify (the “Bureau”) has set out a detailed an active and visible role in promoting documents prepared by or for, sent to, code with protocols to be followed for compliance. or received from, in-house or external competition law compliance programs. counsel as privileged; and This policy affords credit to a company 2. Corporate Compliance Policies that has a pre-existing compliance and Procedures: The content of • Give employees appropriate guidance program in place when resolving the compliance program should be to avoid misleading language that raises competition issues.1 Even in the United described in a company publication, unwarranted “red flags” suggesting States, where no formal policy advising which should be updated regularly to market power or inappropriate on how to implement a compliance reflect changes in the law. communications between competitors: program exists, corporations still benefit e.g., “dominate, “market power, ” ” 3. Training and Education: The in sentencing if a valid compliance “fix prices, “divide markets, “reduce ” ” compliance program should include program is in place.2 competition, or “revenue synergies” ” ongoing training for staff at all levels. (not based on cost-savings or efficiencies), etc. • Require regular review of an advertising and marketing policy by all managers and employees directly involved in pricing or marketing activities.1 Competition Bureau, Corporate Compliance Programs Bulletin (2008) (“Compliance Bulletin”), at 19, available at See U.S.S.G. s.8C2.5 (compliance program serving as mitigating factor in U.S. Sentencing Guidelines).3 Compliance Bulletin, at 18; Competition Bureau, Immunity Program under the Competition Act Bulletin (2010), at 3 (articulating eligibilityrequirements for immunity, including, inter alia, being the first to report an offense), available at; Competition Bureau, Revised Draft Information Bulletin on Sentencing andLeniency in Cartel Cases (2009) (“Leniency Bulletin”), at 19, available at .html.4 Compliance Bulletin, at 7 20. ,5 Id. at 10-17. 1
  13. 13. Point Two: The Rules Have Previously, price discrimination, resale price b. Private Applications to the Tribunal:Changed maintenance, and predatory pricing were Private parties may apply to the Tribunal subject to criminal penalties. challenging a refusal to deal, resale• In March 2009, far-reaching amendments price maintenance, tied selling, market to the Competition Act were enacted. The 3. Merger Reviews: The Bureau has restriction, and exclusive dealing. amendments strive to (better) harmonize more power to delay closing and seek Remedies, however, are limited to Canadian with U.S. law in some (but documents. The Bureau can now issue a injunctive relief (i.e., no damages). not all) respects. Their implications for second request-like discovery tool called a business range across the board—in “Supplementary Information Request” (or some instances, such as hard-core “SIR”) within 30 days of receiving a pre- Point Three: Enforcement cartel conduct, making it easier for the merger notification filing to delay closing Approach is More Aggressive government to obtain a conviction, of a transaction and request additional information from merging parties.7 SIRs • Under the leadership of Commissioner and in other areas, such as resale price can be expensive to respond to and time- Melanie Aitken9 there has been maintenance, predatory pricing, and consuming, and give the Bureau access more aggressive enforcement of the price discrimination, liberalizing the rules to all relevant non-privileged documents of Competition Act across the board. governing businesses’ day-to-day sales and marketing decision-making. the merging parties. • In particular, the Bureau is increasingly 4. Abuse of Dominance: The amendments focused on high profile Canadian• It is crucial that Canadian corporate give the Competition Tribunal (the companies and has taken action recently counsel update their compliance practices “Tribunal”) authority to impose new in telecom, real estate, financial services, to ensure that their operations are administrative monetary penalties for and airlines. The Bureau is also increasing consistent with new law. Below, we violations of up to C$10-million for a first enforcement of the abuse of dominance highlight major changes in five key areas of offense and laws. At the current time, the following competition law: C$15-million for subsequent offenses. matters are before the Competition 1. Criminal Conspiracy is Now Per Se Tribunal or courts. (Automatically) Illegal: Price-fixing, bid 5. Private Enforcement: • CCS Corporation/Complete rigging, market allocation and other a. Class Actions: Private damages Environmental - challenging a non- “hard-core” cartel agreements between actions can only be brought for criminal notifiable merger after closing on the competitors or potential competitors are violations of the Competition Act basis that it would be likely to prevent now per se illegal, regardless of their (e.g., price-fixing, bid rigging, market competition for hazardous waste effects.6 allocation), as well as violations of disposal.10 2. Other Pricing, Marketing, Sales, and Tribunal orders. A growing number Distribution Practices are no Longer of class actions being certified by Criminal: Business decisions about how Canadian courts suggests they will play to unilaterally set prices, who to sell a larger role going forward.8 to, how to deal with distributors, and other common practices not involving agreements with competitors are now all only reviewable as civil matters, requiring proof of an anticompetitive impact on competition.6 Bid rigging, under section 47 of the Competition Act, has always been, and remains, a per se criminal offense.7 A “second request” is a tool under the U.S. Hart-Scott-Rodino Act of 1976, now adopted in Canada and called a SIR.8 See, e.g., Pro-Sys Consultants Ltd. v Microsoft Corp., [2010] B.C.J. No. 380 (SC) (“Microsoft”); Pro-Sys Consultants Ltd. v. Infineon TechnologiesAG, 2009 BCCA 503 (“DRAM”); Irving Paper Ltd. v. Autofina Chemicals, [2009] O.J. No. 4021 (SCJ) (“Hydrogen Peroxide”).9 The Minister of Industry appointed Melanie Aitken to a five-year term on August 5, 2009.10 Competition Bureau, Competition Bureau Challenges BC Landfill Merger (January 26, 2011), available at: See also proceeding at the Competition Tribunal (The Commissioner of Competition v. CCSCorporation et. al.), available at: 2
  14. 14. • Air Canada/United Continental Holdings • General considerations to keep in mind • Agencies request documents without - challenging a proposed joint venture when grappling with global competition regard to their location. A request by and three pre-existing coordination law issues include: the Bureau for documents under the agreements.11 control of a European subsidiary may • Competition or antitrust law raise conflict of law issues with respect • Visa/MasterCard – challenging the rules governmental agencies talk to each to European privacy or other discovery of Visa and MasterCard.12 other. Waivers of confidentiality laws. Counsel should not assume that are frequently sought. Accordingly, • Rogers/Chatr - challenging certain ads of the liberal discovery laws of the U.S. companies must ensure that Rogers discount cell phone service.13 federal courts can be applied extra- representations are consistent across territorially or are consistent with the • In addition to the matters before the jurisdictions, and be mindful of privilege domestic discovery procedures of other Competition Tribunal, the Bureau has issues, such as those raised by the jurisdictions. reached settlements in a number of Akzo Nobel case, in which the European other high profile matters, including with Commission (affirmed by the European • Agencies enforce different standards. the Canadian Real Estate Association14 Union’s highest court on September 14, The standards for finding a violation of and others. 2010) refused to recognize attorney-client competition law vary across jurisdictions. privilege for communications between The potential for conflicting laws or• Other investigations (both criminal and in-house counsel and the company.16 decisions requires businesses to be civil) that are not in the public domain are cautious in extending a business practice also ongoing. • Agencies assist each other. Bilateral in one country to another without first antitrust co-operation treaties exist reviewing the practice for competition between each of the major jurisdictions law implications.Point Four: Competition Law is (e.g., Canada, the U.S., and the E.U.) and allow agencies to co-operate withIncreasingly Global each other, conduct simultaneous “dawn• Today, virtually every major jurisdiction has raids” share information, and co-ordinate , a competition law regime.15 As the number ongoing non-public investigations. Once of nations reviewing mergers and other unprecedented, extradition for criminal conduct for anticompetitive effects has cartel offences and related charges such increased, so has the cost and complexity as obstruction of justice are becoming of these investigations. increasingly common.1711 Competition Bureau, Competition Bureau Seeks to Block Joint Venture between Air Canada and United Continental (June 27 2011), available at: , See also proceeding at the Competition Tribunal (The Commissioner ofCompetition v. Air Canada et. al.), available at: Competition Bureau, Competition Bureau Challenges Visa and MasterCard’s Anti-competitive Rules (December 15, 2010), available at: See also proceeding at the Competition Tribunal (The Commissioner ofCompetition v. Visa Canada Corporation and MasterCard International Incorporated et. al.), available at: 13 Competition Bureau, Competition Bureau Takes Action Against Rogers Over Misleading Advertising (November 19, 2010), available at: Competition Bureau, Competition Bureau Seeks to Prohibit Anti-competitive Real Estate Rules (February 8, 2010), available at: The parties reached a settlement in October 2010, Competition Bureau, FinalAgreement Paves Way for More Competition in Canada’s Real Estate Market (October 24, 2010), available at: See also proceeding at the Competition Tribunal (The Commissioner of Competition v. The Canadian Real EstateAssociation), available at: In 2001, the ABA estimated that 107 jurisdictions had competition law regimes. ABA Antitrust Law Section, Competition Laws Outside theUnited States (2001), at 12-13. The ABA has more recently observed that “[m]ore than eighty jurisdictions, collectively accounting for over 80percent of world output and over 85 percent of world trade, have merger notification laws, some voluntary and some mandatory. ABA Antitrust ”Law Section, Antitrust Law Developments (6th Ed. 2007), at Ch.13.H.1. 3
  15. 15. Point Five: Protocols are Needed • How to avoid “gun jumping” i.e., , • With respect to private enforcement ofto Prevent and Respond to premature pre-closing activity involving the law by individuals: sharing of competitively sensitiveInvestigations • Private Enforcement and Class information or joint marketing, Actions: Competition class actions• Competition law investigations require production, or other operations that are increasingly multinational, and serious and immediate attention. Having could give rise to “conspiracy” liability, usually (but not always) follow criminal pre-existing protocols in place when or premature completion of a deal in settlements. Thus, businesses must be responding to an investigation is essential. violation of Part IX of the Competition able to: Investigations can be time-consuming, Act. expensive, onerous on management, and • Supervise counsel in multiple • Cartels: If antitrust authorities appear at result in serious civil and criminal liability jurisdictions; your offices with search warrants: and negative publicity. Therefore, corporate • Distinguish between jurisdictions counsel need to ensure that privilege is • Advise them that you intend to co- where both direct and indirect preserved, document creation protocols operate with the search but would like purchasers can be certified as a class are in place, and legal defences can be co- to contact outside legal counsel, who or have standing as plaintiffs (Canada) ordinated in multiple jurisdictions. will want to attend to review the search and jurisdictions where indirect warrant, etc.• Below, we highlight some key questions purchasers have no standing (some to keep in mind when responding to • If regulators are not willing to wait, do parts of the U.S.); and Bureau investigations, private enforcement not obstruct their search in any way; • Be aware that disclosure or actions, and in general when thinking call counsel immediately. settlements in one jurisdiction could about competition law issues as they • No documents that could possibly prejudice privilege/litigation positions in affect your business. be relevant to the regulator’s search another.• With respect to public enforcement of should be removed from the premises the law by the Bureau, corporate counsel or destroyed during and after the should consider: search. Conclusion • Mergers: Parties to mergers or other • Keep an accurate record of all • We have highlighted a sample of acquisitions should consider: documents seized. competition law issues in this paper. We have, however, merely shown the tip of • Whether the parties trigger pre-merger • Direct all questions to your outside the iceberg in an increasingly complex and filing notifications, which result in legal counsel. global area of law. waiting periods, suspending closing as • Claim privilege over any documents • For convenience, the Top 5 Things Every well as potential extensive information that are privileged and ask that these Corporate Counsel Needs to Know about requests; be subject to appropriate protocol. Canadian Competition Law are: • Whether the transaction involves any • Other: Ongoing review and compliance 1. Competition Compliance Programs are substantive antitrust risk and how such efforts in relation to marketing, pricing, Essential; risk should be allocated in share or distribution, advertising, and sales purchase agreements; and 2. The Rules Have Changed; practices require continuous vigilance • Even transactions that fall below to ensure that such practices are not 3. The Enforcement Approach is More the notification thresholds may inhibited by a lack of clear understanding Aggressive; be reviewed and challenged on of the limits of the law and to ensure, substantive grounds after closing; and conversely, that they do not cross the 4. Competition Law is Increasingly Global; line and go too far. and 5. Protocols are Needed to Prevent and Respond to Investigations.16 European Court of Justice, Case C-550/07 P: Akzo Nobel Chemicals and Akcros Chemicals v. Commission (Sept. 14, 2010).17 U.S. Dep’t of Justice, Former CEO of the Morgan Crucible Co. Found Guilty of Conspiracy to Obstruct Justice (July 27 2010), available at , 4
  16. 16. Merger Checklist for Competition Act and Investment Canada ActI. Is there a reporting obligation?Consider filing requirements under the Competition Act and Investment Canada Act (see Appendix). □ Consider whether it is appropriate to voluntarily notify the Competition Bureau. □II. Internal PreparationDocument Production: □ • Document creation guidelines. □ • Collection of “4(c)” documents (strategic plans, reports, etc. used in analysing/evaluating the proposed transaction). □ • “Gun-jumping” guidelines and protocols. □ • Consider a non-disclosure and confidentiality agreement. □ • Consider whether a joint defence agreement between the parties is appropriate. □ • Understand the timing issues regarding regulatory clearance. □III. Will confidential information be exchanged?Consider adopting protocols for the sharing of confidential information. □ Restrict access to confidential information. □Consider establishing clean teams to review confidential information. □IV. Strategic IssuesRetention of specialist advisors, such as economists, government relations and strategic communications. □ Develop communication strategy: consider proactive stakeholder, customer and supplier outreach. □Consider likelihood of complaints being made to the Competition Bureau. □Consider foreign filing requirements. □ Continued on reverseMONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI**Associated Office Blake, Cassels Graydon LLP
  17. 17. Appendix “A”THRESHOLDS (as at November 2011)Competition Act (all applicable thresholds must be exceeded)• Size of Parties: The parties to the transaction, together with their affiliates, must have aggregate assets in Canada, or aggregate gross revenues from sales in, from or into Canada, in excess of C$400-million; AND• Size of Transaction: Target entity, together with its affiliates, must have aggregate assets in Canada, or aggregate gross revenues from sales in or from Canada generated from Canadian assets, in excess of C$73-million (adjusted annually): • In an asset transaction, focus is on value of assets acquired and revenues generated from those assets • In an amalgamation transaction, focus is on at least two parties to the transaction, along with the continuing corporation • Target assets/entity must have nexus to Canada• Size of Equity (where applicable): Threshold can be exceeded upon acquisition of more than 20 per cent or 35 per cent of the voting shares of a public corporation or private corporation/non-corporate entity, respectively (additional trigger at +50 per cent)Investment Canada Act• Direct acquisition of a Canadian business • Global book value of C$312-million or greater (for all other investments) (adjusted annually) • Global book value of assets of C$5-million or greater (where investor is not a WTO investor or Canadian business is a cultural business)• Indirect acquisition of a Canadian business • Book value of assets in Canada of C$50-million or, if more than 50 per cent of the assets are in Canada, C$5-million (where investor is not a WTO investor or Canadian business is a cultural business)• Control • Corporation • Deemed acquisition of control: +50 per cent of voting shares • Deemed no acquisition of control: one-third of voting shares • Rebuttable presumption of control: between one-third and a majority of voting shares • Non-Corporation • Deemed acquisition of control: +50 per cent economic interest • Deemed no acquisition of control: 50 per cent or less economic interestMONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI**Associated Office
  18. 18. Blake, Cassels Graydon LLP January 27, 2011 Bulletin Competition, Antitrust Foreign InvestmentCompetition Bureau Challenges B.C. settlement whereby Saskatchewan Wheat Pool agreedLandfill Merger to divest itself of a port terminal grain handling facility and of certain in-country grain elevators, as well asFIrst MerGer ChALLenGe sInCe 2005 ProvIdes to terminate the joint venture with James RichardsonKey MerGer PLAnnInG Lessons International.Yesterday, the Commissioner of Competition challenged • The application is not only against the mergingthe completed acquisition by CCS Corporation companies. It is also against the shareholders of(CCS) of Complete Environmental Inc. (Complete). the acquired company. This is significant as theThe Competition Bureau received a strong mandate Commissioner is seeking to dissolve the merger, whichfrom Parliament to review mergers closely and is provided for under the Competition Act.comprehensively when the Competition Act mergerprovisions were amended in 2009 (see our March • The transaction was not subject to pre-merger2009 Blakes Bulletin: Significant Amendments to notification. This fact highlights that the CommissionerCanadas Competition Act and Investment Canada Act can challenge even those transactions which are notNow in Force). This case further reflects the Bureau’s subject to advance notice.commitment to carry out this new mandate. • The Commissioner’s application also notes that her staff uncovered internal CCS documents whichBACKGround corroborate the challenge. It notes:In February 2010, Complete had obtained regulatoryapproval to convert the Babkirk landfill, located 130 km “Internal CCS documents reveal that CCSnorth of Fort St. John, B.C., into a “secure landfill”, anticipated that it would lose significant revenue,i.e., a landfill designed, constructed and operated to through lower volumes and tipping fees, oncekeep hazardous waste confined for an indefinite period Babkirk opened as a Secure Landfill. CCS wasof time. CCS currently operates the only other two also concerned that the loss of revenue could beoperational secure landfills in B.C. compounded by a ‘price war’ with Babkirk.”Rather than entering the market, however, the Babkirk • The case is a “prevent” case, meaning that thefacility was sold to CCS pursuant to an agreement dated Commissioner is of the view that the merger willDecember 30, 2010. Thereafter, the Competition Bureau prevent future competition. While a number of pastinvestigated the acquisition. The acquisition closed merger challenges have included such allegations, moston January 7, 2011 and yesterday the Commissioner also included an allegation that the merger was likely tochallenged it. “lessen” competition between existing competitors.The Commissioner’s application alleges that the merger In support of the lawsuit, the application notes:would substantially prevent competition for the disposal • Complete was poised to enter the relevant market;of hazardous waste produced largely at oil and gas • CCS considered Complete’s entry as a significantfacilities in northeastern British Columbia. competitive threat, which could lead to lower prices or a price war; andsIGnIFICAnCe oF the CAseThe case is significant for a number of reasons: • the likely substantial prevention of competition would not be remedied by new competitors entering the• It is the first merger case since 2005, when the relevant market with greenfield entry because of theCommissioner challenged the proposed joint venture substantial burden involved in obtaining environmentalof Saskatchewan Wheat Pool and James Richardson approvals, as well as other barriers to entry.International Limited. That case later resulted in a CONT’D ON PAGE 2©2011 Blake, Cassels Graydon LLP MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* * Associated Office
  19. 19. Bulletin January 27, 2011 Competition, Antitrust Foreign InvestmentCONT’D FROM PAGE 1IMPortAnCe For MerGer PLAnnInGThe Bureau’s decision to challenge the completedmerger underscores a number of considerations thatparties contemplating a transaction should keep in mind,including the following:• Regardless of whether a merger triggers a pre-merger notification requirement under Part IX of theCompetition Act, mergers may be challenged by theBureau for up to one year after their completion. Assuch, substantive due diligence is critical in mergersbetween competitors and between suppliers andcustomers, even in circumstances where formal advancenotice need not be given to the Bureau.• Parties to a merger should be aware of theimportance of documents in the Bureau’s review ofmergers, as a review of the parties’ internal documentscan affect both the length and outcome of the Bureau’sassessment of a transaction.• The Bureau is receptive to receiving the views ofmarket contacts on mergers, whether those parties arecustomers, suppliers, competitors or others. While theBureau is sensitive to strategic complaints, it will followup on complaints and follow the evidence as appropriatein any given case.For further information, please call your usual Blakespartner contact or any member of our Competition,Antitrust Foreign Investment Group. Go to to subscribe to other Blakes Bulletins. MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* * Associated OfficeBlakes periodically provides materials on our services and developments in the law to interested persons. If you do not wish to receive further Blakes Bulletins, pleaseclick here. For additional information on our privacy practices, please contact us at Blakes Bulletin is intended for informational purposesonly and does not constitute legal advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired. Forpermission to reprint articles, please contact Blakes Marketing Department at 416-863-2403 or ©2011 Blake, Cassels Graydon LLP
  20. 20. Bulletin Blake, Cassels Graydon LLP January 29, 2011 February 2011 Competition, Antitrust Foreign Investment Bulletin Competition, Antitrust Foreign InvestmentMerger Notification Threshold Revised Therefore, parties to a proposed asset or shareUpward acquisition will be required to notify the Bureau if the target’s assets in Canada or gross revenues fromIn general, the Competition Bureau (the Bureau) must sales in or from Canada exceed C$73-million. Forbe notified in advance of proposed mergers and combinations of assets, the threshold is met when theacquisitions when the assets or revenues of the target assets in Canada transferred to the combination or thefirm in Canada exceed C$70-million and when the gross revenues from sales in or from Canada of thosecombined assets or revenues of the parties and their assets exceed C$73-million. For amalgamations, therespective affiliates in Canada exceed C$400-million. parties will be required to file a Notification with theIn a series of 2009 amendments to the merger review Bureau if each of at least two of the amalgamatingprocess under the Competition Act (the Act), Parliament corporations has assets in Canada or gross revenuesnot only increased the transaction-size threshold from from sales in or from Canada that exceed the threshold.C$50-million to C$70-million, but it also provided for an Should you have any questions about the changesindexing formula to adjust the threshold to reflect annual to the party-size threshold or whether a proposedchanges to Canada’s gross domestic product (GDP). The transaction might require a notification filing with theC$400-million party-size threshold will not change until Competition Bureau, please contact any member of ourthe Act is otherwise amended. Competition, Antitrust Foreign Investment Group.Parliament now authorizes the Minister of Industry (theMinister) to revise the transaction-size threshold everyJanuary and post the revised threshold amount in theCanada Gazette (available online), unless an amountis otherwise prescribed by regulation. The Ministerannounced the increase on February 1, 2011 and isexpected to post the revised amount in the Gazette onFebruary 12, 2011.In January 2010, however, the Minister exercised hisdiscretion not to revise the transaction-size thresholddue to the decline in Canada’s year-over-year GDP from2008 to 2009, which would have resulted in a reductionin the threshold. The revisions to the threshold are notretroactive and come into effect when the decision isposted in the Gazette.The February 1, 2011 announcement by the Ministerreflects an increase to the transaction-size threshold toC$73-million to correspond to the increase in GDP lastyear. Go to to subscribe to other Blakes Bulletins. MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* * Associated OfficeBlakes periodically provides materials on our services and developments in the law to interested persons. If you do not wish to receive further Blakes Bulletins, pleaseclick here. For additional information on our privacy practices, please contact us at Blakes Bulletin is intended for informational purposesonly and does not constitute legal advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired. Forpermission to reprint articles, please contact Blakes Marketing Department at 416-863-2403 or ©2011 Blake, Cassels Graydon LLP
  21. 21. Blake, Cassels Graydon LLP May 2011 Bulletin Competition, Antitrust Foreign InvestmentFederal Court of Appeal Affirms including divestiture, an order requiring compliance withSanctions Under Investment Canada Act undertakings and a penalty not exceeding C$10,000 per day for each breach of an undertaking.On May 25, 2011, the Federal Court of Appeal releaseda decision in United States Steel Corporation and U.S. 2. the US SteeL CASe And deCISIOnSSteel Canada Inc. v. The Attorney General of Canada In August 2007, United States Steel Corporation(US Steel Case) affirming the Federal Court (Trial (U.S. Steel) announced that it had reached a definitiveDivision) decision and upholding the constitutionality of agreement with Stelco Inc. (Stelco), a Canadianremedies, including monetary penalties, available under steel manufacturer, under which U.S. Steel wouldsections 39 and 40 of the Investment Canada Act (the acquire all of Stelcos shares. As the transaction wasICA). The decision further confirms the enforceability subject to review under the ICA, U.S. Steel proposedof the undertakings that investors typically enter into 31 undertakings to the Minister, including two related towith the responsible Minister under the ICA when the employment and production. On October 28, 2007, theinvestment is subject to review. Minister approved the acquisition, in part on the basis of the undertakings provided. The Attorney General1. OvervIew OF reLevAnt PrOvISIOnS OF ICA filed an application under section 40 of the ICA with theAs indicated in our June 2010 Blakes Bulletin, under court, seeking an order directing U.S. Steel to complythe ICA, and subject to certain limited exceptions, the with the two undertakings in question, and a penaltydirect acquisition of control of a Canadian business by a of C$10,000 per day, per breach of the undertakings,non-Canadian that meets a prescribed financial threshold calculated from November 1, 2008. U.S. Steel sub-cannot be implemented until the non-Canadian has filed sequently filed a motion challenging the validity ofits application for review and the responsible Minister sections 39 and 40 of the ICA.under the ICA has, or is deemed to have, declared that In its motion, U.S. Steel argued that sections 39 and 40he is satisfied that the investment is likely to be of net infringed section 11(d) of the Canadian Charter of Rightsbenefit to Canada. In making this determination, the and Freedoms (Charter), which provides that any personICA provides that the Minister may take into account charged with an offence must be presumed innocentany undertakings offered by the investor. Any such until proven guilty in accordance with that paragraphundertaking represents a binding commitment. Because of the Charter, and section 2(e) of the Canadian Bill ofcircumstances can, and sometimes do, change, the Rights (Bill of Rights), which provides that every personMinisters Administrative Guidelines state that: shall be provided a right to a fair hearing in accordance ... plans and undertakings are based to some with the principles of fundamental justice. Among other extent on projected circumstances and the things, U.S. Steel argued that: monitoring of an investors performance will • sections 39 and 40 of the ICA create a “punitive recognize this factor. Where inability to fulfill regime” which engages the Charter because application a commitment is clearly the result of factors of these sections involves the imposition of true beyond the control of the investor, the investor penal consequences and is, by its nature, a criminal will not be held accountable. proceeding;Following amendments to the ICA in March 2009, the • the Ministers application under section 40 causesMinister and investor can agree to a new undertaking, U.S. Steel to be a person charged with an offencepresumably one that takes into account any changed as required in order for section 11(d) of the Chartercircumstances. Regardless, the Minister can bring an to apply, because: i) the purpose of the legislation isapplication to a superior court for a range of remedies, public and not private; ii) the magnitude of the monetary CONT’D ON PAGE 2©2011 Blake, Cassels Graydon LLP MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* * Associated Office
  22. 22. Bulletin May 2011 Competition, Antitrust Foreign InvestmentCONT’D FROM PAGE 1penalty is significant; iii) the failure to pay the monetary As indicated in the June 2010 bulletin, the decisionpenalty leads to contempt proceedings and exposure suggests that parties engaged in merger discussionsto a term of imprisonment; iv) the penalty goes to the with a foreign buyer will need to seriously considerConsolidated Revenue Fund and not to an internal body and value possible undertakings into their dealto maintain or regulate an internal or private sphere of arrangements, including negotiated appropriateactivity; and v) the penalties are imposed by a court and conditions of closing and relevant covenants, muchnot a regulator; and in the way that antitrust covenants have come to be negotiated over the past decade in Canada.• the procedure under section 40 does not accordinvestors the right to a fair hearing in accordance with The decision opens the possibility that section 40principles of fundamental justice. proceedings under the ICA may attract Charter protec- tion when national security is used by the Minister toAs reported in the June 2010 bulletin, U.S. Steel’s assess a non-Canadian application. Although nationalmotion was (first) dismissed by Madame Justice Hansen security was not at issue in this case, Justice Nadon’sat the Federal Court. On May 25, 2011, U.S. Steel’s judgment suggests that a section 40 proceeding withappeal was dismissed by Justice Nadon in a unanimous a purpose that relates to national security (i.e., beyondjudgment at the Federal Court of Appeal affirming mere compliance with the ICA) could be characterizedJustice Hansen’s ruling. Justice Nadon ruled that as criminal or penal and subsequently attract Chartersections 39 and 40 neither breach the Charter nor the protection. To date, this has not been considered by anyBill of Rights therefore upholding the sections. Justice court in Canada and therefore, non-Canadian investorsNadon agreed with Justice Hansen’s judgment that should nonetheless carefully consider undertakings madethe purpose of the sanction is “to maintain compliance under the ICA.with the Act and with undertakings made under it”.Section 40 proceedings brought by the Minister were As indicated in the June 2010 bulletin, the decision – asfound to “lack the indicia of penal proceedings” with the an appellate decision – will be relied upon in support ofresult that they are “not criminal by their very nature” the constitutional validity of other statutes that provideand “do not lead to true penal consequences.” Thus, for administrative monetary penalties (AMPs), such assection 40 proceedings under the ICA were found to the Competition Act. Indeed, the Competition Act’sbe consistent with section 11(d) of the Charter. Justice AMP provisions seem – in their specificity of directionNadon further ruled in agreement with Justice Hansen to the Tribunal or Courts – to be equally if not morethat section 40 proceedings under the ICA do not likely to be upheld as constitutionally valid following theinfringe the right to a fair hearing in accordance with reasoning of the Federal Court of Appeal in this case.the principles of fundamental justice and are therefore For further information, please call any member of ourconsistent with the Bill of Rights. Competition, Antitrust Foreign Investment Group.3. ImPLICAtIOnSThe Federal Court of Appeal’s decision affirms theMinister of Industry’s power to seek fines against,or seek other remedies from, non-Canadian investorsunder section 40 of the ICA, including the constitutionalvalidity of these orders. This said, we do not expect thatthe decision will result in the Minister routinely bringingenforcement actions under the ICA. This case is thefirst such action, notwithstanding that the Minister hasaccepted hundreds of undertakings since the ICA cameinto force in 1985. Federal Court of Appeal Affirms Sanctions Under Investment Canada Act PAGE 2©2011 Blake, Cassels Graydon LLP
  23. 23. Bulletin May 2011 Competition, Antitrust Foreign InvestmentCompetition Bureau Sues toronto real MLS information is commonplace. According to theestate Board for restricting Innovation application, brokers that use such innovations enjoy cost savings that enable them to compete more effectivelyin real estate Brokerage Services against traditional brokers, in addition to providingOn May 27, 2011, the Competition Bureau announced consumers greater convenience and choice of services.that it had filed an application with the Competition The Bureau’s application seeks an order from theTribunal in response to certain practices by the Toronto Tribunal that would, among other things:Real Estate Board (TREB) that the Bureau alleges areanticompetitive. In particular, the Bureau has alleged • prohibit TREB from directly or indirectly enacting,that TREB has restricted the ability of real estate agents interpreting or enforcing any rules that exclude, preventto introduce innovative real estate brokerage services or discriminate against TREB member brokers who wishthrough the Internet, thereby harming consumers. to use the information in the Toronto MLS system to offer services over the Internet, such as through VOWs;The application was brought under the Competition Act’sabuse of dominance provisions, which provide for non- • direct TREB to implement such resources and facilitiescriminal sanctions where a dominant firm has engaged as the Tribunal deems necessary to ensure the operationin a practice of anticompetitive acts that are likely to of VOWs or similar services by, or on behalf of, memberprevent or lessen competition substantially. The Bureau brokers; andalleges that TREB, which is the largest real estate board • grant such further and other relief as the Tribunal mayin Canada and owns and operates the Toronto Multiple consider appropriate.Listing Service system (the Toronto MLS system), Filing an application against TREB in this matter iscurrently restricts and prevents brokers from sharing consistent with the priority the Bureau has placed ondetailed MLS system data with customers in new ways, pursuing abuse of dominance cases. Although thissuch as through secure, password-protected “virtual application is separate and apart from the consentoffice websites” (VOWs). The Toronto MLS system has agreement that was entered into last fall by theinformation about specific properties that is not available Canadian Real Estate Association (CREA) and theon other websites, such as, including Commissioner of Competition, which resolved thedata about previous listing and sale prices, historical Commissioner’s concerns that the MLS rules imposed byprices for comparable properties, and the amount of time CREA constituted an abuse of CREA’s dominant positiona property has been on the market, all of which may in the provision of residential real estate services, itinform consumers home purchase and sale decisions. demonstrates the Bureau’s continued interest in abuseAccording to the Bureau, VOWs would permit of dominance cases, particularly in connection withcustomers to conduct their own searches for, and real estate brokerage services. For additional detailsreview information relevant to, the purchase and sale of regarding the Commissioner’s proceedings againsthomes in the GTA, without the personal assistance or CREA, please see our October 2010 Blakes Bulletins:direct intervention of a broker. Currently, brokers and Competition Bureau Update on MEGs Consultation,their staff are limited to obtaining such information from Leniency Bulletin and CREA Settlement and Competitionthe Toronto MLS system themselves and providing it to Bureau Releases Updated Service Standards fortheir customers by hand, email or fax. Mergers; Announces Definitive Agreement with CREA.The Bureau’s application notes that real estate boards Should you have any questions about the above, orand associations in other Canadian jurisdictions, such as regarding any other areas of competition law, pleaseNova Scotia, allow their members access to and use of contact a member of our Competition, Antitrust their MLS information to provide Internet-based services Foreign Investment Group.and, in the United States, such access to and use of Go to to subscribe to other Blakes Bulletins. MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* * Associated OfficeBlakes periodically provides materials on our services and developments in the law to interested persons. If you do not wish to receive further Blakes Bulletins, pleaseclick here. For additional information on our privacy practices, please contact us at Blakes Bulletin is intended for informational purposesonly and does not constitute legal advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired. Forpermission to reprint articles, please contact Blakes Marketing Department at 416-863-2403 or ©2011 Blake, Cassels Graydon LLP
  24. 24. Blake, Cassels Graydon LLP August 2011 Bulletin Competition, Antitrust Foreign InvestmentRecently Issued Merger Guidelines Guideline 1 indicates that the Bureau has considered the “sensitivities” involved with sharing information withThe Competition Bureau has recently published three both parties to a hostile acquisition. Accordingly, wherenew guidelines related to merger review. the Bureau has shared information with one party, itThe first two guidelines, published July 21, 2011, will “strive” to share that information with the otherexplain the Bureau’s policy on the disclosure of party “equitably.” However, the Bureau recognizes thatconfidential information to parties to hostile acquisitions the policy may be difficult to apply in a straightforwardand the running of waiting periods in such cases. manner due to the complexities that can arise in hostileComplying with merger control obligations in hostile acquisitions. Accordingly, the Bureau indicates it will beacquisitions gives rise to procedural considerations mindful of these complexities on a case-by-case basis.that do not arise in friendly transactions that were not Guideline 1 thus emphasizes the Bureau’s discretion inaddressed in previous guidance published by the Bureau. regard to disclosure of information related to its review, particularly in hostile transactions.The third guideline, published June 20, 2011, describesin further detail the information the Bureau requires Running of Waiting Periodsbefore it will consider merger notifications to be Hostile Transactions Interpretation Guideline Number 2complete. (Guideline 2) concerns the Bureau’s approach to the commencement of waiting periods under theHostILe tRAnsACtIons Act. Guideline 2 is new and was published withoutDisclosure of Information solicitation of public comment.Hostile Transactions Interpretation Guideline Number 1 In friendly transactions, acquisitions notified to the(Guideline 1) concerns the Bureau’s policy on the Bureau under the Act may not close for 30 daysdisclosure of information. These guidelines are a more following submission of a complete notification formformal reissuance of a policy statement that the Bureau by each party (the initial period). The initial periodoriginally published on its website on June 2, 2010. starts when the last complete notification has beenIn a friendly transaction, the Bureau will normally submitted. If the Bureau issues an SIR, the merger maydiscuss with the parties the status of its review, not close until 30 days following the parties’ certifiedincluding the complexity and timing of its review, completeness of a response to such SIR (the secondthe fact and timing of the other party’s response to period). The second period does not start until the lastany supplementary information request (SIR), and party has certified the completeness of its response;the Bureau’s views about the proposed transaction’s this differs from the practice in the United States where,potential competitive effects. In a hostile transaction, in tender transactions, the acquirer’s submission of asuch information could be employed by the hostile complete response triggers the second period, whethertarget for purposes unrelated to compliance with the the transaction is friendly or hostile. (The initial periodCompetition Act (the Act). For instance, the target may and/or second period may be terminated by the Bureau’suse the information to advocate that its shareholders issuance of an Advance Ruling Certificate or “no-action”reject the acquirer’s offer, or attempt to persuade other letter.)market participants to approach the Bureau with views In hostile acquisitions the target cannot be expectedabout the transaction that might buttress the Bureau’s to voluntarily notify its own acquisition to thepreliminary concerns. Separately, the disclosure of Bureau. Accordingly, the Act requires that the Bureauinformation by the hostile target may give a competing “immediately” notify the hostile target of the fact of thebidder an advantage it would not otherwise enjoy. CONT’D ON PAGE 2©2011 Blake, Cassels Graydon LLP MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* * Associated Office
  25. 25. Bulletin August 2011 Competition, Antitrust Foreign InvestmentCONT’D FROM PAGE 1acquirer’s notification, after which the hostile target is Parties to transactions must submit a completerequired to submit its own notification within 10 days. form when notifying mergers to the Bureau, whichThe Act indicates that the initial period commences as triggers the initial period. The Notification Guidelinesoon as the acquirer submits its notification, not when provides insight into when the Bureau will consider thethe hostile target submits its own notification. The Act notification to be complete. Although largely technical,also provides that the second period commences when two aspects of the Notification Guideline are of note.the acquirer certifies completeness with an SIR if issued, First, the Notification Guideline gives additional clarityregardless of the timing of the hostile target’s response into the question of who is a “director” or “officer” ofif it also received an SIR. This is consistent with the an unincorporated entity for the purposes of providingU.S. approach. However, the Act does not expressly documents about the transaction under question 6(1)address how transactions that turn friendly after the of the notification form (the equivalent of “4(c)”expiry of the initial period but before the commencement documents on the U.S. Hart-Scott-Rodino form).of the second period will be treated. The Bureau has indicated that, in such instances, documents must be provided from a “person whoseGuideline 2 explains that the Bureau’s policies are as position is designated in a similar manner.” Second, thefollows: Notification Guideline explains what information can be• In a hostile transaction, the initial period will withheld from the notification because it is confidentialcommence on the date the acquirer submits its “by law.” The Bureau takes the position that informationnotification. The commencement of the initial period will rendered confidential by private agreement is notnot be affected if the transaction turns friendly during considered confidential by law, and to the extent thethe running of the initial period. parties are not willing to submit such information, they• Where a notified transaction turns friendly after must submit an acceptable explanation as to why thethe Bureau has issued an SIR but before the acquirer Bureau’s normal confidentiality protections would notcertifies the completeness of its response – in other be sufficient to maintain the required confidentiality.words, after the expiry of the initial period but before Absent such an explanation, the notification will notthe commencement of the second period – the Bureau be considered complete and the initial period will notwill not consider the second period to have commenced commence.until both the acquirer and the (formerly hostile) target For further information, please call your usual Blakeshave certified completeness of their SIR responses. partner contact or any member of our Competition,• Where a notified transaction ceases to be hostile after Antitrust Foreign Investment Group.the acquirer has certified its response to the SIR andthe second period has commenced, the running of thesecond period will be unaffected.GuIDeLIne on notIFICAtIonsPre-Merger Notification Interpretation GuidelineNumber 13: Satisfying the Information Requirementsset out in Section 16 of the Notifiable TransactionsRegulations and Completeness of Notification(Notification Guideline) concerns the Bureau’s policyon the completeness of notifications. This guideline isnew and was published without solicitation of publiccomment. Go to to subscribe to other Blakes Bulletins. MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* * Associated OfficeBlakes periodically provides materials on our services and developments in the law to interested persons. If you do not wish to receive further Blakes Bulletins, pleaseclick here. For additional information on our privacy practices, please contact us at Blakes Bulletin is intended for informational purposesonly and does not constitute legal advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired. Forpermission to reprint articles, please contact Blakes Marketing Department at 416-863-2403 or ©2011 Blake, Cassels Graydon LLP
  26. 26. Blake, Cassels Graydon LLP October 2011 Bulletin Competition, Antitrust Foreign InvestmentCompetition Bureau Issues Revised IntERLoCkInG DIRECtoRAtEs AnD MInoRItyMerger Enforcement Guidelines IntEREsts In line with the expanded discussion of what constitutesOn October 6, 2011, the Canadian Competition a “merger” under the Act, the MEGs now containBureau (the Bureau) released the final version of its an expanded discussion of the factors the Bureaurevised Merger Enforcement Guidelines (MEGs). The considers when assessing the competitive effects of aprevious guidelines were issued in 2004. The release merger involving interlocking directorates and minorityof the MEGs follows two rounds of consultations, first shareholdings. Factors considered in this analysison whether the Bureau’s previous MEGs should be include the extent to which the acquirer or interlockedamended in light of revisions to the U.S. Horizontal directorate may induce the firms to compete lessMerger Guidelines (U.S. Guidelines), and second on aggressively with one another, and whether access toproposed draft revisions issued June 27, 2011. Blakes confidential information may facilitate co-ordinationparticipated extensively in the consultation process, between the two firms.including submitting comments directly and contributingto comments submitted by the Canadian Bar Association MARkEt DEFInItIonand by the American Bar Association. Reflecting changes in the U.S. Guidelines, the MEGs have been updated to clarify the role of market definitionWhile the MEGs do not represent a fundamental within the Bureau’s analytical framework for mergerdeparture from the traditional Canadian approach to review. In particular, the MEGs now explain that marketmerger review, they do make a number of key changes, definition and the analysis of competitive effects areincluding with respect to: part of an iterative process, whereby evidence in respect• clarifying the Bureau’s view on what constitutes a of market definition and market shares is considered in“merger” assessing anticompetitive effects, while the results of• interlocking directorates and minority interests effects-based analyses are used to hone the Bureau’s definition of the relevant market. Moreover, the MEGs• market definition explain that the Bureau may not reach a firm conclusion• anticompetitive effects analysis on the precise metes and bounds of the relevant market where such a conclusion is not necessary for• non-horizontal mergers the Bureau to conclude its analysis. Nevertheless, the• efficiencies. MEGs make clear that market definition is still “generally undertaken” and “generally sets the context for theWhAt ConstItutEs A “MERGER” Bureaus assessment of the likely competitive effects ofThe MEGs include an expanded discussion of how the a merger.”Bureau interprets the definition of a “merger” under theCompetition Act (the Act). The Act defines a merger AntICoMPEtItIvE EFFECts AnALysIsto include the acquisition of a significant interest in The revised treatment of market definition in the MEGsthe whole or a part of a business. The MEGs take an is accompanied by changes to the discussion regardingexpansive view of what may constitute a significant the anticompetitive effects analysis. The MEGs haveinterest as including transactions and appointments that become more complex and sophisticated in thisresult in the ability to materially influence the economic regard, explicitly contemplating different assessmentsbehaviour of a business – even where no voting or depending on the nature of the products in theeconomic interest is being acquired. CONT’D ON PAGE 2©2011 Blake, Cassels Graydon LLP MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* * Associated Office
  27. 27. Bulletin October 2011 Competition, Antitrust Foreign InvestmentCONT’D FROM PAGE 1relevant market. For example, the MEGs have adopted circumstances. In particular, the old MEGs explainedan approach to assessing differentiated product markets “there are different ways in which the wealth transferthat is very similar to the approach adopted in the could be taken into account when evaluating a merger.U.S. (though they do not specifically reference the One approach to the wealth transfer is the ‘sociallyupward pricing pressure test adopted in the revised adverse effects approach’, which attempts to quantifyU.S. Guidelines). Similarly, the MEGs provide additional the portion of the transfer that is considered sociallyguidance on the evaluation of mergers in bidding and adverse.” Now the MEGs simply state “providingbargaining markets, recognizing that where there are buyers with competitive prices and product choices ismany firms that are similarly situated to the merging an objective of the Act.” This indicates that the Bureauparties in terms of meeting a buyer’s requirements a may intend to resile from its previous interpretationmerger is unlikely to prevent or lessen competition (notwithstanding that the previous interpretation wassubstantially. based on several Court of Appeal decisions in Superior Propane) and wishes to leave its options open in takingnon-hoRIzontAL MERGERs a restrictive approach to the efficiencies defence inIn respect of non-horizontal mergers (which include future cases.“vertical” mergers into upstream or downstream markets Separately, the MEGs indicate that the Bureau only willas well as “conglomerate” mergers into different but consider efficiencies where the merging parties providepotentially related markets), the MEGs explain that the evidence of those efficiencies in a timely manner – inBureau’s focus will be on assessing whether the merger other words, where the Bureau believes a substantialis likely to lead to foreclosure of inputs or customers, or prevention or lessening of competition is likely, unlesscould allow the merging firms to foreclose competitors the parties provide efficiencies evidence on a timelineby tying the sale of two products that are not both the Bureau deems acceptable, the Bureau will apply forproduced by the merged entity’s competitors. an order from the Tribunal without assessing whether the Competition Tribunal is statutorily empowered toEFFICIEnCIEs issue that particular order.The Act contains an explicit “efficiencies defence”,which prohibits the Competition Tribunal from issuing ConCLusIonan order under the merger provisions of the Act where The MEGs are an important reference for thethe gains in efficiency likely to be brought about by competition bar and the business community whenthe merger are greater than, and would offset, the considering the application of the merger reviewlikely anticompetitive effects and those efficiencies provisions of the Act to a proposed merger and whenlikely would not be achieved if the order were made. determining what information should be provided toThis efficiencies defence has been the subject of the Bureau to assist in its review of a proposed merger.considerable debate in Canada and was litigated While the MEGs do not represent a fundamentalextensively in the Superior Propane case. departure from the traditional Canadian approach toThe MEGs represent a departure by the Bureau merger review, they do provide useful guidance on thefrom its previous interpretations of the statutory Bureau’s current enforcement approach, which hasefficiencies defence. The old MEGs and the 2009 evolved since the previous MEGs were issued in 2004.Efficiencies Bulletin acknowledged that a wealth For further information, please call any member of ourtransfer resulting from an anticompetitive price increase Competition, Antitrust Foreign Investment Group.may be considered an anti-competitive effect in some Go to to subscribe to other Blakes Bulletins. MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* * Associated OfficeBlakes periodically provides materials on our services and developments in the law to interested persons. If you do not wish to receive further Blakes Bulletins, pleaseclick here. For additional information on our privacy practices, please contact us at Blakes Bulletin is intended for informational purposesonly and does not constitute legal advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired. Forpermission to reprint articles, please contact Blakes Marketing Department at 416-863-2403 or ©2011 Blake, Cassels Graydon LLP
  28. 28. Tab 3