Merger Review Benchmarking Report — Chapter 1

Table of Content

On November 3, 1997, the Competition Bureau introduced fees under the Competition Act for the following services and regulatory processes:

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• pre-merger notification filings.
• advance ruling certificate requests.
• advisory opinion requests.
• photocopies.

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Prior to implementing the fees, the Bureau had experienced mounting pressure to commit greater resources to merger review. In its report to then Director of Investigation and Research (now the Commissioner of Competition), the Consultative Panel on Amendments to the Act noted that "the Competition Bureau cannot address all meritorious cases.... Cost recovery measures should be explored as an alternative means of addressing resource constraints, particularly if it could be assured that the Bureau would directly benefit from the imposition of any such fees."²

Treasury Board and stakeholders both recognized that an influx of resources would enable the Bureau to effectively deal with cases and adopt a systematic approach to reviewing and improving internal processes.

When the Bureau consulted stakeholders about introducing fees in 1997, it was essentially in a financial crisis and had been forced over the previous few years to delay, and in certain cases abandon altogether, other important enforcement activity in order to fund merger review.³ In 1996-97, the situation was critical, and stakeholders, particularly the Competition Law Section of the Canadian Bar Association, encouraged the Bureau, Industry Canada and Treasury Board to introduce fees to increase Bureau resources and ensure the continued effectiveness and timeliness of merger review.

In November 1997, the Minister of Industry approved fees for services and regulatory processes, as shown in Table 1. These fees were accompanied by service standards, which the Bureau developed in consultation with stakeholders. The Bureau also received Treasury Board’s approval to retain the revenue generated from these fees. There were expectations that these revenues would be used to improve the services for which they were earned.

Table 1. Fees and Service Standards under the Competition Act

Service or Regulatory Process	Maximum Turnaround Times	Fees
Merger review (notifiable transactions and advance ruling certificates)
Non-complex	14 days	$25,000
Complex	10 weeks	$25,000
Very complex	5 months	$25,000
Advisory opinions
Non-complex	4 weeks	$4,000
Complex	8 weeks	$4,000

In May 1997, the Deputy Minister of Industry asked four organizations at Industry Canada involved in client service initiatives - the Corporations Directorate, the Office of the Superintendent of Bankruptcy, the Canadian Intellectual Property Office and the Competition Bureau - to undertake benchmarking⁴ exercises. The mandate was to compare critical service areas against some of the best of similar agencies worldwide, with a view to incorporating best practices and ultimately improving government services.

At the same time, government agencies were focussing on Quality Service Initiatives, placing renewed emphasis on fee-related services and recognizing the inherent obligation of governments to be accountable to those paying fees for services. There was increased media and stakeholder attention to user fees, and expectations were that, when fees were imposed, clients would have a say in the manner and timing of service or product delivery.

The Bureau selected the merger review process for benchmarking as it is the largest fee generator and a critical area from a stakeholder perspective. In addition, the Bureau’s performance on a number of international merger cases had been criticized, and the merger review process faulted for delaying important multi-jurisdiction transactions.

In 1998, the Bureau gathered a team of representatives from the Mergers Branch, the Compliance and Coordination Directorate and the Department of Justice ("Competition Law Division, Justice Canada") to begin the benchmarking initiative. Those involved saw it as an opportunity to carefully examine the Bureau’s merger review process, to identify critical areas, to compare it with the process in other jurisdictions and, ultimately, to improve timeliness, quality of analysis, transparency and predictability. The Compliance and Coordination Directorate of the Compliance and Operations Branch took the lead in managing the benchmarking initiative. As the Directorate had developed the policy on fees and service standards, it was thought to be an objective party to assess merger review and make recommendations.

Lise Davey, Manager, Client Services, reporting to John Barker, Assistant Deputy Commissioner, Compliance and Coordination, was identified as project manager. Both played leadership roles in the development of the policy on fees and service standards and prepared the submission to Treasury Board for revenue retention.

A Working Group and Steering Committee were formed. Membership over a two-year period included the following:

During the first year of the benchmarking initiative, much of the Bureau’s activity focussed on implementing and refining the administration of the fees and service standards policy, areas that were completely new to the Bureau. Credit and chequing accounts were established and formal revenue procedures were developed to meet Treasury Board and Financial Administration Act requirements. For example, the Management Policy and Services Directorate guaranteed to process receipts immediately from 8:00 a.m. to 5:00 p.m. This is essential as law firms often send agents to hand-deliver pre-merger notification filings, and ask that they wait for receipts.

Likewise, the Competition Law Division, Justice Canada committed to providing the Prenotification Unit with direct and priority access to lawyers so that legal issues related to filing could be dealt with as quickly as possible. Because parties were now paying $25,000 for merger review, many sought clarification as to what was legally required to be notifiable, and under what circumstances, if any, an advisory opinion could be requested (for $4,000) instead of an advanced ruling certificate (for $25,000).

Once most initial issues were resolved, the Bureau published a "frequently asked questions" document⁵ and a second version of the Fee and Service Standards Handbook.⁶

In February 1999, the Bureau hosted a forum with stakeholders to solicit feedback on the first year of the fee and service standards regime. Stakeholders did not question the fees, but were concerned that service standards had resulted in additional bureaucracy, which was affecting service. The Bureau published a report⁷ following this meeting, and placed renewed emphasis on completing the benchmarking process in order to address stakeholder concerns.

During the 1999-2000 fiscal year, it became evident that the intensive examination of the merger review process represented by the benchmarking project was timely and, indeed, critical for the following reasons:

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• the merger caseload had doubled from 1994-95 to 1998-99;
• merger transactions had increased in complexity due mainly to deregulation and the globalization of markets;
• amendments to the Competition Act came into effect in 1999;
• new regulations under Part IX of the Act came into effect on December 27, 1999; and
• proposed bank mergers, the largest ever examined in Canadian history, required unprecedented resources.

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Methodology

The initiative followed the benchmarking methodology set out by the American Productivity & Quality Centre (APQC), which also trained members of the Working Group on benchmarking. Note, however, that the description of the process below is simplified and that many of the steps include sub-steps and other components.

The APQC methodology involves the following key steps:

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• establish a team, pick a champion and earmark resources;
• map the process to be benchmarked;
• identify stakeholders;
• identify the critical success factors;⁸
• identify the core business processes that have the greatest impact on those success factors;
• identify benchmarking partners;
• do secondary data collection (prepare for surveys and interviews with partners);
• survey and interview benchmarking partners;
• analyze and normalize data; and
• recommend and implement.

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Process Mapping

When undertaking a benchmarking study, it is critical to understand the process that one is attempting to improve. Process mapping enables the identification of the critical functions within a process, who the critical stakeholders are, what the critical success factors are from stakeholders’ perspective, and the potential bottlenecks that could impede the efficiency and effectiveness of the process.

Critical staff are interviewed as part of process mapping. For example, those involved with pre-merger notification were interviewed, the processes were documented and the bottlenecks identified. Interviewees later verified the accuracy of the findings, which, in turn, were presented to the working group for discussion.

Stakeholder Interviews

A key component of benchmarking is the identification of key stakeholders and their business requirements and concerns. It is important to identify types of stakeholders, both internal and external, and to carefully balance their needs without compromising independence, timeliness, sound economic theory and other key attributes.

Merger Branch staff and those involved in merger review, including staff in the Competition Law Division, ("Competition Law Division, Justice Canada"), the Management Policy and Services Directorate, and the Commissioner’s Office, were identified as internal stakeholders.

A survey was developed to obtain the views of Merger Branch staff, since as key stakeholders, they have an intimate view of the entire merger review process and a collective wealth of experience and knowledge. Staff surveyed included managers, individuals who have been with the Branch since its inception, others with many years in merger review and those who are new.

It is important to note that this survey was meant to obtain views and identify issues. It was not intended to represent a factual representation of information. About 40 staff received the questionnaire at a Branch meeting and could fill it out anonymously if they wished. More than 20 people returned completed questionnaires.

A key element in undertaking external stakeholder interviews was to focus on lawyers who deal with the Mergers Branch regularly. It was also important to identify those who had dealt with the Bureau for many years, and to ensure input from those in contact with the Bureau both before and after the fees and service standards were implemented.

More than 40 lawyers were interviewed. They were given the initial questions well before the interviews and came well prepared, offering candid opinions and suggesting improvements to the merger review process.

Benchmarking Partners

Following process mapping, stakeholder interviews and the identification of critical success factors, competition organizations in other similar jurisdictions were invited to become benchmarking partners. The organizations selected were those with similar practices and at similar stages of development as those in Canada. The organizations that signed on as benchmarking partners include the Office of Fair Trading in the United Kingdom, the Federal Trade Commission and Department Of Justice in the United States, and the Australian Competition and Consumer Commission.

Heads of these organizations received an invitation from Canada’s Commissioner of Competition to provide input to the merger review benchmarking initiative. In return, the Competition Bureau would provide the organizations with the findings of this study and ensure confidentiality of any sensitive information.

Important steps in this data collection phase were identifying the frameworks for merger review in these jurisdictions, identifying processes and issues related to merger review, and interviewing agency personnel and a number of their client lawyers in person to learn from their experience.

Feedback Mechanisms

With the implementation of the Fee and Service Standards Policy, the Bureau also committed to providing stakeholders with feedback mechanisms. These were intended to give those paying for services a say in their delivery and a recourse for lodging complaints. Three vehicles were introduced: the Fee and Service Standards Forum, a redress mechanism and feedback leaflets. Information from these sources was reviewed for the purpose of this benchmarking initiative.

The Fee and Service Standards Forum involves periodic meetings with major stakeholders to review fee-related processes. For information about the Bureau’s first forum following the implementation of fees and service standards, which was held in February 1999, refer to the Competition Bureau Fees and Service Standards Report on Forum. (http://competition.ic.gc.ca)

The Deputy Commissioner, Compliance and Operations is the first person to review complaints lodged using the Bureau’s redress mechanism, although no one has used this process as of the date of publication. For more information, see the Fee and Service Standards Handbook. (http://competition.ic.gc.ca)

The Bureau developed feedback leaflets and sends these with all responses to fee-related processes. For example, when parties receive their advanced ruling certificate, they also receive a postage-paid feedback leaflet. A summary of these cards is included in Chapter 8 - Report on Feedback for Merger-Related Services.

Other Resources

Many documents and reports were reviewed during the course of this study. These include publications of the UK Office of Fair Trading (OFT), U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC), Australian Competition and Consumer Commission (ACCC) and the International Competition Policy Advisory Committee (ICPAC).

Executive Summary   Chapter 2