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Merger Review Benchmarking Report - Chapter 2

This chapter describes the merger review process as documented by the process mapping undertaken in 1998-99 and updated in the spring of 2000. The first section outlines the steps involved in reviewing proposed merger transactions (pre-merger notification and advance ruling certificate requests) and identifies the other branches or sectors involved in the process.⁹

The chapter is laid out in the following manner:

prenotification;
case assignment and review;
legal advice;
financial processing;
international cooperation;
photocopy unit;
resource centre; and
summary of one-on-one interviews.

Merger Pre-notification

Notification, one of the most critical components of the process, is described as fundamental by both Mergers Branch staff and external stakeholders for the following reasons:

delays in the Notification Unit have a direct effect on the time Branch staff have to do an initial assessment, determine the complexity of the file and meet closing dates; and
delays in the Notification Unit affect overall turnaround times stakeholders can expect and affect timing of a lawyer's ability to speak with a case officer to discuss filing requirements and concerns about the proposed merger.

In 1998, when the merger review process was initially mapped, service standards were new. In addition, there was a substantial increase in legal interpretations related to Part IX of the Competition Act ¹⁰. Filings had also doubled in the previous two years, which substantially increased the level of traffic in the Pre-merger Notification Unit (PNU).

From the point of view of the Mergers Branch, the PNU was seen, at that time, as a bottleneck. In some instances, it took two or three days for a file to be assigned to a particular division. This was further compounded by the physical layout of the Unit: a PNU officer with a support person located a considerable distance away. The Unit shared with the rest of the Branch the one fax machine parties used for filings. While layout and equipment might appear to be fairly insignificant, they were having a considerable effect on turnaround times in the Unit.

During the course of this project, it was concluded by Branch management and the project team that the PNU required additional staff in view of the increasing complexity of cases, the growing number of requests from stakeholders for information and assistance and the new regulations and guidelines.

The Mergers Branch has addressed this issue by creating the Merger Notification Unit (MNU). The MNU does an initial triage of all incoming files, indicates the complexity, forwards complex and very complex files to Division A or B and handles the majority of the non-complex files. New and experienced officers are assigned to the MNU to handle the workload and reduce the number of non-complex files assigned to the divisions. This enables the divisions to focus on the more complex files. This arrangement also provides excellent training and coaching opportunities for new officers assigned to the MNU.

Each step in the MNU process is described briefly below based on the June 2000 update of the original mapping. Because of the many improvements the Unit has made since 1998, the MNU and its processes are considered by the authors to be "best practices".

The receptionist on the 21st floor of the Competition Bureau's offices receives the great majority of merger-related service requests. Counsel for the parties usually send the documents by courier, but on rare occasions they deliver them by hand. The receptionist dates and time stamps the envelope and e-mails the MNU secretary and MNU officer to request pick-up, which usually happens immediately.
The secretary initials and time stamps the covering letter, and then opens a file in the tracker system and attaches one of several colour-coded "process slips" to the documentation.
The secretary prepares the receipt letter¹¹ for the MNU officer's signature and provides the package to the officer for review.
The secretary obtains a financial receipt from Management Policy and Services for the $25,000 fee, which parties usually pay by cheque.
The MNU officer, after completing a review, fills out the process slip, indicating the legislated review period and whether the file is complete, and then sends it back to the secretary for processing. The MNU recently instituted a process whereby a file may be assigned to a division for review even when it is not complete. The officer keeps a record of these files and follows up with the responsible officer regularly to ensure ultimate completion of the filing.
The secretary sends the receipt letter, indicating the time and date the Bureau received the documentation and payment (when applicable). A letter indicating whether or not the file is complete is also provided. This correspondence is faxed to the parties and sent by mail.

The above steps are always completed on the same day the Bureau receives a pre-merger notification or advance ruling certificate request unless the material arrives later in the day or there are issues with the filing, in which case the file is processed the following day.

The secretary inputs relevant information into the tracker and maintains a financial log to track cheques, receipts and outstanding payments. Each month, the secretary reconciles the log with the financial report provided by Management Policy and Services. This ensures accuracy in the Bureau's financial system and that all payments are tracked and accounted for.
The secretary maintains a separate log of incomplete filings¹² and checks daily with the MNU officer to find out whether additional information has been provided and if the file is complete.
The secretary writes the end date of the waiting period of the transaction on a calendar. Parties are requested to notify the MNU once a transaction is completed. The secretary receives this information and enters it into the tracker. The secretary has a procedures manual that is maintained and updated so that others are able to step in and perform these duties in the secretary's absence.
The MNU officer deals regularly with calls about filing requirements. Because of the incumbent's experience in the MNU, most questions can quickly be answered. In addition, over a number of years, the MNU has amassed a volume of interpretations and legal advice that has been provided to counsel.
When a question related to Part IX of the Competition Act arises that the MNU officer cannot answer, the practice is to telephone or e-mail the dedicated Department of Justice counsel for the MNU (see "Legal Advice" in this chapter for more information).

Observations

Interpretations and advice provided to counsel is currently housed in various formats: binders and emails. To ensure consistent information to stakeholders, it is recommended that the Branch enter this information into an electronic database, indexed by section of the Act, regulation number and issue, so anyone in the Branch can have access to it. With amendments to the Competition Act and regulations, it is especially critical that consistent information is provided to lawyers.
Counsel should be reminded that all correspondence including pre-merger notification filings, requests for advance ruling certificates, competition briefs and additional information pertaining to a file should be directed to the MNU and not to the case officer. Counsel should be advised that adhering to the process ensures appropriate follow-up and timeliness.
A vehicle for providing regular updates about procedures to the "frequent filers" has also recently been adopted. The MNU has committed to meeting with stakeholders on a regular basis.
Counsel should be encouraged to provide several "certified true" copies of their documents. This would enable the Mergers Branch to maintain originals while providing officers with working copies, and would bring the Canadian process more in line with the practices followed by counsel and agencies in other jurisdictions.

Case Assignment

The authors have concluded, based on their research, that the practices described below represent "best practices."

When the secretary of the MNU receives a file, an e-mail is sent to the Assistant Deputy Commissioner with a copy to his/her secretary, to the program officer¹³ and to the MNU officer with enough information about the file to determine to whom it should be assigned. The Assistant Deputy Commissioner responds, usually within an hour or two, with the name of the officer and his or her supervisor. The MNU secretary enters the name of the officer into the tracker and takes the file directly to the officer. This is a new process, one that has replaced earlier manual processes and reduced processing time by up to two days.
Once a Division secretary receives a file, it is registered in a database with relevant information, including whether the file is complete and the service standard period if it is known at the time. The secretary also enters a BF (bring forward) date for five days later, at which time a verification is made with the officer to determine whether the service standard period has been established. Once established, the appropriate service standard letter is prepared for the Assistant Deputy Commissioner's signature. One exception to this process is when the assessment will be completed within five days. Under these circumstances, officers usually telephone the parties' lawyers to let them know of the outcome.
When the review is complete, the officer completes his or her assessment in either a "template" or WordPerfect format.
Based on the assessment, the Division secretaries produce the appropriate response for the Assistant Deputy Commissioners' signature. The secretaries prepare all letters and certificates. Templates have been developed for all possible responses. The secretaries send the response by fax and mail. Feedback leaflets are included with all responses.
Once the review is completed, the secretaries modify the tracker to indicate the actual end date of the review. They also indicate whether the review resulted in an advance ruling certificate, a no-action letter or other action. All letters, certificates and important correspondence are maintained on the Mergers Branch tracker for future reference.

Legal Advice

The process for obtaining legal advice for the MNU is seen as a best practice.

The Competition Law Division, Justice Canada has a dedicated lawyer to provide legal advice on notification issues. The MNU and this lawyer usually exchange e-mails and telephone calls and confirm any formal advice in writing, usually by e-mail. If this lawyer will be absent, he notifies the MNU and ensures someone else will be there to provide backup legal support.

Numerous formal and informal opinions have been provided by counsel to the MNU over the past several years. It would be beneficial both for the Bureau and the Competition Law Division, Justice Canada to have all of these captured and indexed electronically.

Financial Processing

The processing of financial receipts and information is considered a best practice.

There is a dedicated financial officer who ensures that receipts are processed as quickly as possible. There is an additional person available to do this when the primary person is absent. Approximately 90 percent of the revenue processed in the Management Policy and Services Directorate is related to mergers.

The MNU and the financial officer have developed excellent communications, keeping each other abreast of upcoming absences and urgent requests.

Program Officers

There was a consensus amongst case officers that there has been a huge improvement in the handling of cases since program officers were added to case teams. They are seen as invaluable to the timely resolution of cases.

These program officers free case officers to focus on the analysis of the transaction. The program officers are responsible for coordinating major files and perform a number of valuable functions such as the following; they

register all correspondence in the tracker system;¹⁴
search the Internet and obtain documents and information from the Resource Centre;
coordinate all incoming documents from section 11submissions (they code documents,¹⁵ copy, register information in the tracker and return documents to the parties);
prepare contact lists and make telephone calls to obtain such things as annual reports;
assist in the preparation of affidavits;
assist in the preparation of binders for the Tribunal;
often arrange for electronic equipment such as laptops, servers, etc;
coordinate the Witness Tribunal Appearance schedule;
often coordinate flight and accommodation schedules for witnesses, experts, officers and support staff;
prepare travel claims once travel is complete;
close files and create indexes in the event that documents are ever required in future cases; and
often complete standard replies to correspondence.

The program officers expressed the desire to become more involved in assisting officers on cases. Unfortunately, because there is only, at present, one Program officer for each division, they are barely able to provide full support on all of the big cases.

In view of this caseload, program officers felt they had not had the opportunity to demonstrate their full potential. Case officers also recognized that program officers have heavy workloads and therefore were reluctant to impose additional demands.

Given the success to date and the obvious potential for them to assume additional duties, it is the view of the authors that the Branch would benefit from hiring more program officers.

International Notifications and Contacts

The International Affairs Division of the Economics and International Affairs Branch ("EIA") receives notifications from other jurisdictions (mainly from Australia, the European Union and the United States) and notifies other agencies of any notifiable Canadian proposed transactions with international aspects. All notifications received from foreign counterparts are immediately forwarded to the MNU for processing.

Timely and systematic communications between EIA and foreign counterparts are also very important when identifying relevant foreign contacts. This is especially true with regards to the European Union and its tight timeframe for reviewing mergers. There is a limited amount of time in which Mergers Branch can review a common merger and discuss potential remedies that are acceptable to Canada.

The newly introduced inter-Bureau International Committee continues to contribute to improvements in this area.

Photocopy Unit

The Photocopy Unit in the Management Policy and Services Directorate photocopies all documents for proceeding before the Competition Tribunal and all section 11 documents, among others. The Unit provides very fast turnaround times, provided staff receive advance notice when the task involves numerous documents. Frequently, however, the Unit is advised at the last minute of urgent and voluminous requirements. A better approach to planning requests will result in a more efficient process.

Resource Centre

The Resource Centre has two dedicated officers who conduct searches for information for the Bureau. These staff are regularly called upon to provide company information, industry information and legal documents. In 1998, with the advent of fees and service standards, the Bureau instituted a procedure to ensure that Resource Centre staff understand the urgency of requests and the type of information usually required by the Mergers Branch. The quality and timeliness of the responses of the Resource Centre is seen as a "best practice".

Summary of One-on-One Interviews

During the course of the mapping process, many individuals across the Bureau were interviewed in order to enable the authors to describe the merger review process in Canada. Employees were also asked open-ended questions like: "How would you improve the merger review process?" The following section is a summary of those comments that were made by employees. They reflect only those comments that were made by several employees in order to respect confidentiality.

These interviews clearly indicated that merger employees find their work extremely interesting, challenging and exciting. They deal with novel issues, work under tight deadlines and in most instances are quite satisfied with their careers in the Branch. Having said that, at the time of these interviews, comments also demonstrated that both divisions in the Mergers Branch were facing extreme workload pressures and did not, according to most, have enough staff.

The following are the main themes that surfaced during these interviews.

Service Standards

Some of those interviewed felt that the merger process had become more process-oriented since fees were introduced. In this regard, it was noted that some lawyers were providing submissions on the complexity of a file. This was seen as being of limited value to the Bureau, the lawyers and the parties. Some also expressed the view that because service standards were not introduced as a result of external demand, they add little to the process. It was the general view that closing dates rather than the service standard should be the driver of Branch activities.

There was indication that staff would support a review of the current service standards policy.

Workload

The consensus amongst those interviewed was that "no-issue" cases were dealt with quickly, and the big cases were well staffed and given the necessary priority by managers. The cases that fell in the low to moderately complex categories seemed to be more problematic. Case officers saw these as requiring significant time and effort. With the current caseload (at the time of the interviews), officers felt that these cases were under-resourced.

It was noted that certain officers generally work only on big cases. This has had a number effects:

some valued the opportunity to focus on a single case and not be distracted by other files;
some case officers admitted to being overworked and close to exhaustion.

A number of staff expressed the opinion that workload would be less of an issue if there were an easier flow of officers into the Branch from other parts of the Bureau when the Branch is faced with a big case.

Officers also suggested that the Bureau should actively explore the potential for interchange or other programs to provide for hiring lawyers from private practice. This would further ensure a good mix of experience and new staff.

Training

There was a clear consensus that there was a need for a Merger Branch training program. This would be aimed at

new staff who would be given a structured introduction to the Branch and Bureau;
all staff who would receive training on new and emerging issues, and gain expertise in specific sectors.

Some senior members of the Mergers Branch were frustrated because of their heavy workload and the resulting inability to provide adequate training and coaching to new staff. By the same token, new officers felt like they must "sink or swim" because they received limited training, coaching or guidance.

This led to some new officers' lacking confidence when speaking with experienced lawyers and senior company officials, particularly when they were discussing complex issues such as market definition and barriers to entry.

The interviews also revealed that, as a result of a lack of training and confidence, some inexperienced officers were concerned that they might be classifying transactions in a higher category to provide more time to learn about an industry and geographic markets.

Table 1. Number/Percentage of Cases by Level of Complexity Excluding Securitizations*
This table includes all the transactions that have been completed by the end of the fiscal year (may include transactions that did not commence the same year)
	2000-2001		1999-2000		1998-1999		1997-1998¹⁶
Complexity	#	(%)	#	(%)	#	(%)	#	(%)
Non-complex	282	(81)	232	(80)	212	(77)	68	(89)
Complex	53	(15)	49	(17)	56	(20)	8	(11)
Very-complex	14	(4)	8	(3)	6	(2)	0	n/a
Total	349	(100)	289	(100)	274	(100)	76	(100)

*Includes all completed transactions from April 1 to March 31 except 97/98, see footnote 16.

Table 1 indicates that overall, the merger cases reviewed by the Branch continue to enjoy fairly consistent distribution in terms of complexity levels. In 1997, then the Bureau was about to introduce service standards, there were expectations that, based on caseloads from 1993 to 1996, about 85 percent of files would fall into the non-complex category, 10 percent in the complex category and 5 percent in the very complex category. The last two fiscal periods indicate a distribution closer to 80 percent non-complex, 15 percent complex and 5 percent very complex.

The issues of training and consistency in classifying complexity are being addressed. With the latest hiring of new officers, the Mergers Branch has instituted a formal training process that includes an overview of the work of the Bureau, merger review and notification training. The Branch also provides regular coaching, mentoring and the opportunity to rotate to other parts of the Branch. Several senior officers have also been provided with training through the Department's Leadership Development Initiative (LDI). In addition, the MNU classifies all files (complexity levels)to ensure consistency and predictability in this area. These initiatives are expected to improve morale, workload issues and the quality and timeliness of merger review.

Other Issues

According to some of the case officers, even though the filing form was recently amended, it still does not provide all of the information required to assess competition issues. Some felt that moving closer to the U.S. model, with its greater information requirements and 30-day initial review period, would be beneficial for parties, particularly those involved in multi-jurisdictional transactions.

Branch staff clearly stated the importance of experienced Department of Justice lawyers to support Mergers Branch activities.

Most case officers agreed that the delegation of approvals to the Senior Deputy Commissioner and the Assistant Deputy Commissioners had helped improve internal turnaround times. Some cautioned, however, that in view of the three-year period in which the Bureau may challenge a completed transaction and the relative importance of "no-action" letters on non-routine cases, the latter should be reviewed by experienced Department of Justice lawyers before being sent to parties.

Some also noted that consideration should be given to amending section 11 and section 18 of the Competition Act to remove the requirement to return documents within 60 days. Parties could be required to provide the Branch with three "certified true copies," which would not be returned. This would improve turnaround times for the Bureau and reduce the costs of overtime for officers and employees working in the Photocopy Unit.

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