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Merger Review Benchmarking Report — Chapter 7 — Interviews with the Private Bar

Senior Competition Bureau officials met throughout February to May of 2000 with approximately 45 lawyers in Toronto and Montreal who regularly deal with the Mergers Branch. The lawyers who were invited to participate in this exercise received a list of possible topics for discussion but were encouraged to raise other issues if they wished. Names of those who were interviewed are included as Annex A.

Most invitees also brought partners and associates from their firms to the interviews, which involved groups of two to nine people. Those interviewed included lawyers who have represented the Bureau as agents of the Crown, former Directors and officers, as well as those who have dealt with the Bureau from a strictly external perspective. When particular individuals were not available, their colleagues canvassed them for input in advance.

These interviews were intended to measure stakeholder satisfaction and perceptions stemming from their experience with the Branch. Questions were not fact-based. For example, counsel were not asked to indicate in how many cases the Bureau had either met or not met service standards. They were asked open-ended questions and were free to raise any and all issues related to merger review. The lawyers, in fact, did not limit their comments to their experience with the Branch. Rather, they took the time to offer suggestions for solving perceived problems.

Overview

Counsel expressed a great deal of frustration about the review process, in particular, that problems had developed or were developing and were threatening the reputation that the Branch and the Bureau had justifiably earned since 1987.

That said, all of those surveyed expressed their appreciation for the work of the Mergers Branch and the professionalism of its staff. They generally felt that staff are aware of closing dates and try to complete their analysis and respond in a timely manner. The lawyers applauded the dedication and expertise of Bureau staff, and their willingness to deal with cases as quickly as possible.

Many recognized that the Bureau had been under tremendous pressure because of increased filings as well as the increasing complexity of transactions. They noted that there are more multi-jurisdictional transactions now than in the past and that this trend is expected to continue. They also recognized that factors such as technology, deregulation, internationalization of markets and increased concentration in certain sectors are providing unprecedented challenges to the Bureau. They expressed concern that these factors, taken together, were overtaxing managers, that staff were showing signs of stress and that problems had either developed or were developing.

Most of those interviewed commented that the benchmarking study was very timely in view of the combined impact on the merger review process of an ever increasing number of mergers, of the complexities involved in the banking, airline, grocery and energy related industries, of service standards and the demand of the new regulations under the Act. Many applauded the Commissioner for this transparent, timely and important process. They saw this initiative as allowing the Mergers Branch to address certain important issues in the review process quickly in order to improve the effectiveness, efficiency and the overall health of the Branch.

A large number of those interviewed have dealt with the Branch for a long time. As a result, many of the lawyers framed their comments by comparing historical practice (prior to 1998) to more current approaches (1998-2000). Many of those interviewed felt that their concerns reflected behaviour that seemed to have emerged as a result of the new service standards regime; others felt that the unprecedented increase and complexity of files was overwhelming the Branch.

Almost without exception, the lawyers applauded the Bureau for its improved Web site and e-mail service. They found the backgrounders, guidelines related to mergers and prompt e-mails related to news releases very timely and informative. These initiatives were cited as examples of the value of providing more timely information and as an important step in making the Bureau and its work more transparent.

This chapter groups the comments received under a number of broad headings representing the critical aspects of an effective merger review process, and contains summaries of the lawyers’ comments made during interviews, unattributed quotes as examples, and recommendations provided by those interviewed. The issues reviewed in this chapter represent those subjects upon which there was a broad consensus amongst those interviewed.

Prenotification Unit and Process

The Prenotification Unit (PNU) and its staff were very highly praised for their dedication, professionalism and service. They were commended for often going "above and beyond the call of duty." Without exception, all of the stakeholders commented very positively about the PNU.

Areas seen as critical to the success of the PNU include professionalism, knowledge, experience, ability to respond quickly, timely feedback (calls and receipt letters), consistency in approach and advice related to specific issues, confidence and low turnover of personnel. These, in turn, enable counsel to provide consistent and reliable guidance to their clients.

All of those interviewed see the PNU as one of the most critical functions in the Mergers Branch. They noted that it is crucial that this unit is effective, given the very high case volume, the urgency involved in merger review generally and the economic impact of delays.

One concern the lawyers raised was that files had been held in the PNU, rather than being assigned to an officer, when required information was missing. As a result, the review did not start until days later than it might otherwise. As a result, during the period until the filing was complete, counsel did not have the name of an officer with whom to discuss additional, non-statutory information requirements and delivery. The lawyers interviewed suggested that perhaps the review could begin upon receipt of the file, recognizing that neither the prenotification nor service standard clock would start until the information was complete. Such an approach would allow the company to begin assembling additional information while, at the same time, completing the requirements of prenotification. This could have a significant impact on the timing of the review, for example, when documentation might be in another country and could take days to identify and deliver.

There were also occasions when internal reviews had begun in other countries but not in Canada because the file was not considered to be complete. This was difficult to explain to clients who are kept abreast of developments in the other relevant jurisdictions.

Since these comments were made, the PNU has instituted a process whereby files are forwarded promptly and assigned to officers who are able to begin their review even before the file is complete. The PNU tracks these files and ensures that relevant material is obtained and forwarded to the appropriate officer.

There was also the suggestion that more than one Department of Justice lawyer be assigned to the PNU. While the current lawyer was applauded for his expertise and dedication, the lawyers were concerned that there was no formal back-up lawyer available to provide advice to the unit in the current lawyer’s absence. There was also concern that one lawyer might not be enough to handle the work stemming from the amended regulations.

Mergers Branch and the Competition Law Division, Justice Canada recently identified a back-up lawyer for the PNU.

Many suggested that the PNU should be given more prominence by increasing the number of staff and establishing a manager or senior officer position. This manager or senior officer would oversee the Unit’s work, and should be part of the Merger Branch management team to lend weight, consistency and importance to issues raised at the filing stage. Counsel noted that this senior person should be experienced, decisive and respected. These comments reflect concerns that timing is critical at the front end of the merger review process. This issue is further defined below in the section entitled "Timeliness and Initial Triage."

Mergers Branch has, as of October 30, 2000, instituted the Merger Notification Unit (MNU) which is headed by a senior officer, comprised of several officers and is responsible for filings, ARC requests, complexity ratings and the review of the majority of non-complex files.

There were also suggestions that the Branch, and the MNU in particular, should make greater use of technology to improve efficiency. For example, a number of those interviewed suggested that the Bureau should create an electronic database that would contain all the advice, guidelines and rulings it provides to counsel. To ensure that staff consistently provide the same information to all parties and their lawyers when new issues are raised and resolved, the information must be shared quickly with all staff. This is of particular importance to the MNU, which now also provides interpretations of the new regulations and forms. Counsel also suggested that it would be very useful and a timesaver for the Branch if this information could be put on the Bureau Web site in generic form.

It was generally agreed that having more resources available for the front end of the merger review process and increased use of technology will contribute to long-term savings both for the Bureau and merging parties.

Timeliness and Initial Triage

It is clear that a very critical part of the merger review process is identifying, as quickly as possible, those files with which the Bureau has no or relatively minor concerns. The timeliness with which staff assess these files is important. Counsel expect that the Bureau should be able to provide a response on these files within 14 days. Identifying these files quickly would, by extension, allow the Branch to focus resources more quickly on those files that do raise significant issues. The issue of timeliness is one of the most important to stakeholders. In their view, improving the timeliness of the front end of the process would improve turnaround times for all files, regardless of complexity.

A consistent point raised by interviewees, once the file is through the MNU, it should quickly be reviewed by a seasoned senior officer and sent for immediate processing and completion when it is not a complex matter. A typical comment was that "an experienced officer can take an initial look and know within 10 minutes whether there are issues."

It was suggested that relatively simple cases (e.g. non-complex and those at the lower end of complex) could be dealt with by less experienced officers and students under the supervision of a senior officer.

Training and experience among staff at the front end of the process are also critical. The lawyers noted that there seemed to be more instances in the 1998-2000 period of case officers who lacked experience, training, coaching, confidence and access to senior officers for advice. There was a sense that, as a result, these officers were following some kind of "checklist" and attempting to obtain all the information that could be required before completing their assessment. The perception among lawyers was that these officers were required to demonstrate that they had followed an established process. The lawyers frequently referred to instances when they were asked for information on files that, in their view, seasoned officers would have recognized as "no-issue cases."

Many lawyers noted that officers responsible for files were, in some instances in the past, summer students or term employees. This was disconcerting to parties and their lawyers, who expect to deal with officers who have experience and will see the case through to the end.

It was mentioned that, in law firms, experienced lawyers do some form of "triage" and assign only simple matters to new lawyers. These new lawyers do not initially deal directly and autonomously with clients. The risk of new lawyers providing "bad advice" to a client or requesting unnecessary information can have serious repercussions. Because of the intricacies of merger review, firms use the period before new lawyers work directly with clients for training and coaching.

The impact of inexperience in the early stages of the merger review process was seen to have a number of adverse consequences. For example, if an inexperienced officer thought that he or she might need two to four weeks to review a file, the case might be classified as complex, regardless of the complexity of the issues. While an internal statistical analysis does not confirm a trend to "overclassify" cases, lawyers’ perception was that this was starting to happen.

With a central unit responsible for classification and review of non-complex files, 80 to 90 percent of files would be dealt with quickly, leaving the more complex cases for more detailed review. Inexperienced officers would not be required to make "the early call," and the number of requests for unnecessary information would be reduced. Such a unit would also enable the two existing divisions and assistant deputy commissioners to focus on the more substantial cases and other management issues.

Again, as a solution, many suggested setting up a dedicated unit, perhaps merging it with the MNU, under the leadership of a senior seasoned member of the staff. Counsel felt that this change would greatly enhance efficiency and the Branch’s ability to focus resources on key cases.

As noted previously, the MNU is now responsible for classifying transactions and dealing with most non-complex files.

File Review

Accessibility

Counsel were very clear on the importance of having an open dialogue with the Branch early in the review process on files that would likely raise competition concerns, "to discuss issues before they become problematic." On such cases, it is particularly important for counsel to have access to Branch managers, to be able to quickly narrow the issues, to discuss any additional information requirements ahead of time and to raise concerns related to the process.

Counsel who have dealt with the Bureau over an extended period of time say that, in past years, they could telephone a Branch manager (usually a chief or assistant deputy commissioner) to discuss what might be an "issue" on a file soon to be submitted for a prenotification or advance ruling certificate request. They valued the trust that had been developed over the years and knew that they would be provided with the manager’s "best guess" and reaction to the issue at hand, which would help them develop their submission. They were also confident that the Branch would give the submission prompt attention - that is, the Branch and managers would be expecting it and this early awareness would help focus the early stages of the review and ensure management’s interest in the file.

Counsel were consistently of the view during these interviews that Branch managers and senior officers were not as accessible as they were in the past. In addition, telephone calls were not always returned or returned promptly; and files that were discussed with senior officers or managers were no further ahead in terms of review when the Branch received them.

A number of lawyers mentioned the confidential guidance and informal advice procedures in the U.K. Office of Fair Trading and the discussions prior to filing the Form CO in the EU as, respectively, examples of the value of early contact with the agency and a way to narrow the issues both for filing and for the review.

The general consensus was that this lack of availability was due to the heavy and ongoing workload on the assistant deputy commissioners. Most noted that some reorganization, which would reduce the number of files and issues for which each is responsible, should be considered. Again, lawyers referred to an expanded prenotification unit as a possible solution.

Counsel voiced similar concerns about accessibility after they had filed. The consistent view was that it was more difficult than in the past to find out, in a timely manner, who the officer was on any given file and the status of the review. The lawyers suggested that the Bureau send an e-mail, not yet another letter, with the name and telephone number of the case officer so that counsel can establish an early dialogue with the officer.

The Branch, as a standard practice, now includes the name and telephone number of the officer when confirming the service standard of the file. This confirmation is sent electronically.

There were also concerns about accessibility during summer holidays, March break and other holiday periods. Counsel recognized that the Bureau needs to provide holiday time to its staff, but noted that "business does not stop because someone in the Bureau is on holidays." Suggestions were made that a more focussed approach to holiday approval might be considered. Another suggestion was that officers planning holidays could "pick up the phone and say, ‘Hi, my name is John Smith, I am the officer on your file. I will be away from the office until X but if you need information, please contact, Jane Doe.’ " This would reassure lawyers and their clients that their file is not in a "holding pattern."

Another accessibility issue related to the telephone system. Some complained about the voice mail system and the lack of management of same. They noted that in certain instances, officers might be away from the office for days but did not indicate this on their voice mail message.

Consistency and Predictability

A recurring theme among those interviewed was that there was less consistency and predictability in their dealings with the Branch than previously. Consistency was described as lacking in two ways.

First is consistency of approach among officers, in the way files are approached, the nature and scope of responses to information requests and the guidance provided to counsel. A significant number of those interviewed felt that an officer’s view of a case often depended on the officer in question. Depending on personality, experience, confidence and knowledge of industry, two officers could require from counsel greater or lesser information. Counsel saw this, in part, as resulting from a lack of internal information sharing and accessibility to seasoned officers and internal experts.

There was also a sense of a lack of consistency between officers and managers. There were accounts of lawyers receiving the case officer’s view of the issues or the likely outcome on a file only to receive a completely different assessment weeks later when, the assumption is, a senior officer or manager became involved in the file. This is complicated for counsel, who must explain the change and, in some instances, the new and very voluminous information requirements to their clients. Instances were cited where lawyers had been given the impression that the file was progressing well only to be surprised by a detailed information request.

There was concern that lawyers have no mechanism by which to lodge formal or informal complaints related to developments in files and the manner in which officers are addressing issues. The U.S. Federal Trade Commission, reacting to similar concerns, has recently formalized a procedure to allow such matters to be raised with the General Counsel.⁵⁸ Refer to Chapter 5 - Merger Review in the U.S. for additional details.

Another result of a perceived inconsistency was that, according to counsel, many did not request as many advance ruling certificates as they have in the past. This appears to be a result of the perception that these now took longer to process, "the threshold for getting a certificate has gone up," and "officers are inconsistent in determining whether a certificate can be issued". In view of the perceived climate of greater uncertainty in the Bureau in the last couple of years, clients are more insistent that counsel stay within legislated requirements and time periods. "Clients want the assurance that comes with the waiting periods and prenotification."

As indicated in Table 1, the number of Advance Ruling Certificates (ARC) requests as a percentage of total merger reviews has remained fairly consistent over the last six-year period.

Table 1. Caseload*
This table includes all the commenced transactions that Mergers worked on in a fiscal year.
	Number of Transactions
	2000-2001		1999-2000		1998-1999		1997-1998		1996-1997		1995-1996
Business Line	#	(%)	#	(%)	#	(%)	#	(%)	#	(%)	#	(%)
PMN Filing	73	(20)	92	(22)	109	(30)	84	(21)	58	(19)	57	(25)
ARC Request	255	(68)	209	(49)	174	(48)	219	(56)	181	(58)	117	(52)
Other Examinations	45	(12)	60	(14)	26	(7)	17	(4)	23	(7)	17	(7)
Sub-Total	373	(100)	361	(85)	309	(85)	320	(81)	262	(84)	191	(84)
Securitizations	0	n/a	64	(15)	52	(15)	72	(19)	52	(16)	36	(16)
Total	373	(100)	425	(100)	361	(100)	392	(100)	314	(100)	227	(100)

*Includes all transactions received by the Branch from April 1 to March 31

Openness and Transparency

There was widespread view during the interviews that the Branch had become less open and transparent in recent years, in areas such as early identification of issues, willingness to discuss and debate issues, ability of lawyers to get a "progress report" and to negotiate the content of information requests.

There was a general view that in an increasing number of cases lawyers were not informed of emerging issues in a timely manner but rather were advised weeks into the process of issues to address.

On the specific issue of section 11 or other substantial information requests, counsel consistently stated that the Branch should, at the time it issues an information request, provide a clear statement to lawyers of the competition issues and concerns that are outstanding as the review moves to what can be described as the "second stage." Counsel felt that, by the time the information or section 11 request is issued, the issues should have been sufficiently narrowed, the Bureau should be focussed on the outstanding issues, and the context for the request could and should be conveyed to counsel.

The view is also that there should be a clear commitment from the Bureau to discuss the content of the request. Counsel proposed that the Bureau should contact them to discuss what information is being sought, whether the information sought could be provided in a different format than that proposed - one that is easier for the company to provide and still meets the Bureau’s needs.

References were made to the U.S. approach where, when a second request is issued, the DOJ is committed to meeting the parties to discuss and consider modifications within five days. The DOJ also has an appeals procedure to provide parties with the opportunity to narrow the second request when they do not agree with its contents. The Director approves second requests, but does not usually meet with or get involved in negotiations with the parties.

In response to concerns that have been raised concerning the use of section 11 orders by the Bureau, an internal challenge function has been implemented. All section 11 applications must now be reviewed and signed off by a senior officer in the Compliance and Coordination Directorate. The objective is to ensure that the information requested focuses on relevant issues and that parties will be subject to the minimum burden necessary to meet the Bureau’s information needs.

Merger Enforcement Guidelines

A frequently heard concern was that recent Bureau decisions, the current approach of Mergers Branch staff to merger review and the questions and the depth of some reviews suggested that the Bureau was no longer strictly adhering to the competition-based framework laid out in the Merger Enforcement Guidelines (MEGs).

This concern was expressed in two forms. First, the Bureau seemed, particularly in its public statements, to be placing a greater emphasis on quantitative issues at the expense of qualitative factors. Counsel saw this, potentially, as a move away from the MEGs and the intent of the law. A number of counsel gave the impression, in recent cases, that the Bureau would expect divestiture when market shares are more than 45 percent, without due regard for the impact of qualitative factors.

Cited in support of this view were the Bureau’s public statements explaining decisions in the cases involving banks and grocery stores, and counsel’s submissions to the Competition Tribunal in the propane case. In the grocery case for example, lawyers felt that the Bureau described its analysis and findings in terms of market share, devoting very few lines to the consideration of qualitative factors and offering no discussion of the method used and their relative importance. Many spoke of the "red, yellow, green" classification of markets as giving the perception of a market-share-driven analysis. An additional question, in light of the Bureau’s statements, was whether the Bureau would expect divestiture in markets with more than 45 percent market shares regardless of the qualitative factors.

Counsel expressed an additional concern that, as the Bureau had become much more visible in the media and government, the environment in which it was operating had changed, presenting new challenges. They recognized that this had brought an additional burden and dimension to the merger review process.

Administrative Processes

There was a widely held view among lawyers that, since the inception of fees and service standards, the Mergers Branch had become much more process-oriented. The lawyers’ concern was not with the fee but rather with the impact of the service standards, complexity definitions and guidelines ⁵⁹ developed and introduced in 1997 in conjunction with the fees.

Counsel noted instances when they had lengthy debates with Bureau staff about whether a file was deemed to be non-complex, complex or very complex. The time and expense of these conversations detract from the substantive issues and delay closures.

Fees

There were no negative comments about the fees, which are small compared to the total expense involved in a typical merger. The lawyers do, however, expect the process to benefit since the Bureau now receives additional funding through revenue.

Service Standards

A consistent view among the lawyers was that service standards cause greater concern than comfort. A lawyer’s priority is the time required to obtain a decision on a particular case and to provide the Branch with the information it needs in order to make a decision as quickly as possible; closing dates are the driver for lawyers and their clients. Delays in obtaining a response from the Bureau can have very serious economic repercussions for the parties.

Counsel noted that the Bureau no longer systematically sent a letter confirming the service standard. In the first year or so following the implementation of the fee and service standards process, the Bureau sent the letters "...within five business days of receipt of the filing or request."⁶⁰ Some lawyers noted that they had not seen one of these letters in six months to a year.

While regretting the fact that the letters are not systematically sent, counsel were generally of the view that these service standard letters are a source of confusion and worry for merging parties. Many lawyers stated that they no longer ask for these letters for fear that weeks or months into the process, they will receive a letter indicating the administrative service standard period. "If an officer has told me that it will take three to four weeks to come to a decision, I don’t want a letter telling my client that it’s complex and could take up to ten weeks to review." A further complication that was noted is that because the response ⁶¹ is a template (Annex B) that includes the time period but not the specific dates related to service standards, it is often assumed that the service standard period begins when the letter is received which, in some cases, might be a considerable time after filing.

Compounding the problem, in the lawyers’ views, is the difficulty in explaining to merging parties (particularly those outside Canada) the difference between legislated waiting periods and administrative service standards. Again, merging parties are concerned with legal requirements of the merger review process and the economic impact of delays in starting or finishing a review. In this context, service standards are "irrelevant."

An additional concern that was expressed is that human nature might lead officers to view service standards as deadlines rather than outside time limits. In such a situation, lawyers were increasingly concerned that the incentive to complete a review is lessened once a matter is classified as complex and the next internal date of significance is 10 weeks away. In light of these comments, the authors examined recent experience in the Branch. Annex C would indicate that this is in fact not happening, given the distribution of cases to completion time.

It should be noted that the authors of the ICPAC report (see Chapter 9 -Merger Review in an International Context) did share this concern, although they were generally in favour of service standards as a discipline on reviews. "There was also concern that maximum time periods would effectively turn into minimum standard review periods." ⁶²

A further issue that counsel felt needed to be clarified is when the "clock" starts on the review process. Counsel questioned whether it was appropriate to start only when all required information was received, since it is likely that the review could be started before that, while the company is compiling the additional information. Several lawyers referred to the practice in the U.K. Office of Fair Trading to start the clock upon receipt of a "reasonable submission."

Complexity Definitions

There was near unanimity among the lawyers that complexity definitions do not provide any kind of yardstick or comfort level for counsel to use when advising their clients. The categories, particularly the complex category, are seen as too broad. That and their view of a greater inconsistency of interpretation in the past have led lawyers often to ignore them altogether.

The guidelines in the Fee and Service Standards Handbook do not necessarily provide sufficient clarity to enable counsel to advise clients as to how a file will be classified. Counsel do not feel able to provide definitive advice to clients, based on the guidelines, regarding timing or the filing of information.

This was linked to a perception that Branch officers were classifying many more transactions as complex or very complex than they were in the past. While counsel recognize that there continues to be an increase in complex merger filings, they still had the impression that officers were being very conservative in assigning complexity levels to files.

Some lawyers noted that cases had been re-classified either from non-complex to complex or from complex to very complex. There was growing concern that files would be "bumped" to a higher category.

A verification of statistics over the last four years indicates that complexity ratings as a percentage of totals has remained relatively constant (refer to Table 2). Nonetheless, it is expected that centralizing the classification of files within the MNU will ensure consistency and reduce the risk of unnecessary bumping. There may be circumstances however, when issues might arise late in the review, that might warrant a re-classification. This would be on an exceptional basis.

Table 2. 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)

Table 2. 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)
	Number of Transactions
	2000-2001		1999-2000		1998-1999		1997-1998⁶³
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 63.

Most lawyers said that five days is not long enough, in many instances, for the Bureau to determine whether a file is complex or very complex, given the current definitions of complexity. Merging parties and their lawyers would have more confidence in the "system" if the Bureau took more time to assess the issues before determining that a case falls in the complex or very complex category.

Many noted that they would not be troubled if the Bureau eliminated the complexity definitions and service standards. With respect to the definitions, the clear concern was that the complex category is too broad, and counsel would like the Bureau to review the divide between the non-complex and complex categories. Suggestions ranged from expanding the non-complex category, perhaps also adding seven days to the review period, to adding a fourth category.

The lawyers noted that the reality is that the Bureau will get as much time as it requires; it is very rare for lawyers to advise their clients to finalize a merger prior to receiving the go-ahead from the Bureau. As a result, a frequently heard suggestion by counsel is that the Bureau use internal performance standards to provide guidance, internal discipline and training rather than the current published service standards.

Issues Related to Recent Amendments

New Short and Long Forms

Counsel were, for the most part, satisfied with the new short form and revised waiting periods under the Competition Act. The short form, in particular, was seen as a great improvement. It is straightforward, easy to comply with and not too costly in terms of time and money for parties to complete. The information requested on the form is similar to that required in other jurisdictions. Some lawyers, however, noted that in some instances the information required may not, at times, be available. In such instances, counsel want a dialogue with the officer assigned to the file to discuss filing requirements.

Some lawyers felt that having to list 20 clients or customers on the form was unreasonable, and that listing 5 to 10 customers, including the top 2 to 4 would be better, particularly in non-complex cases when companies have low market shares and no overlap. It was felt that the Bureau could ask for additional information, where required, through a formal information request.

Counsel had serious issues both with the content of and policy related to the long form. Most noted that a clear statement from the Bureau on when the long form would be required is essential. Currently, the statements are seen as very qualified and open to interpretation.

One specific concern was that when a file is classified as complex or very complex, according to the service standards guidelines and procedures guide⁶⁴, the Bureau may request a long form. "The levels of complexity defined in the Fee and Service Standards Handbook provide some guidance as to the circumstances in which a long-form submission is more likely to be requested..... At the other end of the spectrum, parties to ‘very complex’ transactions should expect that a long-form submission will be requested if it is not submitted along with the section 114 notice. For proposed transactions in the ‘complex’ category... generally as the level of complexity increases and a detailed review is believed necessary, it is more likely that a long form submission will be required." This, according to counsel, is inappropriate in view of the fact that the definition for the complex category is so broad. Counsel are looking for greater clarity about where the Bureau "draws the line" at the higher end of the complex category for requiring a long-form filing. The lawyers point to the many qualified phrases in the current version of the procedures guide which add to the uncertainty. Given the amount of time counsel report it takes to comply with a long-form request, many lawyers requested a clearer statement from the Bureau.

There was also the perception that the Bureau would require more long forms than it had in the past, given the statement in the procedures guide "it is expected that instead of requesting a detailed list of additional information, the Bureau may ask the parties to provide the long-form information." and that "whether a long form submission will be requested for a ‘complex’ proposed transaction will depend on the supplemental information provided by the parties along with the short form submission, the quality of information obtained from other sources and the preliminary assessment of the section 93 factors." This contrasts with other statements in the guide that "if parties to a proposed transaction file a short form and supplement it with sufficient additional information, the long form might not be necessary." Given these statements, counsel would like the Bureau to look at the text of the guide again and provide greater certainty.

Some suggested the long form only be required when parties are not cooperating, are withholding information or seem to be causing unnecessary delays. The lawyer’s preference, and indeed that of their clients, is to file a short form with additional pertinent information and a detailed review of the substantive issues. Parties would follow up with any additional information the Bureau requires. Counsel think this approach would be less costly for clients and the Bureau and more in keeping with international practice.

Counsel with considerable experience in dealing with the Bureau expressed the view that in the past, they had only ever filed one or two long forms, if any. Some had never filed a long form. By contrast, several noted that, since the implementation of the new regulations, they have been required to file long forms.

A verification of the number of long forms received as of the end of March 2001 indicates that long forms were received in relation to 5 transactions in 1999-2000 and long forms were received in relation to 7 transactions in 2000-2001.

A number of those interviewed expressed a concern about using section 116 to justify not providing information because of the risk of falling afoul of section 116(3) ⁶⁵ with all the attendant time delays that would encompass.

Information

Several lawyers expressed the hope that, with the 1999 amendments, the Bureau would see the value in terms of transparency and guidance, and of issuing interpretation bulletins on substantive issues.

Since the 1999 amendments, the Bureau has published the following guidelines:

Section 108 - Definition of "operating business"
Section 114 - Number of Notices - Multiple Step or Continuous Transactions
Paragraph 111(a) - Exemptions for Ordinary Course of Business Acquisitions (draft)
Section 112 - Exemption for Combinations that are Joint Ventures
Subsection 110(3) - Acquisitions of Non-Voting Shares and Convertible Securities
Subsection 110(4) - Amalgamation
Paragraph 111(d) - Creditor Acquisitions
Section 103 - "Substantially Completed" and Section 119 - "Completed"
Shareholder Agreements
Notifiable Transactions Regulations - Transactions and Events in Section 14
Corporate Spin-Offs

Many also suggested that, given the limited number of cases that go to the Competition Tribunal, the Bureau should increase its use of backgrounders and news releases on significant cases when it decides not to challenge a proposed transaction.

Training

There was a consistent view among lawyers that many of the issues and concerns being raised in the interviews were the result of a lack of a well-thought-out training and development program within the Branch. Counsel saw the uncertainty reflected in obtaining feedback from the Bureau as fundamental indications that there is a need to develop a targeted training program for staff involved in merger review.

One component of a comprehensive training program would involve mentoring and development of new officers. As indicated above, in law firms, experienced lawyers do some form of "triage" and only simple matters are assigned to new lawyers. These new lawyers do not, however, deal directly and autonomously with clients for up to a year. Along the same vein, the lawyers interviewed suggested that new officers should "shadow" experienced officers for up to a year. They could be assigned for three months at a time to officers who have known expertise and qualities, such as analytical skills, writing skills and interpersonal skills for market contacts and interviews. The new officer should also be required to work in the MNU to obtain a complete understanding of filing requirements.

Counsel also expressed a concern that perhaps Bureau staff have not been given the training to fully understand the environment within which a merger proposal takes place. For example, some felt that staff did not understand the mechanics of a public bid and the impact of a protracted merger review on stock prices and market participants. To address this issue, lawyers suggested that an important component of the Bureau’s training would provide information on mergers in the broader context. For instance, it is important to recognize that the review is not taking place in a vacuum, and that with public bids, shareholders, traders, analysts, "Bay Street"and the media are watching and waiting for the Bureau’s decision. Share prices can fluctuate based on perceptions that are generated during the period leading up to a decision.

These multiple market participants do not necessarily understand the Bureau’s workings and requirements. For them, any delays can be perceived as serious concerns about the merger and have serious economic repercussions: "head hunters pick up key people," "Bay Street creates stories," "the world is watching," and "lenders get nervous."

It was suggested that representatives of other bodies such as the Ontario Securities Commission and Toronto Stock Exchange could be invited to provide seminars as part of a regular training program for Merger Branch officers. The Economic and International Affairs Branch could also provide regular economic seminars, including reviews of important cases.

Some also suggested that the Bureau make a regular practice of recruiting officers from other jurisdictions to learn from their processes.

As a final comment on the importance of a focussed training and mentoring program, there was general agreement among counsel that it takes a long time to become experienced in merger review. This "experience, and the confidence that go with it cannot be replicated overnight."

Technology

The consensus amongst those interviewed was that the Bureau should make much greater use of technology in addition to the creation of a database for the MNU as indicated previously. In their view, the Bureau should have a database with the names of officers and their relevant expertise. This database should also include information on relevant industry experts with summaries of the expertise and recommendations, details of persons interviewed with notes about their areas of knowledge and expertise, officer assessments of cases, and the like. Officers could use this database to quickly identify persons who might have knowledge relevant to a particular file, for instance, and who in the Branch might have recently dealt with a similar issue.

It was suggested by some lawyers that the Bureau should request that they file electronic copies of all relevant documents in a specified format. Information on forms would not have to be re-entered into the Bureau’s tracker system, the paper copy could be stored and the electronic copy sent to officers on the file. Electronic annotations could be used to flag important issues to team members.

One other suggestion was that the Bureau scan paper filings upon receipt. Only those documents required for review would be scanned and a numbering scheme and index could be developed for this purpose. This would cut down on paper flow, time and cost.

These two ideas are being considered as part of the Bureau’s Evidence Handling Project.

There were other suggestions:

officers should use laptops when conducting interviews to minimize duplication (i.e. transferring written notes to electronic format);
the Bureau should make more use of CD ROMs; and
the Bureau should make it possible for the short and long forms to be completed electronically.

Increased use of technology would also reduce the amount of time required to produce assessments, news releases and backgrounders. The Bureau would be moving in the same direction as the courts and the Competition Tribunal, and would be better prepared to take a case, electronically, to the Tribunal.

On the specific issue of electronic filings of notification, most lawyers did not feel that the Bureau should be in any great hurry to provide this service, as they had concerns related to a number of issues including client signatures, security and compatibility, and sign off by a company official. Some lawyers noted that they would still have to send many documents in paper format; others suggested that while almost all documents exist electronically they are often in different formats necessitating substantial work for conversion.

Some lawyers recognized the need for and benefit of electronic filing. Others simply felt that the infrastructure was not fully in place to support electronic filing.

In summary, a recommendation of several of those interviewed was that it was vital that the Bureau focus considerable effort on modernizing work processes and tools both for efficiency reasons and to keep up with public demand.

This issue is being addressed through such Bureau initiatives as the Work Processing Project⁶⁶, Evidence Handling⁶⁷, and the Bureau Information Management System (BIMS)⁶⁸.

Planning

An issue consistently raised during the interviews was whether the Branch was undertaking sufficient planning to effectively meet its responsibilities. There were suggestions that the Bureau should take a more pro-active role in foreseeing trends and preparing itself for future merger activity and other significant mergers. It was suggested that some of the revenue the Bureau receives be used to have academics or industry experts provide research and information on future trends in key industries. This would give staff a head start when faced with a merger in a key or fast-moving industry.

The Branch could conduct annual or periodic environmental scans to ensure that it has the knowledge and expertise to address new issues as they arise. "The Branch can consult the World Bank, economic experts etc. to foresee trends and prepare accordingly. This, in the long run, will save time and money for the Branch and merging parties." "They can sponsor economic ‘think tanks’ to develop papers on emerging issues like technology, energy, telecom, etc."

Another suggestion was that the Branch should conduct weekly reviews of its caseload to quickly "shut-down" those cases with no competition issues or minimal overlap.

As a means to address training and mentoring issues, it was suggested that the Branch ensure an appropriate balance of experienced and less experienced officers when forming large teams for complex and very complex cases. Less experienced officers could be given responsibility for research and third-party contacts, while more senior officers would be primarily responsible for the substantive analysis.

A number of lawyers also felt that the Bureau should ensure that case theories are developed early in the review process. This would reduce the amount of information requested by the Bureau and would focus the review thus reducing review time. There were suggestions that Department of Justice lawyers should be involved much earlier in case assessments to help develop the theory of a case; junior lawyers should be dedicated to the Branch to perform this function. It was felt that when and if issues become more complex, the "heavy hitters" could be brought into the process. This would ensure that the case is developed with a broader enforcement view in mind in case of challenges and litigation.

This is being addressed through the Re-engineering Project involving the Competition Law Division, Justice Canada.

The importance of post-mortems was also stressed as a way of improving knowledge and the process. It was suggested that the Bureau should hire an experienced competition law economist to do post-assessments on important cases. Valuable lessons could be learned on how to improve the process and analysis.

The Bureau should also encourage parties to meet confidentially with the merger review staff early in the process. This would provide the Bureau with the opportunity to harness the necessary resources and prepare ahead of time.

Finally, many noted that the bar must also take responsibility for the manner in which it conducts business with the Bureau. If counsel are forthcoming with information and provide complete briefings and explanations ahead of time regarding peculiarities of a case, a better working relationship will be established and merger reviews generally will go more smoothly.

Annex A: Stakeholders Interviewed

**Toronto**
Law Firm		Names
Smith Lyons Scotia Plaza Tower 58th Floor, 40 King Street West Toronto, Ontario, M5H 3Z7		Bruce M. Graham Eric Adelson
Stikeman, Elliott Commerce Court West 199 Bay Street Toronto, Ontario, M5L 1B9		Lawson A.W. Hunter, Q.C.
Fraser Milner Casgrain 1 First Canadian Place 39th Floor, 100 King Street West Toronto, Ontario, M5X 1B2		Randy Hughes Tracey Patel et al.
Osler, Hoskin & Harcourt 1 First Canadian Place P.O. Box 50 Toronto, Ontario, M5X 1B8		Timothy J. Kennish Michelle A. Lally et al.
Blake, Cassels & Graydon Commerce Court West Suite 2300, 199 Bay Street Toronto, Ontario, M5L 1A9		Warren M.H. Grover et al.
Lang Michener Suite 2500, BCE Place 181 Bay Street P.O. Box 747 Toronto, Ontario, M5J 2T7		James B. Musgrove
Borden Ladner Gervais Scotia Plaza Suite 4100, 40 King Street West Toronto, Ontario, M5H 3Y4		Robert S. Russell
Goodmans Eaton Towers (Eaton Centre) 24th Floor, 250 Yonge Street Box 24 Toronto, Ontario, M5B 2M6		William Rosenfeld Robert Vaux
Davies Ward Phillips & Vineberg 44th Floor, 1 First Canadian Place Toronto, Ontario, M5X 1B1	Calvin S. Goldman, Q.C. Paul S. Crampton
Kelly Affleck Greene Suite 840, 1 First Canadian Place P.O. Box 489 Toronto, Ontario, M5X 1E5	Donald S. Affleck, Q.C. Donald B. Houston
Davis & Company Park Place Suite 2800, 666 Burrard Street Vancouver, British Columbia, V6C 2Z7	Stanley Wong
Fasken Martineau DuMoulin Toronto Dominion Bank Tower, P.O. Box 20, Stn. Toronto Dominion Toronto, Ontario, M5K 1N6	Anthony F. Baldanza et al.

**Montréal**
Stikeman, Elliott 40th Floor, 1155 René-Lévesque Blvd. W Montréal, Quebec, H3B 3V2	Francine Matte, Q.C.
Ogilvy Renault Suite 1100, 1981 McGill College Avenue Montréal, Quebec, H3A 3C1	Robert Cowling Denis Gascon
McCarthy Tétrault "Le Windsor" 4th Floor, 1170 Peel Street Montréal, Quebec, H3B 4S8	Yves Bériault Madeleine Renaud Yves Comtois

Annex B: Example of E-mail response

Re: Service Level Dates for Your File XXXXXXXXXXXX

I am writing in regard to your letter of xxxxxxxxxxxx requesting the issuance of an Advance Ruling Certificate pursuant to section 102 of the Competition Act and your short-form notification filing pursuant to section 16 of the NotifiableTransactions Regulations with respect to the above-noted transaction.

We have reviewed the material submitted and determined this matter to be classified as non-complex. The corresponding service standard period is 14 calendar days.

The information that you have provided in support of your request is sufficient to commence the Bureau’s review. In addition, third party contacts will not be required. As a result, the service standard period commenced xxxxxxxxxxxx, the date that your request was received by the Bureau, and will end on xxxxxxxxxxxx.

Should you wish to discuss or have any questions concerning this matter, please contact the reviewing officer, xxxxxxxxxxxxxxxxxxxxxx at (tel no.) xxxxxxxxxxxx.

Yours sincerely,

Michael Sullivan
Senior Competition Law Officer
Merger Notification Unit
(819) 953-4297
sullivan.mike@cb-bc.gc.ca