Merger Review Benchmarking Report - Chapter 10

Table of Content

The following is a summary of the key observations of the authors resulting from the research and analysis described in the previous chapters. The observations are grouped thematically into areas that naturally emerged during the final analysis.

Communications with filing parties

Early and on-going communications with parties and their lawyers concerning a proposed or actual transaction and with the legal and business communities on merger issues in general is important.

1)  Pre filing

There was concern expressed by members of the Bar during interviews held in the winter of 2000 that managers and other senior Mergers Branch staff were not seen as being as consistently available as they had been in the past to meet with parties prior to filing. Such meetings are potentially very useful because they allow for discussion of the nature of the potential merger and give parties and the Branch the opportunity to narrow the issues prior to filing and to focus submissions and information requirements at the earliest moment. An inherent result is the potential to shorten the subsequent period required for review.

The Office of Fair Trading in the United Kingdom has established a process for providing confidential guidance and informal advice for offering useful guidance and establishing a more visible and structured pre-filing consultation process.

2)  Filing Requirements

There is a need to clarify a number of procedural matters concerning the use of the long-form filing since there are concerns that assembling the information required can be a major endeavour and, in some instances, certain information may not be relevant to the matter at hand. As currently worded, the requirements of the long form are not always clear to parties and their lawyers.

Canadian lawyers who were interviewed expressed the view that there is a need to clarify the language in the Procedures Guide⁹⁰ describing in what instances the long form will be required. There was increased concern that the long form will be required more frequently than it was in the past and that it may be requested some time after a short form has been submitted.

A verification of records demonstrated that since the implementation of the regulations, there were long forms filed in 5 cases in 1999-2000 and long forms filed in 7 cases in 2000-2001.

3)  Contact Person

By informing counsel immediately upon assignment of a file of the name and telephone number of the officer responsible, the Branch creates the vehicle for an early dialogue with that officer. This also enables the early identification of additional information for the Branch if necessary, and the potential to quickly narrow the issues.

4)  Technical Advice

Lawyers must be able to rely on receiving timely, accurate and consistent advice from the MNU regarding issues related to notification.

There would be clear benefits for the Mergers Branch and specifically the MNU from the creation of a database of interpretations, opinions and advice with the possibility of placing responses to frequently asked questions on the Bureau Web site.

The Assistant Director of the U.S. Federal Trade Commission’s Pre-merger Notification Office (PNO) has created a "best practice" for filing processes, triage, communicating policies and procedures with "frequent filers." In addition, a senior U.S. counsel has developed a database that contains interpretations related to all sections of the Hart-Scott-Rodino provisions. This type of user-friendly database is useful, cost-effective and ensures consistency of information and advice.

The MNU intends to meet with "frequent filers" on a regular basis.

Such meetings were held in January 2001 in various Canadian cities to initiate a dialogue with stakeholders related to filing requirements. Staff of the MNU also met with the Director of the PNO at the FTC to gain additional insights into filing processes at the FTC.

5) Completing a Filing

It is essential that information be received by the Mergers Branch in a timely fashion.

Counsel for merging parties should be reminded to send all merger filing material to the MNU. Failure to send material directly to the MNU can lead to delays in notifying counsel that the filing is complete and delays in the progress of the review.

6) During Review

When the Mergers Branch keeps parties informed of developments and issues related to a file as they arise, lawyers are in a better position to address matters in a timely and efficient manner.

Efficiency and timeliness can be improved if information requests (particularly those of a substantial nature) and section 11 orders are discussed with counsel. Such discussion enables parties and their lawyers to better understand the nature, format and intent of information requirements. For example, an information request might include a requirement for information that has already been produced for another jurisdiction but in a different format. This format might be acceptable for submission to the Bureau. With the increase in the number of cross-border mergers and the consequent requirement for merging parties to file in many jurisdictions, it is important to consider the most effective way to obtain information from parties who are responding, often simultaneously, to information requirements in multiple jurisdictions.

The U.S. Federal Trade Commission and the U.S. Department of Justice announced in April 2000 a formal process whereby staff "routinely schedule second request conferences early in the investigation in which key issues will be identified and, hopefully, an agreed upon plan for the investigation put in place."⁹¹ In addition, "staff attorneys are now instructed to convene a ‘second request conference’ with parties to a transaction within five business days after issuance of the second request, unless otherwise agreed."⁹² Were the Branch to consider such a process, many issues related to legislated waiting periods and service standards would require careful consideration.

7) Feedback leaflets

There is a need to review the content of the feedback leaflets. The cards provide an excellent picture to managers and staff of stakeholder views, levels of satisfaction or dissatisfaction and appreciation of particular practices. It was found that the cards, as currently worded, do not provide a complete range of targeted information necessary for stakeholders to rate specific areas of performance. The cards provide important information related to timing and deadlines but very little, if any, related to economic considerations, client service, etc. Additional questions targeted to these areas would be of considerable value to the Mergers Branch in gathering, on a systematic basis, timely and useful feedback from clients on all key areas of performance.

A higher rate of return may be achieved if the Bureau instituted a process to ensure the anonymity of the sender. It was found by the authors that some stakeholders do not complete the cards when they have a complaint as they are looking for a greater degree of anonymity.

A new process has been instituted whereby the Compliance and Coordination Directorate receives all feedback leaflets and provides regular reports to the Merger Branch. The card is also being reviewed and will be modified to extract more meaningful information from stakeholders.

8)  Public Communication

Canadian counsel expressed the view that it is important wherever possible that the Bureau make as much information available as possible to the legal and business communities on decisions, major files, interpretations of various points of law, policies and procedures. This is particularly important given the relatively few cases that result in Competition Tribunal proceedings. This information enables members of the bar to better understand the approach and position of the Branch and to better serve their clients.

The Bureau’s Web site is seen as a source of valuable information. Some of the documents are not available, however, in downloadable format.

The Bureau is in the process of reviewing its website to address these and other issues.

The Australian Competition and Consumer Commission regularly publishes brief summaries of important cases and interpretations. Canadian and foreign lawyers find that these provide useful guidance and clarification of the law. The U.S. Federal Trade Commission and U.S. Department of Justice also regularly publish speeches and studies related to important cases, interpretations and undertakings. The U.K. Office of Fair Trading has a practice of publishing working papers on particular subjects.

In Canada, lawyers see value in knowing about cases that were not opposed and would like "no- action" letters to be more detailed. The news releases and back grounders the Civil Matters Branch produced for two cases (ADLS and Autobody) are, according to members of the bar, good examples of informative and educational Bureau communications. Documentation prepared following reviews in the bank transactions were also seen as useful.

Stakeholders recognize the need, however, in view of resource constraints, to balance their need for information with the Bureau’s primary role of reviewing mergers in a timely manner.

Process

The Mergers Branch recently announced the creation of the Merger Notification Unit, which is headed by a senior officer and now includes several officers. This is seen by the authors as a very positive step in increasing consistency and timeliness and the adoption of a "best practice".

Merger notification files are now assigned to officers whether or not the filings are considered complete. This enables the officer to begin the review earlier, separates the technical question of the completeness of the filing from the review itself and, thus, enables the officer to have an early dialogue with parties, when required.

Files are now assigned to officers "electronically" rather than being routed by hand. This has resulted in a decrease in the time taken to assign cases thereby permitting the review to begin more quickly.

There were comments during the interviews with the bar in early 2000 about delays in reviewing cases. While most delays related to complex and very complex cases (and those having a multi-jurisdictional dimension), it was also the experience that the review of non-complex transactions was slowing down. This was attributed to increases in filings, staff turnover, and the increased complexity of the cases and globalization.

The MNU, in addition to handling prenotifications and requests for advance ruling certificates, has recently been made responsible for classifying files (as non-complex, complex or very complex) and handles many of the non-complex cases. Once fully operational and established, this change should prove beneficial in many ways:

There were many references made to the 2-stage process and 30-day waiting periods in the U.S. and E.U. Many suggested that the Bureau might consider, over the longer term, a system which more closely resembles that of the U.S.

Most agreed that the service standard of 5 months in the Bureau for communicating a decision to parties on a very complex case is acceptable and closely aligned with the legislated time in the EU and the time period recommended by ICPAC.

The advice provided by Justice to the MNU is currently not available in easily accessible electronic format. Conversion of paper and electronic documents to one consistent format would further enable the Department of Justice Canada and the MNU to provide consistent and timely advice about prenotification.

It is recognized that early involvement of lawyers and economists on cases is essential for ensuring that the theory of a case is developed early. This also ensures consistency as the case develops.

The U.S. Federal Trade Commission’s Compliance Division interacts with attorneys early in the merger review process and later monitors compliance with orders and looks for violations of the Hart-Scott-Rodino rules. The Bureau of Economics brings in academics and business people to brainstorm on emerging issues in recognition of the value of scanning the environment and planning ahead.

Legislative Amendments

There is a need to examine whether the current legislation supports the growing need, crucial to an effective review process, to exchange merger information with other jurisdictions.

The Bureau should explore the use of waivers, which are described in Chapters 5 and 9 of this report, and are seen as effective both for agencies and parties.

In view of the limited scope for the enforcement of undertakings, there is growing consensus that legislation should provide a process for registering consent agreements with the Competition Tribunal.

Training and Development

An effective training plan for staff who do merger review should include the Merger Enforcement Guidelines, administrative processes and filing requirements.

External speakers are seen as valuable and inexpensive sources for learning. Many suggested the Bureau should not restrict its use to nationals, but should invite experts from other jurisdictions and areas of expertise that might provide a broader perspective for managers and staff.

The Bureau’s rotation and mentoring programs are seen as effective and, when used consistently, provide great benefit to employees. Rotation can be expanded to include rotation within the Mergers Branch from one area or senior officer to another. For example, a new officer could begin in the Merger Notification Unit, rotate to another division and be matched with a mentor.

Personal training plans would be beneficial to ensure that officers, over the course of their careers in the Bureau, benefit from systematic development and feedback.

Ongoing Process Improvement

Finally, the authors also recommend that the Bureau, having obtained a substantial amount of baseline information related to the merger review process through this benchmarking initiative, re-examine the state of merger review in two years time.

Chapter 9   Table of Content