Frequently asked questions regarding updated merger guidance documents
On October 22, 2010, an updated Competition Bureau Fees and Service Standards Policy for Mergers and Merger-Related Matters (Policy) was published in the Canada Gazette Part I.
As a result of the changes to the Policy and recent amendments to the Competition Act (Act), the Bureau has published a revised Competition Bureau Fees and Service Standards Handbook for Mergers and Merger-Related Matters (Handbook) and a revised Procedures Guide for Notifiable Transactions and Advance Ruling Certificates Under the Competition Act (Procedures Guide). The policies and procedures set out in the Policy, Handbook and Procedures Guide come into force on November 1, 2010.
The following sets out answers to anticipated questions regarding the changes to the Handbook and Procedures Guide. However, this document does not replace the need to review the Policy, Handbook and Procedures Guide in their entirety, and the Bureau strongly encourages you to do so in advance of the November 1, 2010, implementation date.
Competition Bureau fees and service standards handbook
1. What is a service standard?
A service standard represents the maximum time within which the Bureau will endeavour to advise parties of the Bureau's position in respect of a proposed transaction that is the subject of a notification and/or a request for an advance ruling certificate (ARC), assuming cooperation from the parties. Proposed transactions are designated as "non-complex" or "complex" and assigned the corresponding service standard.
2. Have there been changes to the non-complex, complex and very complex service standards?
Yes. The complex and very complex categories have been consolidated.
3. How are non-complex and complex mergers defined?
- Non-complex mergers are readily identifiable by the clear absence of competition issues, and include transactions where there is no or minimal overlap between parties, assuming properly defined product and geographic markets. Minimal overlap includes a combined post-merger market share of less than 10% in any relevant market. Transactions with a combined post-merger market share of between 10% and 35% may be considered non-complex or complex, depending on a number of complicating factors set out in the Handbook. Where one or more of these factors are present, the transaction is more likely to be classified as complex. Where none of these factors are present, the transaction is more likely to be classified as non-complex.
- Complex mergers involve proposed transactions between competitors, or between customers and suppliers, where there are indications that the transaction may, or is likely to, create, maintain, or enhance market power, as described in the Merger Enforcement Guidelines. Proposed transactions, where the combined post-merger market share of the parties is potentially 35% or more, are generally classified as complex. This category also includes certain proposed transactions where the combined post-merger market share is less than 35% and one or more complicating factors are present.
4. How is a service standard assigned?
The senior case officer responsible for assessing a transaction is also responsible for assigning complexity. The officer may consult with an Assistant Deputy Commissioner, the Economic Policy and Enforcement Branch of the Bureau, market participants, and/or outside experts before assigning complexity, particularly where a transaction appears to be complex. In determining complexity, consideration will be given to factors including product market, geographic market, market shares, effective remaining competition and barriers to entry.
5. What is the duration of the new non-complex and complex service standards?
For non-complex mergers, the service standard is 14 calendar days, commencing the day a complete notification or ARC request is received by the Commissioner, assuming sufficient information is provided to assign complexity.
For complex mergers, the service standard is 45 calendar days, commencing the day a complete notification or ARC request is received by the Commissioner, assuming sufficient information is provided to assign complexity. However, where a Supplementary Information Request (SIR) is issued, the service standard is 30 calendar days and commences the day on which the Commissioner has received a complete response to the SIR from all SIR recipients.
6. What information does the Bureau typically require to designate complexity and commence the applicable service standard?
- For mergers with no or minimal overlap, the Bureau typically requires the following information, as applicable, to assign complexity:
- a description of the proposed transaction, including the proposed consideration to be paid and received by each party (e.g. cash, assets, shares, interests);
- the full name of each party to the proposed transaction;
- a list of all affiliates, relevant for a competition analysis, of each party that has significant assets in Canada or significant gross revenues from sales in, from or into Canada;
- a copy of each legal document, or the most recent draft of that document if it has not yet been executed, that will be used to implement the proposed transaction; and
- a submission regarding relevant product and geographic market definitions, along with a detailed explanation as to why the parties believe that there are no or minimal competitive overlaps (horizontal or vertical) between the businesses of the parties, taking into consideration any: (i) significant affiliates, (ii) related businesses in which a party owns any interest; and (iii) interlocking directorships.
- For mergers with moderate overlap of between 10 and 35% and no complicating factors, the Bureau typically requires the following information, as applicable, to assign complexity:
- the information required by section 16 of the Regulations;
- a submission regarding relevant product and geographic market definitions, identification of all competitive overlaps (horizontal or vertical) between the businesses of the parties, taking into consideration any: (i) significant affiliates, (ii) related businesses in which a party owns any interest; and (iii) interlocking directorships, and a detailed explanation as to why the parties believe there are no competition issues arising as a result of the proposed transaction;
- for each relevant product, in each relevant geographic market for the most recently completed year: (i) independent third party data with respect to: (1) the total annual dollar sales, unit sales and capacity; (2) market shares for each party and each competitor; and (ii) if independent third party data is not available, the dollar sales, unit sales and capacity for each party and estimated market shares for each party and competitor, with an explanation of the basis for the estimates;
- a list of the parties' respective competitors; and
- all co-production, joint venture or strategic alliance agreements with a competitor in relation to any relevant product and having an effect on a relevant geographic market.
For mergers between competitors and between customers and suppliers, where there are indications that the transaction may, or is likely to, create, maintain or enhance market power as described in the Merger Enforcement Guidelines, and where market shares are (i) greater than 35%, or (ii) between 10 and 35% and there are one or more complicating factors, the Bureau typically requires the following information, as applicable, to assign complexity:
- the information listed above for non-complex mergers with moderate overlap;
- in respect of each party and each of its significant affiliates, for each relevant product, in each relevant geographic market, all marketing, business and strategic plans, and similar documents, that were prepared or received by an officer or director of the corporation; or, in the case of an unincorporated entity, an individual who serves in a similar capacity, and that have been implemented in Canada within the two years before the date of the notification or ARC request or that are to be implemented in Canada;
- in respect of each party and each of its significant affiliates, all offering memoranda (or documents that served that function) for the purpose of evaluating or analyzing the proposed transaction with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into new products or geographic regions produced within the two years before the date of the notification or ARC request;
- all non-compete agreements and other types of agreements, arrangements or licences the parties may have with third parties that would have an impact on the ability of actual or potential competitors to compete with the parties now or in the future;
- submissions regarding any relevant factors listed in section 93 of the Act; and
- a detailed explanation as to how prices are determined for each relevant product in each relevant geographic market.
7. When does a service standard commence?
The applicable service standard commences the day a complete notification or ARC request is received by the Commissioner, assuming sufficient information is provided with the notification or ARC request to assign complexity. In the case of an unsolicited bid under subsection 114(3) of the Act, the service standard will commence when all parties other than the target corporation have complied with the applicable requirements.
8. When do the new service standards come into force?
The new service standards come into force November 1, 2010.
9. When can a service standard be paused?
Where the Bureau has requested additional information from one or more of the parties to a proposed transaction (other than the target in the case of an unsolicited bid under subsection 114(3) after the commencement of the service standard period, and such additional information is not received within three days in a non-complex case or five days in a complex case, the Bureau may, on the following day, pause the service standard period. Upon receipt of the information, the service standard period will resume.
10. When is a service standard satisfied?
A service standard represents the maximum time within which the Bureau will endeavour to advise parties of the Bureau's position in respect of a proposed transaction that is the subject of a notification and/or an ARC request, assuming cooperation from the parties. Typically, the service that is the subject of the service standard is considered to have been provided when the parties are either: (i) issued an ARC or a No-Action Letter; or (ii) advised that, without a remedy, the proposed transaction is likely to prevent or lessen competition substantially.
11. Have there been changes to the filing fees?
No. The filing fees remained unchanged at $50,000 for merger notifications and ARC requests, and $5,000 for written opinions requests with respect to Part IX of the Act.
However, if a notification is withdrawn and subsequently resubmitted (pulled and refiled), no fee will be required for the subsequent notification provided that certain conditions set out in the Policy are satisfied.
12. When will parties be advised of complexity?
The Bureau will inform parties of the complexity designation within five business days of receipt of sufficient information to assign complexity.
1. What is the procedure for submitting a notification or ARC request electronically or in paper format?
Notifications and ARC requests may be submitted in paper form or electronically to the Merger Notification Unit (MNU) during business hours (9:00 a.m. to 5:00 p.m. Eastern Time on business days). Notifications and ARC requests may be sent to the MNU in paper copy or electronically, and shall be deemed to be received when delivery is effected to the Bureau Mail Room or the Bureau Mail Server in Gatineau, Quebec during business hours. ARC requests that are not voluminous may also be sent by facsimile, and will be deemed to be received when transmission is successfully effected to the MNU during business hours. Any notification or ARC request received after 5:00 p.m. Eastern Time on a business day, or at any time on a holiday, shall be deemed received by the Commissioner on the next business day.
2. How can I reach the MNU?
The MNU can be contacted at:Merger notification unit
Mergers branch, Competition Bureau
3. Are parties required to translate foreign language documents prior to submitting them with a notification or ARC request?
Previously, parties were required to translate all documents submitted with a notification, unless otherwise agreed. The Procedures Guide no longer mandates the translation of pre-existing documents for the purpose of notification, and instead requests, to the extent it already exists, an English or French language outline, summary, extract or verbatim translation. This does not alter the requirement that foreign language documents submitted in response to a SIR be translated into either English or French.
4. If the MNU requires a party to provide information pursuant to subsection 116(3), when will the waiting period and service standard commence?
Where a party has chosen to not supply information required under section 114 with a notification on the basis that it is not relevant or because it had previously been supplied and the information is subsequently requested under subsection 116(3), the applicable waiting period does not commence until that requested information is supplied.
5. What should parties do when there has been a failure to notify?
Where a transaction has been completed in violation of the Act, it is important to bring the matter to the attention of the MNU and submit a notification, together with the applicable filing fee and an explanation for the failure to notify, as soon as possible. The explanation should be submitted by an officer or director of the party, setting out the reasons why the notification was not filed in a timely manner, how and when the failure was discovered, and what steps have been taken to prevent a violation of the Act in the future.
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