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Proactive Disclosure
Merger Review Benchmarking Report
TABLE OF CONTENTS
The Benchmarking Project
The Study
Attributes of an Effective Merger
Review Process
Summary
Chapter 1 - Background 10
Methodology
Process Mapping
Stakeholder Interviews
Benchmarking
Partners
Feedback Mechanisms
Other Resources
Chapter 2 - Merger Review in Canada
Merger Pre-notification
Observations
Case Assignment
Legal
Advice
Financial Processing
Program Officers
International
Notifications and Contacts
Photocopy Unit
Resource Centre
Summary of
One-on-One Interviews
Service Standards
Workload
Training
Other Issues
Chapter 3 - The Mergers Branch Employee Survey
Results
Summary
Annex A
Chapter 4 - Merger Review in the United Kingdom
Merger Review Structure
Definition of a Merger
Thresholds for Applying
the Fair Trading Act
Substantive Test
Review
Process
Notification
Confidential Guidance
Informal
Advice
Administration of a Merger Review
Merger Panel
Impact of Office
of Fair Trading and Secretary of State Decisions
The Role of the Competition
Commission
Impact of Competition Commission Decisions
Merger Review
Fees
Review of Current UK Merger Review Test and Process
European
Community Merger Regulation (ECMR)
General Views of the Private
Sector
Confidential Guidance
Voluntary Pre-Notification Versus Informal
Filing
Extent and Value of Published Information
Office of Fair Trading
Process
Adversarial Versus Non-adversarial Process
Annex A: - Persons Interviewed
Annex B: - Statistical
Information
Chapter 5 - Merger Review in the United States
U.S. Merger Review Structure
The Federal Trade Commission
The
Department of Justice
The Notification Process
Review Process in the
FTC
Pre-merger Notification
Clearance
Review by the Bureau of
Competition
Second Request
Closing Files
Compliance Division
Bureau
of Economics
International Cooperation
Review Process at the Department
of Justice
Pre-merger Notification
Review
Second Request
DOJ
Resources
International Cooperation
Comments from the Private
Bar
Canada
Annex A: People Interviewed
Annex B
Chapter 6 - Merger Review in Australia
Introduction
Legislative
Provisions
Authorization
Structure
Process
Remedial
Measures
Public Register
Chapter 7 - Interviews with the Private Bar
Overview
Prenotification Unit and Process
Timeliness and Initial Triage
File
Review
Accessibility
Consistency and Predictability
Openness and
Transparency
Merger Enforcement Guidelines
Administrative
Processes
Fees
Service Standards
Complexity Definitions
Issues
Related to Recent Amendments
New Short and Long
Forms
Information
Training
Technology
Planning
Annex A:
Stakeholders Interviewed
Annex B: Example of E-mail response
Annex C:
Meeting the Service Standard target: 1997/1998 to 2000/2001
Chapter 8 - Report on Feedback for Mergers-related Services
Feedback Leaflet
Comments from
Stakeholders
Timeliness
Consistency and
Predictability
Conclusions
Recommendations
Chapter 9 - Multi-Jurisdictional Merger Review
I. Merger Review Processes
II. International Cooperation
Best
Practices for International Cooperation
Early Identification of Other Reviewing Agencies
Early Notice to
Management of Multi-jurisdictional Issues
Notification
Exchange of
Information
Understanding the Context
Coordination of Information
Requests
Transparency
Jointly Work Towards Acceptable
Resolutions
Centre of Expertise on International Cooperation
Chapter 10 - Summary of Observations
Communications with filing parties
Pre filing
Filing Requirements
Contact Person
Technical
Advice
Completing a Filing
During Review
Feedback leaflets
Public
Communication
Process
Triage
Service Standards
Legal Support
Program Support
Case
Assessment
Legislative Amendments
Training and
Development
Ongoing Process Improvement
Executive Summary
In the mid-1990s, the Competition Bureau recognized that it needed an influx of resources to deal with the burgeoning wave of new mergers resulting in large part from globalization and free trade. Revenue from fees for services was seen as an appropriate source to fund these necessary activities. Thus, in November 1997, after extensive consultation, the Bureau introduced fees for a number of its services and regulatory processes, namely pre-merger notification, advance ruling certificates, advisory opinions and photocopies. The Bureau also developed service standards in consultation with stakeholders to ensure that, since they were now paying for services, clients would have some say in the manner and timing of the delivery of those services.
One of the expectations of both Treasury Board and those paying the fees was that revenue would be used to improve the current merger review process. A benchmarking exercise was seen as an ideal way to meet that obligation and was timely, given the rapidly changing environment within which the Bureau and the Mergers Branch then operated. A rising number of filings, an increase in complex multi-jurisdictional mergers, and the challenges of changing technology were all having a significant impact on the work of the Mergers Branch.
The Benchmarking Project
The project was led by the Compliance and Coordination Directorate of the Bureau with a Steering Committee and Working Group composed of managers and staff from the Mergers Branch and the Competition Law Division , Industry Canada Legal Services, Department of Justice ("Competition Law Division, Justice Canada").
The objectives of the study were to develop processes and procedures that are realistic and that reflect the best practices of the Bureau's benchmarking partners, are useful from an operational perspective, are client-responsive and are as efficient and consistent as possible. The expected benefits were increased efficiency, improved client service and turnaround times, improved training and career development and better overall functioning of the Branch.
It was important to involve in the project all persons with an interest in the success of the Canadian merger review process, including Mergers Branch employees, staff who provide ancillary services to the Branch, and lawyers representing merging parties. In addition, other competition agencies were invited to participate in order to give the Bureau an opportunity to understand and compare their approaches and ultimately incorporate their best practices when appropriate. These agencies, it was discovered, faced many of the same challenges in merger review as did the Competition Bureau.
The Study
The Benchmarking Project represents the most thorough study ever undertaken by the Bureau of its operations. It is the first comprehensive examination of the merger review process in Canada since the enactment of the Competition Act in 1986.
The authors of the Benchmarking Study ("the authors")1 undertook process mapping which broke down the steps of the merger review process into its individual components and enabled the Working Group to identify strengths, bottlenecks, areas for study and potential solutions.
Interviews with Mergers Branch staff provided an exceptional opportunity to benefit from the day-to-day experience of those faced with the unprecedented number of mergers in recent years, globalization and the review of increasingly complex transactions.
In-depth interviews with a large number of lawyers who deal with the Branch on a regular basis enabled the Working Group to identify key issues, perceived and actual over the period of time since the introduction of the legislation in 1986. The lawyers had obviously spent a substantial amount of time preparing for these interviews, and were ready not only to identify issues but also to offer constructive suggestions for change.
Interviews with other competition agencies enabled the comparison of practices in Canada with those in other jurisdictions and allowed the Bureau to benefit from their processes, their experience and the thinking that has gone on in agencies faced with similar challenges. Members of the Working Group also interviewed lawyers in these countries to obtain their views on their country's system, and their insight into what they consider to be best practices related to merger review.
Attributes of an Effective Merger Review Process
All competition agencies are faced with a continuous increase in the numbers of mergers they are required to review, more and more of which are complex and involve multiple jurisdictions. This places greater demands on effective analysis (market definition, barriers to entry, rate and nature of change) and requires ongoing dialogue with the parties. It also increases the necessity for effective cooperation with other investigative agencies around the world.
The Mergers Branch is recognized by those interviewed for the professionalism of its staff, and their dedication and commitment to respecting and working within closing dates. Having said this, it should be understood that a great deal of the frustration expressed by members of the bar about the current review process was focussed on problems and issues that were seen to have developed since the inception of service standards.
The study's findings are consistent with respect to the essential attributes of an effective merger review process, whether identified by Mergers Branch staff, members of the bar, other competition agencies or the authors of the International Competition Policy Advisory Committee report.
Consistently, the first and foremost factor identified is that every successful merger review process is built on the ability of an agency's staff to review and assess filings effectively and quickly at the front end of the process. The agency must "cast its net" widely enough to capture potentially problematic transactions. Having said that, the agency must also have a system in place that allows it to quickly identify cases with competition issues and quickly close those that do not raise concerns. This report includes recommendations related to both the structure and process for achieving this crucial requirement.
Another attribute of a "best practice" agency is consistency of approach among case officers during the merger review process. This includes consistency in the nature and scope of information requests, and in the guidance provided to lawyers.
Other key attributes of an effective merger review system identified by the study are openness/transparency and accessibility. It is important to have a dialogue with the agency early in the process to quickly narrow the issues. Several agencies have formal or informal processes to allow discussions prior to filing, which have the advantage of allowing early identification of issues and related information requirements and, by corollary, of issues that are "off" the table. It is important, once the filing is made, for counsel to have an ongoing dialogue with the agency to discuss new issues and get a sense of the status of the review.
Linked to openness is the requirement that agencies publish as much information as possible in guidelines, notices, annual reports, statements and speeches. Articulating clearly an agency's rationale for challenging, or refraining from challenging, significant transactions (that is, decisions that set precedents or otherwise indicate a shift in doctrine or policy) adds fundamentally to the understanding of the agency's underlying approach. Publishing comprehensive guidelines on merger review, as has been done in Canada, enhances understanding and provides discipline for both the agency and filing parties.
Successful merger review is also based on well-thought-out and implemented training and development programs. Such programs provide staff with a full understanding of the economic and legal issues related to merger review and the context within which mergers or specific transactions are taking place. Training programs are critical to the quality of merger review, given the complexity and breadth of the issues involved and continually emerging trends. One obvious benefit of a training program is that it enhances consistency within the review agency and increases confidence among staff when providing advice to lawyers and making decisions.
Maximizing the use of technology is necessary today to support timely and effective merger review. Technology can be used to develop databases to ensure the consistency of information and the ready availability of information on precedents. Technology can also help speed the movement of files and reports within the review agency, reducing the time needed to assign or review matters.
Summary
The report identifies those areas of the current merger review process that are effective and efficient and those where change may be required in order for the Mergers Branch and the Bureau to create a "best practice" process from start to finish. This will assist the Branch in discharging its responsibilities in a timely, thorough, transparent and consistent fashion, according to the requirements of the law. A comprehensive set of summary observations is included at the end of this report.
Many suggestions, if adopted, will represent a substantial change for the Branch and the Bureau. Some will affect not only the structure of the Branch but also its processes, approach to delegation and decision making. It is the view of the authors that this process improvement initiative will also ensure Canada has an effective, efficient, open and responsive system for linking the best practices at home with the best learning and practices from abroad.
For this benchmarking initiative to have the greatest impact, it must be recognized that the project is only a start, and that continuous learning and review are essential to maintaining the best practices described above.
A reasoned approach is being taken while implementing some of these changes. Some have been adopted, and others need to be refined and adapted to ensure a smooth transition. Moreover, sufficient effort should continue to be given to communicating the findings of this report (and related decisions by managers) to Branch and Bureau staff to avert any potential anxiety or stress that may arise from such change.
The project benefited from the support, guidance, time and energy of all of those in the Bureau, the Department of Justice, the private sector and other competition agencies who contributed in so many ways to the creation of this report.
