Fees and Services Standards Annex B - Statistical Information

Table of Contents | Annex A | Annex C

Merger Review

Number of Transactions

Business Line	1998-1999 Forecast Fiscal	1997-98 Fiscal	1997-98 Nov. 3/97 Nov.3/98	1996-97 Fiscal	1995-96 Fiscal
Pre-merger notification filing	88	90	84	64	64
Advance Ruling Certificate request	293	284	213	224	142
Total	381	374	297	288	206

Merger Review - Transactions grouped by complexity

Year	Non-complex	Complex	Very Complex
Nov.3/97 to Nov.3/98	256	40	1
Percentage	86%	13%	1%
Note: The remainder of statistics for mergers relate to the period of November 3, 1997 to November 3, 1998.

Merger Review - Service Standards

Complexity	Number of Transactions	Service Standard S.S.	Met	Not Met
Non-complex	256	14 days	232	24
Complex	40	10 wks.	39	1
Very Complex	1	5 mths.	1	0

Observations - Trends

During the period of November 3, 1997 to November 3, 1998, the Mergers Branch met service standards in 92% of cases.

The service standards were met in 91% of non-complex cases and they were not met in 9%. In complex cases, service standards were met in 98% of cases and the case in the very complex category met the service standard. Service standards were exceeded in non-complex cases for several reasons namely:

• further information was required in addition to that specified in the guidelines contained in the Handbook;⁽¹⁾
  
  
• certain process improvements are required to ensure the timely flow of files and related information throughout the merger review process.

Through the process mapping exercise, the Bureau is identifying areas for improvement. These include management information systems, training, approval processes, "best practices" in administration areas, etc.

With volumes expected to remain constant over the short to medium term, the Mergers Branch is looking at ways of balancing resources to meet the requirements in all complexity areas.

Advisory Opinions

Number of Transactions

Advisory Opinion Requests

	1998-99 *	1997-98	1996-97	1995-96
Contests S.59	10	96 (6 received since fees)	109	100
Multi-level Marketing S. 55	38	59 (9 received since fees)	102	140
Others	4	13 (2 received since fees)	54	43
Total	52	168	265	283
*Estimates to year-end.

Advisory Opinions - by Section of the Act

Note: The remainder of statistics for advisory opinions relate to the period of November 3, 1997 to November 3, 1998.

Business Line	Actuals Nov. 3/97 to Nov. 3/98	Actuals Nov. 3/96 to Nov. 2/97
FBP Section 52	2	56
Section 54	0	1
Section 55	30	151
Section 57	0	1
Section 59	10	137
Criminal Section 34	1	2
Sections 34, 45, 61	1	1
Section 45	1	9
Sections 45, 61	1	2
Section 50	0	1
Section 50(1)(a)	0	1
Section 51(1)(a), 77	0	1
Section 50(1)(c)	0	2
Sections 61, 51	0	1
Section 51	0	1
Section 77	0	1
Section 77, 51	0	1
Mergers Section 92	4
Total	50	369

Advisory Opinions - Transaction grouped by complexity

Business Line	November 3/97 to November 3/98
Section 52 Non-complex	2
Complex	0
Section 54
Non-complex	0
Complex	0
Section 55
Non-complex	27
Complex	3
Section 57
Non-complex	0
Complex	0
Section 59
Non-complex	10
Complex	0
Criminal Section 34
Non-complex	1
Complex	0
Sections 34, 45 & 61
Non-complex	1
Complex	0
Section 45
Non-complex	1
Complex	0
Sections 45 & 61
Non-complex	1
Complex	0
Mergers Section 92
Non-complex	4
Complex
Total	50

Advisory Opinions - Service Standards

Section 52

Complexity	Number of Transactions	Service Standard S.S.	Met	Not Met
Non-complex	2	8 days	2	0
Complex	NONE	30 days	N/A	N/A

Section 55

Complexity	Number of Transactions	Service Standard S.S.	Met	Not Met
Non-complex	27	8 days	26	1
Complex	3	30 days	2	1

Section 59

Complexity	Number of Transactions	Service Standard S.S.	Met	Not Met
Non-complex	10	8 days	8	2
Complex	NONE	30 days	N/A	N/A

Section 34

Complexity	Number of Transactions	Service Standard S.S.	Met	Not Met
Non-complex	1	4 weeks	1	0
Complex	NONE	8 weeks	N/A	N/A

Sections 34, 45 & 61

Complexity	Number of Transactions	Service Standard S.S.	Met	Not Met
Non-complex	1	4 weeks	0	1
Complex	NONE	8 weeks	N/A	N/A

Section 45

Complexity	Number of Transactions	Service Standard S.S.	Met	Not Met
Non-complex	1	4 weeks	0	1
Complex	NONE	8 weeks	N/A	N/A

Sections 45 & 61

Complexity	Number of Transactions	Service Standard S.S.	Met	Not Met
Non-complex	1	4 weeks	1	0
Complex	NONE	8 weeks	N/A	N/A

Section 92

Complexity	Number of Transactions	Service Standard S.S.	Met	Not Met
Non-complex	4	4 weeks	4	0
Complex	NONE	8 weeks	N/A	N/A

Observations/Trends

Prior to the implementation of fees, FBP received an average of 23.5 AO requests each month. Together with fee implementation, a more rigorous methodology for counting AOs was also introduced. Since fee implementation, the Bureau receives an average 4 AO requests each month. Evidently there is a decrease in the number of requests, but with the change in counting methodology it is impossible to quantify changes between periods.

An analysis of available data yields the following observations:

Multi-level Marketing

There has been a significant decrease in the numbers of advisory opinions requested under sections 55 and 55.1 of the Act (Multi-level Marketing (MLM) for example, 1995-96 (140 AO requests) and 1997-98 (59 AO requests).

For the first full year under a fee regime, opinion requests are expected to be approximately 38. There are two principal reasons for this decrease:

• Individuals who wish to begin an MLM operation as an off-shoot of the company that they are involved in are more cognisant of the administrative and financial burden of running an effective MLM program than in years past. There are simply fewer individuals willing to commence an MLM program - perhaps due to the requirements of the revised section 55 and 55.1 of the Act (buy-back guarantee, no inventory loading, income disclosure). The Act makes it far more difficult to deceive than prior to the revision in 1993.

• While numbers are down, the method of counting advisory opinion requests has changed. In the past, every advisory opinion given on a MLM plan was counted - so if the first three plans submitted received a negative opinion and then a fourth received a positive opinion, there would be four total advisory opinions given to the one requester. Now, such a situation would account for only one opinion (for which a $500 fee was submitted).

The decrease in numbers can also be explained, in part, by the media and education program targeting MLM undertaken by the Bureau to inform the public.

In 1993, when the amendments to section 55 of the Act came into force a number of education initiatives were introduced so that the MLM industry and the public were informed of the changes to the legislation. These initiatives were:

• information bulletin on the new section sent to all known MLM companies in North America in 1992 and 1993;
  
  
• training given to all FBP staff in early 1993 so that they would be able to discuss it effectively with the public;
  
  
• brochures and pamphlets on MLM and on schemes of pyramid selling distributed at trade shows and seminars in 1993-5;
  
  
• the Information Centre has faxed thousands of information bulletins and brochures to callers since 1996;
  
  
• news releases have been issued on every conviction under the sections since 1994;
  
  
• articles have appeared in a number of Canadian magazines (Chatelaine, Parenting, TIME, Redbook) on the subject after interviews with FBP staff;
  
  
• information-sharing initiatives and education of Canadian law enforcement personnel have been hilighted on sections 55 and 55.1 since 1993;

This education program is felt to be responsible for increased awareness among those who participate in MLM plans and among operators of MLM companies.

Other reasons for the decrease in the number of AO requests would appear to be :

• the increase in law firms providing advice related to MLM practices in provinces where proof of the Bureau's approval is not required;

• improved applications in other words, now that there is a fee applicants are more thorough when making a request.

Method of Counting Requests

With fees, a more rigorous methodology for counting AOs has been introduced. It has also been made clear to requesters that, except for minor adjustments, requests will be treated as new AO requests and the applicable fee will be charged.

This has resulted in much more complete and accurate documentation in the first instance; hence the reduction in numbers and a much more effective use of Bureau resources.

Contests

The Branch used to receive about 100 advisory opinion requests annually dealing with contests. These were typically sent in by large advertising firms and large corporations with marketing departments. They were seeking an official "stamp of approval" from the Bureau. These firms were typically aware of the requirements of the Act and the FBP played almost a "rubber stamping" role.

With the advent of fees, these firms are relying on their own experience and expertise and are requesting AOs for more novel issues.

AO Definition

The adoption by the Bureau of a new definition for an AO has also had an impact on requests.

Whereas the Bureau typically counted all requests, including those involving third party contacts, now only those falling within the scope of the definition are counted as an AO and treated as such. Refer to the Fee and Service Standards Handbook, Version 2 for additional details.

Fee Level

While the numbers seem to speak for themselves, there is no statistical information available that would indicate that the market is now taking more risks rather than paying the $500 fee for an AO.

There have however been some comments made by marketing firms that the fees are too high and service standards are too long.

Revenue

Business Line	Fiscal Year
	1998-99 Estimate "$"	%	1997-98 Actual "$"	%
Merger Review	$6,600,000	99.1%	2,184,400	99.4%
Advisory Opinions
Sections 52 to 60	$31,500	.48%	8,000	.36%
Other provisions	$24,100	.36%	$4,150	.18%
Total	$6,655,600	100%	$2,196,550	100%

Observations/Trends

The Bureau expected to generate about $3 million from November 3, 1997 to March 31, 1998. Anticipating that fees would be effective in November, many PMNs and/or ARC requests were submitted to the Bureau during the week prior to fee implementation. During the month of October 1997, the Bureau received 62 Merger review requests. This is compared to a monthly volume average of about 31.

The Bureau expects to generate about $6.7 million in the current fiscal year. As in 1997-98, this will be made up mainly of merger review revenue (99%). Last year, the majority of the revenue was used for costs related to industry experts, legal advice and travel. Although the Bureau had intended to hire more staff earlier in the 97-98 fiscal period, new employees were hired closer to the end of the period.

Annex C - Helpful Hints

The following are details of the information required by the Bureau to ensure that requests and filings are handled in a timely manner.

• Parties should make it clear in instances where the applicant is a non-resident under the Excise Tax Act and the GST does not apply.

• It is helpful to indicate in the covering letter, the name of the individual or company to whom the receipts should be addressed.
  
  
• Cheques that follow a request for service should clearly indicate the file to which they relate.
• The Bureau does not determine whether the acquirer or acquiree is responsible for payment. This must be determined by the parties. In the context of an ARC request, the fee is payable by the person submitting the request. In the context of a PMN, the obligation to pay the fee is on the parties to the proposed transaction and it is up to them to determine who will pay the fee. When the fee is not included with a notice, the Bureau will send an invoice to the party who first submitted the notice.
• Wire transfers should clearly identify the file to which they relate.

Table of Contents | Annex A | Annex C

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Footnotes

¹ Competition Bureau, Industry Canada. Fee and Service Standards Handbook pursuant to theCompetition Act. Release 2. May 1, 1998