Merger Enforcement Guidelines (Banks) - Annex I: Banking Merger Review Process

Merger Enforcement Guidelines (Banks) - Annex I: Banking Merger Review Process

Introduction

This annex sets out in detail the banking mergers' review process to be employed by the Competition Bureau.

Current Legislative Provisions

Mergers are reviewed by the Director of the Competition Bureau under the Competition Act to assess their impact on competition. Should the Director conclude that a merger is likely to substantially lessen or prevent competition he may proceed to the Competition Tribunal to seek a remedy.

A merger among any of the banks also requires the ultimate approval of the Minister of Finance under the Bank Act.

In addition, the Minister of Finance also has the unique authority under section 94 of the Competition Act to prevent the Competition Tribunal from issuing any order in those circumstances where he has certified that a transaction among banks is desirable in the interest of the financial system. In short, exercising this authority would over-ride the Director's and the Tribunal's roles.

While the authority of both the Director and the Minister of Finance are spelled out in the Competition Act and the Bank Act, both acts are silent on how the Director and the Minister should interact and how this process should unfold.

Review Procedures

In order to continue the Bureau's practice of ensuring predictability and transparency, the Director, after consultations with the Minister of Finance, has decided to adopt the following procedure for all Schedule I bank mergers:

1. The Bureau will follow its practice of gathering information about proposed bank mergers and in analysing any possible anticompetitive effects.
2. The Bureau will identify to the merging parties on an ongoing basis any likely anti-competive issues that may arise.
3. Immediately after having completed its analysis of the merger as proposed, the Director will provide to the parties and to the Minister of Finance, a letter setting out the Director's views on the competitive aspects of the proposed merger. In the event the merger raises competitive concerns the Director will set out in general terms the sort of measures that have historically been applied to deal with competition concerns.
4. After receiving the letter from the Director and after taking into account any public interest concerns expressed by the Minister of Finance on behalf of the Government of Canada, the parties to the merger would then be in a position to determine if it is appropriate to explore potential remedies with the Bureau in relation to any anticompetitive concerns raised by the Director.
5. In the event the parties subsequently succeed in suggesting competitive remedies acceptable to the Director such remedies may, if appropriate, still require the approval of the Competition Tribunal; and the resulting merger itself still needs to be approved by the Minister of Finance pursuant to the Bank Act.