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Archived — Pre-Merger Notification Interpretation Guideline Number 12: Requirement to Submit a New Pre-Merger Notification and/or ARC Request Where a Proposed Transaction is Subsequently Amended

Enforcement Guidelines

Draft for Public Consultation — March 23, 2012


This publication is not a legal document. It contains general information and is provided for convenience and guidance in applying the Competition Act.

For information on the Competition Bureau's activities, please contact:

Information Centre
Competition Bureau
50 Victoria Street
Gatineau QC K1A 0C9

Tel.: 819-997-4282
Toll free: 1-800-348-5358
TTY (for hearing impaired): 1‑866‑694‑8389
Fax: 819-997-0324
Website: www.competitionbureau.gc.ca

This publication can be made available in alternative formats upon request. Contact the Competition Bureau's Information Centre at the numbers listed above.

Permission to reproduce

Except as otherwise specifically noted, the information in this publication may be reproduced, in part or in whole and by any means, without charge or further permission from the Competition Bureau provided due diligence is exercised in ensuring the accuracy of the information reproduced; that the Competition Bureau is identified as the source institution; and that the reproduction is not represented as an official version of the information reproduced, nor as having been made in affiliation with, or with the endorsement of the Competition Bureau. For permission to reproduce the information in this publication for commercial redistribution, please Apply for Crown Copyright Clearance or write to:

Communications and Marketing Branch
Innovation, Science and Economic Development Canada
C.D. Howe Building
235 Queen Street
Ottawa, ON K1A 0H5

Email: ISED@Canada.ca

Aussi offert en français sous le titre Avis d'interprétation no 12 sur les préavis de fusion : Obligation de soumettre un nouveau préavis de fusion ou une nouvelle demande de CDP lorsqu'une transaction proposée est modifiée par la suite




This Interpretation Guideline is issued by the Commissioner of Competition ("Commissioner"), who is responsible for the administration and enforcement of the Competition Act ("Act"). The purpose of this Guideline is to assist parties and their counsel in interpreting and applying the provisions of the Act relating to notifiable transactions. This Guideline sets out the general approach taken by the Competition Bureau ("Bureau") and is not intended to be a binding statement of how discretion will be exercised in a particular situation and should not be taken as such, nor is it intended to substitute for the advice of legal counsel to the parties, or to restate the law. Guidance regarding a specific proposed transaction may be requested from the Merger Notification UnitFootnote 1 ("MNU").

This Guideline addresses various common amendments to proposed transactions and discusses in which instances parties would typically be required to file a new notification and/or request for an Advance Ruling Certificate ("ARC").

I. Background

All parties to a proposed transaction that exceeds the relevant monetary thresholds set out in sections 109 and 110 of the Act are required by section 114 to notify the Commissioner and supply the prescribed information set out in section 16 of the Notifiable Transactions Regulations ("notification") prior to the completion of the transaction. Further, in accordance with section 118 of the Act, each party is required to certify under oath or solemn affirmation that the information it has supplied in the notification is correct and complete in all material respects at the time of filing. The initial 30-day waiting period set out in paragraph 123(1)(a) will commence once the Commissioner has received a complete notification.

Unlike the notification provisions in Part IX of the Act, the Act does not stipulate the information that must be supplied to the Commissioner in support of a request for an ARC. Parties should supply the Commissioner with all information relevant to the proposed merger and its potential effect on competition.

II. Policy

Where a proposed transaction is amended following receipt of a complete notification or ARC request by the Commissioner, parties may be required to submit a new notification or ARC request, as applicable. In making this determination, the Bureau will consider whether:

  1. the information supplied with the notification is correct and complete in all material respects relative to the amended transaction; and/or
  2. the amendment to the proposed transaction that is the subject of the ARC request will result in the Bureau having to conduct a more in-depth or different competitive effects analysis.

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III. Discussion

Below are examples of common amendments to transactions, together with a discussion as to whether such amendments will typically require a new notification and/or ARC request to be submitted. It is important to note that the same amendment may have different implications for a notification than an ARC request, as the Act prescribes the information that must be supplied with a notification.

Parties are encouraged to consult the MNU where they are considering delaying the submission of a notification or ARC request owing to concerns that a particular aspect of a proposed transaction may not be final or may be subject to change, which may result in a requirement to file a new notification or ARC request. The effect of submitting a new notification and/or ARC request on statutory waiting periods and service standards, as applicable, are discussed in Part IV.

A. Notification

Section 118 of the Act requires that the information supplied with a notification be correct and complete in all material respects at the time of filing. Where a transaction is amended, and the information supplied with the notification is not correct and complete in all material respects relative to the amended transaction, parties will be required to submit a new notification to comply with the statutory notice and information requirements.

In determining whether the information supplied with a notification is correct and complete in all material respects relative to an amended transaction, the Bureau will consider, among other things:

  • the description of the proposed transaction and the parties;
  • the relationship of an added party to the other parties to the transaction (e.g., affiliate, customer, supplier or competitor);
  • whether a redistribution of assets or ownership interests among the existing parties to the transaction would increase the ownership interest to be acquired by a party by more than 5%; and
  • where a new asset is added, whether that asset is ancillary to existing assets.

1. Addition of a New Party

All parties to a proposed transaction that is subject to Part IX of the Act are required, under section 114 of the Act, to notify the Commissioner of the proposed transaction and supply the prescribed information. Where a transaction is amended to add a new party, a new notification providing the prescribed information for the added party must be submitted in order for the notification in respect of the amended transaction to be considered complete.

However, in accordance with subsection 109(2) of the Act, a new notification will not be required where the added party is a new vendor in a share transaction, or a guarantor. Further, a new notification will typically not be required where an affiliate of an existing party is added, other than the addition of a significant affiliateFootnote 2 whose prescribed information was not submitted with the notification.

2. Addition of a New Asset

Where a proposed asset transaction is amended to include an additional asset, the information supplied with the notification will not typically be correct and complete in all material respects relative to the amended transaction and a new notification will typically be required.

However, it is possible that, notwithstanding an asset addition, the information supplied with the notification may be correct and complete in all material respects relative to the amended transaction, owing to the fact the asset being added is ancillary to the other assets being acquired. In evaluating whether an asset is ancillary, the Bureau will consider both qualitative and quantitative factors including the book value of the added asset, relation to existing assets, and relative size. The addition of ancillary assets will not typically require the submission of a new notification.

3. Addition of New Voting Shares or the Redistribution of Assets, Voting Shares or Ownership InterestsFootnote 3

Where a proposed transaction is amended to increase the voting shares to be acquired by an existing party, whether through the addition of new shares or the redistribution of shares among purchasers, the description of the proposed transaction in the notification will typically not be correct and complete in all material respects relative to the amended transaction and a new notification will be required. This would also be the case where a redistribution of interests in an asset or combination results in one or more purchasers increasing its ownership interest

Where, however, the party acquiring the additional voting shares was previously acquiring more than a 50% voting interest in the target corporation, a new notification will not be required. Similarly, for an amendment that will result in an existing party acquiring less than an additional 5% of the voting shares of the target business, a new notification will not typically be required, unless the additional acquisition results in a new subsection 110(3) threshold being met, in which case parties are required to comply with the notification requirements of the Act and submit a new notification.

4. Removal of an Asset or Party

Where an asset or party is removed from a proposed transaction, the information supplied with the notification will typically be correct and complete in all material respects relative to the amended transaction, and a new notification will not typically be required. However, as discussed above in paragraph 3 above, where the removal of a party to a proposed transaction results in an increase in the ownership interest of another purchaser a new notification may be required.

B. ARC Request

A new ARC request will typically be requiredFootnote 4 where an amendment to a proposed transaction results in the Bureau having to conduct a more in-depth or different analysis regarding the competitive effects of the amended transaction.

In making this determination the Bureau will, among other things, consider:

  • the description of the proposed transaction and the parties;
  • whether the complexity designation and the information required to commence the service standard for the amended transaction differs from the initial proposed transaction;
  • the relationship of an added party to the other parties to the transaction (e.g., affiliate, customer, supplier or competitor);
  • where there is a redistribution of assets or ownership interests among the parties, whether or not the ARC request contemplated such a redistribution; and
  • where a new asset is added, whether or not that asset is ancillary to the existing assets.

1. Addition of a New Party

Where a proposed transaction that is the subject of an ARC request is amended to add a new party, the Bureau will require information in respect of the added party. Based on a review of the information supplied in respect of the added party, the Bureau will make a determination as to whether the amendment will require the Bureau to conduct a more in-depth or different competitive effects analysis. In making that determination, the Bureau will consider, among other things, the relationship of the added party to the other parties to the transaction, whether the added party is a purchaser or a vendor, the interest(s) or asset(s) to be acquired by the added party, the ability of a new purchaser to influence the economic behaviour of the target business.Footnote 5

The addition of a competitor, potential competitor, customer or supplier as a purchaser will typically require a more in-depth or different competitive effects analysis, and consequently a new ARC request; whereas, this will typically not be the case where a new vendor, guarantor, or an affiliate of an existing party is added as the Bureau's competitive effects analysis typically focuses primarily on the ability of the merged entity to exercise market power.

Similarly, in the Bureau's experience, it will typically not be required to conduct a more in-depth or different competitive effects analysis where the added party will be acquiring, absent any shareholder, pooling, voting or other agreement affecting how shares or interests are voted, an interest of 5% less in the assets or combination that are the subject of the proposed transaction or of the voting shares of the target corporation. Where, however, a new purchaser's interest exceeds 5%, absent a clear indication otherwise, the Bureau will be required to consider the ability of the new purchaser to influence the economic behaviour of the business, thereby conducting a more in-depth or different competitive effects analysis, and a new ARC request will be required.

2. Addition of a New Asset

An amendment to a proposed transaction to include a new asset will typically require the Bureau to conduct a more in-depth or different competitive effects analysis and, as a result, a new ARC request will be required. However, where the asset being added is ancillary to the other assets being acquired, it is possible that, notwithstanding this addition, a more in-depth or different competitive effects analysis may not be warranted and, as a result, a new ARC request will not be required. In evaluating whether an asset is ancillary, the Bureau will consider both qualitative and quantitative factors including the book value of the added asset, relation to existing assets, and relative size.

3. Addition of New Voting Shares or Redistribution of Assets, Voting Shares or Ownership InterestsFootnote 6

Where a proposed transaction is amended to increase the voting shares to be acquired by an existing party through the addition of new shares or the redistribution of existing shares among purchasers, the Bureau must determine whether that party may influence the economic behaviour of the target business, and thereby conduct a more in-depth or different competitive effects analysis. This will also be the case where a proposed transaction is amended such that a redistribution of interests in an asset or combination among purchasers results in one or more purchasers increasing its ownership interest.

However, where the increase is less than 5% voting interest, absent a shareholder, pooling, voting or other agreement affecting how shares or interests are voted, a new ARC request will typically not be required as there is typically no change in the economic incentives of any relevant party that would require the Bureau to conduct a more in-depth or different competitive effects analysis. If the party acquiring the additional voting shares was previously acquiring more than a 50% voting interest, the acquisition of any additional voting interest by that party will not require a new ARC request.

4. Removal of an Asset or Party

Where the removal of an asset or a party from a proposed transaction will not require a more in-depth or different competitive effects analysis, no new ARC request will be required. However, where the removal of a party to a proposed transaction results in an increase in the ownership interest of another purchaser, as discussed in paragraph 3 above, a new ARC request may be required.

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IV. Submitting a New Notification or ARC Request

When submitting a new notification, parties may rely on subsection 116(2.1) to avoid resubmitting information that has previously been supplied to the Commissioner, provided that the requirements of that subsection are met.

Where the amendment to a transaction involves the addition of a party, receipt of a notification from the added party containing an accurate description of the amended transaction and the parties to the transaction (as well as other prescribed information in respect of the added party), and a certification under sections 116(2.1) and 118 of the Act, will typically be sufficient. The initial 30-day waiting period will only commence upon receipt of the complete filing from the added party.

1. Commencement of Initial Waiting Period Where a New Notification is Required

Where a new notification is required, the amended transaction will be considered a new transaction and the initial 30-day waiting period will only commence upon receipt by the Commissioner of a complete filing in respect of the amended transaction.

2. Requirement to Pay Filing Fee

Where a new notification and/or ARC request is required, parties must also pay the applicable filing fee, except where parties have filed both a notification and an ARC request and the amendment to the transaction only requires one of them to be resubmitted. In this latter instance, because either the initial ARC request or notification does not need to be updated with respect to the amended transaction, a new filing fee is not payable as the Competition Bureau Fees and Service Standards Policy for Mergers and Merger-Related Matters ("Merger Fees Policy") provides that only one fee applies where both a notification and an ARC request are submitted with respect to the same proposed transaction.Footnote 7

Parties may also want to consider whether they are entitled to rely on the Bureau's refund policy. Where parties withdraw their notification and/or ARC request within two business days of receipt by the Bureau, parties may be entitled to a refund. For further information on the Bureau's refund policy, please refer to the Merger Fees Policy.

For further information, please contact:

Merger Notification Unit
Mergers Branch, Competition Bureau
Competition Bureau
50 Victoria Street
Gatineau, Quebec K1A 0C9
Telephone: 819-953-4297
Toll-free: 1-800-348-5358
Fax: 819‑994‑0998
E-mail: ic.avisdefusionmergernotification.ic@canada.ca

How to Contact the Competition Bureau

Anyone wishing to obtain additional information about the Competition Act, the Consumer Packaging and Labelling Act (except as it relates to food), the Textile Labelling Act, the Precious Metals Marking Act or the program of written opinions, or to file a complaint under any of these acts should contact the Competition Bureau's Information Centre:

Website

www.competitionbureau.gc.ca

Address

Information Centre
Competition Bureau
50 Victoria Street
Gatineau, Quebec
K1A 0C9

Telephone

Toll-free: 1-800-348-5358
National Capital Region: 819-997-4282
TTY (for hearing impaired) 1‑866‑694‑8389

Facsimile

819-997-0324

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