Two important changes to the Competition Act (Act) merger review regime have arrived with the end of a seemingly-interminable Canadian winter. First, the Act's affiliation provisions have been amended to apply in a more consistent manner to different types of business associations (such as corporations, partnerships, and trusts). By treating different types of entities more consistently, the amended Act will, among other things, no longer require Competition Bureau (Bureau) notification of transactions between parties that were related but not previously considered "affiliates" under the Act. Second, the Bureau's longstanding $50,000 fee for merger notification filings and Advance Ruling Certificate (ARC) requests has increased by more than 40% to $72,000, and will now be subject to inflation-indexing.

Affiliation amendments to the Competition Act

On May 1, 2018, amendments to the Act contained in Bill C-25 came into force. These housekeeping amendments remove longstanding gaps in the Act's affiliation provisions that have had unintended consequences for many areas of the Act's administration. In Parliament, Minister Navdeep Singh Bains described the reforms as targeting "an outdated framework that can cost businesses unnecessary time and resources."

With respect to pre-merger notification, the Act exempts inter-affiliate transactions. However, prior to their amendment, the affiliation provisions of the Act failed to properly account for the affiliate status of many partnerships, trusts and other non-corporate structures. As a result, parties were often forced to incur substantial costs to notify—or confirm notifiability of—competitively-benign transactions involving related entities to the Bureau.

Bill C-25 introduces a new definition of "entity" that more completely captures ownership by and of non-corporate organizations. In so doing, the Act's affiliate exemption will operate such that intra-group transactions, restructurings and reorganizations that exceed the Act's financial thresholds no longer require pre-merger notification. By removing this "red tape" notification obligation that had no demonstrable value to Canadian competition enforcement, Bill C-25 complements the Bureau's below-described increase in its notification filing fee and the Bureau's stated objectives for that increase (in particular, ensuring the adequate resourcing of its merger review responsibilities).

The changes to the affiliation provisions will also have other consequences. In particular, by broadening the range of entities recognized as affiliates, the amendments could also result in certain transactions becoming notifiable by requiring the inclusion of new affiliate assets and revenues when determining whether merging parties cross the relevant thresholds in the Act. Information on newly-qualifying affiliates would also be required when filing notification forms with the Bureau.

Outside of the merger review context, the affiliation amendments expand the availability of defences and exceptions applicable where affiliates engage in conduct that might otherwise be considered anti-competitive under the Act, including in the context of its provisions concerning cartel conduct, bid-rigging, distribution practices and non-criminal competitor collaborations.

Filing fee increase and new inflation indexing approach

Since 2003, a flat $50,000 filing fee has applied to merger notification and ARC request filings made to the Bureau. On April 24, 2018 the Bureau announced an increase in the fee to $72,000. Importantly, the fee will also now be made subject to an annual review and adjustment for inflation. This approach mirrors the annual adjustments made to the "size of transaction" notification threshold itself (which increased from $88 to $92 million this year, as we reported on earlier here).

The Bureau described the increase as being necessary to ensure that it "has adequate resources to fulfill its merger review mandate and continues to meet its service standards." As outlined during its late 2017 consultation process, the Bureau notably opted to continue its fixed fee model rather than adopting the more "user pay" approach of a fee based on transaction value (as in the United States) or review duration, citing administrative simplicity.

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