Copyright 2011, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on Competition, Antitrust & Foreign Investment, August 2011
The Competition Bureau has recently published three new
guidelines related to merger review.
The first two guidelines, published July 21, 2011, explain the Bureau's policy on the disclosure of confidential information to parties to hostile acquisitions and the running of waiting periods in such cases. Complying with merger control obligations in hostile acquisitions gives rise to procedural considerations that do not arise in friendly transactions that were not addressed in previous guidance published by the Bureau.
The third guideline, published June 20, 2011, describes in further detail the information the Bureau requires before it will consider merger notifications to be complete.
Disclosure of Information
Hostile Transactions Interpretation Guideline
Number 1 (Guideline 1) concerns the Bureau's policy on
the disclosure of information. These guidelines are a more formal
reissuance of a policy statement that the Bureau originally
published on its website on June 2, 2010.
In a friendly transaction, the Bureau will normally discuss with the parties the status of its review, including the complexity and timing of its review, the fact and timing of the other party's response to any supplementary information request (SIR), and the Bureau's views about the proposed transaction's potential competitive effects. In a hostile transaction, such information could be employed by the hostile target for purposes unrelated to compliance with the Competition Act (the Act). For instance, the target may use the information to advocate that its shareholders reject the acquirer's offer, or attempt to persuade other market participants to approach the Bureau with views about the transaction that might buttress the Bureau's preliminary concerns. Separately, the disclosure of information by the hostile target may give a competing bidder an advantage it would not otherwise enjoy.
Guideline 1 indicates that the Bureau has considered the "sensitivities" involved with sharing information with both parties to a hostile acquisition. Accordingly, where the Bureau has shared information with one party, it will "strive" to share that information with the other party "equitably." However, the Bureau recognizes that the policy may be difficult to apply in a straightforward manner due to the complexities that can arise in hostile acquisitions. Accordingly, the Bureau indicates it will be mindful of these complexities on a case-by-case basis. Guideline 1 thus emphasizes the Bureau's discretion in regard to disclosure of information related to its review, particularly in hostile transactions.
Running of Waiting Periods
Hostile Transactions Interpretation Guideline
Number 2 (Guideline 2) concerns the Bureau's approach
to the commencement of waiting periods under the Act. Guideline 2
is new and was published without solicitation of public
In friendly transactions, acquisitions notified to the Bureau under the Act may not close for 30 days following submission of a complete notification form by each party (the initial period). The initial period starts when the last complete notification has been submitted. If the Bureau issues an SIR, the merger may not close until 30 days following the parties' certified completeness of a response to such SIR (the second period). The second period does not start until the last party has certified the completeness of its response; this differs from the practice in the United States where, in tender transactions, the acquirer's submission of a complete response triggers the second period, whether the transaction is friendly or hostile. (The initial period and/or second period may be terminated by the Bureau's issuance of an Advance Ruling Certificate or "no-action" letter.)
In hostile acquisitions the target cannot be expected to voluntarily notify its own acquisition to the Bureau. Accordingly, the Act requires that the Bureau "immediately" notify the hostile target of the fact of the acquirer's notification, after which the hostile target is required to submit its own notification within 10 days. The Act indicates that the initial period commences as soon as the acquirer submits its notification, not when the hostile target submits its own notification. The Act also provides that the second period commences when the acquirer certifies completeness with an SIR if issued, regardless of the timing of the hostile target's response if it also received an SIR. This is consistent with the U.S. approach. However, the Act does not expressly address how transactions that turn friendly after the expiry of the initial period but before the commencement of the second period will be treated.
Guideline 2 explains that the Bureau's policies are as follows:
- In a hostile transaction, the initial period will commence on the date the acquirer submits its notification. The commencement of the initial period will not be affected if the transaction turns friendly during the running of the initial period.
- Where a notified transaction turns friendly after the Bureau has issued an SIR but before the acquirer certifies the completeness of its response – in other words, after the expiry of the initial period but before the commencement of the second period – the Bureau will not consider the second period to have commenced until both the acquirer and the (formerly hostile) target have certified completeness of their SIR responses.
- Where a notified transaction ceases to be hostile after the acquirer has certified its response to the SIR and the second period has commenced, the running of the second period will be unaffected.
GUIDELINE ON NOTIFICATIONS
Pre-Merger Notification Interpretation Guideline
Number 13: Satisfying the Information Requirements set out in
Section 16 of the Notifiable Transactions Regulations and
Completeness of Notification (Notification Guideline) concerns
the Bureau's policy on the completeness of notifications. This
guideline is new and was published without solicitation of public
Parties to transactions must submit a complete form when notifying mergers to the Bureau, which triggers the initial period. The Notification Guideline provides insight into when the Bureau will consider the notification to be complete. Although largely technical, two aspects of the Notification Guideline are of note. First, the Notification Guideline gives additional clarity into the question of who is a "director" or "officer" of an unincorporated entity for the purposes of providing documents about the transaction under question 6(1) of the notification form (the equivalent of "4(c)" documents on the U.S. Hart-Scott-Rodino form). The Bureau has indicated that, in such instances, documents must be provided from a "person whose position is designated in a similar manner." Second, the Notification Guideline explains what information can be withheld from the notification because it is confidential "by law." The Bureau takes the position that information rendered confidential by private agreement is not considered confidential by law, and to the extent the parties are not willing to submit such information, they must submit an acceptable explanation as to why the Bureau's normal confidentiality protections would not be sufficient to maintain the required confidentiality. Absent such an explanation, the notification will not be considered complete and the initial period will not commence.
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