Bill C-101, together with the consequential publication of regulations and guidelines, enacted several changes to the Competition Act (Canada) (the "Competition Act")2 and the Investment Canada Act (the "IC Act")3 on March 12, 2009. During the past year, there have also been a number of noteworthy changes in both the law and administrative procedure under these two Canadian statutes. What follows is a brief outline of some of those changes, organized by topic:
Competition Act (Canada)
- the parties and affiliates threshold4 has remained at $400 million but the transaction threshold5 is now $77 million in 2012 for all 5 types of transactions subject to notice under Part IX of the Act, with adjustments for subsequent years based on calculations related to Canada's nominal gross domestic products at market prices
- the Competition Bureau has issued updated Merger Enforcement Guidelines6 that contain new commentary regarding, among other things, interlocking directorates, the impact of competitive effects of a merger and monopsony power
- the Bureau has issued revised Merger Review Process Guidelines7 offering, in particular, increased guidance on the relatively new concept to Canada of a supplementary information request8 (a "SIR"). The recent Merger Review Performance Report9 noted that 18 SIRs had been issued since the enactment of Bill C-10
- the Bureau has announced10 that henceforth the Bureau will publish a monthly summary report regarding completed mergers listing the names of the parties to a transaction, the industry sector involved and the result of the Bureau's review. This increased transparency is meant to assist the Commissioner of Competition in monitoring mergers post-closing11. Nonetheless, this new practice has received a good deal of informal commentary about confidentiality12 under the Competition Act
- the Bureau has announced13 that two entities have pleaded guilty to participating in a price-fixing cartel for polyurethane foam. While the fines were said to total $12.5 million, it is understood that the actual amount paid was considerably less following bankruptcy protection14 sought by the parties. Further, while the release announced that this guilty plea was the first of its kind under the new conspiracy section, it is also noted that the cartel is said to have taken place over a period of 11 years15
Notable Civil Enforcement
- the Commissioner has begun her application to the Competition Tribunal16 under the price maintenance section17 seeking remedial orders against Visa and MasterCard who are alleged to have imposed restrictive and anti-competitive rules on merchants who accept their credit cards. It is observed18 that Canadian merchants pay twice as much as their counterparts in Europe, Australia and New Zealand, albeit still slightly less than the amounts paid by similar businesses in the US
Investment Canada Act
- the threshold for review for so-called WTO transactions dealing with foreign direct investments (that are not cultural businesses) closing in 2012 is $330 million19. Draft regulations were proposed in 200920 to change the threshold test from value of the assets to an enterprise value of the assets incorporating the concept of the market capitalization of the entity and, at the same time, having the effect of increasing the threshold for review in stages to $1 billion, as further indexed. These draft regulations did not come into force because, it is understood, that significant criticisms were received concerning the drafting. Following the Industry Minister's announcement,21 revised, draft regulations have been published for comment22
- since enactment in 1985, there still has been only one rejection by the Industry Minister under the IC Act, namely the MacDonald, Dettwiler Canadarm transaction23. While the much-heralded BHP Billiton proposed acquisition of Potash Corporation24 was not approved by the Industry Minister, BHP in fact withdrew its application before the inevitable turn-down
- the test for approval continues to be net benefit to Canada25, albeit some politicians have called for a strategic asset26concept in the wake of the BHP / Potash case
- the federal government prevailed in its case27 against US Steel alleging breaches of undertakings to continue the employment of a specific number of individuals, which undertakings were given in relation to US Steel's 2007 acquisition of Stelco
- notwithstanding the government's existing ability under the IC Act to deal with highly sensitive matters of national concern (Potash) and that apparent court victory (US Steel), the government has recently proposed amendments28 to the IC Act that would allow (i) more public transparency during the review process, allowing the Minister to signal publicly the reasons given to an investor that its investment may not be approved, and (ii) the government to accept security for any penalty that might henceforth be imposed for a breach of the IC Act. The Industry Minister has also announced29 the publication of a guideline that will make formal mediation procedures available under the IC Act, thereby providing a voluntary means of resolving disputes in relation to whether an investor has failed to comply to an undertaking
1. Bill C-10, or the Budget Implementation Act, 2009.
2. Competition Act (Canada) R.S.C. 1985, c. C-34.
3. Investment Canada Act R.S.C. 1985, c. 28 (1st Supp.).
4. Section 109(1) of the Competition Act.
5. Sections 110(7) and 110(8) of the Competition Act.
6. Bureau release dated October 6, 2011.
7. Bureau release dated January 11, 2012.
8. Section 123(1)(b) of the Competition Act. Note the similarity between the Canadian process and the so-called US process of second requests under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976.
9. Bureau release dated April 12, 2012.
10. Bureau release dated February 6, 2012.
11. See in particular section 97 of the Competition Act that allows the Commissioner a one-year period post-closing to decide whether or not to apply to the Competition Tribunal seeking a remedial order on the basis that a merger is likely to prevent or lessen competition substantially. Such ability is not possible in circumstances where the Commissioner has issued an advance ruling certificate under the authority of section 102 of the Competition Act before the completion of a merger.
12. See in particular section 29(1) of the Competition Act. Presumably the Bureau justifies its new practice on the basis that such disclosure is for the purposes of the administration ... of the Competition Act.
13. Bureau release dated January 6, 2012.
14. Under the provisions of the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36.
15. See section 45 of the Competition Act, both before and after the enactment of Bill C-10. The former version of the conspiracy section contained a competitive effects test based on the word unduly. The current version of section 45 has dropped the word unduly and is now said to be, in effect, a per se offence.
16. A special interest, quasi court, established under the authority of the Competition Tribunal Act, R.S.C. 1985, c. 19 (2nd Supp.).
17. Section 76 of the Competition Act.
18. See Bureau Backgrounder dated May 8, 2012 containing the Commissioner's opening statement to the Competition Tribunal.
19. Section 14.1(2) of the IC Act.
20. See Canada Gazette Part I, Vol. 143, No. 28 (July, 2009).
21. See Industry Minister's press release dated May 25, 2012.
22. See Canada Gazette Part I, Vol. 146, No. 22 (June, 2012).
23. The Industry Minister confirmed on May 8, 2008 that the proposed sale to Alliant Techsystems of the Information Systems Business of MacDonald, Dettwiler did not meet the standard of net benefit to Canada under the IC Act.
24. The Industry Minister announced on November 9, 2010 that the proposed acquisition by BHP Billiton was not likely to be of net benefit to Canada. BHP Billiton in fact withdrew its application under the IC Act before the Minister made a final decision.
25. Section 21(1) of the IC Act.
26. During the review of the BHP Billiton / Potash proposed transaction, the Saskatchewan premier called potash a strategic asset which comment was echoed by the premier of Alberta. Both comments raised nationalistic concerns, especially having regard to the fact that there were a number of Conservative members of Parliament representing ridings in these western provinces, at a time when the Conservative Party clung to a minority, federal government. No steps have been taken since to incorporate the concept of strategic asset into the language of the IC Act.
27. On November 24, 2011, the Supreme Court of Canada refused to hear the appeal of United States Steel Corp. from the Federal Court of Appeal's ruling that the government's seeking of fines in relation to breached commitments by US Steel was unconstitutional. The matter was settled on December 12, 2011 when the Industry Minister announced that US Steel had committed to replacement undertakings in exchange for the earlier, alleged breached undertakings.
28. Bill C-38, Division 28, sections 479 and 480. This Bill was given first reading by the House of Commons of Canada on April 26, 2012.
29. See also endnote 21, ibid.
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