For anyone considering the sale or acquisition of a business in
Canada in 2013, we suggest that your New Year's resolutions
include the following: "I will not jeopardize my
transaction's chances for success by creating internal
documents that are likely to attract the Competition Bureau's
If the reasons for adopting this type of resolution are not
clear already, then we refer you to the U.S. Department of
Justice's ("U.S. DOJ") lawsuit of January 10, 2013
challenging Bazaarvoice Inc.'s acquisition of PowerReviews Inc.
The acquisition, which was below the relevant merger notification
thresholds in the United States, closed in June 2012.
The U.S. DOJ alleges that the PowerReviews acquisition
substantially lessens competition in the U.S. market for online
platforms for customer product ratings and reviews. Central to the
U.S. DOJ's case are internal Bazaarvoice documents which
allegedly demonstrate that Bazaarvoice's objective in
proceeding with the acquisition was to put an end to aggressive
price competition from PowerReviews. For example, according to the
one of Bazaarvoice's co-founders wrote that the
PowerReviews acquisition would "[e]liminat[e]
[Bazaarvoice's] primary competitor" and provide
"relief from ... price erosion";
Bazaarvoice's current CEO wrote that Bazaarvoice had
"literally, no other competitors" beyond PowerReviews;
Bazaarvoice's former CEO predicted that, as a result of the
acquisition, Bazaarvoice would have "[n]o meaningful direct
The Bazaarvoice/PowerReviews challenge is just the latest in a
long line of cases where competition authorities have used
statements found in internal company documents, including emails,
as the basis for opposing merger transactions. Indeed, a recent
report by the U.S. Federal Trade Commission discloses that this
agency has taken enforcement action in almost 90 per cent of the
cases in which it uncovered "hot documents", defined as
company documents which "predict that the merger will produce
adverse price or non-price effects on competition".
We have had the same experience in Canada. The most recent
example saw the Competition Bureau initiate a successful challenge
to a merger in the hazardous waste industry based, in part, on
internal company documents (that merger was also below the relevant
Managing the document creation process, therefore, should be one
of the foremost considerations for companies and their advisors
when contemplating a merger transaction in Canada (even small
transactions that are not subject to formal notification).
Guidelines should be circulated as soon as possible (we have
precedent templates) and steps should be taken to ensure that
competition counsel are able to review key documents early in the
drafting process. This applies not only to internal company
documents, such as management/board presentations, but also to
materials prepared by third party advisors, such as investment
bankers. All such documents may have to be produced to the Bureau,
either as part of mandatory pre-merger notification or in response
to information requests/orders.
There is an understandable tendency to try to "sell"
merger transactions to stakeholders. Unfortunately, this often
leads to the use of unhelpful and overly-aggressive language that
can imply anti-competitive effects. Don't make the mistake of
handing the Bureau the evidentiary rope with which to hang you;
remember that words count in competition law, and none more so than
one's own self-authored – and self-incriminating –
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
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