Finance Minister Joe Oliver tabled the 2015 federal budget
before the House of Commons on April 21, 2015. The budget
highlighted recent policy changes in competition law and foreign
investment review, including new powers for the Competition Bureau
to investigate cross-border price gaps and new thresholds for World
Trade Organization (WTO) investors under the Investment Canada
INVESTIGATING CROSS-BORDER PRICE DISCRIMINATION
On December 9, 2014, the Price Transparency Act (PTA)
was introduced in the House of Commons. If passed, the Competition
Bureau will be empowered to investigate and publicly report on
instances of cross-border price discrimination (i.e., where
products or services are sold in Canada at unjustifiably higher
prices than similar goods or services in the United States). The
budget allots C$5-million over five years to the Competition Bureau
to pursue investigations under the PTA.
The allotment in the budget specifically to this issue
highlights the government's intention to enact the PTA and
commit significant resources to investigating cross-border price
gaps. Businesses, especially consumer-facing ones, with operations
in Canada and the United States are at risk of facing subpoenas if
their prices are different in each country. Although the
Competition Bureau will not yet have any powers to take enforcement
action, the investigative process can be burdensome as company
documents and data may be required to be turned over by court order
to the Competition Bureau.
Amended regulations, which take effect on April 24, 2015,
provide that investments by private-sector foreign investors from
WTO-member countries will only be reviewable on "net benefit
to Canada" grounds where the "enterprise value" of
the Canadian target business exceeds C$600-million. This amount
will rise progressively until the threshold reaches C$1-billion in
Replacing the current threshold—C$369-million in book
value of assets—with an enterprise value threshold is meant
to more accurately capture the value of intangible assets of
modern, knowledge-based businesses. The threshold has not changed
for acquisitions by foreign state-owned enterprises or acquisitions
of Canadian cultural businesses.
For private-sector investors, the change to the monetary
threshold should be welcome news, particularly as it increases to
C$1-billion in four years' time. The threshold change should
signal the government's openness to foreign investment and its
intention to restrict "net benefit to Canada" reviews to
very large transactions.
Changes to the national security review timelines announced last
month, which potentially affect any investment in Canada no matter
the size, are already in force.
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