Under the Competition Act, the Commissioner of Competition can enter into consent agreements with merging parties to resolve competition issues in mergers and acquisitions. The consent agreement is final when it is registered with the Competition Tribunal. Since amendments to streamline the process in 2002, there has been no process for public comments or approval of draft consent orders by the Tribunal.
Challenging a Consent Agreement
However, a third party who is "directly affected" has the right to request the variance or rescission of a registered consent agreement. The Tribunal may rescind or vary the agreement if it finds that its terms could not be the subject of an order of the Tribunal. While the Tunney Act in the United States gives interested parties the right to file comments before approval of a consent decree by the court, directly affected third parties in Canada can only attempt to set aside a consent agreement after registration of the agreement.
Test to Vary or Rescind
In Burns Lake Native Development Corporation et al. v. Commissioner of Competition and West Fraser Timber Co. Ltd. et al., released March 27, 2006, the Tribunal ruled that a "fairly restrictive approach" should be taken to the term "directly affected", to respect Parliament’s intention for an expeditious and certain consent agreement registration process. It concluded that: "A third party must experience first hand a significant impact on a right which relates to competition or on a serious interest which relates to competition. The impact must be definite and concrete (i.e. not speculative or hypothetical) and must be caused by the consent agreement and not by any other agreement or obligation."
It is important to bear in mind that since consent agreements are meant to deal with the anti-competitive effects of a merger, the rights or interests affected by the consent agreement must relate to competition. For example, as in the Burns Lake case, if a party to a joint venture resolves its competition issues by entering into a consent agreement with the Commissioner to dispose of its interest in the joint venture, another party to the joint venture might be concerned about the identity of the successor. However, the Tribunal considered that the identity of individual competitors in this case was not a competition issue and therefore did not meet the requirement that the effect of the consent agreement must relate to competition.
The Tribunal also stated that it is not sufficient for a third party to show that it could potentially be affected in the future by the consent agreement. Even though the window of 60 days to challenge a consent agreement is relatively short, the third party must be able to show in "concrete terms" that an adverse effect will "definitely occur" as a result of the consent agreement, even if the effects have not been experienced at the time the third party applies to vary or rescind the agreement. To continue with the above example, a potential bidder considering the acquisition of the interest to be divested must identify a competition-related issue up front which "directly affects" its bid.
The Tribunal also ruled that parties to a consent agreement are not required to file any evidence when the agreement is registered with the Tribunal.
The Tribunal’s restrictive interpretation of the scope of the "directly affected" requirement in the Burns Lake case provides more certainty for merging parties that once they enter into a consent agreement with the Commissioner, the resolution of the issues will not be easily revisited by the Tribunal. Consequently, anyone thinking of challenging a registered consent agreement will have to bring forward a serious case after the fact, based on competition rather than commercial or strategic grounds.
Authors Credit: Peter Glossop is a partner in the Competition & Antitrust Law Practice Group. Anik Lalonde-Roussy is an associate in the Business Law department in the firm’s Toronto office.
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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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