Canada: A Path To Proportionality In The SIR Process

Last Updated: July 9 2015
Article by Bronwyn Roe and Lisa Scheulderman

In a merger review, the Commissioner of Competition has the power to issue supplementary information requests ("SIRs") to merging parties, in addition to the standard disclosure required under the Competition Act. The authors suggest that the principle of proportionality is and should be applicable to the exercise of the Commissioner's SIR power; however, current merger review procedures, including pre- and post-issuance dialogue and the Competition Bureau's internal appeal process, do not provide effective avenues for parties to challenge the scope or proportionality of a SIR. Recent decisions of the Competition Tribunal suggest that the principle of proportionality—well recognized in civil proceedings in Canada—is equally applicable in Tribunal proceedings. If a party were to take the risky course of closing a transaction over the Commissioner's objections after refusing to comply with an overbroad SIR, and in the event of a proceeding brought by the Commissioner, challenge the scope of the SIR before the Tribunal, the Tribunal would likely consider the proportionality of the SIR. The authors conclude that policy and legislative changes—including acknowledgment and implementation by the Bureau of the proportionality principle, and the oversight of SIR appeals by an independent arbiter—are necessary to better ensure proportionality in the SIR process.

Canada's Competition Act ("Act") requires parties to many mergers to submit prescribed information to the Commis­sioner of Competition ("Commissioner"), and to satisfy a waiting period before closing. The Commissioner has the power, during that initial waiting period, to request "additional information that is relevant to the Commissioner's assessment"1 of a proposed merger transaction in the form of a Supplementary Information Request ("SIR"), following the standard disclosure required under the Act.2 The Commissioner decides whether the additional information sought is relevant to the Commissioner's assessment, and a merging party's only recourse when faced with a SIR it believes to be overly broad is to challenge the SIR through an internal appeal process within the Competition Bureau ("Bureau"). While no two SIRs are identical and the length of time required to comply can vary, two to three months is not uncommon. Meanwhile, however, the transaction cannot be com­pleted until a new waiting period expires—and the new waiting period only starts upon full compliance with the SIR. Clearly, the scope of the SIR—if overbroad—can unnecessarily delay closing of a transaction. In this paper, we identify the shortcomings of this internal review process and suggest that policy and legislative changes are necessary to better ensure proportionality in the SIR process. Though we do not suggest that it is the Commissioner's practice to issue overly broad SIRs,3 given the inadequate appeal mechanism currently provided, merging parties lack meaningful opportunity to challenge the scope of a SIR.

The principle of proportionality—the principle that a fair and just process must be proportionate to the nature of the dispute and the interests involved—informs the conduct of civil proceedings in Canada, and is a key feature of the discovery process. The principle is codified in civil rules of procedure throughout Canada, and its impor­tance was recently affirmed by the Supreme Court of Canada, which called for a "culture shift" that will require judges "to actively manage the legal process in line with the principle of proportionality."4 The Court emphasized that a fair and just process must be "accessible— proportionate, timely and affordable. The proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure."5

Recent decisions of the Competition Tribunal ("Tribunal") regard­ing the discovery process in a contested hearing suggest an emerging trend whereby the proportionality principle is equally applicable to discovery in Tribunal proceedings as it is to civil proceedings. It is the authors' view that the principle of proportionality is and should be applicable to the Bureau's merger review process, and, in particular, to the exercise of its SIR power. If, as an alternative to the limited internal review mechanism available to parties to challenge the scope of a SIR, parties challenged the scope of a SIR before the Tribunal, the Tribu­nal would be likely to consider the proportionality of the SIR to, for example, the interests involved, the volume of commerce affected, and the amount of money at stake in the transaction.

We recommend that the Bureau undertake policy changes to address questions of proportionality proactively and to expressly recognize the principle of proportionality in its merger review process policies. We further recommend legislative change to create an objective and pre­dictable process for reviewing a SIR, similar to the "presiding officer" role that exists for challenges to examinations under section 11 of the Act.6

Part I of this article provides an overview of the SIR process and current mechanisms available to merging parties to challenge the scope of a SIR.

Part II reviews recent Tribunal jurisprudence and concludes that the proportionality principle is being applied by the Tribunal. Given the similar goals to be achieved by the discovery process and the SIR process—namely, both processes are designed to uncover evidence to help determine whether a transaction will result in a substantial less­ening or prevention of competition—we suggest that strong arguments exist for applying the principle of proportionality to the SIR process as well, and that, given the opportunity, the Tribunal would likely apply the principle when reviewing a challenge to a SIR.

The conclusion proposes that the Bureau should proactively incor­porate the principle of proportionality into its SIR process, and, in consultation with the competition bar, develop guidelines for ensur­ing proportionality in the SIR process. In conjunction with the Bureau's policy changes, legislative changes should be made to improve the appeal process.



The SIR power was created in 2009 as part of significant changes to Canada's merger review process. These changes created a two-stage review process. First, merging parties must notify the Bureau of a pending transaction and wait 30 days before closing7 (unless the waiting period is terminated earlier by issuance of a letter or certifi­cate by the Bureau indicating the Commissioner does not intend to challenge the transaction). Most transactions are cleared in this first stage. Second, in some complex cases, the Bureau may issue a SIR requiring the parties "to supply additional information that is relevant to the Commissioner's assessment of the proposed transaction," trig­gering a second waiting period during which parties are prohibited from closing the transaction until thirty days after all requested infor­mation is received by the Bureau.8 The Bureau states that it issues SIRs "[w] here a notifiable transaction raises concerns regarding a potential substantial lessening or prevention of competition."9

The new process was implemented to give the Bureau more time to review complex mergers, to align Canada's process with the United States' Hart-Scott-Rodino10 process, and to provide more certainty with respect to review timelines.11 Melanie Aitken, the Interim Commissioner of Competition at the time the changes were made, explained:

The old provisions did not provide us with the proper tools or sufficient time to review the very small number of transactions each year that have the potential to significantly harm com­petition in Canada. We are confident that the new provisions, designed with an emphasis on predictability and aligning incen­tives, will allow the Bureau to collect information we need to proceed with a responsible review. At the same time, it will give more certainty to business about timing and process and har­monize our process with the U.S., which should help parties navigate the process more efficiently in a global marketplace.12

The SIR power enables the Bureau to demand additional documents and data from merging parties. This is a powerful tool for obtaining information from transacting parties, given that closing before all requested information is provided is prohibited.

The SIR power was enacted despite the Commissioner's pre-existing broad power to request information. Under section 11(1) of the Act, the Commissioner has always had the power to make an ex parte applica­tion to the court or Tribunal for the production of documents or other information from any party under investigation. Concern had been expressed about the misuse of this power before the creation of the SIR process, even though section 11 requests, unlike SIRs, are subject to court supervision. For example, in Canada (Commissioner of Competi­tion) v. Labatt Brewing Co., Mactavish, J. overturned her previous order for the production of information from Labatt Brewing Co. ("Labatt") because the Commissioner had failed to disclose, among other things, the burden the order would impose on Labatt.13 Specifically, the Com­missioner failed to disclose Labatt's concerns that the information request was too broad, that it demanded irrelevant information, and that compliance would cost Labatt over half a million dollars.14

Despite existing concerns of overuse of information demands under section 11 of the Act, Parliament nonetheless expanded the Bureau's information-gathering tools in 2009 with the SIR process. Since the coming into force of the SIR power, the Bureau has issued at least 39 SIR requests.15 The first SIR was issued on April 29, 2009 to Suncor Energy Inc. and Petro-Canada in connection with the companies' pro­posed merger.16 Since then, the number of SIRs per annum has doubled from five in each of the first two years of the program to 10 in each of 2012 and 2013. SIRs as a percentage of total reviews have also doubled, from 2.3% in 2009 to 4.7% in 2012/2013.17 On average, it takes parties 50 days to respond to SIRs.18 Although this figure has dropped signifi­cantly from 93 days in 2009, it is indicative of the significant burden and delay that are often imposed upon merging parties by such requests, especially since the parties must typically wait at least an additional 30 days to close the transaction after supplying all information requested by the SIR.19

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1 Competition Act, RSC, 1985 c C-34, s 114(2).

2 Ibid, s 114(1).

3 Indeed, Paul Collins and Michael Laskey observed in 2012 that, in comparison with the American counterpart to the SIR—the "second request"—the Bureau's SIRs were often more carefully tailored than second requests, and could be answered more quickly: Paul Collins & Michael Laskey, "Striking the Right Balance: 25 Years of Merger Review in Canada" (2012) 25:2 Can Comp L Rev at 422-23.

4 Hryniak v Mauldin, 2014 SCC 7, [2014] 1 SCR 87 at para 31.

5 Ibid at para 28.

6 Competition Act, supra note 1, s 11. The function and powers of a presiding officer are set out in ss 13 and 14 of the Act.

7 Ibid, ss 114(1), 123(1)(a).

8 Ibid, ss 114(2), 123(1)(b).

9 Competition Bureau, Merger Review Process Guidelines (Gatineau: Competition Bureau, 2009) at 4, online: http://www.competitionbureau.$FILE/ merger-review-process-2012-e.pdf.

10 Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 USC § 18a.

11 Melanie Aitken, Speaking Notes for speech delivered at the Senate Banking, Trade and Commerce Committee Hearings Regarding Competition Act Amendments, 13 May 2009, online: eic/site/cb-bc.nsf/eng/03065.html.

12 Ibid.

13 Canada (Commissioner of Competition) v Labatt Brewing Co, 2008 FC 59, [2008] FCJ No 127 [Labatt].

14 Ibid at para 100.

15 As of June 22, 2014.

16 Suncor Energy Inc. and Petro-Canada, Joint Information Circular and Proxy Statement at 71 (1 May 2009), online:

17 Competition Bureau, Mergers Branch, SIR Report: Update on Key Statistics & Trends, delivered at the Annual Roundtable Meeting (Toronto: 10 May 2013) at 2.

18 Ibid at 2.

19 Ibid at 2, 4; Competition Act, supra note 1, s 123(1)(b). In practice, the Bureau often requests additional time beyond 30 days following compliance with a SIR.

Previously published in the Canadian Competition Law Review

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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