Last April, we reported that the Competition Tribunal had
dismissed an application by the Commissioner of Competition for
an order under section 100 of the Competition Act to
prevent the closing of Labatt's acquisition of Lakeport
Brewing – see M&A Bulletin, April 9, 2007, Labatt–Lakeport Transaction:
Implications of the Competition Tribunal's Dismissal of the
Commissioner's Application to Prevent the Merger
Closing. On January 22, 2008, the Federal Court of Appeal
dismissed the Commissioner's appeal of the Tribunal's
decision. In doing so, the Court confirmed that the granting of
section 100 orders is discretionary and it agreed with the
Tribunal that the Commissioner's application in this case
had failed to meet the statutory requirements for an order.
Predictions have been made by some competition specialists
that these decisions will prompt merger parties to push back
more aggressively against lengthy reviews by the Competition
Bureau. We disagree.
The premerger notification provisions of the Competition
Act establish a maximum statutory waiting period of 42
days that must expire before the parties to a notifiable merger
may complete the deal. In the vast majority of cases
– more than 90% of all mergers in any given year
– the Bureau completes its review within a much
shorter period of time, often as little as two weeks. In most
of the remaining cases, the Bureau completes its review within
the statutory waiting period or shortly thereafter. When the
Bureau's review exceeds the formal timeline, the parties to
the transaction are often willing to give the Bureau the extra
time it requires. They do so because the corporate timeline to
complete most mergers is usually longer – sometimes
much longer – than 42 days, and most purchasers want
the certainty that comes with the completion of the
Bureau's review and its decision not to challenge the
As regards the few "very complex" mergers in
Canada each year (in 2007, there were only three, including
Labatt) for which the Bureau's reviews can take up to five
months or more, the Labatt decisions may place some
pressure on the Bureau to expedite its review, particularly if
the parties threaten to close the transaction as soon as the
statutory waiting period has expired. However, this will only
be an effective strategy if (i) the purchaser is prepared to
take the postclosing risk of a challenge by the Bureau, which
has three years after a merger is completed to commence
remedial proceedings, and (ii) the parties believe that the
Bureau will be unable to establish its entitlement to a section
100 order on the facts of the particular case.
We continue to believe that the Commissioner will seek an
amendment to the Competition Act to either ease her
burden in establishing entitlement to a section 100 order or
provide her with a longer period of time in which to review the
most complex merger transactions.
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