Earlier today the Competition Policy Review Panel (Panel) released its report entitled "Compete To Win". The Report contains a number of important recommendations to improve the competitiveness and economic performance of the Canadian economy. The Report sets out a "competitiveness agenda for Canada" which is designed to improve Canadian productivity by increasing Canada's competitive intensity.
On the whole the Report is sensible, far-reaching and makes a number of positive substantive and process recommendations in areas that are long overdue for reform.
In addition to recommending significant changes to Canada's foreign investment and competition laws, the Report proposes changes that would reduce or eliminate certain industry specific ownership restrictions. Osler's Competition/Antitrust Law Group will be preparing a detailed analysis of the implications of the Report which will be available in the near future. We will also be hosting a dial-in webcast on Friday, June 27 at 11:00 am EDT. Osler Co-Chair, Brian Levitt, who is one of the members of the Panel will be one of the participants in the webcast. For more information see information on the webcast.
The key recommendations in the Report are outlined below.
Investment Canada Act
- While the Report does not recommend narrowing
the ambit of the Investment Canada Act (ICA) as was
recommended by some (e.g. requiring ICA approval only for
cultural businesses), if implemented, the recommendations
would affect the number of transactions that will be subject
to government review by raising the review threshold (for all
non-cultural transactions) to $1 billion (currently the
threshold is $295 million) based on the enterprise value of
the acquired business (rather than gross assets as is
currently the case). The Panel indicates that this higher
threshold is consistent with its view that the scope for
intervention should be made narrower and is aligned with the
underlying premise that foreign investment is, except in
unique circumstances, beneficial to Canada.
- In one of the most significant proposals in
the Report, the Panel recommends shifting the onus to the
government to show that a proposed transaction would be
contrary to Canada's national interests in order to
disallow a transaction instead of requiring the foreign
investor to demonstrate that the transaction is of "net
benefit to Canada".
- Establishing a de minimis exemption
for cultural transactions where the cultural activities are
merely ancillary and fall below the lesser of $10 million or
10% of gross revenues.
- As expected, the Report does not deal with the
issue of introducing a "national security" test
into the ICA. However, the Panel does explicitly state that
it supports the Minister's consideration of
developing a new requirement for transactions that raise
"national security" concerns and suggests that such
review requirement be aligned with that used by the U.S.
Committee on Foreign Investment. The Panel also
"welcomes" the Minister's recent
clarification on the ICA's application to state-owned
While acknowledging that the Competition Act is recognized internationally as being both "modern and flexible" and is not an impediment to Canada's overall competitiveness, the Panel concluded that updating certain provisions of Canada's competition laws could facilitate long-term improvements to Canada's productivity. The Panel recommended the following changes:
- Aligning the merger notification process more
closely with its U.S. counterpart by establishing an initial
30 day review period with a discretionary "second
stage" review that could extend the review period until
30 days after compliance with a "second request"
for information. This has the potential to increase timing
certainty and streamline the merger review process for large
multi-jurisdictional mergers. The implications for large
domestic mergers are less clear.
- Reducing the period within which the
Commissioner can challenge a completed merger to 1 year (from
- Repealing the outdated criminal price
discrimination, promotional allowance and predatory pricing
provisions, and repealing the existing criminal conspiracy
provision (which requires proof of an "undue"
effect on competition) and replacing it with a per
se criminal prohibition on hardcore cartel activity and
a civil, effects-based test for other types of
- Repealing the existing per se
criminal price maintenance provision and replacing it with a
new civil, effects-based test (together with allowing a
private right of enforcement of this new provision).
- Introducing administrative monetary penalties
of up $5 million for anti-competitive activity by dominant
market participants (currently the Competition Tribunal can
only issue prescriptive orders but not economic
- Repeal the "Air Canada" airline
industry specific abuse of dominance rules and
Sectoral Specific Recommendations
The Report recommends easing foreign ownership restrictions across a variety of industries:
- In air transport, increasing the limit on foreign
ownership to 49% of voting equity on a reciprocal basis,
expediting the negotiation of an Open Skies arrangement with
the EU and examining whether foreign investors should be
permitted to establish Canadian-incorporated domestic air
- Liberalizing non-resident ownership of uranium mining
activities, subject to new national security legislation and
market access for Canadians in the development of uranium
resources outside Canada or access to uranium processing
technologies for nuclear fuel for nuclear power plants.
- Adopting a two-step approach to increasing foreign
participation in telecom and broadcast industries by allowing
foreign companies to establish new telecom businesses in
Canada or acquire existing telecom companies with up to a 10%
market share, followed by a review of broadcasting and
cultural policies, with a view to liberalizing telecom and
broadcast investment restrictions in a "competitively
- Facilitating bank mergers by removing the de
facto prohibition on bank, insurance and cross-pillar
mergers of large financial institutions while retaining the
"widely held" rule for large financial institutions
(which limits any person from owning more than 20% of voting
shares or 30% of non-voting shares).
Peter Franklyn is the Chair of the firm's highly regarded Competition/Antitrust Law Group.
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.