Canada: Competition Policy Review Panel Recommendations To Sharpen Canada’s International And Domestic Competitiveness: Impact On Financial Services

1. Background

On June 26, 2008, Canada's Competition Policy Review Panel (the "Panel") issued its Final Report entitled Compete to Win (the "Report") after almost 12 months of consultations and research. The Panel was initially established in June, 2007 by the federal Canadian Ministers of Industry and Finance, to review Canada's competition and foreign investment policies and make appropriate recommendations for making Canada more competitive.

The Report contains 65 legislative and public policy recommendations aimed at: (a) reducing barriers to the entry of foreign investment; (b) adjusting the Canadian competition/anti-trust regime to align with internationally accepted best practices; and (c) boosting Canadian competitiveness. The recommendations assume "raising Canada's overall economic performance through greater competition will provide Canadians with a higher standard of living."

The Panel's recommendations are, for the most part, a positive contribution to the public policy debate regarding key elements of federal government policy necessary and long overdue reforms.

The key noteworthy recommendations are in the first third of the Report. The key recommendations are highlighted below.

2. Financial Services

The most significant recommendations affecting the financial services industry address (a) the regulation of large financial institutions ownership, and (b) as the Panel describes it, the end of the de facto prohibition of mergers among large financial institutions

  • Retaining the "Widely Held Rule". The current ownership regime requires Schedule I banks (Canadian domestic banks), with equity of over $8 billion, to be widely held (i.e. 20 per cent of any class of voting shares, and up to 30 per cent of any class of non-voting shares). This rule is intended to reduce the risk of lending transactions between a financial institution and persons who are in positions of influence over the institution, known as "self dealing". The financial services industry has argued that liberalizing ownership restrictions governing large financial institutions would enhance competition and allow Canadian financial institutions to compete abroad and allow small and medium-sized businesses to broaden their credit options. The Panel disagreed favouring instead allowing greater international competition, and more competition between bank and non-bank lending institutions. Accordingly, the Panel recommends that the "widely held" rule should be retained.

  • Removing De Facto Prohibition on Mergers. The Panel's second recommendation was that the Canadian Minister of Finance should remove the de facto prohibition on mergers of large financial institutions subject to regulatory safeguards. The Report states there is a need for greater scale to compete internationally, including efficiencies resulting from domestic mergers and increased choices in the domestic marketplace. As a result, the Panel recommends that the Minister of Finance remove the prohibition on bank, insurance and cross pillar mergers of large financial institutions.

3. Amendments to the Investment Canada Act (ICA)

The Panel's recommendations can be viewed primarily as efforts to reduce barriers to entry to foreign investment focused on a few substantive and several procedural issues, while still addressing culturally-sensitive industries. The recommendations are not revolutionary and some have been under discussion for some time. They are, however, necessary and belated modernizations to respond to the perception (not supported by data) that Canada is one of the most restrictive developed countries for foreign investment.

  • Raise the Review Threshold. The Panel urges the Minister of Industry to: (a) raise the general review threshold under the ICA from its current $295 million, based on gross assets, to $1 billion, based on enterprise value of the acquired business. This threshold would also apply to the special sectors of transportation (including pipelines), non-federally regulated financial services and uranium mining, which are currently subject to a much lower ICA review threshold of $5 million; and (b) remove the current notice requirement under the ICA for investments below the applicable review threshold as well as for the establishment of new businesses. An increase in the applicable thresholds would certainly serve to reduce the current regulatory burden for much foreign investment, although the shift from asset value to enterprise value would likely increase uncertainty relating to the application of the new threshold in specific instances. Perhaps more importantly, the Panel did not address a continuing problem relating to the scope of the ICA's current application. In assessing whether an investment meets the applicable threshold for review the total value of an entity's assets must be considered, regardless of where those assets may be located. As a result, many investments in "Canadian" entities with few operations in Canada, but with a significant international presence, are subject to review, only because of the value of the entities' operations in countries outside of Canada. There appears to be no clear rationale for continuing to subject such investments to review under the ICA, regardless of a higher threshold for review. This is particularly true in light of the fact that most acquisitions of foreign corporations with Canadian subsidiaries (so-called indirect acquisitions) are now completely exempt from ICA review.

  • Shift Onus Under Test. The Panel recommends a shift in the burden of proof under the ICA from the investor (who must currently demonstrate a "net benefit to Canada") to the Government (which must allow the investment unless it can be demonstrated that it would be "contrary to Canada's national interest"). This recommendation is made on the premise that "foreign investment is, except in unique circumstances, beneficial to Canada." The Panel concludes that this shift would mean that investments that might not now meet the "net benefit" test could proceed without ministerial intervention unless there is an overriding "national interest" concern. However, in such cases, an investor would be faced with the broad, amorphous and undefined threshold of "national interest" that, unless clearly defined, would still result in business uncertainty and would continue to contribute to Canada's restrictive foreign investment reputation. How such a reverse onus actually improves upon the existing, perhaps equally amorphous, "net benefit" test is not entirely clear.

  • Increase Transparency, Predictability and Timeliness. In order for the recommendations to have teeth, the Panel's procedural proposals relating to transparency (reporting on disallowances with reasons, reporting annually about administrative guidance and type of activities addressed), predictability (including increased use of published guidelines, advisory materials, and binding opinions) and timeliness would also need to be implemented. These are helpful and largely uncontroversial suggestions, many of which can be implemented immediately, without the need for legislative change.

  • Cultural Businesses. The Panel recommends that the Minister of Heritage: (a) establish a de minimus cultural business activities exemption based on the lesser of $10 million or 10% of gross revenues when measuring the cultural activities against the entire business. This would be aimed at business acquisitions that include an ancillary (not stand-alone) cultural business aspect not subject to Department of Canadian Heritage review; and (b) establish a five-year review of cultural industry policies, including foreign investment restrictions. The current $5 million ICA review threshold for stand-alone cultural businesses would remain in the interim.

  • "National Security" Issues. The introduction of a new national-security-related review of proposed foreign investments has been under active consideration by the Federal Government for some time. Consequently, that issue was not considered to be part of the Panel's mandate. However, the Panel still chose to include an indirect recommendation that any such security review process should be based on the process now utilized in the United States, which would also be generally in line with similar processes currently utilized in the UK, China, Japan and Germany. This is a helpful suggestion, but careful evaluation of the manner in which these other countries operate their security review processes, the scope of application and the definition of "national security" is clearly required. In this regard the Federal Government will need to tread a fine line between protecting the nation's security and introducing a highly uncertain and potentially political process that will frighten off legitimate and beneficial foreign investment.

4. Sector-Specific Amendments to Air Transport, Uranium Mining, Telecommunications and Broadcasting Ownership Restrictions

The Panel's recommendations also target long-standing sector-specific legislation containing foreign ownership restrictions in order to increase Canadian competitiveness and other public policy goals. The Panel's recommendations in these areas are:

  • Air Transport. Increasing the foreign ownership limit from 25% to 49% of voting equity on a reciprocal basis; completing the Open Skies negotiations with the EU as soon as possible; and establishing a policy (within 18 months) on foreign establishment of Canadian incorporated domestic air carriers.

  • Uranium Mining. Liberalizing non-resident ownership on uranium mining, subject to new national security legislation; and securing market access benefits for Canadian participation in uranium resource development outside of Canada, or access to processing technology.

  • Telecommunications/ Broadcasting. Implementing a two-phased approach to foreign participation in the telecommunications and broadcasting market, reflecting the significant convergence of these sectors. It would begin with allowing foreign companies to establish a new business or acquire a business with up to 10% of the telecommunications market in Canada, followed by a review of broadcasting and cultural policies to liberalize foreign investment restrictions in a "competitively neutral" manner.

  • Procedural Changes to All Sectors. Implementing a periodic five-year review of all sector-specific regulatory regimes to assess ownership restrictions against competitive impediments, in light of then relevant public policy considerations.

5. Amendments to the Competition Act

The Panel considers its recommendations for amendments to the Competition Act to be "fine-tuning" and not a "major overhaul" since Canada's regime is "recognized internationally as both modern and flexible." The finetuning is aimed at ensuring that the Competition Act is focused on anti-competitive conduct and outcomes rather than industry concentration, which the Panel considers inevitable given the reality of Canada's small open economy. As is the case with the Panel's recommendations relating to investment, many of its proposed recommendations in the competition area have also been under discussion for some time.

The Panel recommends:

  • Adjusting Current Thresholds for Pre-Merger Notification. The Minister of Industry should examine the current financial thresholds which trigger pre-merger notification under the Competition Act with a view to increasing those thresholds. In particular, the "size of the parties" threshold has remained at $400 million since it was initially established over 20 years ago. The net result of any such threshold increases would be to subject fewer transactions to pre-merger notification. The Commission of Competition would retain her ability to challenge any transaction, whether notified or not. In addition, the Minister should also consider whether additional classes of transactions which are unlikely to result in any competitive harm can be excluded from the review process entirely. Unfortunately, the Panel remained silent on the current notification filing fee of $50,000. For example, it might have proposed, as an alternative, that if nonproblematic transactions cannot be excluded from the review process entirely, the applicable fees might be adjusted to better reflect their non-problematic nature.

  • Procedural Changes to Merger Review. Amending the pre-merger notification process to better align it with the process currently used in the United States. Proposed changes encompass an initial 30-day review (and clearing) period, and, at the Commissioner's discretion, a "second stage" review that would end 30 days following full compliance with a "second request" for information. These proposed procedural changes recognize the fact that many transactions are subject to merger review in both Canada and the United States, as well as the need for timeliness in merger review. There are both positive and negative aspects to these proposals. On the negative side, the Competition Bureau currently completes its review of most notified transactions within 14 days. The proposed 30-day initial period may therefore result in additional delays for most transactions. This appears completely unnecessary. On the positive side, the Bureau often takes several months to review very complex transactions. A second mandatory 30-day period following submission of information necessary to meet a "second request" could therefore result in a significant improvement to the current processing periods for the small number of such very complex transactions. A formalized "second request" process might also go some way to address current concerns relating to the Competition Bureau's information gathering processes.

  • Reduction of Post-Merger Review Period. Limiting the challenge period to one year (from the current three years) after the substantial completion of a merger during which the Commissioner may challenge a transaction post-closing. While this change would decrease post-merger uncertainty for businesses, it is also possible that it could result in the Commissioner undertaking more thorough reviews upfront and challenging more potentially problematic transactions because her ability to take a "wait and see" approach will be more limited.

  • Amendment of Criminal Provisions. (a) Repealing price discrimination, promotional allowances, predatory pricing provisions; (b) de-criminalizing resale price maintenance and implementing civil penalties; (c) replacing current conspiracy provisions with a per se criminal provision to target hardcore cartels and a civil provision to address other agreements between competitors that have an anti-competitive impact. Many of these proposals are relatively uncontroversial, such as repeal of the price discrimination provisions, and will bring Canadian competition law up-to-date with current economic thinking. Others, such as proposed amendment of the conspiracy section, have been under discussion for many years with no clear consensus as to how issues relating to the current provision can or should be addressed. Concerns generally relate to any such changes being over-inclusive and potentially punishing legitimate procompetitive business conduct. The Panel's proposals provide no guidance as to how this current log-jam might be broken.

  • Changes to Abuse of Dominant Position. (a) Repealing the special air passenger service abuse of dominant position provisions (the so-called "Air Canada" amendments) and penalties; and (b) introducing administrative monetary penalties of up to $5 million for violations of abuse of dominant position provisions. The introduction of financial penalties for abuse of dominant position have been under discussion for some time and is perhaps more contentious than changes to the conspiracy section. The concern here relates to the fact that the abuse offence, in part, judges behavior after the fact, based on effect. Concerns over the potential imposition of significant fines could therefore act to stifle legitimate procompetitive behavior in many instances.

6. Other Public Policy Initiatives

The remaining two-thirds of the Report lists numerous public policy initiatives that should be undertaken in order to improve Canada's overall competitiveness. Broad areas covered include taxation, international trade, strengthening the workforce through education and immigration, directors' role in M&A transactions, innovation and IP, securities and general regulatory reforms and Canada-US economic relations. The Panel also singles out barriers to internal trade and notes that greater efforts need to be made to reduce these barriers and improve upon the existing Agreement on Internal Trade.

7. Timing and Next Steps

A task force has been struck within the Ministry of Industry to review the Report and consider options. Even if this task force recommends wide-scale implementation of the Panel's recommendations, those proposals requiring legislative amendments will compete for scarce parliamentary time, particularly in this minority Parliament. Therefore, we do not expect to see many proposals requiring statutory amendment to see the "light of day" prior to the next Canadian federal election, expected this fall. There simply is not enough time to push such changes through Parliament even if they were to receive wide-spread acceptance. The more controversial suggestions not requiring legislative changes, such as the removal of the opposition to bank mergers, for example, are also not likely to be brought forward in the current minority Parliament. The Government has yet to formally respond to the Report and recommendations, but does appear to be generally satisfied with the Report. Opposition criticism, thus far, has been muted. This perhaps may signal that there is wide-spread acceptance of the Report and that most of the Panel's recommendations may eventually find their way into changed policy or legislative amendment following the next federal election.

The Financial Services Regulatory Group at Borden Ladner Gervais LLP would be pleased to discuss with you these legislative developments and any other regulatory issues you may have.

About BLG

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions