Draft guidelines recently issued by the Minister of Transport,
Infrastructure and Communities ("Minister") confirm a
potentially significant expansion of the Minister's review of
mergers in relation to transportation undertakings, with
implications for merger timing and possible increased regulatory
intervention in this sector.
The Canada Transportation Act ("CTA") was amended in
2007 to expand the merger review provisions relating to air
transportation undertakings to encompass all transportation
undertakings. The draft guidelines issued this past summer discuss
the range of public interest considerations that may be taken into
account by the Minister in a review and the information that should
be provided in a notification, but do not address important
threshold issues, such as the scope of transactions subject to
The amended merger review provision requires parties to a
proposed transaction that involves a transportation undertaking to
give notice to the Minister if the parties are required to notify
the Commissioner of Competition under merger notification
provisions of the Competition Act. The Minister then has
42 days to decide if the matter will be reviewed under the CTA
merger provisions. If the Minister does decide that a public
interest assessment as it relates to national transportation is
warranted, then the proposed transaction cannot be completed unless
it is approved by the Governor in Council, i.e., the Federal
Cabinet. Under the CTA merger review process, the Commissioner of
Competition has up to 150 days, or such longer period as the
Minister may allow, to report to the Minister and the parties on
concerns relating to any potential prevention or lessening of
competition that may occur as a result of the proposed transaction.
This report will be made public immediately after its receipt by
the Minister. The Minster may also direct the Canadian
Transportation Agency ("Agency") to examine public
interest issues as it relates to national transportation, in which
case the Agency has up to 150 days, or such longer period as the
Minister may allow, to report to the Minister.
The CTA amendments raise many important threshold questions on
which the draft guidelines fail to provide clarity. For example,
the term "transportation undertaking" is not defined, and
could mean the movement of goods or people by any mode within
federal jurisdiction, including transportation by air, rail,
marine, truck, bus, electrical transmission or pipelines. It may
also include services that relate to transportation, such as
airports or ports. There is no de mimimis exception, so
even where transportation services are a small part of the
business, they may be considered a transportation undertaking.
Moreover, the term "involves a transportation
undertaking" is sufficiently ambiguous that it may include a
proposed transaction where a transportation undertaking is
acquiring a non-transportation undertaking, even though such a
proposed transaction is very unlikely to have any effect on the
national interest as it relates to national transportation.
While it is expected that the Minister will conduct a full
public interest assessment only in the relatively few transactions
affecting major transportation undertakings, in the absence of
guidelines or appropriate exemptions, a significant number of
transactions may be required to the notify the Minister and provide
the information outlined in the guidelines.
If a public interest assessment is conducted and concerns are
raised with respect to the proposed transaction, parties may be
required to make significant changes to the proposed transaction or
commit to certain undertakings in order to obtain approval. While
the public interest was not defined in the amendments, the draft
guidelines suggest a host of possible considerations, including the
impact on users, communities, tourism, employment, other
transportation undertakings, trade, environment, security and
It is hoped that when the Minister publishes the guidelines in
final form, more clarity will be provided on these issues. In
addition, it would be useful for the Minister to put in place
exemptions that would narrow the potential scope of the CTA merger
provisions to those types of proposed transactions that are most
likely to raise significant public interest concerns as they relate
to national transportation
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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