Earlier today, the Federal government introduced Bill C-10, the Budget Implementation Act, 2009 (the "Bill"). The Bill proposes significant changes to Canada's Competition Act and Investment Canada Act. The Bill's key amendments in this area include:
- Replacing the existing conspiracy provisions in the Competition Act with a per se criminal offence for cartel-like agreements between competitors and a civil offence to deal with other types of agreements between competitors that substantially lessen or prevent competition.
- Amending the current merger notification process to mirror the U.S. Hart-Scott-Rodino Antitrust Improvements Act process and increasing the current merger notification thresholds.
- Granting the Competition Tribunal the power to order significant administrative monetary penalties for contravention of the abuse of dominance provisions of the Competition Act.
- Repealing provisions relating to price discrimination, promotional allowances and predatory pricing and de-criminalizing the price maintenance offence.
- Substantially increasing the Investment Canada Act review threshold for direct acquisitions of Canadian businesses by or from WTO investors (other than acquisitions of cultural businesses).
- Introducing a national security test to the Investment Canada Act review process.
A more detailed discussion of the Bill's proposals is set
Proposed Amendments to Competition Act
- The Bill proposes that the merger review process in Canada be aligned with the U.S. Hart-Scott-Rodino Antitrust Improvements Act procedure. The proposed process involves an initial 30-day waiting period in which a notified merger may not be completed and the government can assess the likely competitive effects of the proposed transaction. Before that 30-day period expires, the government may choose to issue a "second request" for information, in which case the proposed transaction may not be completed until 30 days after the Commissioner of Competition receives the requested information.
- The Bill also proposes to increase the thresholds for merger pre-notification. Currently, the Competition Act generally requires that the aggregate value of the assets in Canada or the annual gross revenues from sales in or from Canada of the acquired party exceeds $50 million in order for the notification requirements to be triggered (the value is currently $70 million for amalgamations). The Bill would increase this threshold for all forms of transactions to $70 million initially, with future increases tied to changes in inflation (or as prescribed by regulation).
- Finally, the Competition Bureau's ability to review mergers after closing would be reduced from the current three years to one year post-closing, providing greater certainty to parties post-merger.
- The Bill proposes to repeal the existing conspiracy provisions and replace them with a per se criminal offence for "cartel-like" agreements between competitors to fix prices, affect production or supply levels of a product, or allocate sales, customers or territories. The proposed provision does not require evidence that the conspiracy would be likely to lessen competition or allow for an efficiencies defense. However, liability will be avoided if the agreement is ancillary to a broader agreement that does not contravene the conspiracy offense and necessary for giving effect to the objective of that broader agreement. Maximum penalties under this provision are proposed to be raised to 14 years imprisonment and a $25 million fine, from the current five years and $10 million.
- The proposed civil provision would apply to other agreements between competitors that have the effect of lessening or preventing competition substantially. Under the proposed legislation, the Commissioner of Competition would apply to the Competition Tribunal for a remedial order where an agreement between competitors is likely to prevent or lessen competition substantially in a market.
Various other Competition Act amendments are proposed, which generally expand the scope of various offences or increase their penalties. These proposals include:
- Granting the Competition Tribunal the power to order an administrative monetary penalty of up to $10 million for a contravention of the abuse of dominance provisions of the Competition Act and up to $15 million for subsequent offences.
- Expanding the bid-rigging offence to include situations where a person agrees with another to withdraw their already-submitted bid.
- De-criminalizing the price maintenance offence and making the offence subject to private actions before the Competition Tribunal, in addition to Competition Bureau enforcement.
- Expanding the deceptive telemarketing offence to apply to companies targeting foreign individuals.
Proposed Amendments to Investment
The Bill includes a number of proposed amendments to the Investment Canada Act, which applies to acquisitions of Canadian businesses by non-Canadians. The two most significant proposed amendments include an increase in the financial thresholds applicable to direct acquisitions of Canadian businesses by or from WTO investors (other than acquisitions of cultural businesses) and the addition of a national security review process.
- Increased Review Thresholds for Acquisitions by WTO Investors – Direct acquisitions of Canadian businesses (other than acquisitions of cultural businesses) by or from WTO investors would be reviewable under the Investment Canada Act only if the enterprise value of the assets of the Canadian business is equal to or greater than (a) $600 million, in the case of investments made during the first year after the amendments come into force; (b) $800 million, in the case of investments made between the first and second years after the amendments come into force; and (c) $1 billion, in the case of investments made between the second and fourth years after the amendments come into force. This figure would thereafter be adjusted on an annual basis. In addition, the lower thresholds currently applicable to the transportation, financial services and uranium sectors would be repealed. Indirect acquisitions of Canadian business by WTO investors would continue to be subject to only post-closing notification, rather than review.
- National Security – A new review process for investments that could be injurious to national security would be introduced. The proposed amendments would, among other things, allow the Governor in Council to take any measures that the Governor in Council considers advisable to protect national security, such as prohibiting a non-Canadian from implementing an investment. Time frames for the review of such investments have not yet been determined.
Other proposed amendments to the Investment Canada Act include the following:
- Reasons for Not Approving Reviewable Transaction – The Minister would be required to provide reasons for any decision that an investment is not likely to be of net benefit to Canada.
- Potentially Greater Disclosure of Information – The Minister would be permitted to communicate or disclose privileged information obtained as a result of his review of an investment to prescribed investigative bodies, provided that such communication or disclosure is for the purpose of the administration and enforcement of the national security provisions and those bodies' lawful investigations. In addition, unless it would prejudice the investor or the Canadian business, the Minster would be permitted to disclose that an application for review had been filed under the Investment Canada Act (other than an application under the national security review provisions) and at what point the investment (to which the application relates) is in the review process.
- New Undertakings – If the Minister believes that an investor has failed to comply with written undertakings, the Minster may, after the investment has been implemented, accept new undertakings from the investor.
The proposals to amend the Canadian foreign investment review
regime, as well as the proposals to repeal or de-criminalize
certain pricing offences in the Competition Act, are
welcome initiatives that should enhance Canadian competitiveness
and Canada's attraction to foreign investors.
Unfortunately, the proposed amendments to the conspiracy provisions, the adoption of a U.S.-style second request merger notification regime and the introduction of significant penalties for abuse of dominance will undoubtedly increase legislative and market uncertainty at significant cost to the private sector. Whether these changes will come close to the objective of enhancing the efficiency and competitiveness of Canadian businesses is doubtful.
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.