Yesterday, the Competition Bureau (the "Bureau")
issued draft Enforcement Guidelines on the Revised Merger Review
Process (the "Draft Guidelines"). The Draft Guidelines
describe the Bureau's general approach to implementing the new
information gathering powers and time frames established by
amendments to the merger provisions of the Competition Act
(the "Act") that came into force on March 12, 2009. The
Draft Guidelines will be open for public comment until May 29,
2009.
Under the new merger review process, parties face an initial 30-day
waiting period in which a notified merger may not be completed and
the Bureau can assess the likely competitive effects of the
proposed transaction. Before that 30-day period expires, the Bureau
may choose to issue a "supplementary information
request", in which case the proposed transaction may not be
completed until 30 days after the Bureau has received the requested
information. While the merger review process has been amended, the
Bureau's substantive approach to merger review remains
unchanged.
The Bureau has stated that few proposed mergers will raise
competition concerns and will require a supplementary information
request. Nonetheless, the U.S. experience with its "second
request" regime suggests that mergers proceeding to a
supplementary information request are likely to experience
significant costs and delays. This noted, the Draft Guidelines
state that the Bureau "is committed to minimizing the
parties' burden in complying with a supplementary information
request by narrowing the issues and/or the requirements for
additional data and records to the extent reasonably
possible".
The highlights of the Draft Guidelines are summarized below.
Initial 30-Day Review Period
The initial 30-day review period begins once a complete filing
is received by the Bureau's Merger Notification Unit. However,
the Draft Guidelines state that parties are encouraged to consult
with the Bureau prior to or as soon as possible after submitting a
merger notification. The goal of such consultations is to assist
the Bureau to identify the issues raised by the proposed
transaction with the aim of streamlining the review process.
Within the initial 30-day period, the Bureau must determine whether
to allow the transaction to proceed or to issue a supplementary
information request to the merging parties. The Bureau's stated
goal is "to efficiently and effectively determine whether the
proposed transaction is likely to result in a substantial lessening
or prevention of competition, or whether the investigation can be
closed within the initial 30-day period". A transaction could
be cleared by the Bureau issuing an Advance Ruling Certificate or a
no-action letter. It is also possible that instead of
"clearing" the transaction in this way, the Bureau could
simply allow the 30-day waiting period to expire without issuing a
supplementary information request (at which point the parties may
complete the transaction), as often occurs in the United
States.
Supplementary Information Request
Overview
If additional information is required by the Bureau to complete
its review of a merger, it may issue a supplementary information
request. The issuance of a supplementary information request
extends the waiting period during which the proposed transaction
may not be completed until 30 days following compliance with the
supplementary information request. Where the proposed transaction
is a "hostile" bid, this 30-day period begins on the date
that the Bureau receives the requested supplementary information
from the bidder, regardless of whether the target has complied. The
waiting period may be terminated by the Bureau at any time by
notifying the parties that the transaction will not be challenged
at that time.
The Draft Guidelines state that it is unlikely that the
supplementary information request mechanism will be used often. If
it is invoked, it applies only to the merging parties. If
additional information is required from third parties, this
information will have to be supplied voluntarily or pursuant to a
production order issued by a court.
Interim Injunctions
Beyond the timelines contemplated by the supplementary information
request process, the Draft Guidelines state that the Bureau retains
the option of seeking an interim injunction under section 100 of
the Act to delay the closing of a proposed transaction up to a
further 60 days to allow the Bureau additional time to complete its
review. The appropriateness of seeking such further delay in light
of the considerable costs and delays already built into the new
supplementary information request process seems questionable.
Scope of Supplementary Requests
The new two-stage process has been criticized on the grounds that
there is no judicial oversight of the scope of the Bureau's
potential supplementary information requests. To limit the
potential scope of supplementary information requests, the Draft
Guidelines state that discussions with parties prior to issuance of
the request may help to reduce the burden, by discussing perceived
over-breadth, resolving confidentiality concerns, limiting
applicable time periods and relevant custodians and identifying
technological barriers to production. The Bureau may also request
interviews with representatives of the parties in order to better
understand the likely competitive effects of the transaction with a
view to narrowing the supplementary information request.
The Draft Guidelines describe a number of restrictions and
considerations that the Bureau will follow to limit the scope of
the Bureau's supplementary information requests:
- Limiting the number of custodians to be searched in response to a supplementary information request to a maximum of 30 individuals (excluding predecessors, successors, secretaries and assistants).
- Limiting the search period for hard copy and electronic records to a two year period prior to the supplementary information request and limiting the search period for data requests to a three year period prior to the request.
- Acknowledging that back-up tapes and other storage media are not typically configured for routine document review and stating a willingness to engage in discussions about requests for such information with parties on a case-by-case basis.
- Remaining open throughout the process to discussing with parties suggestions for tailoring the supplementary information request.
A final internal control on the scope of supplementary
information requests outlined in the Draft Guidelines is the
Bureau's internal review and approval process for such
requests. A committee of four senior members of the Bureau and the
Department of Justice will review all supplementary information
requests prior to issuance with the goal of minimizing the burden
imposed on parties in complying with a request.
International Cooperation
The Draft Guidelines state that the Bureau will accept access to
and copies of information and documents produced to a foreign
agency as compliance with the relevant terms of a supplementary
information request, provided that parties do not impose
restrictions on the use of such documents that are unacceptable to
the Bureau.
Compliance and Appeals
The Draft Guidelines do not address how a determination is made
that a supplementary information request has been complied with and
the new 30-day waiting period has commenced. Concerns have been
raised that, unlike in the U.S. where the 30-day clock starts upon
achieving "substantial compliance" with the supplementary
request, the Bureau may seek a stricter and unworkable "full
compliance" standard in Canada.
The Draft Guidelines outline a mechanism for an internal appeal
within the Bureau when a party objects to the scope of the
supplementary information request or to a determination by the
Bureau that the party has not complied with the request. In either
case, a party may appeal the matter to a (Senior) Deputy
Commissioner (other than one in the Mergers Branch of the Bureau),
who must render a decision within seven business days after
receiving all requested information. This internal Bureau appeal
mechanism option does not alter that the statutory authority to
prevent the closing of a proposed transaction, including where
there may be issues regarding compliance with a supplementary
information request, resides with the Competition Tribunal or the
courts and not with the Bureau.
Conclusions
The Draft Guidelines offer welcome guidance on a number of aspects
of the new merger review process. Most notably, the Bureau's
various self-imposed limitations on the scope of supplementary
information requests are generally helpful. At the same time,
questions remain as to whether in practice the Bureau will confine
supplementary information requests to the "very few
mergers" that raise serious competition concerns and, when
issued, the scope of supplementary information requests will be
manageable and proportionate to the perceived competition
questions.
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.
