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,
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
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.
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.
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.
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.