The Competition Bureau (the "Bureau") is required to review certain merger transactions that exceed various financial thresholds, based on the size of the business being acquired and the combined size of the buyer, the target business, and their affiliates. The notification thresholds under the Competition Act (the "Act") are discussed in more detail here. The Bureau reviews transactions that exceed these thresholds ("notifiable transactions") to assess the potential competitive effects of the deal prior to its completion, and if the Bureau concludes that a transaction is likely to substantially lessen or prevent competition, they may seek a remedy (such as a divestiture) or an injunction to prevent closing. Although the Bureau has always had the jurisdiction to examine any transaction under the Act for up to one year after its completion, regardless of its size, deals that meet the criteria of a notifiable transaction create the greatest cause for concern and have historically attracted the most attention from the Bureau.
That being said, in May the Commissioner gave a speech which highlighted the Bureau's plan to broaden its focus to include gathering intelligence on transactions that do not exceed the notification thresholds, but nonetheless raise competition concerns. In pursuit of its expanded mission, on September 17, 2019, the Bureau announced that the Merger Intelligence and Notification Unit ("MINU"), introduced in May, and previously called the Merger Notification Unit, is encouraging parties to voluntarily notify the MINU of transactions that present competition concerns even if the proposed transaction does not exceed the statutory thresholds.
The Bureau's moves come after the M&A market has enjoyed relatively high activity in the past two years. Larger companies continue to acquire innovative start-ups and often these transactions do not meet the notification thresholds. However, the downstream competitive effects may be significant as there is concern that disruption is dampened with the early incorporation of an innovator into an incumbent.
In furtherance of this mission the Bureau announced it was seeking information from market participants in the digital economy related to why certain digital markets have become concentrated, potentially to the detriment of consumers. By gaining a better understanding of the digital economy market and its players, the Bureau aims to inform its investigations and strategies for protecting consumers, and provide guidance to market participants. The Bureau's commitment of additional resources to aid in the battle against anti-competitive activity in smaller transactions, then, comes as no surprise and may be just one of its steps towards ensuring the digital economy does not lack competition and favours Canadian consumers.
Overall, the tension between the Bureau's limited resources and the requirement that it act swiftly when met with a notifiable transaction means that the Bureau is unlikely to expand the notification criteria at this time. However, with the Bureau's greater understanding of the digital economy and competition issues related to technology as well as its enhanced focus on smaller transactions, businesses must be cognisant of possible competition issues that their transactions present, even at an early stage in the process.
The author would like to thank Kiri Buchanan, articling student, for her assistance in preparing this blog post.
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