For the second year in a row the Canadian government has maintained the transaction-size threshold for pre-merger notification at $93 million. The Minister cited the need to fully scrutinize potentially harmful deals and the government's commitment to a robust competition enforcement framework as reasons for not raising the threshold.
On February 2, the Honourable François-Philippe Champagne, Minister of Innovation, Science and Industry announced that the transaction-size threshold for notifiable transactions under the Competition Act will remain at $93 million for 2023, despite high inflation. This signals the government's intention to subject more transactions to pre-closing review by the Competition Bureau, which is consistent with its recent focus on expanding the role of the Bureau.
The government reduced the threshold in 2021 after a reduction in Canadian GDP in 2020 at the outset of the COVID-19 pandemic and did not increase the threshold in 2022 or 2023 following relatively significant increases in GDP as the Canadian economy recovered. If the Minister had increased the thresholds in accordance with changes in GDP, the threshold would have been $96 million for 2022 and $100 million for 2023 based on the indexing provisions in the Act.
The Minister's announcement stated that maintaining the transaction-size threshold at $93 million will ensure that the Bureau is able to fully scrutinize "potentially harmful deals" and that the decision reflects the government's "ongoing commitment to see more competition in the marketplace through a robust enforcement framework".
The Minister reviews the transaction-size threshold annually and may (but is not required to) modify the amount in accordance with changes to nominal Canadian GDP. The government opted not to change the threshold in 2022 and 2023, but before that the government typically adjusted the threshold annually in accordance with the change in GDP in the prior year.
The government launched a review of the Act in November 2022 and the discussion paper included commentary about whether the pre-merger notification thresholds should be lowered, or otherwise adjusted, in order to capture more transactions that could potentially cause competitive harm. While the review is still ongoing, the decision to maintain the transaction-size threshold, despite significant increases in Canadian GDP in 2021 and 2022, could signal the government's desire to lower the threshold permanently and, as a result, subject more and relatively smaller transactions to mandatory pre-closing review.
For 2023, the Competition Bureau must generally be given advance notice of proposed transactions when:
- The target (on a consolidated basis) has a book value of assets in Canada or annual gross revenues generated from those assets exceeding$93 million; and
- The purchaser and target - together with all entities under common ultimate control - have a combined book value of assets in Canada or annual gross revenues in, from or into Canada exceeding$400 million.
For notifiable transactions, merging parties are required to pay a filing fee (currently $77,452.36). This fee is also adjusted annually, typically in early April. But, unlike the notification thresholds, adjustment of the filing fee is mandatory and based only on inflation. Accordingly, parties should expect a higher filing fee for transactions that close in April 2023 or later.
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