Originally published in Blakes Bulletin on Competition Law
On May 1, 2007, the Competition Bureau published its Outline Consent Agreement (OCA) template, which is aimed at providing guidance to businesses and their counsel regarding the key terms of consent agreements in the context of merger transactions. Last year, the Bureau announced that it would publish a model consent agreement when it released its Remedies Bulletin. However, unlike with the Remedies Bulletin, the Bureau did not provide stakeholders with an opportunity to provide comments on the OCA before publication.
According to the Bureau’s press release that accompanies the OCA, the OCA is meant to serve as a starting point for the preparation of future consent agreements with merging parties. The OCA does not have the force of law, and thus the Commissioner of Competition can be expected to negotiate each specific consent agreement with an acquiring party in the context of a particular merger. For acquiring parties, it is critical that the Commissioner not treat the OCA as a definitive text, and thus really as a guidepost, since many of the terms set out therein are in the clear favour of the Bureau.
Highlights of the OCA include the following:
- The Commissioner rather than the acquiring party is responsible for appointing a Hold Separate Manager, Hold Separate Monitor and Divestiture Trustee. This provision can be contrasted with the equivalent process before the European Commission where, according to the EC’s “Commitments to the European Commission” publication, the acquiring party appoints the Hold Separate Manager, Hold Separate Monitor and the Divestiture Trustee, subject to the final approval of the EC.
- The acquiring party is responsible for remunerating the Hold Separate Manager, the Hold Separate Monitor and the Hold Separate Trustee, including any expenses occurred, such as where the manager, monitor or trustee hires experts, consultants or employees to assist.
- The acquiring party must take all steps to preserve the viability, marketability and competitiveness of the assets (or business) to be divested, including making certain that the assets are (or business is) adequately funded and, where a hold separate arrangement is necessary, that independence is maintained.
- The Hold Separate Monitor’s role is to oversee the operation of the business during the divestment period and to regularly report to the Commissioner, and in this respect the Hold Separate Monitor must be free from control, direction or influence from either the acquiring party or the Hold Separate Manager.
- The acquiring party is responsible for divesting the required assets (or business) during the initial sale process, while the Commissioner must approve the purchaser and purchase agreement prior to the divestment being completed. To this end, a divestment is subject to the notification provisions of Part IX of the Competition Act where the thresholds for notification are exceeded.
- During the sale process, the acquiring party must keep the Commissioner informed, including giving the Commissioner notice of any negotiations. The Commissioner can send information demands to the acquiring party throughout the process, and the acquiring party must respond in a timely manner.
- The OCA includes a number of provisions that seem to be designed to facilitate a sale, such as requiring the acquiring party to give or make available to a purchaser of the divested business: customary representations and warranties, technical assistance, employees, protect pension benefits, etc.
- Where appropriate, the acquiring party must agree to submit to the Tribunal’s jurisdiction to include additional assets in the divestiture package where the divestiture period has expired or the Commissioner believes the assets will not be divested before the divestiture period expires.
The OCA does not explicitly indicate which (if any) provisions of a consent agreement will remain confidential, but presumably the Bureau will continue its practice of allowing the parties to keep things like the existence of a crown jewel provision and the length of the initial sale and divestment sale periods confidential.
A copy of the OCA can be found at:
http://www.competitionbureau.gc.ca/internet/index.cfm?itemid=2310&1g=e.
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.