The Canadian Competition Authority announces that its 2020 pre-merger notification thresholds will remain the same level as last year

Canada’s Competition Bureau (the “Bureau”), which assists the Commissioner of Competition (the “Commissioner”) in the administration and enforcement of the Competition Act (the “Act”), [1] announced on 1 April 2020 [2] that the 2020 pre-merger notification transaction size threshold for acquiring an undertaking will be $96 million (CAN), the same level as last year. [3] There is also a second test based on the size of the parties to the transaction when assessing whether to notify. Parties, and any affiliates, must have aggregate assets in Canada, or annual gross revenues from sales in, from or into Canada, in excess of $400 million. When a proposed merger reaches these levels, the parties to the transaction must notify the Bureau in accordance with s. 114(1) of the Act. [4] If the threshold is not revised, it remains the same as the previous year.

The indexing mechanism to establish the annual threshold level is found in s. 110(8) of the Act. The Minister of Innovation, Science and Industry, to whom the Commissioner reports, reviews the threshold annually. [5] The formula to determine the party and transaction size that triggers the notification are outlined in the Notifiable Transactions Regulations. [6]

The announcement in early April seems rather late in the year for business to know the ‘ground rules’ for potential mergers, but this delay may be in part due to the Covid-19 pandemic and related government priorities. It is also instructive to note that the threshold level remains unchanged from 2019. Perhaps this is tacit recognition that the economy will be in for slow growth and a rough ride because of the pandemic.

According to the Bureau’s 1 April news release:

Under the Competition Act mergers of all sizes and in all sectors of the economy are subject to review by the Commissioner of Competition. The Competition Bureau must generally be given advance notice of proposed transactions when the target’s assets in Canada or revenues from sales in or from Canada generated from those assets exceed $96 million, and when the combined Canadian assets or revenues of the parties and their respective affiliates in, from or into Canada exceed $400 million.

The Commissioner reviews these notifiable transactions to determine if they are likely to prevent or lessen competition substantially. [7]

Although mergers of all sizes and in all sectors of the economy are subject to possible review by the Commissioner, the statutory threshold provisions make clear that companies must notify the Commissioner if a proposed merger, acquisition or other proposed transaction exceeds certain levels. Once notified to the Commissioner, the Bureau conducts a review of the proposal to assess whether it will prevent or lessen, or is likely to prevent or lessen, competition substantially in a definable market. [8]

The Act’s substantive jurisdiction extends to all mergers that have a real and substantial Canadian nexus, regardless of size. However, the Act’s pre-merger notification requirements are triggered by bright-line thresholds designed to give certainty to merging parties regarding filing obligations. The transaction must involve an ‘operating business’ in Canada (in the sense that employees regularly report for work within Canada as opposed to merely a passive investment – but, in the Commissioner’s view, such employees may be those of an agent or contractor). The obligation to notify is also contingent upon satisfaction of both a party-size threshold and an acquiree-size threshold. [9]

Bureau not letting up during Covid-19 global pandemic

Notwithstanding the current climate with a global Covid-19 pandemic and lockdowns everywhere, the Commissioner has confirmed in the strongest language that it is business as usual at the Bureau. [10] Earlier this month the Bureau also provided guidance on business collaboration during the pandemic. Nevertheless, it all signalled that anti-competitive behaviour will not be tolerated.

Competition law enforcement remains vital in a period when the availability and affordability of critical goods and services are vital to the wellbeing of Canadians. Competition will also be critical to driving Canada’s economic recovery and future competitiveness as the country emerges from the impact of COVID-19.

As always, the Bureau encourages individuals and companies to report anticompetitive conduct, such as deceptive marketing, price-fixing or bid-rigging, through the Bureau’s complaint form and immunity and leniency programs. [11]

Holding the pre-merger notification threshold at 2019 levels may help enhance legitimate pro-competitive business activity during this difficult time. As well, it is hoped the Commissioner and Bureau will continue to reflect on their mandate to ensure a competitive marketplace that fosters lower prices, product choice and economic efficiencies for all Canadians.

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  • Commonwealth Secretariat (London)

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Gavin Murphy, The Canadian Competition Authority announces that its 2020 pre-merger notification thresholds will remain the same level as last year, 1 April 2020, e-Competitions April 2020, Art. N° 94406

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