Procedures Guide for Notifiable Transactions and Advance Ruling Certificates Under the Competition Act

2.1 Purposes of pre‑merger notification

Part IX of the Act sets out the statutory framework for pre‑merger notification, which requires parties to proposed transactions that exceed certain monetary thresholds to:

1. notify the Commissioner prior to completing the proposed transaction;
2. provide specified information; and
3. wait a specified period of time before completing the transaction.

The purposes of notification are to:

1. provide the Commissioner with advance notice of large proposed transactions;
2. provide the Commissioner with a sufficient period of time to undertake an analysis of the impact of the proposed transaction;
3. facilitate this analysis by ensuring that certain required information is submitted to the Commissioner with the notice; and
4. avoid the difficulties associated with remedying a completed merger, where that merger is subsequently found to be anti‑competitive.

2.2 Determining whether a proposed transaction is notifiable

Determining whether a proposed transaction is notifiable generally involves the four steps set out below. Where the first three steps are satisfied and there is no applicable exemption in step four, the transaction is notifiable. In certain cases, one or more of these steps may require further analysis before reaching a conclusion as to whether a transaction is notifiable.

Section 114 of the Act requires that all parties to a proposed transaction that exceeds the thresholds set out in sections 109 and 110 of the Act must notify the Commissioner prior to the completion of the transaction and supply the Commissioner with certain information. Section 123 of the Act sets out the waiting periods during which the parties to a proposed transaction are legally prohibited from closing the transaction.

Note that section 113.1 of the Act provides that when one or more transactions are proposed or designed to avoid notification, sections 114 through 123.1 apply. Implications for parties that complete such a transaction without submitting a Notification under subsection 114(1) may include criminal sanctions, where appropriate.^{Footnote 1}

Step 1: Determine whether the structure of the proposed transaction falls within section 110 of the Act

Section 110 of the Act addresses the following transaction structures:

1. the acquisition of any of the assets in Canada of an operating business^{Footnote 2};
2. the acquisition of voting shares of a corporation that carries on an operating business or controls a corporation that carries on an operating business;
3. the amalgamation of two or more corporations, if one or more of those corporations carries on an operating business or controls a corporation that carries on an operating business;
4. the creation of a combination of two or more persons^{Footnote 3} to carry on business otherwise than through a corporation, where one or more of those persons proposes to contribute to the combination assets that form all or part of an operating business carried on by those persons, or corporations controlled by those persons; and
5. the acquisition of an interest in a combination.

If the proposed transaction is of a type described above, the parties should consider whether the party‑size and transaction‑size thresholds have been exceeded.

Step 2: Determine whether the parties exceed the party‑size threshold in section 109 of the Act

For purposes of pre‑merger notification, section 109 of the Act requires that the parties to the proposed transaction, together with their affiliates^{Footnote 4}, must collectively have assets in Canada or annual gross revenues from sales in, from or into Canada that exceed $400 million. The Regulations outline the procedure for calculating the value of assets and gross revenues from sales.

Where the proposed transaction involves the acquisition of voting shares, subsection 109(2) of the Act specifies that the parties to the proposed acquisition of shares are:

1. the person(s) who propose to acquire the shares; and
2. the corporation whose shares are being acquired.

Step 3: Determine whether the proposed transaction exceeds the applicable transaction‑size threshold specified in subsections 110(2) to 110(6) of the Act

Generally, for purposes of pre‑merger notification, the aggregate value of the assets in Canada, or the annual gross revenues from sales in or from Canada generated from those assets, must exceed the transaction‑size threshold amount (the " TSTA "). The 2009 amendments to the Act increased the TSTA to $70 million and introduced an indexing mechanism^{Footnote 5} for subsequent years to adjust the TSTA based on changes in the level of Nominal Gross Domestic Product at market prices. The TSTA when determined for a particular year by the Minister of Industry will be published in the Canada Gazette^{Footnote 6} and posted on the Bureau's website.

Based on the transaction structure, step 3 will be satisfied where:

1. Asset Acquisition: The aggregate value of the assets in Canada or the annual gross revenues from sales in or from Canada generated from those assets would exceed the TSTA .
2. Voting Share Acquisition^{Footnote 7}:
   1. the aggregate value of the assets in Canada of the acquired corporation, or the annual gross revenues from sales in or from Canada generated from those assets, would exceed the TSTA ; and
   2. if it is an acquisition of voting shares that are:
      1. publicly traded, the proposed acquisition must result in the acquiring party, together with its affiliates, holding in excess of 20% of the target corporation's voting interests, unless the acquiring party already owns more than a 20% voting interest, in which case the proposed acquisition must result in the acquiring party holding in excess of 50% of the target corporation's voting interests; or
      2. not publicly traded, the proposed acquisition must result in the acquiring party, together with its affiliates, holding in excess of 35% of the target corporation's voting interests, unless the acquiring party already owns more than a 35% voting interest, in which case the proposed acquisition must result in the acquiring party holding in excess of 50% of the target corporation's voting interests.

3. Amalgamation:^{Footnote 8}
   1. the aggregate value of the assets in Canada of the continuing corporation, or corporations controlled by it, or the annual gross revenues from sales in or from Canada generated from those assets would exceed the TSTA ; and
   2. each of at least two of the amalgamating corporations, together with its affiliates, have assets in Canada, or annual gross revenues from sales in, from or into Canada, that would exceed the TSTA .

4. Combination: The aggregate value of assets in Canada of the combination or the annual gross revenues from sales in or from Canada generated from those assets would exceed the TSTA .
5. Acquisition of an Interest in a Combination:
   1. the aggregate value of the assets in Canada of the combination, or the annual gross revenues from sales in or from Canada generated from those assets, would exceed the TSTA ; and
   2. the acquiring party, together with its affiliates, as a result of the proposed acquisition would be entitled to receive more than 35% of the profits of the combination or of its assets on dissolution, or more than 50% where the acquiring party's interest already exceeds 35%.

2.3 Further acquisition of voting shares or interest in a combination

As noted above, where a person has already exceeded the 20% or 35% threshold for an acquisition of voting shares, or the 35% threshold for an acquisition of an interest in a combination, another Notification (as defined below) under section 114 of the Act will generally be required if the same person will exceed the 50% threshold after making a further acquisition of either voting shares or an interest in a combination. However, where a person intends, at the time of the initial acquisition, to make such a future acquisition, subsection 115(2) of the Act provides that a notice of the intended future acquisition may be given along with the initial Notification. Where such notice is provided, the parties will not be required to supply a Notification under section 114 for the future acquisition if two conditions are met:

1. the future acquisition is carried out in accordance with the notice given under subsection 115(2); and
2. an additional notice is given in writing to the Commissioner within 21, and at least seven, days before the future acquisition. Pursuant to subsection 115(4) of the Act, the exemption under subsection 115(3) will not apply to a future acquisition that is not completed within one year after the date of notice given under subsection 115(2).

2.4 Information to be supplied with the notification

Subsection 114(1) of the Act provides that parties to a notifiable proposed transaction are required to notify the Commissioner and supply the prescribed information set out in section 16 of the Regulations (collectively, the "Notification").

2.5 Waiting periods

Paragraph 123(1)(a) of the Act provides that parties submitting a Notification under subsection 114(1) shall not complete the proposed transaction before the expiration of 30 days after receipt of a complete Notification by the Commissioner. Where either waiting period set out in subsection 123(1) of the Act ends on a holiday, the waiting period is extended until the end of the next day that is not a holiday^{Footnote 13}.

Further, subsection 114(2) provides that the Commissioner may, within 30 days after receiving a Notification, require the notifying parties to supply additional information that is relevant to the assessment of the proposed transaction. Pursuant to paragraph 123(1)(b), the issuance of a Supplementary Information Request (" SIR ") triggers a second 30‑day waiting period during which the proposed transaction cannot be completed. This second 30‑day waiting period begins once the parties have provided a complete response^{Footnote 14} and have certified compliance with the SIR . The Bureau has issued the Merger Review Process Guidelines, which describe the process the Bureau will follow when a decision to issue a SIR has been made.

Following expiration of the applicable waiting period(s), parties are free to complete the proposed transaction unless they have entered into a timing agreement with the Bureau that would preclude them from completing the proposed transaction for a certain period of time or, on application by the Commissioner, the Tribunal has issued an interim order preventing completion of the transaction.

In the following three instances, parties may complete their proposed transaction without waiting the full applicable waiting period set out in subsection 123(1) of the Act:

1. pursuant to subsection 123(2), the Commissioner, or a person authorized by the Commissioner, may notify the parties, prior to expiration of the applicable waiting period, that the Commissioner does not intend, at that time, to make an application under section 92 of the Act in respect of the proposed transaction. Such a notification to the parties will be in the form of a "No‑Action Letter";
2. paragraph 113(b) of the Act provides that the issuance of an ARC exempts the transaction from the notifiable transactions provisions in Part IX of the Act. Thus, where a Notification is filed together with an ARC request, the issuance of an ARC prior to the expiration of the applicable waiting period automatically terminates that period; or
3. where information has been supplied in an ARC request, and where that information is substantially similar to the information required under subsection 114(1), the Commissioner, or a person authorized by the Commissioner, may, pursuant to paragraph 113(c) of the Act, waive the notification requirement under subsection 114(1) and, consequently, the applicable waiting period.

Where parties to a proposed transaction complete, or are likely to complete, a proposed transaction before the end of the applicable waiting period, the Commissioner may apply to the Tribunal for an order under section 123.1 of the Act. Possible sanctions under section 123.1 include administrative monetary penalties of up to $10,000 for each day on which the parties have failed to comply with section 123. The Tribunal may also order the parties not to implement the merger, or to dissolve it in whole or in part.

2.6 Transactions to which subsection 114(3) of the Act applies

Subsection 114(3) of the Act was added to the notification provisions in 1999 to ensure that information required from the target of an unsolicited or "hostile" takeover bid is submitted sufficiently in advance of the expiration of the waiting period. Such timely filing of the information from all parties to a proposed acquisition assists the Bureau in carrying out its assessment of the transaction as expeditiously as possible.

In a hostile takeover situation, where the Commissioner receives a Notification from a person who has commenced or has announced an intention to commence a take-over bid prior to receiving information from the corporation whose shares are being acquired (the "target"), paragraph 114(3)(a) of the Act requires the Commissioner to notify the target immediately that a Notification has been received from the acquirer. Paragraph 114(3)(b) of the Act requires the target to supply the prescribed information within 10 days after being so notified by the Commissioner.

In cases where subsection 114(3) of the Act applies, subsection 123(3) of the Act provides that the waiting period is determined without reference to the day on which the prescribed information is received from the target. In other words, the initial waiting period begins after the Commissioner has received the Notification from the acquirer and, where SIR s have been issued, the subsequent waiting period begins after the Commissioner has received the information requested from the acquirer and the acquirer has certified completeness of its response.

2.7 When should parties notify?

Parties must ensure that a complete Notification is filed sufficiently in advance of the proposed transaction's closing date in order to account for the expiration of the applicable waiting period(s). Generally, parties are encouraged to contact the Bureau at the earliest stage reasonably possible, and certainly as soon as they have an agreement or, in the case of a hostile takeover, definite plans.

When determining filing dates for proposed transactions, parties may wish to consider the following factors:

1. While paragraph 123(1)(a) of the Act sets out a minimum 30‑day waiting period, the issuance of a SIR pursuant to paragraph 123(1)(b) triggers a second waiting period during which the proposed transaction cannot be completed. The second waiting period ends 30 days after the parties have provided a complete response and have certified compliance with the SIR .
2. While subsection 123(1) of the Act sets out a minimum time period between filing and completion, the Act does not provide a maximum time period for the Bureau to complete its assessment of a proposed transaction. Therefore, parties should be aware that the statutory waiting periods under subsection 123(1) may not match the service standard periods set out in the Handbook. While parties can legally complete their transaction after the end of the applicable waiting period, even if the Bureau has not completed its assessment, they do so at their own risk. Section 7 of the Act provides a one‑year period following completion of a transaction during which the Commissioner may choose to challenge the transaction before the Tribunal.
3. Where a party files its materials to coincide with the minimum statutory waiting period and the Commissioner determines that the proposed transaction raises competition issues, the Commissioner may seek from the Tribunal an order temporarily preventing completion of the transaction. Accordingly, parties may wish to consider planning their transactions to take into account the possibility of a more extended review, according to the complexity level of the transaction^{Footnote 15}.

Parties that are interested in having the Bureau commence its review of a proposed transaction prior to triggering a statutory waiting period are encouraged to contact the Bureau, and may wish to consider submitting an ARC request only or together with a draft Notification that contains the prescribed information but has not been certified and therefore does not meet the statutory requirements. This may be useful in particularly complex transactions, where it would be inherently difficult for the Bureau to complete its review or sufficiently narrow any anti‑competitive concerns within the initial 30‑day waiting period. Such an approach may also be useful where parties are seeking to defer market contacts. In this situation, the Bureau may exercise its discretion to agree to defer market contacts, but parties must appreciate that the statutory waiting period and the applicable service standard will not commence until the statutory requirements and the requirements in the Handbook, are satisfied.

Prior to filing a Notification, parties should be reasonably certain of their intentions regarding completion of the proposed transaction. Parties who submit a Notification and subsequently abandon the proposed transaction create an unnecessary burden for themselves and for the Bureau, and they are not likely to be entitled to a refund of the fee, except in very limited circumstances. For more information about the Bureau's refund policy, please consult the Handbook.

2.8 Failure to notify

Section 113.1 of the Act provides that when one or more transactions are proposed or designed to avoid notification, sections 114 through 123.1 apply. Parties that complete such a transaction without submitting a Notification will be considered as a failure to notify the Bureau, and this Section of the Guide applies.

Parties that complete a notifiable transaction without submitting a Notification under subsection 114(1) may have committed a criminal offence under subsection 65(2) of the Act, and may be liable to a maximum fine of $50,000. In addition, parties may have contravened section 123, which prohibits completing a transaction prior to expiry of the applicable waiting period, and may be subject to an order under section 123.1 of the Act.

Where a transaction has been completed in violation of the Act, it is important to bring the matter to the attention of the MNU and submit a Notification, together with the applicable filing fee^{Footnote 16} and an explanation for the failure to notify, as soon as possible. The explanation should be submitted by an officer or director of the party, setting out the reasons why the Notification was not filed in a timely manner, how and when the failure was discovered, and what steps have been taken to prevent a violation of the Act in the future.

2.9 Interpretation Guidelines

The Bureau has published a series of Interpretation Guidelines that are intended to assist parties and their counsel in interpreting and applying the provisions of the Act relating to notifiable transactions.

The following interpretation guidelines are available on the Bureau's website:

• Interpretation Guideline No.1 ‑ Section 108. Definition of "operating business"
• Interpretation Guideline No.2 ‑ Section 114. Number of Notices ‑ Multiple Step or Continuous Transactions
• Interpretation Guideline No.3 ‑ Paragraph 111(a). Exemptions for Acquisitions in the Ordinary Course of Business
• Interpretation Guideline No.4 ‑ Section 112. Exemption for Combinations that are Joint Ventures
• Interpretation Guideline No.5 ‑ Subsection 110(3). Acquisitions of Non‑Voting Shares and Convertible Securities
• Interpretation Guideline No.6 ‑ Subsection 110(4). Amalgamation
• Interpretation Guideline No.7 ‑ Paragraph 111(d). Creditor Acquisitions
• Interpretation Guideline No.8 ‑ Section 103. "Substantially Completed" and Section 119 "Completed"
• Interpretation Guideline No.9 ‑ Shareholder Agreements
• Interpretation Guideline No.10 ‑ Notifiable Transactions Regulations ‑ Transactions and Events in Section 14
• Interpretation Guideline No.11 ‑ Corporate Spin‑Offs

3.1 Overview

Parties to a proposed transaction may apply for an ARC in lieu of, or in addition to, submitting a Notification. Pursuant to section 102 of the Act, where the Commissioner is satisfied by a party or parties to a proposed transaction that there are insufficient grounds to apply to the Tribunal for a remedial order under section 92, the Commissioner may issue an ARC ^{Footnote 17}. The issuance of an ARC is discretionary; however, an ARC cannot be issued for a transaction that has been completed. Where an ARC is issued, paragraph 113(b) of the Act exempts the named transaction from the notification provisions of Part IX.

Under section 103 of the Act, where the Commissioner issues an ARC and where the proposed transaction to which the ARC relates is substantially completed within one year after the ARC is issued, the Commissioner cannot apply to the Tribunal solely on the basis of information that is the same or substantially the same as the information upon which issuance of the ARC was based; however, where the Commissioner receives additional information that differs substantively from the basis on which the ARC was issued, the Commissioner may apply to the Tribunal for an order under section 92 of the Act. Thus, it is critical that parties provide full disclosure of all information relevant to the proposed transaction and its effect on competition at the time an ARC is requested.

A request for, or issuance of, an ARC will not prevent an inquiry under section 10 of the Act that the Commissioner may cause to be made in respect of any other provision of the Act.

Where an ARC is denied, a No‑Action Letter may be issued by the Commissioner, or a person authorized by the Commissioner, indicating that the Commissioner does not, at that time, intend to make an application under section 92 in respect of the proposed transaction.

3.2 Factors relevant to the consideration of an ARC request

Factors to be considered by the Bureau in assessing an ARC request include, but are not limited to, those set out in sections 93 to 95 of the Act. The Merger Enforcement Guidelines, which are available on the Bureau's website, provide general guidance on the Bureau's analytical approach to merger review. They describe, to the extent possible given the wide variety of factual circumstances, how the Bureau will conduct its analysis of merger transactions.

3.3 Information to be submitted with an ARC request

Unlike the notification provisions in Part IX of the Act, the Act does not stipulate the information that must be supplied to the Commissioner in support of an ARC request. Given that the decision to issue an ARC will be based largely on information received from the party or parties requesting the ARC , parties should supply the Commissioner with all information relevant to the proposed merger and its effect on competition.

An ARC request in respect of a non‑complex transaction with no or minimal overlap requires significantly less information than one relating to a non‑complex transaction with moderate overlap. Where moderate overlap exists, the information provided should be similar to the information requirements under section 16 of the Regulations^{Footnote 18}. In addition, the parties should focus on the matters listed in section 93 of the Act. The submission of relevant market share information and any related industry studies may also assist in satisfying the Commissioner that there is no competition issue and that an ARC should be issued. Parties requesting an ARC should suggest the wording for a "Re:" line that adequately identifies the transaction and could be used on the ARC . Parties may also optionally choose to provide their Business Numbers when submitting an ARC request.

Where the information supplied with an ARC request is substantially similar to the information required under subsection 114(1) of the Act, the Commissioner may, pursuant to paragraph 113(c) of the Act, waive the requirement to file a notice and supply information under subsection 114(1). Thus, where the possibility exists that an ARC request made in relation to a notifiable transaction could be rejected, parties may also wish to submit a Notification in order to commence the statutory waiting period. The Commissioner is likely to waive notification where the examination of the proposed transaction has been completed and additional information is not required.

3.4 When to request an ARC

Given that an ARC is available only for proposed transactions, an ARC request should be made as soon as reasonably practicable to ensure that the Bureau has sufficient time to complete its review, having regard to the Bureau's service standards. A prompt request will enable the parties to respond to any concerns or questions the Commissioner may have so that an ARC or No‑Action Letter may be issued before the transaction is scheduled to be completed. The Commissioner is obliged under subsection 102(2) of the Act to consider the matter expeditiously. With the full assistance of the parties, the Commissioner is generally able to issue the ARC or No‑Action Letter in a timely fashion.

Where a proposed transaction is not notifiable, and parties wish to receive written confirmation that the Commissioner will take no further action in the matter, they should submit an ARC request along with the appropriate fee. Where an ARC is denied, a No‑Action Letter may be issued by the Commissioner, or a person authorized by the Commissioner, indicating that the Commissioner does not, at that time, intend to make an application under section 92 in respect of the proposed transaction.

4.1 Merger Notification Unit

The MNU is responsible for the receipt and initial processing of Notifications and ARC requests, as well as requests for written opinions under section 124.1 of the Act relating to Notifiable Transactions. The MNU also handles other issues regarding the application and interpretation of Part IX of the Act, filing procedures and the notification form, and will provide non‑binding verbal assistance in this regard. Where parties are uncertain about whether a proposed transaction is notifiable, whether an exemption is applicable, or the type of information that must be provided to the Bureau, parties are encouraged to contact the MNU for guidance. This informal advice is not binding on the Commissioner, but is provided to facilitate compliance with the law. Parties involved in matters that raise complicated fact scenarios or legal issues are encouraged to seek private legal counsel.

Where a question relating to Part IX of the Act is detailed and complex in nature, it may be preferable for parties to submit their question in writing and to request a written opinion pursuant to section 124.1 of the Act, subject to a fee^{Footnote 19}. Such written opinions are binding on the Commissioner and remain binding as long as the material facts on which the opinion was based remain substantially unchanged and the transaction is carried out substantially as proposed.

The MNU can be contacted at:

Merger Notification Unit
Mergers Branch, Competition Bureau
Telephone: 819‑953‑4297
Toll‑free: 1‑800‑348‑5358
Fax: 819‑994‑0998
E‑mail: avisdefusionmergernotification@cb-bc.gc.ca

4.2 Submission of a notification or ARC request

4.3 Submission of responses to voluntary information requests

During the course of its review of a proposed transaction, the Bureau may request that parties provide additional information on a voluntary basis to assist in completing its review. Responses to such requests may be sent to the case officer(s) in paper form or electronically. Parties intending to submit their response electronically should contact the case officer in advance.

4.4 Confidentiality

Pursuant to subsection 29(1) of the Act, information provided voluntarily or pursuant to sections 102 or 114 of the Act is confidential; however, subsection 29(1) does permit the communication of such information to Canadian law enforcement agencies or for the purposes of the administration or enforcement of the Act. Subsection 29(2) of the Act provides that the confidentiality provisions do not apply in respect of any information that has been made public.

Further information on the Bureau's approach with respect to the communication and use of confidential information obtained in the course of a merger review can be found in the "Information Bulletin on the Communication of Confidential Information under the Competition Act".