With little publicity, at least outside of the legal community, the Federal Government made sweeping changes to the Competition Act in the recent Budget Implementation Act.   Despite the fact that these were the most significant changes to the Competition Act since 1986, they were included in an omnibus bill and were not subject to detailed examination and stakeholder input.   As a result, there are potential, and unintended, impacts that may defeat the stated goal of increasing competition in Canada.

The amendments to the Competition Act address both the criminal and the civil aspects of competitor agreements, abuse of dominant position, price discrimination and predatory pricing, price maintenance, and mergers.   For now, I will focus only on the changes made in relation to mergers.

The Budget Implementation Act altered the merger review process to introduce a ‘second request’ modelled after the American approach.   This was adopted despite the fact that the American approach has been widely criticized by competition lawyers here and abroad.

Under this process, once notification of a merger and the prescribed information has been provided, the Commissioner of Competition has 30 days to send notice that additional information is required from the companies involved.  

While this provision may seem fairly tame, it has the potential to significantly impact competition and mergers in Canada.

The amendments provide the Commissioner with extremely broad powers to order disclosure.   The Commissioner may require any information that is relevant to the   proposed transaction.   There is very little to restrict what documentation and information the Commissioner may require, and there is no judicial oversight.   Essentially, the Commissioner could just adopt a mentality that the Competition Bureau can ‘back a truck up and take any document they want’.  

Aside from the potential Charter issues involved in this, a significant increase in costs could result from this discretionary power.   There is a substantial amount of documentation and information that could be ordered to be provided, and compiling and producing information to adhere with a request could require substantial legal and administrative costs.   Disputes could also arise with the Commissioner about the relevance of the information, and whether or not all of the information required has been filed.   These additional expenses and obstacles have the potential to act as a disincentive to many corporations to merge.

Along with these expenses is uncertainty regarding the timeframe required for the completion of a merger.   The amendments to the Competition Act specify that if a second request is made, the completion of the merger is delayed until at least 30 days after the Commissioner deems there to be full compliance with the information request.   This discretion results in a company having no control over when a contemplated merger could be completed.   This area is ripe for conflict regarding the exercise of this discretion and over whether or not the 30 day period has expired, leading to substantial costs and delays.

In the end, the amendments to the Act, included in a stimulus Bill designed to assist with the economic downturn, may actually contribute to a reduction in the efficiency and competitiveness of Canadian companies.   At a time when market forces are severe and merger is one of the few options for survival that many companies have, the Federal Government has created additional obstacles that create a disincentive to merge.   When faced with the broad disclosure powers, and the additional costs and delays, companies looking to acquire may determine that it is no longer worth the trouble.   Instead of a merger occurring, and the operations of the companies being streamlined to increase efficiency, allow for more competitive pricing, and enable growth, no merger may take place and the companies that would have been involved could be further weakened or fail entirely.

To learn more about competition law, and professionals who can help you, visit our website  here.

If you have any thoughts about the above or any questions about the amendments to the Competition Act, we would love to hear from you.    You can reach the writer at  gary.graham@gowlings.com  or you can visit our website at  www.gowlings.com/industry/md.asp.