Sandy Walker, Aug 31, 2010
Canada’s merger review process has always suffered from schizophrenia. Unlike in the EU and United States, the timeline for the substantive merger review process has never been aligned with the statutory waiting periods. Absent an injunction, once the statutory waiting periods have expired, the parties are free to close a transaction. However, the expiry of the waiting period has never offered the merging parties any comfort that their proposed transaction would not be challenged under the Competition Act post-closing. The parties could only obtain such comfort by obtaining positive clearance from the Competition Bureau (“Bureau”), either in the form of an advance ruling certificate (“ARC”) or a no-action letter advising that it does not have substantive competition concerns and therefore does not intend to challenge the deal. This state of affairs has left merging parties wondering whether to close in Canada when legally entitled to or whether to await the Bureau’s positive clearance.
All this was expected to change when Canada’s Parliament amended the Competition Act in March 2009 to establish a two-stage merger review. These amendments appeared to align Canada’s regime with that of the U.S. Hart-Scott Rodino Act (“HSR Act”) process. The new regime came into effect in March 2009, introducing a 30 day initial waiting period with the possibility of a supplementary information request (“SIR”) that would trigger a second waiting period expiring 30 days after compliance with the SIR. It was anticipated that this process would streamline the review process and that the expiry of the initial 30 day waiting period for the vast majority of transactions would signal that the Bureau did not intend to challenge the deal except in highly unusual circumstances.
Has the new Canadian merger review regime lived up to its potential? Not according to the Bureau’s draft Fee and Services Standards Handbook for Merger-Related Matters (“draft Handbook”) which was released for comment in May 2010. As described in detail below, while the draft Handbook reduces the existing service standard periods (a welcome change) and provides additional clarity on how it categorizes mergers, it continues the misalignment or de-linking of the substantive merger review periods and the statutory waiting periods-plus ça change, plus c’est la meme chose. This results in what the Canadian Bar Association has called a “complex mosaic of timing and information requirements…which increases uncertainty for the business community in merger review.”