A Guide to Canada's
Merger Notification Rules

The Competition Act

This tool guide is designed to assist you in determining whether a transaction is subject to the pre-closing mandatory notification regime of Canada’s Competition Act.

However, it is important to recognize that the Commissioner of Competition has the right to review and challenge any merger, regardless of whether it is subject to the notification regime, if the Commissioner believes that the merger is likely to substantially lessen or prevent competition in a relevant market.

Does the Transaction meet the Notification Thresholds?

The notification regime applies only to certain types of transactions, and only where such transactions meet both the Party Size and Transaction Type thresholds.
All currency is expressed in Canadian dollars and the amounts are based on the audited financial statements for the most recent fiscal year.

To determine whether a transaction requires notification it must meet the following criteria:

1

Party Size

Threshold

Do the parties to the transaction and their affiliates have aggregate assets in Canada, or gross revenues from sales in, from or into Canada, in excess of C$400 million.

Notification

is not required

Need Help? Contact one of Osler’s Competition experts.

Based on the transaction type, does the transaction meet the monetary threshold?

2

Transaction type

Thresholds

Click on the transaction type to view threshold details:
  • Asset Acquisition

    In respect of the acquired business, does the value of its assets in Canada, or its gross revenues from sales in, from or into Canada generated from all the assets proposed to be acquired exceed C$93 million?

  • Share Acquisition

    In respect of the acquired business, does the value of its assets in Canada, or its gross revenues from sales in, from or into Canada generated from all the assets that are owned by the corporation (or entities controlled by that corporation) exceed C$93 million?

    • where the shares are publicly traded, will the purchaser (together with its affiliates) own more than 20% of the outstanding voting shares following the acquisition, or if more than 20% are already held, will the purchaser (together with its affiliates) own more than 50% following the acquisition? or
    • where the shares are not publicly traded, will the purchaser (together with its affiliates) own more than 35% of the outstanding voting shares following the acquisition, or if more than 35% are already held, will the purchaser (together with its affiliates) own more than 50% following the acquisition?
  • Amalgamation

    In respect of the continuing corporation does the value of its assets in Canada, or its gross revenues from sales in, from or into Canada generated from all the assets that would be owned by the continuing corporation, exceed C$93 million?

    • Do at least two of the amalgamating corporations, together with their affiliates, each have assets in Canada, or gross revenues from sales in, from or into Canada, in excess of C$93 million?
  • Acquisition of an Interest in an Unincorporated Combination

    In respect of the combination, does the value of its assets in Canada, or its gross revenues from sales in, from or into Canada generated from all the assets that are the subject matter of the combination assets exceed C$93 million?

    • Are purchaser & its affiliates entitled to more than 35% of profits or assets on dissolution, or if more than 35% already held, to more than 50% of profits or assets on dissolution?

Notification

Is Not Required

Need Help? Contact one of Osler’s Competition experts.

3

Your transaction meets the notification thresholds, however an exemption might apply. Find out if your transaction is exempt

Transactions among affiliates:

An acquisition is exempt if all parties to the transaction are affiliates of each other.

Joint venture combinations:

Combinations satisfying a prescribed and narrowly interpreted three part test.

Acquisition in the ordinary course of business:

An acquisition of real property or goods in the ordinary course of business so long as the purchaser(s) would not, as a result of the acquisition, hold all or substantially all of the assets of a business or of an operating segment of a business.

Underwriting:

An acquisition of voting shares or of an interest in a combination solely for the purpose of “underwriting” the shares or the interest.

Gifts, intestate succession or testamentary disposition:

An acquisition of voting shares, an interest in a combination or assets that would result from a gift, intestate succession or testamentary disposition.

Realizing on credit entered into in the ordinary course of business:

An acquisition of collateral or receivables, or an acquisition resulting from foreclosure or default or forming part of a debt work-out, made by a creditor in or pursuant to a credit transaction entered into in good faith in the ordinary course of business.

Canadian resource property:

An acquisition of a “Canadian resource property”, as defined in subsection 66(15) of the Income Tax Act, if the purchaser incurs expenses to carry out exploration or development activities with respect to the property, subject to certain conditions.

Transactions exempted by the Minister of Finance:

A merger under the Bank Act, Cooperative Credit Associations Act, Insurance Companies Act or Trust and Loan Companies Act which the Minister of Finance has certified to the Commissioner as being in the public interest.

Transactions
among affiliates:

Learn More

Joint venture
combinations:

Learn More

Acquisition in the
ordinary course
of business:

Learn More

Underwriting:

Learn More

Gifts, intestate succession or
testamentary disposition:

Learn More

Realizing on credit
entered into in the
ordinary course
of business:

Learn More

Canadian resource
property:

Learn More

Transactions
exempted by the
Minister of Finance:

Learn More

Do any of the above exemptions listed apply?

Notification

Is Not Required

If the Transaction does not meet the Notification Thresholds, then it is not subject to Mandatory Notification under the Competition Act.

However, it is important to recognize that the Commissioner has the right to review and challenge a non-notifiable transaction if the Commissioner believes that the merger is likely to substantially lessen or prevent competition in a relevant market. Accordingly, it is important to assess the competitive effects of every transaction to determine whether Canadian competition law poses a risk to completion.

Need Help? Contact one of Osler’s Competition experts.

Notification Thresholds are Met and an Exemption is Not Available

Where both the Party Size and Transaction Type Thresholds are met, and an exemption is not available, then parties must comply with the Notification Regime and take one of the following actions prior to closing. These options are not mutually exclusive.
1

Option One

Notify and observe the statutory waiting period

What To File

To trigger the statutory waiting period the parties must each file the statutorily-prescribed notification form.

To mitigate against the issuance of a SIR (described below) and facilitate the Bureau's review, parties typically file a substantive competitive effects assessment of the transaction in addition to the statutorily-prescribed notification form. In addition, while not required, if a notification is filed, parties often request affirmative comfort in the form of an ARC or a no-action letter.

Statutory Timelines for Review

The initial statutory waiting or no-close period is 30 days from receipt of a complete notification form from each party to the transaction. If, during the initial review period, the Competition Bureau issues a supplementary information request (“SIR”), which is akin to a US-style 2nd Request, the transaction cannot be completed until 30 days after compliance with the SIR. After the second 30-day period has elapsed, the parties may complete the transaction unless challenged or enjoined by the Commissioner.

For further information, refer to this .

Note that unsolicited takeover bids have special timing rules.

Bureau Service Standards

In order to provide some indication of when the Bureau believes it will be in a position to complete its merger review and decide whether to issue an ARC or no-action letter, the Bureau established a non-binding administrative complexity classification system and associated “service standard” timelines.

These standards are different than the statutory timelines and do not impact the statutory timelines.

Non-Binding Service Standards

Non-complex

0 DAYS

14 days (non-binding) – for transactions that clearly have no competition issues because no or minimal overlap

Complex

0 DAYS

45 days (non‐binding) – for transactions between competitors,or a customer and supplier, where there are indications that it may create, maintain or enhance market power

Note: The service standards only commence once the Bureau determines that it has all of the information necessary to conduct its analysis, and can be suspended if the parties are not timely in responding to Bureau questions. Refer to the Bureau’s Merger Review Process Guidelines and the Fees and Service Standards Handbook for Mergers and Merger-­‐Related Matters.

What is the filing fee?

There is a filing fee of C$86,358.76, regardless of notification method or transaction size, payable to the Receiver General for Canada.

Need Help? Contact one of Osler’s Competition experts.

2

Option Two

obtain an advance ruling certificate (“ARC”)

What To file

Where a transaction raises no or minimal substantive competition law issues (generally where there is no or limited competitive overlap between the merging parties and no material vertical issue), parties may choose to file an ARC request only.

Receipt of an ARC is an exemption from filing a notification and observing the statutory waiting period. While an ARC will be issued only where the Commissioner believes a transaction raises no or minimal substantive competition law issues, if the Commissioner does not believe it is appropriate to issue an ARC, the Commissioner may grant a waiver of the notification requirement and issue a no-action letter.

Statutory Timelines for Review

Filing an ARC request on its own, without also filing the prescribed notification form, does not trigger the statutory waiting period. There is also no prescribed timeframe within which the Commissioner must issue an ARC.

Where a transaction raises minimal or no substantive competition law issues an ARC is typically issued within 2-3 weeks of a request being made.

Bureau Service Standards

In order to provide some indication of when the Bureau believes it will be in a position to complete its merger review and decide whether to issue an ARC or no-action letter, the Bureau established a non-binding administrative complexity classification system and associated “service standard” timelines.

These standards are different than the statutory timelines and do not impact the statutory timelines.

Non-Binding Service Standards

Non-complex

0 Days

14 days (non-binding) – for transactions that clearly have no competition issues because no or minimal overlap

Complex

0 Days

45 days (non‐binding) – for transactions between competitors,or a customer and supplier, where there are indications that it may create, maintain or enhance market power

Note: The service standards only commence once the Bureau determines that it has all of the information necessary to conduct its analysis, and can be suspended if the parties are not timely in responding to Bureau questions. Refer to the Bureau’s Merger Review Process Guidelines and the Fees and Service Standards Handbook for Mergers and Merger-­‐Related Matters.

What is the filing fee?

There is a filing fee of C$86,358.76, regardless of notification method or transaction size, payable to the Receiver General for Canada.

Need Help? Contact one of Osler’s Competition experts.

Meet our team:

  • Shuli Rodal

    Partner and Chair, Competition/Antitrust & Foreign Investment

    416.862.4858
    srodal@osler.com

  • Michelle Lally

    Partner, Competition/Antitrust & Foreign Investment

    416.862.5925
    mlally@osler.com

  • Kaeleigh Kuzma

    Partner, Competition/Antitrust & Foreign Investment

    403.260.7046
    kkuzma@osler.com

Definitions

Challenge

Only the Commissioner can challenge a merger under the Competition Act; there is no ability for private parties to do so. Applications are heard by the Competition Tribunal, which is a quasi-judicial body comprised of a rotating panel of lay and judicial members with expertise in business, economics and the law.

Merger

“Merger” is broadly defined as the “acquisition or establishment, direct or indirect, by one or more persons, whether by purchase or lease of shares or assets, by amalgamation or by combination or otherwise, of control over or significant interest in the whole or a part of a business of a competitor, supplier, customer or other person.”

Substantially Lessen or Prevent Competition

A substantial lessening or prevention of competition results only from mergers that are likely to create, maintain or enhance the ability of the merged entity, unilaterally or in coordination with other firms, to exercise market power. Refer to the Bureau’s Merger Enforcement Guidelines.

Canadian Dollars

Conversions to Canadian dollars must use the Bank of Canada noon exchange rate on the last day of the relevant annual period.

Audited Financial Statements

Where audited financials for the most recently completed fiscal year are not available, calculations are based on amounts stated in the person’s books, in accordance with accounting principles that are generally accepted for the type of business carried on by that person. No specific accounting standard (i.e. GAAP, IFRS) is mandated.

Parties

For each transaction type, the parties are as follows:

  • Asset acquisition - the person or persons who propose to acquire the assets, and the vendor of the assets.
  • Share acquisition - the person or persons who propose to acquire the shares, and the corporation the shares of which are to be acquired.
  • Amalgamation - the corporations to be amalgamated.
  • Acquisition of an interest in an unincorporated combination - the person or persons who propose to acquire the interest, and the combination whose interest is to be acquired.

Affiliates

Affiliate means the following:

  • One entity is affiliated with another entity if one of them is a subsidiary of the other or both are subsidiaries of the same entity or each of them is controlled by the same entity or individual.
  • If two entities are affiliated with the same entity at the same time, they are deemed to be affiliates of each other.
  • An individual is affiliated with an entity if the individual controls the entity.

An entity is a subsidiary of another entity if it is controlled by that other entity.

A corporation is controlled by an entity or an individual if the securities of the corporation to which are attached more than 50% of the votes that may be cast to elect directors of the corporation are held, directly or indirectly, whether through one or more subsidiaries or otherwise, other than by way of security only, by or for the benefit of that entity or individual, and the votes attached to those securities are sufficient, if exercised, to elect the majority of the directors of the corporation.

An entity other than a corporation is controlled by an entity or individual if the entity or individual, directly or indirectly, whether through one or more subsidiaries or otherwise, holds an interest in the entity that is not a corporation that entitles them to receive more than 50% of the profits of that entity or more than 50% of its assets on dissolution.

Assets in Canada

The asset assessment for both the Party Size and the Transaction Type thresholds is based on assets located in Canada.

Adjustments may be required:

Deduct:

  • Any amount that represents duplication arising from transactions between affiliates.
  • Any amount that represents duplication arising from an ownership interest (including minority interests) of one person in another person.
  • Any amount provided for depreciation or diminution of value (as reflected in the financial statements for the most recently completed fiscal year).

Consider subsequent transactions or events, including:

  • A write-down or re-evaluation for financial reporting purposes of the value of any assets.
  • Any disposition, acquisition or reorganization that is likely to have a material effect on the aggregate value of assets.
  • Any agreement, arrangement, understanding or other transaction or event that is likely to have a material effect on the aggregate value of assets.

In, From or Into

Gross revenues “in, from or into” Canada refers to domestic sales, export sales to a foreign jurisdiction, and import sales from a foreign jurisdiction.

Adjustments may be required:

  • Deduct any amount that represents duplication arising from transactions between affiliates.
  • Consider subsequent transactions or events, including any agreement, arrangement, understanding or other transaction or event that is likely to have a material effect on the aggregate gross revenues from sales.
  • Do not deduct expenses or other amounts incurred.

In or From

Gross revenues “in or from” Canada refers to domestic sales and export sales to a foreign jurisdiction.

Adjustments may be required:

  • Deduct any amount that represents duplication arising from transactions between affiliates.
  • Consider subsequent transactions or events, including any agreement, arrangement, understanding or other transaction or event that is likely to have a material effect on the aggregate gross revenues from sales.
  • Do not deduct expenses or other amounts incurred.

Prescribed and Narrowly Interpreted Three Part Test

The formation of non-corporate joint ventures are exempt so long as the following conditions are met:

  • all of the parties who propose to form the joint venture are parties to an agreement in writing (or intended to be put in writing) that requires one or more of them to contribute assets and governs a continuing relationship between them;
  • no change in control over any party to the joint venture would result from the formation of the joint venture; and
  • the joint venture agreement restricts the range of activities that may be carried on by the joint venture and contains provisions that allow for its orderly termination.

Underwriting

Underwriting of a security refers to the primary or secondary distribution of the security, in respect of which a prospectus is required to be filed, accepted or approved under a Canadian or foreign securities law regime, or would be required to be filed, accepted or approved but for an express exemption under a Canadian or foreign securities law regime.

Advance Ruling Certificate

An ARC provides an exemption from the notification requirements of the Competition Act and effectively precludes the Commissioner from challenging the transaction so long as the transaction is completed within one year. Accordingly, ARCs are only issued where it is clear that the transaction will not substantially prevent or lessen competition in Canada. Where the Commissioner is not prepared to issue an ARC, the Commissioner may issue a “no-action” letter.

No-Action Letter

A “no-action” letter is a lesser form of legal comfort from the Commissioner than an ARC, as it states that the Commissioner does not currently intend to make an application challenging the transaction (but reserves the right to do so for up to one year after closing). In practice, the Commissioner has never challenged a transaction after issuing a “no-action” letter. Therefore, in practice (but not in strict legal terms) a “no-action” letter delivers essentially the same comfort as an ARC.

Special Timing Rules

Where a bidding party files a notification, the Commissioner is required to notify the target company immediately, and the target is then required to file its portion of the notification within ten days. The timing of the target’s response does not affect the running of either the initial waiting period or the waiting period following the bidding party’s response to a SIR.

Notification Form

This is a statutorily-prescribed form to be completed by each party to the transaction. The form requires specific information about the transaction (e.g., structure and consideration), the business of each of the parties and their respective affiliates, including detailed customer and supplier information, and “all studies, surveys, analyses and reports that were prepared or received by an officer or director of the party for the purpose of evaluating or analyzing the proposed transaction with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into new products or geographic regions”.

Request for an ARC or a No-Action Letter

There is no prescribed form for a request for an ARC or a no-action letter. Such requests, which often are in letter format, set out a description of the transaction and parties, each party’s rationale for the transaction, and a detailed explanation, with supporting data and facts, as to why the proposed transaction is not likely to substantially lessen or prevent competition having regard to the factors in section 93 of the Competition Act and the Bureau’s Merger Enforcement Guidelines.

Supplementary information request

Whether to issue a SIR to the parties to a transaction, and the content of a SIR, is a unilateral Bureau decision. The Bureau will generally provide a draft SIR to the recipient party and, at that party's election, engage in a dialogue regarding the information requests set out therein.
Refer to the Bureau’s Merger Review Process Guidelines.

Interim Order

Where the Commissioner has filed an application to challenge a transaction, the Competition Act provides the Commissioner may also seek an interim order to, for example, require that certain assets be held separately upon closing, pending resolution of the Commissioner's challenge.

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