ARCHIVED — Regulations Amending the Notifiable Transactions Regulations
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Vol. 144, No. 4 — February 17, 2010
SOR/2010-22 February 2, 2010
P.C. 2010-101 February 2, 2010
Whereas, pursuant to subsection 124(2) (see footnote a) of the Competition Act (see footnote b), a copy of the proposed Regulations Amending the Notifiable Transactions Regulations, substantially in the annexed form, was published in the Canada Gazette, Part I, on April 4, 2009 and a reasonable opportunity was afforded to interested persons to make representations with respect to the proposed Regulations;
Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Industry, pursuant to subsection 124(1) (see footnote c) of the Competition Act (see footnote d) , hereby makes the annexed Regulations Amending the Notifiable Transactions Regulations.
REGULATIONS AMENDING THE NOTIFIABLE TRANSACTIONS REGULATIONS
1. The definition “senior officer” in section 2 of the Notifiable Transactions Regulations (see footnote 1) is repealed.
2. The Regulations are amended by adding the following after section 9:
PROVISIONS WITH RESPECT TO PARTIES TO AN AMALGAMATION
9.1 (1) For the purpose of subsection 110(4.1) of the Act, the aggregate value of assets in Canada of an amalgamating corporation, together with its affiliates, shall be determined by aggregating the aggregate values of the assets in Canada of the corporation and each affiliate.
(2) For the amalgamating corporation and each affiliate, the aggregate value of its assets in Canada shall equal the aggregate amount of those assets as stated in the audited financial statements referred to in section 6.
9.2 (1) For the purpose of subsection 110(4.1) of the Act, gross revenues from sales in, from or into Canada of an amalgamating corporation, together with its affiliates, shall be determined by aggregating the gross revenues from sales in, from or into Canada of the corporation and each affiliate.
(2) For the amalgamating corporation and each affiliate, the gross revenues from sales in, from or into Canada shall equal the aggregate amount of those gross revenues as stated in the audited financial statements referred to in section 7.
3. The portion of section 10 of the Regulations before paragraph (a) is replaced by the following:
10. For the purposes of subsections 110(2) to (4), (5) and (6) of the Act, the aggregate value of assets in Canada
4. The portion of section 11 of the Regulations before paragraph (a) is replaced by the following:
11. For the purposes of subsections 110(2) to (4), (5) and (6) of the Act, the gross revenues from sales in or from Canada generated from the assets in Canada
5. The portion of subsection 12(1) of the Regulations before paragraph (a) is replaced by the following:
12. (1) If the aggregate value of a person’s assets cannot reasonably be determined in accordance with subsection 8(2) or 9.1(2) or section 10, the aggregate value of the assets
6. The portion of subsection 13(1) of the Regulations before paragraph (a) is replaced by the following:
13. (1) If gross revenues from a person’s sales cannot reasonably be determined in accordance with subsection 9(2) or 9.2(2) or section 11, the gross revenues
7. Subsection 14(1) of the Regulations is amended by replacing the reference to section 86 with a reference to section 114.
8. Section 14.1 of the Regulations and the heading before it are repealed.
9. (1) The portion of section 16 of the Regulations before paragraph (a) is replaced by the following:
16. (1) For the purposes of subsection 114(1) of the Act and subject to subsection (2), the following information is to be supplied to the Commissioner:
(2) Paragraph 16(1)(b) of the Regulations is replaced by the following:
(a.1) a copy of each legal document, or the most recent draft of that document if it is not yet executed, that is to be used to implement the proposed transaction;
(b) a list of the foreign competition or antitrust authorities that have been notified of the proposed transaction by the parties and the date on which each authority was notified;
(3) Subparagraph 16(1)(c)(iv) of the Regulations is amended by striking out “and” at the end of clause (C) and by adding the following after that clause:
(C.1) statements identifying, for each of those principal categories of products, the total annual volume or dollar value of purchases from and sales to all suppliers and customers, and
(4) Subsection 16(1) of the Regulations is amended by adding “and” at the end of paragraph (c) and by adding the following after that paragraph:
(d) in respect of each party, and each of its affiliates referred to in subparagraph (c)(iii), all studies, surveys, analyses and reports that were prepared or received by an officer or director of the corporation — or in the case of an unincorporated entity, an individual who serves in a similar capacity — for the purpose of evaluating or analysing the proposed transaction with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into new products or geographic regions and, if not otherwise set out in that document, the names and titles of the individuals who prepared the document and the date on which it was prepared.
(5) Section 16 of the Regulations is amended by adding the following after subsection (1):
(2) Instead of being supplied with a report or financial statement referred to in clause (1)(c)(iv)(A), the Commissioner may be supplied with the address of an Internet site from which a copy of those documents can be obtained without charge, which is operational at the time the address is supplied and which remains operational prior to the expiry of the period referred to in subsection 123(1) of the Act.
10. Section 17 of the Regulations is repealed.
11. The Regulations are amended by replacing the references to sections 81 and 82 with references to sections 109 and 110, respectively, in the following provisions:
(a) paragraph 3(b);
(b) subsections 4(1) and (2);
(c) subsection 5(1);
(d) sections 6 and 7;
(e) subsection 8(1); and
(f) subsection 9(1).
COMING INTO FORCE
12. These Regulations come into force on the day on which they are registered.
(This statement is not part of the Regulations.)
Issue and objectives
The Notifiable Transactions Regulations (the “Regulations”) regulate how merging parties must notify the Commissioner of Competition (the “Commissioner”) of proposed mergers pursuant to Part IX of the Competition Act (the “Act”). The Regulations are being amended to reflect legislative changes to the Act passed in the Budget Implementation Act, 2009 (the “BIA”) in March 2009; namely changes to the form of merger notification. The Regulations are also being amended to update section numbers modified as a result of previous amendments to the Act made in 1999. Finally, the Regulations are being amended to reduce the amount of information that parties to a proposed transaction must supply, to reduce the paperwork burden on businesses.
Description and rationale
The notifiable transactions provisions in Part IX of the Act require that merging parties notify the Commissioner in advance of the closing of the merger where the size of the transaction and the parties exceed the financial thresholds set out in the Act, subject to certain exemptions in the Act or Regulations. The Regulations establish the procedure for calculating the aggregate value of assets and gross revenues from sales for purposes of the party-size and transaction-size thresholds in sections 109 and 110 of the Act, respectively. They also define certain classes of transactions that are exempt from filing requirements and set out the type of information that must be provided to the Commissioner when notification is required.
These amendments to the Regulations:
(a) update sections 3 to 9 and section 14
These are housekeeping amendments to correct outdated references to sections of the Act. Sections 3 to 9 and section 14 of the Regulations refer to sections in the Act that were amended and/or renumbered in 1999. The named sections now reflect the amended and/or renumbered sections of the Act.
(b) add new sections 9.1 and 9.2, and amend sections 10 to 13
The addition of subsection 110(4.1) to the Act (through the amendments contained in the BIA) introduces a new test for determining whether an amalgamation is notifiable. In addition to the existing test, which is retained in the revised 110(4), subsection 110(4.1) provides that the notification requirement does not apply unless each of two or more of the amalgamating corporations, together with each one’s affiliates, has Canadian assets or gross revenues that exceed the relevant threshold. The new sections 9.1 and 9.2 of the Regulations describe how those asset and revenue amounts are determined. This amendment was designed to address concerns surrounding the need for notification when a larger firm amalgamates with a smaller one. Consequential amendments have also been made to sections 10 to 13 of the Regulations.
(c) repeal section 14.1
The previous section 14.1 of the Regulations set out the financial notification thresholds for the purposes of section 110 of the Act. The addition of subsections 110(7) and 110(8) to the Act (through the amendments passed in the BIA) provides for new financial notification thresholds, and for a process for determining the financial notification thresholds in future years. As a result, section 14.1 of the Regulations is no longer necessary.
(d) amend section 16
Section 114 of the Act requires parties to certain proposed transactions to supply prescribed information to the Commissioner. Section 16 of the Regulations outlines the specific information required to be supplied to the Commissioner. As described below, amendment of section 16 of the Regulations was necessary to reflect amendments to the Act contained in the BIA.
(i) Reference to 114(2) — changed to 114(1)
As a result of substantive amendments to the Act, the prescribed information formerly referred to in subsection 114(2) of the Act is now referred to in subsection 114(1).
(ii) Addition of subsection 16(1)
Due to the increased information requirements contained in section 16 of the Regulations, the former contents of the section, as modified by these amendments, are now set out in the new subsection (1).
(iii) Addition of paragraphs 16(1)(a.1) and 16(1)(d) to include information required under former paragraph 17(b) and former subparagraph 17(e)(xii)
Under the previous formulation, parties to proposed transactions were required to give the Commissioner advance notice by providing the information prescribed in section 16 (for “short form” notifications) or section 17 (for “long form” notifications). The Act, as amended by the BIA, now provides a uniform notification information requirement (section 16 of the Regulations) for all notifiable transactions. The distinction between the two previous forms of notification has now been removed. To ensure that the Commissioner continues to receive the information necessary to adequately assess the proposed transaction, the provision of information that was formerly only required for “long form notifications” pursuant to paragraph 17(b) and subparagraph 17(e)(xii), namely copies of legal documents that are to be used to implement the proposed transaction, and studies, surveys, analyses and reports, was added to section 16 to form part of the new uniform requirement contained in that section.
(iv) Amendment to paragraph 16(1)(b) — “foreign competition or antitrust authorities”
More clarity has been provided to parties to proposed transactions regarding what information to include in the list of foreign authorities required by paragraph 16(b) of the Regulations. Namely, the list must state which foreign authorities have been notified of the transaction and the date of notification.
(v) Addition of clause 16(1)(c)(iv)(C.1) — “the total annual volume or dollar value of purchases from and sales to all suppliers and customers”
The previous long form filing asked notifying parties to calculate, for each of their principal categories of products, the annual volume or value of purchases from or sales to their top forty customers as a percentage of the notifying party’s total sales or purchases. That requirement has been removed to reduce the information burden on notifying parties. New clause 16(1)(c)(iv)(C.1) of the Regulations simplifies the obligation placed on the notifying parties by requiring that they only provide the total annual volume or dollar value of purchases from and sales to all suppliers and customers for each of the principal categories of products that the notifying parties or their affiliates produce, supply or distribute. The Commissioner will use that information along with the specific supplier and customer information required by clause 16(1)(c)(iv)(C) to calculate the relevant percentages.
(vi) Addition of subsection 16(2) — provision of an Internet address as a source of electronic documents
A new subsection has been added to the Regulations to facilitate the electronic submission of documents prescribed by clause 16(1)(c)(iv)(A) by reference to the address of an Internet site from which a copy of a given document can be obtained. Allowing parties to supply certain required information through electronic links will significantly reduce the volume of material required in a notification filing, resulting in reduced costs and a reduced compliance burden for parties to proposed transactions.
(e) repeal the former section 17
As a result of the repeal of the distinction between short and long form notifications, and the transfer of certain elements from former section 17 into section 16 of the Regulations, the former section 17 is no longer necessary.
The amendments to the Act, passed in the BIA, that gave rise to the majority of the amendments to the Regulations described herein stem from recommendations of the Competition Policy Review Panel (the “Panel”). The Panel was mandated in July 2007 to review Canada’s competition and investment laws and propose ways to enhance Canada’s competitiveness. The Panel consulted widely, hearing from dozens of stakeholders, reviewing over 155 written submissions, and holding thirteen formal cross-country roundtables.
The proposed Regulations were pre-published in the Canada Gazette, Part I, on April 4, 2009, for a 60-day comment period. One submission was received from the National Competition Law Section of the Canadian Bar Association (“CBA”), dated June 3, 2009. The main comments of the CBA, and the government’s response to those comments, can be summarized as follows:
Redrafting paragraph 16(1)(d)
CBA suggested redrafting paragraph 16(1)(d) of the Regulations (the request for studies, surveys, analyses and reports) to better align the wording with item 4(c) of the United States Notification and Report Form. The term “senior officer,” defined in section 2 of the former Regulations, was broader than the United States (U.S.) interpretation of “officer,” and, unlike their U.S. counterpart, the former Regulations did not include a reference to directors.
Accordingly, the definition of “senior officer” in section 2 of the Regulations has been repealed, and the term in paragraph 16(1)(d) of the Regulations has been replaced with “an officer or director of the corporation — or in the case of an unincorporated entity, an individual who serves in a similar capacity.” This will be accompanied by the issuance of an interpretation guideline defining “officer(s) or director(s).”
Proceeding in this manner will enhance efficiency for merging parties by ensuring that documents requested and required to be produced in Canada and the United States are similar. In addition, defining the term “officer(s) or director(s)” in an interpretation guideline, as opposed to in the Regulations, provides the greatest degree of flexibility for future refinement if necessary.
CBA also recommended amending sections 4 and 5 of the Regulations to create a more explicit deduction of assets and revenues arising from transactions among affiliates of merger parties when calculating totals, as well as adding new exemptions from the requirement to provide advance notification.
Neither the amendments to the Act contained in the BIA nor the pre-published Regulations contemplated changes to section 4 or 5 or an expansion of the list of exemptions. As such, the changes recommended by CBA go beyond those that the Governor-in-Council proposed and would require a separate consultation.
Implementation, enforcement and service standards
The legislative amendments to the Act passed in the BIA that are the main impetus for the proposed regulatory amendments introduced new waiting periods applicable to notifiable transactions in the merger review process. The new timeframes are expected to lead to greater efficiency in the merger review process owing to their closer alignment with the notification regime in the United States. The Bureau continues to provide a response to merger notifications within its 14-day service standard period for non-complex transactions, and anticipates that the vast majority of mergers will continue to be reviewed within a 30-day period. Since the BIA amendments went into effect, no problems have been encountered in meeting these standards.
In addition, a single notification form has replaced the current short-form and long-form notification filings, to reflect the uniform notification requirement introduced by the amendments to the Act, and to assist merging parties to comply with the new notification information requirements.
Marketplace Framework Policy Branch
C.D. Howe Building, East Tower, Room 1046A
235 Queen Street
R.S., c. 19 (2nd Supp.), s. 45
R.S., c. C-34; R.S., c. 19 (2nd Supp.), s. 19
R.S., c. 19 (2nd Supp.), s. 45
R.S., c. C-34; R.S., c. 19 (2nd Supp.), s. 19
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