Authors: Penny Yeager, Aaron Vogel
Effective April 1, 2020, the filing fee for merger reviews under the Competition Act is now $75,055.68 (up from $73,584), following a recent announcement from the Canadian Competition Bureau.
The filing fee is adjusted annually for inflation, and applies to companies filing a pre-merger notification and/or requesting an Advance Ruling Certificate from the Commissioner of Competition, who is the head of the Bureau.
Whenever parties wish to complete a transaction that exceeds prescribed thresholds under the Act, they must make a pre-closing filing to the Commissioner. The Commissioner reviews all “notifiable” transactions to determine if they are likely to prevent or lessen competition substantially in the relevant market.
The Bureau issued a statement last month indicating that in the COVID-19 environment, it may take Bureau staff longer than usual to complete merger reviews.
Following the review process, if the Commissioner determines that a transaction will not likely result in anti-competitive effect, he may issue a form of clearance letter, indicating that he does not plan to challenge the proposed transaction. Alternatively, the Commissioner may decide to challenge a transaction, if he has concerns respecting anti-competitive effect.
Generally, companies must submit a pre-closing filing to the Bureau when their transaction exceeds both of the following thresholds:
Transaction-Size Threshold: This threshold remains at $96 million, after being increased to $96 million in 2019. This threshold is met when the target, together with its subsidiaries (to the extent applicable to a particular filing), has assets in Canada with a book value in excess of $96 million; or has annual gross revenues from sales in or from Canada generated from those assets that exceed $96 million.
Party-Size Threshold: This threshold is reached when the transaction parties, together with all of their affiliates, have combined assets in Canada with a book value that exceeds $400 million; or annual gross revenues from sales in, from or into Canada that exceed $400 million.
An additional ownership threshold applies to share acquisitions, and acquisitions of interests in non-corporate entities:
Ownership Threshold for Share Acquisitions: This threshold is met when following the transaction, the purchaser (together with its affiliates) will have more than a 20% voting interest in the target (where the target’s shares are publicly traded); or 35% (if the target’s shares are not publicly traded); or 50% if the relevant threshold is already exceeded prior to the transaction.
The Act contains particular rules pertaining to amalgamations and non-corporate business combinations.
Within one year after a transaction closes, the Bureau may review and challenge any merger – not just mergers that are notifiable.
Given the amount of the filing fee, it is worth considering who will be responsible for paying it. While the purchaser may agree to pay the fee, it is also common for transaction parties to split it.
Note: This article is of a general nature only, is not exhaustive of all possible legal rights or remedies and is only current to the date it was posted. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.