The Canadian Competition Bureau has started the process to increase the fee that must be paid when filing a pre-merger notification or seeking an advance ruling certificate under the Competition Act. The fee is currently $50,000, and the Bureau is seeking permission to increase the fee to up to $72,000, effective April 1, 2018. Any change to the filing fee must be approved by the Minister of Innovation, Science and Economic Development.
Merger notification regime
Proposed transactions that exceed the merger notifications thresholds in the Competition Act cannot be completed until certain steps have been taken. A pre-merger notification is only required for five specific types of transactions:
- the acquisition of the assets of an operating business;
- the acquisition of voting shares of a corporation that will result in the buyer and its affiliates holding greater than (i) 20% of the shares of a publicly traded corporation, (ii) 35% of the shares where none of the shares is publicly traded, or (iii) 50% of the shares if the buyer(s) already owned more than the percentages in (i) or (ii), as the case may be, before the proposed acquisition;
- the acquisition of a greater than 35% interest in non-corporate combinations;
- the amalgamation of two or more corporations; or
- the formation of a combination (e.g., joint venture) of two or more entities which will carry on business otherwise than through a corporation (e.g., a partnership).
In addition, a pre-merger notification is only required when two financial thresholds are both met:
- Size of parties threshold: the parties, together with their respective affiliates, must have aggregate assets in Canada or annual gross revenues from sales in, from, or into Canada in excess of $400 million; and
- Size of transaction threshold: the value of the assets in Canada, or the annual gross revenue from sales (generated from those assets) in or from Canada, of the target operating business and if applicable, its subsidiaries, must be greater than $88 million. In the case of an amalgamation, each of at least two of the amalgamating corporations (together with its affiliates) must exceed the $88 million threshold.
Rationale for fee increase
In its consultation paper, the Bureau identifies a number of reasons why the fee should be increased:
- The Bureau imposes a filing fee to cover the costs of merger review. There has been no increase in the fee since 2003; had there been annual increases to account for inflation, the fee would currently stand at approximately $65,500.
- The federal government is currently modernizing its approach to business fees, and under new legislation fees will be adjusted annually based on the consumer price index.
- Although the number of merger filings each year has remained relatively stable over the past nine years, there has been an increase in the number of complex cases requiring resource-intensive reviews.
- The Supreme Court of Canada’s decision in the Tervita case, which underscored the need for the Bureau to quantify anti-competitive effects, has increased the time and cost of merger reviews.
- The additional funds generated by the increased filing fee will allow the Bureau to more frequently hire outside economic, industry and legal experts as well as improve its document management and review processes.
The proposal is open for public comment until November 20, 2017. Any member of the Norton Rose Fulbright antitrust and competition team would be pleased to assist you if you have questions or would like assistance in submitting a comment.
Stay informed on M&A developments and subscribe to our blog today.
