Changes to fees, thresholds and service standards will significantly affect businesses dealing with the Competition Bureau
On April 1, 2003, long-anticipated changes to the thresholds for merger notification under the Competition Act (the "Act") and to Competition Bureau (the "Bureau") fees, service standards and advisory opinions process came into effect. These include:
- an increase in the transaction-size threshold for merger notification from C$35 million to C$50 million;
- the doubling of fees for merger notification filings and Advance Ruling Certificates (ARCs) from C$25,000 to C$50,000;
- the coming into force of a recent amendment to the Act providing for legally binding written opinions from the Commissioner of Competition (the "Commissioner") on proposed business conduct; and
- an increase in fees for written opinions from the Commissioner.
The Bureau describes these changes as enhancing client service, presumably as a result of benefits derived from higher fees, the availability of binding opinions and a reduction in the regulatory burden for smaller businesses.
Amendments to Merger Notification Threshold
Advance notification of mergers is required under the Act if two thresholds are met: the size-of-parties threshold; and the transaction-size threshold. (A shareholding threshold is also applicable to share acquisitions.) The size-of-parties threshold remains unchanged. Merging parties must have, on a combined basis and including their respective affiliates, C$400 million in assets in Canada or revenues from sales in, from or into Canada. However, the transaction-size threshold has been increased. Prior to April 1, the transaction-size threshold was C$35 million in assets of the acquired operating business in Canada or revenues from sales in or from Canada generated by those assets. The new regulation raises this threshold to C$50 million and as a result, some smaller transactions will no longer be caught. There has not been a corresponding increase in the C$400 million size-of-parties threshold, because the Bureau views this threshold as high in comparison to the size of the Canadian economy and threshold levels in other jurisdictions such as the United States, where at least one of the merging parties must have US$100 million or more in annual sales or total assets worldwide and the other party, US$10 million or more worldwide.
Changes to Fees and Service Standards
Bureau fees are set by government policy and vary according to the service provided. Previous fees and service standards for merger notification, advance ruling certificates and advisory opinions were implemented in November 1997. The current fee increase has been justified as necessary to cover more of the costs of merger review and the written opinions process.
Mergers
The Bureau's new policy doubles the present fee from C$25,000 to C$50,000 with respect to requests for ARCs and merger notifications. According to the Bureau, this increase is required due to the increased costs of merger review since 1997, including salaries and associated costs, direct Bureau support (i.e., dedicated economists in the Competition Policy Branch and dedicated legal staff), expert and legal costs and ongoing investment in technology and other process improvements.
The Bureau will "grandfather" requests relating to transactions for which notifications or ARC requests were filed prior to April 1, 2003. Requests may also be made for binding opinions on the notifiability of a proposed merger for a fee of C$5,000. The applicable service standard for requests related to notification is two weeks for non-complex issues and four weeks for complex issues. The Merger Notification Unit will continue, however, to provide informal, "over the phone"-type advice on relatively simple notification issues at no charge.
The Bureau's revised Fee and Service Standards Handbook (the "revised Handbook") states that parties seeking an opinion respecting a proposed transaction should request an ARC. This raises the question of how the Bureau will manage a request for a comfort letter stating that the transaction does not raise any significant competition issues where the transaction is not notifiable. Based on the Bureau's public statements to date, it appears that the Bureau may well require that parties to a non-notifiable transaction request an ARC at a cost of C$50,000, leaving no opportunity for seeking a lesser form of comfort (e.g., a form of non-binding no-action letter) at a substantially lower fee. A foreclosure of the comfort letter option by the Bureau would be an unfortunate development. It would certainly "chill" the existing incentive for voluntary notification by merging parties of proposed mergers that are not notifiable, but raise potential competition issues.
The service standards for substantive merger review remain unchanged. The maximum timeframes for review of transactions classified by the Bureau as non-complex, complex and very complex, respectively, are two weeks, ten weeks and five months. Some members of the competition bar had advocated convergence of time periods with those in the European Union (one month for transactions not raising material issues, four months for transactions raising significant competition issues). However, during the public consultation, Bureau staff noted that the time periods in the European community were overly optimistic, as witnessed by the European Commission's current proposal to increase timelines for merger review under certain circumstances.
Non-Merger Opinions
Fees for written opinions relating to proposed business conduct (other than mergers) as well as timeframes for such opinions have also increased. The Bureau has justified both changes on the basis that with the coming into force of section 124.1 of the Act, which permits the Commissioner to issue legally binding opinions, the provision of opinions is expected to be more costly and time-consuming than was previously the case for non-binding advisory opinions. In particular, the Bureau expects to need more frequent and formal legal and economic consultation to support its opinions.
The fee increases depend on which section of the Act is implicated by the request for a written opinion. Opinions on misleading representation and deceptive marketing practice provisions, which previously cost C$500, are now C$1,000. The service standard for the review of a non-complex case in that category has increased from eight days to two weeks and for a complex case from thirty days to six weeks. The fee for an advisory opinion on "all other" sections of the Act used to be C$4,000 with a service standard of four weeks for non-complex cases and eight weeks for complex. Under the new Fees and Service Standards schedule, opinions relating to sections 45 to 51 (including conspiracy and price discrimination) and section 79 (abuse of dominance) now cost C$15,000. The service standard for non-complex cases is six weeks and for complex cases, ten weeks. The service standard has therefore increased by two weeks in each case, while the cost has increased (astronomically) from C$4000 to C$15,000. With respect to the remaining provisions of the Act (not including ARC requests or opinions regarding merger notification requirements), the fee is C$5,000 and the service standard is four weeks for non-complex and eight weeks for complex. This represents a 25% increase in the fees, while the service standard has remained the same.
If you would like any further information on these changes, please contact a member of the Competition Group. The Bureau's revised Fee and Service Standards Handbook may be found at http://strategis.ic.gc.ca/ssg/ct02530e.html.
