Canada Releases Draft Merger Remedies Bulletin for Comment
Susan M. Hutton and Michael Kilby
In a flurry of announcements this fall, the Canadian Competition Bureau released a draft Information Bulletin on Merger Remedies in Canada. Comments are requested by January 20, 2006. Highlights of the draft Bulletin of note to practitioners include:
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a preference for structural remedies (such as divestiture) to behavioural remedies (which, in the Bureau's view, may require monitoring and/or risk being ineffective).
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acceptance of partial divestitures (e.g., selected manufacturing facilities, retail locations, products or product lines, intellectual property or other discrete assets), subject to satisfaction that willing buyers are available. In this regard, the Bureau may seek information from the marketplace to verify the likely viability and effectiveness of the proposed remedy.
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a strong recommendation to merging parties to use a "fix it first" approach, which means either completion of a divestiture of a party's own assets before the main transaction closes or a signed agreement in this regard, to be executed on closing of the main transaction. Registration of a consent agreement in such circumstances will not normally be required.
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if up-front divestiture is not possible, the Bureau indicates it expects sales processes to be concluded within between 3 and 6 months after closing (considerably shorter time limits than many prior consent agreements would indicate).
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the increased use of "crown jewels" during the trustee sale period, to provide the vendor with an incentive to complete the initial divestiture in a timely fashion, and/or to enhance its marketability in the hands of the trustee.
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the draft Bulletin indicates that certain terms of agreed remedies can initially be kept confidential. Such information as the initial time period for sale before the assets are transferred to a trustee, the fact that there is no minimum price, and the assets forming part of a "crown jewel" package, may be kept confidential. Full disclosure will be the norm, however, if other jurisdictions disclose such information, or in the case of cases that are contested before the Competition Tribunal (in which case the full text of a proposed order will be made public at the time the application is filed).
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the draft Bulletin also contains an indication that, in cooperating with other competition enforcement agencies internationally, Canada may rely on remedies arrived at in foreign jurisdictions if they raise no Canada-specific issues.
The shortened time limits for initial divestiture, the increased desire for crown jewels, and the emphasis on up-front buyers and other "fix it first" remedies are likely to engender significant comment amongst merger specialists and their clients.
