New Transaction Review Thresholds Announced for Competition Act and Investment Canada Act

The Government of Canada recently announced changes to the monetary thresholds to determine whether a review is required under the Competition Act and Investment Canada Act. Where a transaction exceeds the applicable monetary and control thresholds under these statutes, parties to the transaction are required to submit a filing and undergo a review before the transaction can close.

It is important to check with Canadian counsel to assess which thresholds apply given the technical nature of the rules and the ability of the agencies to review transactions before or after closing, even if they do not meet the relevant thresholds.

COMPETITION ACT

• A transaction is normally reviewable if both the “transaction size” and “party size” thresholds are exceeded.

• The transaction size threshold decreased from C$96-million in 2020 to C$93-million for the remainder of 2021. This threshold is based on the book value of the assets in Canada of the target and its subsidiaries or the gross revenues from sales in or from Canada generated by those assets.

• A decrease in the transaction size threshold is unusual; however, it is indexed to nominal GDP, which was adversely impacted in 2020 by COVID-19.

• The party size threshold remains unchanged at C$400-million. This threshold is based on the book value of the assets in Canada of all parties to the transaction (including their affiliates) or their gross revenues from sales in, from or into Canada.

• The Competition Bureau has one year from closing to review and challenge mergers even if they do not exceed the applicable thresholds.

INVESTMENT CANADA ACT

• The Investment Canada Act applies to all investments in Canadian businesses by non-Canadian investors, regardless of whether the investment is made directly or indirectly through an investment in a non-Canadian parent company.

• The monetary threshold that determines whether a review is required varies depending on the nationality of the buyer, whether the buyer is a state-owned enterprise and whether the Canadian business is a cultural business.

• The threshold for investors based in countries with a trade agreement with Canada decreased to C$1.565-billion in enterprise value from C$1.613-billion. The threshold for investors based in other World Trade Organization countries decreased to C$1.043-billion in enterprise value from C$1.075-billion.

• State-owned enterprise investors from World Trade Organization countries also saw a decrease in their threshold to C$415-million in book value of assets of the Canadian business being acquired (down from C$428-million).

• The threshold for investments in Canadian cultural businesses remained the same: C$5-million in asset value of the target Canadian business for direct acquisitions, and C$50-million in asset value of the target Canadian business for indirect acquisitions.

• For acquisitions of control (or deemed control) below the applicable thresholds, and for the establishment of new Canadian businesses, investors are still required to submit a notification filing, and they can do so before or up to 30 days after closing.

• In addition, no monetary or control thresholds apply for reviews on national security grounds.

If you have any questions regarding these developments, please do not hesitate to contact your usual Blakes contact or any member of the  Blakes Competition, Antitrust & Foreign Investment group.