The Evolving Landscape of Merger Review: Understanding Canada’s Competition Act Amendments and Forthcoming Revisions to Merger Enforcement Guidelines

Significant amendments to the Competition Act (Act) over the last two years have dramatically altered the landscape for merger review in Canada. With these changes, businesses contemplating a potential merger will now often face a greater burden to justify their proposed transaction and address arguments about potential anti-competitive effects. This necessitates a more proactive approach to merger planning, including a more detailed and sophisticated merger analysis at the outset, to successfully navigate the merger review process.

Three waves of amendments, commencing in June 2022 and culminating in June 2024, have significantly expanded the scope of the Act’s merger review provisions. For more information on these amendments, see our June 2024 bulletin Canadian Competition Law Changes Now in Force and our Competition Act Amendments page.

At a high level, as a result of these amendments: (i) the Competition Bureau (Bureau) will have greater ability to challenge mergers, as the prohibition on finding a merger to be anti-competitive solely based on market shares or concentration has been repealed; (ii) parties will face a greater burden to successfully defend a challenged merger following the repeal of the efficiencies defence and the introduction of a new rebuttable presumption that, where applicable, shifts the burden to the parties to prove that the merger is not anti-competitive; and (iii) remedies will be required to meet a higher standard by restoring competition to pre-merger levels.

The recent amendments represent a significant overhaul of the merger provisions of the Act and will necessitate adjustments in both how the Bureau reviews mergers and in how parties approach such reviews. For businesses, an important indicator of the Bureau’s merger enforcement approach and practice is set out in its Merger Enforcement Guidelines (MEGs) which were last updated in 2011.

In November 2024, the Bureau announced the launch of a consultation process to assist it in preparing revisions to the MEGs. The intent of the forthcoming updates is to ensure that the MEGs reflect the recent amendments to the Act and current practices, including with respect to the latest legal and economic developments. Other areas that the Bureau has identified as potentially requiring updates include (i) ensuring that the MEGs correctly identify the types of mergers that are likely to harm competition and the anticompetitive harms that could result from those mergers and (ii) considering the growth in digital technologies and their effect on how mergers may harm competition. The consultation period ends on January 12, 2025, with draft revisions to the MEGs expected later in 2025.

Understanding the New Merger Provisions

Recent amendments to the Act have substantially overhauled the Canadian merger review regime in the following ways:

Substantive Test

• Reversing the prior prohibition on the Competition Tribunal (Tribunal) deciding that a merger was anti-competitive solely on the basis of market concentration or market share.
• Introducing a rebuttable structural presumption that a merger is presumptively anti-competitive, unless the merging parties can prove otherwise.
  • A merger is presumptively anti-competitive if it results in an increase in the “concentration index” (the sum of the squares of the market shares of the participants in the relevant market) of more than 100 and either (i) the post-merger concentration index is more than 1800 or (ii) the parties’ post-merger market share exceeds 30%.
• Repealing the efficiencies defence that allowed mergers that were found to be anti-competitive to proceed if the efficiency gains were greater than and offset the anti-competitive effects of the merger.
• Expressly including as factors to be considered in any merger review (i) impacts on labour, (ii) effects from increases in market share, and (iii) express or tacit coordination between competitors.

Remedies Standard

• Raising the bar for merger remedies by requiring remedies to restore competition to the level that would have prevailed but for the merger — a higher threshold than the prior standard that remedies reduce any prevention or lessening of competition from the merger to a level that was no longer substantial.

Merger Challenges

• Automatically preventing parties from closing a merger upon the Bureau filing an application with the Tribunal for an injunction seeking more time to complete its inquiry or to block closing pending a challenge on the merits, until the Bureau’s application has been disposed of by the Tribunal.
• Extending the limitation period for the Bureau to challenge mergers that were not notified from one year to three years post-closing.

Pre-Merger Notification Rules

• Expanding the scope of transactions subject to pre-merger notification by including sales “into” Canada as part of the “size of transaction” notification threshold and introducing an anti-avoidance provision requiring that transactions designed to avoid pre-merger notification must still be notified to the Bureau.
• Introducing civil penalties for failure to notify a notifiable transaction without good and sufficient cause, including administrative monetary penalties of up to C$10,000 per day.

Key Takeaways

Businesses should consider the following in the wake of these amendments:

(a) Implications for Merger Planning and Timing: A wider range of transactions will take longer for the Bureau to review and will require more advance planning by the merging parties. Non-notifiable transactions will need to be considered carefully in light of the extended 3-year limitation period for the Bureau to review such mergers. Parties will need to more carefully consider competition law risk and implications for deal timing in transaction documents, including the use of appropriate risk-shifting provisions. Despite these changes, it is expected that most deals will continue to be reviewed quickly.

(b) Implications for Merger Analysis: The strategic, pro-competitive rationale for a merger will be an important factor in merger analysis and should be clearly documented. Potential competition law implications of internal documents, such as board decks and strategic planning materials, will need to be considered, especially with respect to market shares and “market definition,” which will be key factors in merger review. The Bureau may increasingly use court orders to obtain data from third parties to assist it in assessing market shares and market definition, which may increase information asymmetry.

(c) Implications for Remedies: Effective remedies will remain a viable alternative to litigation; however, remedies will require more upfront planning, and parties will need to demonstrate the availability of qualified remedy buyers. The new, more stringent remedy standard requiring competition be restored to the level that would have prevailed in the absence of the merger is likely to influence transaction structure and timing considerations, including through the adoption of “fix it first” solutions to proactively address competition concerns and through extended outside dates to account for protracted remedy negotiations.

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