Canada's Competition Bureau seems to have awakened from a very long slumber.
In the past year, the United States' northern neighbor launched extended investigations into three major mergers, moves that suggest some antitrust issues could be raised with each. The reviews, which Canada has named "supplementary information requests," or SIRs, are the equivalent to the second requests for information U.S. antitrust authorities issue when they believe mergers pose competition concerns that should be examined. The three current Canadian SIRs cover Maple Group Acquisition Corp.'s bid for Toronto Stock Exchange owner TMX Group Inc., United Rentals Inc.'s plan to acquire RSC Holdings Inc. and AbitibiBowater Inc.'s bid for Fibrek Inc.
On top of those, the bureau in January 2011 asked Canada's Competition Tribunal to break up a consummated merger of landfill operators CCS Corp. and Complete Environmental Inc. The tribunal's proceeding, the country's first merger challenge since 2005, is still pending.
"Our mergers branch has been quite busy, both in terms of the number of filings and the size and complexity of transactions," Canadian Commissioner of Competition Melanie Aitken told the Canadian Bar Association in October.
The recent aggressiveness on the merger front coincides with revisions to Canadian merger rules that some competition lawyers say made it easier for regulators to challenge mergers.
In October, the bureau finalized changes to its merger enforcement guidelines, known as the MEGs. The MEGs govern how regulators will determine whether a deal harms competition. The MEGs revisions incorporated many of the economic analyses U.S. officials adopted the year before, and some lawyers say the changes give regulators more grounds to challenge a merger.
Last month, the bureau followed up that effort with changes to its merger review process, which covers things like how much information regulators can request from merging parties and how timing agreements with merging parties can be structured. These too are viewed by many lawyers as bolstering the bureau's power to intervene in deals.
January's changes are the first update to the merger process since Canada adopted a two-stage notification and investigation regime similar to the Hart-Scott-Rodino process used in the U.S. Previously, Canadian applicants could choose how much information they wanted to submit. If regulators wanted more, they had to obtain a court order. Both merging parties and the government found the old process too rigid because the court orders left no room to negotiate the scope of an investigation.
Kevin Ackhurst, a lawyer at Norton Rose LLP, concedes that the changes give regulators more power to expand an investigation's scope but doubts they will run amok with their new powers.
For instance, the 2009 framework stipulated that SIRs would demand information from no more than 30 people. If more was needed, staffers would have to obtain approval from the bureau's senior deputy commissioner. In the new version, the preference for not going beyond 30 remains, but staffers won't have to get their boss' approval if they believe additional people should be approached.
"There is a change in tone from regulators that represents a maturing of the process since the two-stage process came out in 2009," he says. "The 2009 document was meant to reassure merging parties that regulators weren't going to go crazy with their investigatory power. The new document is more formalistic. But it's based on two years of experience, and people are more comfortable now with how the process works and the bureau is a bit less apologetic."
Other changes include a provision that SIRs related to hostile tender offers typically will be accompanied by timing agreements so that targets of hostile bids can't delay a ruling by responding slowly. The bureau also clarified how merging parties can negotiate with regulators to narrow the scope of SIRs or prioritize the information they supply.
Aitken said that with the changes, regulators "are now operating under a coherent framework" but that further changes will be made as experience warrants. "In the mergers area, as elsewhere, we will continue to assess our guidelines to ensure that they are as constructive and practical as possible, and reflect our actual practice."
Bill McConnell is The Deal magazine's Washington bureau chief.