2022 merger thresholds announced under Competition Act and Investment Canada Act

The Government of Canada has announced the 2022 transaction size thresholds for review under (i) the Competition Act, which will remain unchanged from the previous year, and (ii) the Investment Canada Act, which will be adjusted upward.

Competition Act

Transactions that exceed both the (i) transaction-size threshold, and (ii), the party-size threshold, require pre-closing merger notification to the Competition Bureau before they can close.

The transaction size threshold will remain static at $93 million for 2022, following a decrease in the previous year. The transaction size threshold is based on the assets of the target entity's Canadian assets, or gross revenue from sales in, from or into Canada generated from those assets. This threshold is adjusted annually based on Canada's nominal GDP. For a transaction to be subject to pre-closing notification, it must also meet the party size threshold of $400 million in aggregate value (which is calculated based on the parties and their affiliates). This threshold is not subject to inflation adjustment, and remains unchanged from 2020.

The filing fee for pre-merger notification was set in April 2021 at $74,905.57 (a slight decrease from the previous year), and remains in effect.

In its press release announcing the 2022 threshold, the Competition Bureau also revealed that the Competition Act would be re-examined to "evaluate potential ways to improve its operation". We can expect revisions addressing the following:

  • "fixing loopholes that allow for harmful conduct;
  • more clearly addressing drip pricing;
  • tackling wage fixing agreements;
  • increasing access to justice for those injured by harmful conduct;
  • adapting the law to today's digital reality to better tackle emerging forms of harmful behaviour in the digital economy; and
  • modernizing the penalty regime to ensure it serves as a genuine deterrent against harmful business conduct."

Investment Canada Act

Investments in Canadian businesses by non-Canadian investors are subject to the Investment Canada Act. An acquisition of control of a Canadian business by a non-Canadian investor is either notifiable or reviewable under the Investment Canada Act.

The 2022 threshold for direct acquisitions of control of a Canadian business (other than a cultural business) for:

  • non-SOE WTO investors has increased from $1.043 billion to $1.141 billion in either enterprise or acquisition value, depending on the nature of the Canadian business and transaction;
  • trade agreement investors has increased from $1.565 billion to $1.711 billion in either enterprise or acquisition value, depending on the nature of the Canadian business and transaction; and
  • SOE investors has increased from $415 million to $454 million, calculated on the basis of the aggregate book value of the assets being acquired (as determined by the most recently completed audited financial statements).

The thresholds for non-WTO investors and acquisitions of cultural businesses remain static at $5 million in asset value for direct investments and $50 million in asset value for indirect transactions.

If you have any questions about the new merger thresholds or investment in Canada, please reach out to Brittney LaBranche or Alicia Quesnel