Decreased 2021 merger thresholds under the Competition Act and Investment Canada Act
Competition and Foreign Investment Bulletin
By Alicia Quesnel, Brittney LaBranche and Robyn Finley
The Government of Canada has announced updates to the transaction size thresholds for review under the Competition Act and Investment Canada Act. The updated thresholds decreased slightly under both acts from the 2020 thresholds, which may result in more transactions that will be subject to review than there were last year.
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.
Transaction Size Threshold: The "transaction size" threshold has decreased from $96 million to $93 million for 2021. This threshold is subject to inflation, and its decrease reflects the adverse impact of the COVID-19 pandemic on Canada's economy. The "transaction size" is calculated as the aggregate value of the assets being acquired, or the gross revenue from sales in, from or into Canada generated from those assets.
Party Size Threshold: the parties, together with their affiliates, have assets in Canada, or gross revenue from sales in, from, or into Canada, that exceed $400 million in aggregate value. This threshold is not subject to inflation adjustment, and remains unchanged from 2020.
The filing fee for pre-merger notification was set in April 2020 at $75,055.68 and remains in effect. Moreover, the Canadian Competition Bureau's (the Bureau) increased flexibility for collaborations between competitors acting in good faith that are "motivated by a desire to contribute to the crisis response rather than achieve competitive advantage", announced in April 2020 in response to the COVID-19 pandemic has not been reneged. For more details on the Bureau's pandemic response, see our previous publication here.
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 is either notifiable or reviewable under the Investment Canada Act.
WTO (non-SOE) Investors: the threshold for direct acquisitions of control of a Canadian business (other than a cultural business), by a non-SOE WTO investor has decreased from $1.075 billion to $1.043 billion for 2021 in either enterprise or acquisition value, depending on the nature of the Canadian business and transaction.
Trade Agreement Investors: the threshold for direct acquisitions of control of a Canadian business (other than a cultural business), by a trade agreement investor has decreased from $1.613 billion to $1.565 billion for 2021 in either enterprise or acquisition value, depending on the nature of the Canadian business and transaction.
SOE WTO Investors: the threshold for direct acquisitions of a Canadian business (other than a cultural business), by SOE investors has decreased from $428 million to $415 million for 2021, 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.
Foreign investments continue to be subject to enhanced scrutiny in connection with the COVID-19 pandemic, which is expected to be in place until the economy recovers from the effects of the pandemic. For further details, see our previous publication here.
If you have any questions about the new merger thresholds or investment in Canada, please reach out to one of the authors or a member of our Competition and Foreign Investment Group. References can be found in the PDF linked at the top of this article.