Global Competition Law is primarly a practitioner's guide presenting the most salient aspects of the major competition laws country by country, giving an overview of their structure and most charasteristic elements.
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Global Competition Law

The current Competition Act includes a set of non-criminal provisions governing mergers. All merger transactions, whether notifiable or not, are subject to examination by the Commissioner for an appreciation of their anticompetitive effect (Section 114 of the Competition Act). …

Context

The current Competition Act includes a set of non-criminal provisions governing mergers. All merger transactions, whether notifiable or not, are subject to examination by the Commissioner for an appreciation of their anticompetitive effect (Section 114 of the Competition Act).

A merger is defined in the Competition Act as “the acquisition or establishment, direct or indirect, by one or more persons, whether by purchase or lease of shares or assets, by amalgamation or by combination or otherwise, of control over or a “significant interest” in the whole or part of a business of a competitor, supplier, purchaser, or other person” (Section 91 of the Competition Act). With respect to corporations, “control” is defined in Section 2(4) of the Competition Act to mean de jure control, that is, a direct or indirect holding of more than 50 per cent of the votes that may be cast to elect directors of the corporation, and which are sufficient to elect a majority of such directors. The Competition Bureau has indicated in its Merger Enforcement Guidelines that acquisition of de jure control constitutes a merger. The Guidelines also indicate that a significant interest exists when a merger confers upon the acquiring party the ability to materially influence the economic behavior of the business of the acquired party. In this context, a significant interest has been found to exist where the acquiring party had sufficient shares to obtain representation on the board of the acquired party so as to materially influence the board or to block resolutions of the corporation. The acquisition of a minority shareholding can amount to a merger. Moreover, a significant interest may arise, even in the absence of a share acquisition, for example, through contract, where it results in the acquisition of a material influence.

The Merger Enforcement Guidelines provide a safe harbor for acquisitions of less than 10% of a company's shares, which generally are not considered as leading to the acquisition of a significant interest.

Exceptions to the application of the merger rules are set out in Section 113 of the Competition Act, including, inter alia, transactions where the parties are affiliates.

Concept of concentration

Parties are required to notify mergers and concentrations to the Bureau prior to consummation where thresholds concerning asset and transaction significance are met. The first threshold provides that the parties to the transaction, together with affiliates, must have assets or annual gross revenues from sales in, to or from Canada, in excess of C$ 400,000,000 (US$ 298.76 million) (Section 109 of the Competition Act). The second threshold varies depending on the nature of the transaction. With regard to the acquisition of assets, the operation must be notified where the value of assets (or gross revenues in or from Canada generated by those assets) exceeds C$ 70 million (US$ 52.28 million) (Section 110(2) of the Competition Act). With regard to the acquisition of voting shares (Section 110(3) of the Competition Act), the operation must be notified where assets of the acquired corporation (or the gross revenues in or from Canada generated by those assets) exceed C$ 70 million (US$ 52.28 million) and the acquiring persons would have voting shares in the corporation exceeding:

- in the case of a publicly traded corporation, 20% (or if the person owned 20% or more prior to the acquisition, then where the voting shares as a result of the transaction exceed 50%);

- in the case of a private corporation, 35% (or if the person owned 35% or more prior to the acquisition, then where the voting shares as a result of the transaction exceed 50%).

In the case of a corporate amalgamation, the operation must be notified where the value of the assets of the continuing corporation exceeds C$ 70 million (US$ 52.28 million) (Section 110(4) of the Competition Act). In the case of a combination of two or more persons, the operation must be notified where combined assets exceed C$ 70 million (US$ 52.28 million) (Section 110(5) of the Competition Act). Finally, in case of an acquisition of an interest in a combination, the operation must be notified where the value of assets (or gross revenues in or from Canada generated by those assets) exceeds C$ 70 million (US$ 52.28 million) (Section 110(6) of the Competition Act).

The amounts of the second threshold are amended annually (e.g. from 2012 to 2020, they increased from C$77 million to C$ 96 million). As soon as the new threshold is determined, it is published in the Canada Gazette by the Minister (Section 110(9) of the Competition Act). 

A new provision was added by the 2022 Amendment to ensure that the mandatory merger notification requirements would apply to transactions designed to avoid notification (Section 113.1 of the Competition Act).

Thresholds

In making its evaluation, the Competition Bureau appreciates if the merger substantially prevents or lessens, or is likely to substantially prevent or lessen, competition.

The Canadian Merger Enforcement Guidelines dated October 6, 2011 have adopted a methodology similar to that adopted by the US Department of Justice and the FTC in their Joint Horizontal Merger Guidelines. In general, the relevant market is defined as the smallest group of products, including at least one product of the merging parties, and the smallest geographic area in relation to which sellers are able to impose and maintain a significant and non-transitory price increase (Section 4.4 of the Canadian Merger Enforcement Guidelines). In most contexts, the Canadian Competition Bureau considers a 5% price increase to be significant, and a one-year period to be non-transitory. The Canadian Competition Tribunal has approved this approach.

The Competition Act provides that the Tribunal shall not make the finding that a merger is likely to substantially lessen competition based solely on evidence of market share (Section 92(2) of the Competition Act). Nevertheless, the Canadian Merger Enforcement Guidelines state that the Competition Bureau is unlikely to challenge a merger on the basis of a concern related to the unilateral exercise of market power if the post-merger market share of the entity will likely be less than 35 percent. The Bureau has also stated that it is unlikely to question a merger on the basis of a concern related to a coordinated exercise of market power where the four largest firms on the relevant would have less than 65 percent of the market or, if this four firm ratio is exceeded, if the market share of the entity postmerger would be less than 10 percent (Section 5.9 of the Canadian Merger Enforcement Guidelines). Neither does large market share always result in a finding of anticompetitive effect and in at least one case, the Commissioner found no substantial lessening of competition even though the merger at issue resulted in a market share of 60% (Dir. of Investigation and Research v. Hillsdown Holdings Ltd., 1992, 41 Can. Patent Rep.3d 289, 328-331, Comp. Trib.).

Once the Competition Bureau has identified the relevant market for a merger and calculated the market shares likely to exist post-merger, it considers additional factors and has developed different doctrines of appreciation, as listed in Section 93 of the Competition Act. These factors include:

- the nature and extent of foreign competition;

- degree of effective competition remaining on the market;

- the likelihood that a merger will remove a vigorous and effective competitor;

- the nature and extent of change and innovation in the relevant market; and

Assessment of the factors listed in Section 93 allows the Bureau to determine whether a merger substantially enhances market power. In particular, the Commissioner considers whether the merged entity will be able to exercise as a result of the merger a materially greater degree of market power in a substantial part of the market.

Further, following the US approach, the Competition Act provides that a merger should not be prohibited where the Tribunal finds that any lessening of competition is likely to be more than offset by greater gains in efficiency, including potential substitution of domestic products for imports and increases in the real value of exports (Section 96 of the Competition Act). Thus, while defendants may not rely on the efficiencies that may result from an agreement among competitors as a defense to a violation of the conspiracy provisions (The Queen v. N.S. Pharm. Soc'y, 1992, 2 S.C.R. 606), in contrast, an efficiencies defense is expressly provided for under Section 96 with respect to mergers.

However, this framework was significantly tightened following the legislative amendments adopted in June 2024. These reforms introduced a structural presumption of illegality, whereby certain mergers are now presumed to substantially lessen or prevent competition if they exceed defined thresholds—such as a combined market share above 30% or an increase of more than 100 points in the Herfindahl-Hirschman Index (HHI), with a post-merger HHI exceeding 1,800. Although these presumptions may be rebutted by the merging parties, the burden of proof has effectively shifted, marking a major departure from the previous interpretation of Section 92(2). This development brings Canadian merger control closer to the U.S. model outlined in the 2023 Merger Guidelines.

As before, once market definition and shares are established, the Bureau also considers the factors listed in Section 93 of the Act, including barriers to entry, the elimination of a vigorous competitor, and the extent of remaining effective competition. While the efficiencies defense under Section 96 remains available, the threshold for avoiding merger intervention has become materially stricter under the revised legal framework.

Global Competition Law

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Les notions juridiques connexes

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Les notions juridiques connexes

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