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ToolsRelated topicsResourcesMerger Review Performance ReportCompetition Bureau
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Number of Transactions | ||||||||||||
2000-2001 |
1999-2000 |
1998-1999 |
1997-1998 |
1996-1997 |
1995-1996 | |||||||
Business Line |
# |
(%) |
# |
(%) |
# |
(%) |
# |
(%) |
# |
(%) |
# |
(%) |
Pre-merger Notification Filing |
73 |
(20) |
92 |
(22) |
109 |
(30) |
84 |
(21) |
58 |
(19) |
57 |
(25) |
Advance Ruling Certificate Request |
255 |
(68) |
209 |
(49) |
174 |
(48) |
219 |
(56) |
181 |
(58) |
117 |
(52) |
Other Examinations |
45 |
(12) |
60 |
(14) |
26 |
(7) |
17 |
(4) |
23 |
(7) |
17 |
(7) |
Subtotal |
373 |
(100) |
361 |
(85) |
309 |
(85) |
320 |
(81) |
262 |
(84) |
191 |
(84) |
Securitizations |
0 |
N/A |
64 |
(15) |
52 |
(15) |
72 |
(19) |
52 |
(16) |
36 |
(16) |
Total |
373 |
(100) |
425 |
(100) |
361 |
(100) |
392 |
(100) |
314 |
(100) |
227 |
(100) |
Table 2. Cost of Merger Review
Fiscal Period |
Number of Full-time Staff |
Direct Costs5 ($million) |
Indirect Costs6 ($million) |
Comments |
1995-1996 |
37 |
2.779 |
2.720 |
|
1996-1997 |
36 |
4.733 |
2.720 |
Major expenditures: Cast litigation7 |
1997-19988 |
44 |
4.223 |
Not available9 |
Major expenditures: additional staff, computer equipment, accommodation costs to begin the relocation of Mergers Branch staff to one floor |
1998-1999 |
59 |
12. 211 |
Not available |
Major expenditures: bank files, grocery file, accommodation, additional staff, experts and legal counsel |
1999-2000 |
54 |
12 .155 |
Not available |
Major expenditures: propane litigation,10 airline file, experts and legal counsel |
2000-2001 |
57 |
9.500 |
Not available |
Major expenditures: Chapters/Indigo file, waste litigation,11 experts and legal counsel |
As indicated in the Fee and Service Standards Handbook,12 and in recognition of there being both private and public benefit of merger review, the Bureau only partially recovers the cost of merger review, in keeping with Treasury Board policy. In 1995-1996, when the Bureau undertook a costing exercise prior to the introduction of fees, the total costs involved in merger review were estimated at about $4.3 million. This included both direct and most indirect costs.
As Table 2 indicates, additional staff were hired starting in 1997-1998 as a result of the funding approved by Treasury Board for fee-generated revenue. Revenue received in that year totalled just $2.185 million (see Table 3 for revenue details for 1998-1999 to 2000-2001), as the Competition Bureau Fee Charging Policy13 only came into force on November 3, 1997.14
In 1998-1999, staff on the 19th floor of Place du Portage who were not part of the Mergers Branch relocated to enable all Mergers Branch employees to be co-located in one contiguous space. Prior to this initiative, members of the Pre-notification Unit were at a considerable physical distance from one another, which resulted in wasted time and effort. There were also members of the Branch who were located on other floors.
The 1998-1999 fiscal period was also the year of the proposed bank and grocery transactions; the proposed merger between four of the five largest chartered banks in Canada being the biggest and most complex case in the history of the Branch. In addition to the intensive management, technical and resourcing efforts involved with these files, the Branch was also coping with a large number of cases (309),15 many of which were complex and involved more than one jurisdiction. Added to this was the increased publicity related to the proposed bank and grocery mergers, which also required increased work for the Branch and Bureau overall. The government recognized these additional pressures and authorized Treasury Board to provide the Bureau with additional funding to avoid having to redirect staff and resources from other parts of the Bureau, and to ensure that the Commissioner could discharge his responsibilities related to these files, without significantly affecting other important files.16
In 1999-2000, the Branch was responsible for the airline and propane files and reviewed a record 36117 transactions. The proposed propane merger18 was argued before the Competition Tribunal, which was a resource-intensive endeavour. Not only were several Mergers Branch officers and Department of Justice Canada lawyers assigned to the case, but several economic and industry experts were also retained. In addition, the litigation took place in Calgary, which meant the Bureau had to incur substantial expenses for travel and accommodation. When the Tribunal decided to allow the merger of Superior Propane and ICG Propane to proceed on the basis of efficiencies, the Bureau appealed the decision. The appeal was allowed in April 2001 and the matter referred back to the Competition Tribunal.
Following the review of the proposed merger of Air Canada and Canadian Airlines, the Mergers Branch continued its involvement in the airline file, devoting resources to the drafting of airline- related changes to the Competition Act, and ensuring compliance with the undertakings, including arbitration related to the Canadian Regional sale process. In 2000, the Bureau made use for the first time of the Commissioner's power under s. 104.1 of the Competition Act to issue a temporary order to prevent passenger airlines from abusing a dominant position. The Commissioner issued the order against Air Canada in October 2000. The order was upheld and extended by the Competition Tribunal. Air Canada has appealed the Tribunal's decision and is challenging the temporary order power in Quebec Superior Court. In March 2001, the Commissioner commenced an application against Air Canada under the new regulations defining anti-competitive conduct by airlines. These initiatives also required use of Mergers Branch staff.
The Bureau published draft enforcement guidelines in February 2001 "...as part of the Bureau's continuing efforts to ensure a transparent and predictable enforcement policy... with respect to the Canadian airline industry."19 Again, in order to ensure the necessary resources for the airline file and to maintain enforcement levels in other parts of the Bureau, the government authorized Treasury Board to provide additional funding.
In August 1999, the Mergers Branch review of the proposed acquisition by Loblaw Companies Limited of Provigo Inc., and in Atlantic Canada of the grocery assets of The Oshawa Group, revealed serious competition concerns in a number of markets. To address these concerns, Loblaw Companies Limited divested itself of some of its interests in markets in Ontario, Quebec, Nova Scotia, New Brunswick and Newfoundland. Due to these significant divestitures, there are new significant competitors in many markets. As a result of these transactions, Métro-Richelieu became a major player in Ontario and Loblaw entered Quebec and increased its presence in Atlantic Canada.
As one part of the series of grocery mergers in 1999, the acquisition by Sobeys Inc. of The Oshawa Group Inc. also resulted in significant divestitures. Due to competition concerns, Sobeys Inc. divested itself of its interests in certain assets in two Ontario markets, three Quebec markets, and a food service operation in Atlantic Canada. With its acquisition of The Oshawa Group Inc., Sobeys Inc. became a significant grocery wholesaler and retailer in many markets where it previously had little or no presence.
In 1999-2000, the Branch began a review of the proposed acquisition by Canadian Waste Services Inc. of Browning-Ferris Industries Ltd., a subsidiary of Allied Waste Industries. In April 2000, the Bureau filed an application with the Competition Tribunal challenging parts of the transaction. The contested hearing took place in November 2000. In late March 2001, the Tribunal issued its decision allowing the Commissioner's application that the proposed acquisition of the Ridge landfill is likely to prevent and lessen competition substantially in the disposal of institutional, commercial and industrial waste in the Greater Toronto Area and the Chatham-Kent area.20 A remedy hearing is scheduled for June 2001.
All of the documentary evidence in this case was presented in electronic format, and the Bureau and Canadian Waste Services jointly submitted a Statement of Agreed Facts on the case. Jointly, these two firsts "...resulted in a shorter hearing time and the need for fewer witnesses."21
The increasing numbers of complex, crossborder filings, coupled with cases such as the much publicized Chapters/Indigo transaction consumed substantial amounts of resources in terms of staff, experts and lawyers in 2000-2001. Examples of other significant cases during the past two years in which the Bureau obtained either a consent order from the Competition Tribunal or undertakings from the merging parties requiring divestiture of assets or businesses include the following:
Table 3. Revenue Generated from Fees
Fiscal Period |
Revenue from Pre-merger Notification, Advance Ruling Certificates and Advisory Opinions ($million) |
1997-1998 |
2185 |
1998-1999 |
6890 |
1999-2000 |
7465 |
2000-2001 |
843722 |
Table 3 indicates the amount of revenue generated from fees related to merger review, which the Bureau uses to fund merger-related activities. It is important to note, however, that the maximum amount of funding from fees available to the Bureau is $7.5 million (125 percent of the $6 million ceiling established by Treasury Board). Any fees the Bureau receives that exceed the ceiling are credited to the Consolidated Revenue Fund. Fiscal period 2000-2001, as expected, was a record year, with $8.437 million generated from fees. This was despite the decrease in transactions related to asset securitization.
The Bureau is also required to ensure that revenue generated from fees is used to fund fee-related activities. Separate accounts have been established to track fee related expenditures.
Almost half of the filings and advance ruling certificate requests are received without the corresponding fee payment; between April 1, 1999 and March 31, 2001, the Bureau received 338 fee- related filings and ARC requests without payment. Although most companies submit appropriate payment upon filing, the follow-up with the companies that do not can be time-consuming and administratively costly. Invoices are prepared and sent on a monthly basis to companies that have not submitted payment, with year-to-date interest charges incurred until full payment is received. The Bureau has pursued one company since October 2000, and the account is now in the formal collection process.
Table 4. Number and Percentage of Cases by Level of Complexity23
Number of Transactions | ||||||||
2000-2001 |
1999-2000 |
1998-1999 |
1997-1998 | |||||
Complexity |
# |
(%) |
# |
(%) |
# |
(%) |
# |
(%) |
Non-complex |
282 |
(81) |
232 |
(80) |
212 |
(77) |
68 |
(89) |
Complex |
53 |
(15) |
49 |
(17) |
56 |
(20) |
8 |
(11) |
Very Complex |
14 |
(4) |
8 |
(3) |
6 |
(2) |
0 |
N/A |
Total |
349 |
(100) |
289 |
(100) |
274 |
(100) |
76 |
(100) |
Table 4 indicates that the overall distribution of non-complex and complex merger cases the Branch reviewed has been fairly consistent since 1999. There has been, however, an increase in the number of very complex cases, which, obviously, are the most resource-intensive. In 1997, at the inception of service standards, expectations were that, based on a review of caseloads from 1993-1994 to 1995-1996, about 85 percent of files would fall into the non-complex category, 10 percent into the complex category and 5 percent into the very complex category. In recent years, the Branch has seen the ratio move so now approximately 80 percent fall into the non-complex category, 15 percent into the complex category and 5 percent into the very complex category. This shift is due in part to globalization and the inherent complexities involved with multijurisdictional cases.
Table 5. Meeting the Service Standards24
Complexity |
Number of Transactions |
Service Standards Met | |||||||
2000- 2001 |
1999- 2000 |
1998- 1999 |
1997- 1998 |
Target |
2000- 2001 |
1999- 2000 |
1998- 1999 |
1997- 1998 | |
Non-complex |
282 |
231 |
212 |
68 |
14 days |
270 95.7% |
218 94% |
187 88.2% |
57 83.8% |
Complex |
53 |
49 |
56 |
8 |
10 weeks |
49 92.5% |
43 87.8% |
54 96.4% |
8 100% |
Very Complex |
14 |
8 |
6 |
0 |
5 months |
14 100% |
7 87.5% |
6 100% |
N/A N/A |
The Branch is successful at meeting service standards, which demonstrates that the standards are probably appropriate; they are not easy enough for the Branch to meet 100 percent of the time and yet are not so unrealistic as to discourage staff. The Branch has lived through the growing pains of this new administrative process and finds that it is effective in providing a good level of "checks and balances" in the system. Notwithstanding that the definitions and guidelines related to service standards and complexity definitions still require some improvement, it is expected that over time the standards and definitions will be seen as helpful to the competition law bar and merging parties in preparing filings and providing a certain level of predictability.
The bar graphs on the following pages indicate the distribution of cases by complexity and time for completion. This information is useful for the Branch when identifying files that were not completed within the service standard, and analyzing the factors that enabled the Branch to significantly surpass its service level time periods when files are completed well within the standard.
The figures indicate that for all the complexity levels, the average completion time falls within each of the respective standards (see Appendix 1 for service standards). The figures show that the Branch completed non-complex cases within an average of 12 days in 1997-1998, 11 days in 1998-1999, 11 days in 1999-2000 and 10 days in 2000-2001. For complex cases, the average completion time was five weeks in 1997-1998, six weeks in 1998-1999, and seven weeks in both 1999-2000 and 2000-2001. Very complex cases25 were completed within an average of four months in both 1998-1999 and 1999-2000 and three months in 2000-2001. While it is not expected that the Branch will meet service standards in all cases, they provide valuable information with which to continually improve internal processes and practices.
Figure 1. Meeting the Service Standard Target26: 1997-1998
Figure 2. Meeting the Service Standard Target: 1998-1999
Figure 3. Meeting the Service Standard Target: 1999-2000
Figure 4. Meeting the Service Standard Target: 2000-2001
When it developed the Fee and Service Standards Policy in 1997, the Bureau also included feedback mechanisms to ensure that those who sought services or were bound by regulatory processes to which a fee applied had timely and systematic opportunities to provide ongoing input about service levels and quality. One way stakeholders are able to provide constructive comments is with feedback leaflets.
Table 6.* Monitoring Merger Review through Feedback Leaflets: Fiscal Year 2000-200127
Service |
Total |
Service Rendered Within Specified Time |
Quality of Service | ||||
Yes |
No |
Excellent |
Good |
Fair |
Poor | ||
Advance Ruling Certificate |
30 |
30 |
- |
23 |
5 |
- |
- |
Pre-merger Notification Filing |
14 |
12 |
2 |
6 |
8 |
- |
- |
Pre-merger Notification Filing and Advance Ruling Certificate |
14 |
11 |
3 |
8 |
6 |
- |
- |
Pre-merger Notification Filing and Advisory Opinion |
1 |
- |
- |
1 |
- |
- |
- |
Advisory Opinion |
4 |
4 |
- |
2 |
2 |
- |
- |
Total |
63 |
57 |
5 |
40 |
21 |
- |
- |
Percentage |
100% |
90% |
8% |
63% |
33% |
- |
- |
*Note: One returned leaflet had no indication of the Quality of Service, and one had both Excellent and Good for Quality of Service. Another returned leaflet had no indication of whether the service was rendered within the Service Standard. These results have been left out of the table; hence the total percentage for the respective categories does not equal 100. A number of these leaflets apply to more than one service, as more than one service can be involved in the same request. For example, one request can involve a pre-merger notification filing and an advance ruling certificate but the party completed and returned only one feedback leaflet.
Table 6 includes detailed information about the feedback leaflets the Bureau received during 2000-2001. During this period, the Bureau completed 349 transactions for merger review services. Of these, stakeholders returned 63 or 18 percent of the leaflets. In comparison, during the first three years with the Fees and Service Standards Policy (November 3, 1997 to March 31, 2000), 25 percent of the leaflets were returned.
From November 1997 to March 31, 2000, 91 percent of the leaflets returned indicated that the Bureau rendered the service within the specified time frame. Last year, 90 percent of the leaflets returned indicated that the Bureau had met the service standard.
Not one of the leaflets returned during 2000-2001 rated the service fair or poor, and comments such as "the review was conducted in a professional and timely manner" indicate very positive feedback from stakeholders. In comparison, from November 1997 to March 31, 2000, 10 percent of the leaflets returned rated the quality of service fair or poor.
In December 1999, a number of provisions in Part IX of the Competition Act were amended to reflect and respond to suggestions expressed by stakeholders.28 The amendments to the regulations include the following:
Asset securitizations are competitively benign as they largely finance transactions in which a change in ownership of the asset in question would occur in the event of failure to meet financial obligations. These transactions accounted for approximately 15 percent of the total number of transactions examined by the Mergers Branch annually.
The exchange rate to be used is the noon exchange rate quoted by the Bank of Canada, resulting in consistent and easily accessible information for all users. This clarification has assisted in the calculation of the aggregate value of assets and gross revenue from sales.
The information required in the new forms enables the Bureau to more efficiently review proposed mergers, as they require the provision of more pertinent information, while dispensing with unnecessary information, particularly in the previous short-form information requirements.
Following the December 1999 amendments to the Competition Act, the Mergers Branch published the following interpretation guidelines, which were developed in consultation with stakeholders. These guidelines were published on April 28, 2000 and are available on the Bureau's Web site (http://www.cb-bc.gc.ca). A draft interpretation guideline dealing with Paragraph III (a), Exemptions for Ordinary Course of Business Acquisitions, was republished on May 17, 2001 for an eight weeks public consultation in light of comments on the original document. The series of interpretation guidelines is set out below.
- Section 108. Definition of "Operating Business"
- Section 114. Number of Notices: Multiple Step or Continuous Transactions
- Paragraph 111(a). Exemptions for Ordinary Course of Business Acquisitions (Draft)
- Section. 112. Exemption for Combinations that are Joint Ventures
- Subsection 110(3). Acquisitions of Non-Voting Shares and Convertible Securities
- Subsection 110(4). Amalgamation
- Paragraph 111(d). Creditor Acquisitions
- Section 103. "Substantially Completed" and Section 119. "Completed"
- Shareholder Agreements
- Notifiable Transactions Regulations: Transactions and Events in Section 14
- Corporate Spin-Offs
In May 2000, the Mergers Branch published Procedures Guide: Notifiable Transactions and Advance Ruling Certificates under the Competition Act. The document was issued to help counsel and merging parties by setting out the general approach the Mergers Branch takes to pre-merger notification and advance ruling certificate procedures.
In November 2000, the Mergers Notification Unit (MNU), which comprises six commerce officers and three support personnel, commenced operations. The creation of the MNU stems from the long-held belief in both the private sector and the Mergers Branch that notification activities have been underresourced. Additionally, the Bureau's benchmarking initiative and the Branch's ongoing discussions with the Mergers Committee of the Competition Law Section of the Canadian Bar Association identified a number of inconsistencies in the administration of fees and service standards and also promoted the adoption of a number of "best practices." Consequently, in addition to traditional merger notification activities, the MNU is responsible for classifying all incoming files and administering service level periods, reviewing most non-complex transactions, as well as Part IX policy and communications activities.
In January 2001, members of the MNU held nine consultation meetings with members of the competition law bar in major Canadian cities. Currently, the MNU is undertaking proposed revisions to relevant documents and intends to issue additional interpretational guidelines as a result of its consultations.
Industry Canada and the Competition Bureau are gearing up to function in an electronic commerce environment. Security of information is of the utmost importance and the PKI (Public Key Infrastructure) solution is set to be in place government-wide by 2002. Parties will be able to notify the Bureau of proposed transactions and request advance ruling certificates through a secure, on-line system.
The Bureau is also implementing an organization-wide information management system to improve service delivery to both internal and external clients. Rollout of the system began in May 2001 and is expected to be completed by the end of the fiscal year (March 2002).
Funding from fee revenue has had a positive impact on the performance of the Mergers Branch. With an increasing caseload and a growing number of complex and very complex transactions, fee revenue has enabled the Branch to hire more investigative and support staff as well as increase training budgets. The timeliness and quality of the Mergers Branch's investigations has also improved. The Branch has more funds for travel to interview relevant industry participants as well as engage more outside experts and legal counsel.
Overall, the Mergers Branch has a good track record in meeting its service level commitments. Performance improvements in 2000-2001, in particular, are noteworthy. Increased consultations with the competition law bar, legislative reforms, institutional changes such as the establishment of the Merger Notification Unit and the adoption of "best practices" from other jurisdictions demonstrate a serious commitment to performance improvement. Nonetheless, more can be done. The Mergers Branch will be working, in consultation with the private sector, on more ways to improve merger review.
Appendix 1. Competition Act Fees and Service Standards
Pre-merger Notification Filings and Advance Ruling Certificates | ||
Service/Regulatory Process |
Fee |
Service Standard |
Non-complex |
$25 000 |
14 days |
Complex |
$25 000 |
10 weeks |
Very Complex |
$25 000 |
5 months |
Advisory Opinions | ||
Service/Regulatory Process |
Fee |
Service Standard |
Non-complex |
$4000 |
4 weeks |
Complex |
$4000 |
8 weeks |
Photocopies |
$0.25 |
N/A |
1 Competition Bureau. Fees and Service Standards: Report on Forum held February 2, 1999. May 1999.
2 Number of cases quoted excludes securitizations.
3 Regulation 15 of the Notifiable Transactions Regulations, which exempted securitization transactions from the notification provisions in Part IX of the Competition Act, came into force on December 27, 1999.
4 This includes all the cases the Branch commenced from April 1 to March 31 of each year.
5 This includes salary and non-salary expenditures directly related to merger review.
6 This includes salary and non-salary expenditures for overhead and shared services provided by the Bureau, Industry Canada and the Department of Justice Canada related to merger review.
7 Director of Investigation and Research v. Canadian Pacific Limited et. al. CT96/2
8 First year with revenue from fees.
9 The development of fees (see Appendix 1) was based on a complete costing exercise concluded in 1996. Such an exercise has not been undertaken since the implementation of fees.
10 Commissioner of Competition v. Superior Propane Inc. et. al. CT98/02
11 Commissioner of Competition v. Canadian Waste Services Inc. et.al CT00/02
12 Competition Bureau. Industry Canada. Fee and Service Standards Handbook pursuant to the Competition Act.
13 Competition Bureau Fee Charging Policy. November 3, 1997.
14 The government's fiscal period starts on April 1 and ends on March 31of the following calendar year.
15 Number of cases quoted excludes securitizations.
16 For example, 1998-1999 was the year in which record-breaking fines were imposed in the food and feed additives and telemarketing cases.
17 Number of cases quoted excludes securitizations.
18 Supra note 10.
19 Draft Enforcement Guidelines on The Abuse of Dominance in the Airline Industry: February, 2001
20 Supra note 11.
21 Information Notice: Competition Tribunal decision protects competition for waste disposal in the Greater Toronto Area and Chatham-Kent. Ottawa. March 28, 2001
22 The Bureau can access a maximum of $7.5 million through a vote-netting agreement with Treasury Board.
23 This includes all completed transactions (excluding securitizations) from April 1 to March 31 of each year, except in 1997–1998 for which only those transactions completed between November 3, 1997 and March 31, 1998 (excluding securitizations) are included.
24 This includes all completed transactions (excluding securitizations) from April 1 to March 31 of each year, except in 1997–1998 for which only those transactions completed between November 3, 1997 and March 31, 1998 (excluding securitizations) are included.
25 There were no very complex files completed between November 3, 1997 and March 31, 1998
26 Securitizations have been excluded
27 This reflects all the feedback leaflets the Bureau received between April 1, 2000 and March 31, 2001
28News Release, Coming Into Force of the Changes to the Notifiable Transactions Provisions. December 17, 1999