Competition Act Review Threshold Remains Same for Third Year in Row While Investment Canada Act Review Threshold Increases for 2023

February 07, 2023

Written By Adam Kalbfleisch and Alysha Pannu

Competition Act Thresholds

For the third year in a row the Competition Bureau announced that the transaction-size threshold for pre-merger notification under the Competition Act will be $93 million.

Generally, acquisitions may be subject to mandatory pre-notification where:

1. the aggregate value of the target firm's assets in Canada, or the gross revenues from sales in or from Canada generated from those assets, exceeds the size of transaction threshold; and
2. the parties to the transaction, together with their affiliates, have assets in Canada that exceed $400 million in aggregate value, or had gross revenues from sales in, from or into Canada that exceed $400 million.

Further, certain other non-financial thresholds may apply depending on the structure of the deal.

The size of transaction threshold under the Competition Act may be adjusted by the Minister each year based on a formula that considers changes in Canada's nominal GDP. Despite an increase in Canada's GDP from the prior year, the Minister opted not to increase the size of transaction threshold. In making the announcement about the transaction-size threshold, Honourable François-Philippe Champagne, Minister of Innovation, Science and Industry cited the need to fully scrutinize potentially harmful deals and the government's commitment to a robust competition framework as a rationale for maintaining the transaction-size threshold. This announcement by the Minister comes on the heels of an ongoing legislative review of the Competition Act, which intends to increase the enforcement authority of the Competition Bureau. By maintaining the transaction-size threshold despite a period of high inflation, the government is signalling that it intends to subject more transactions to mandatory pre-closing review by the Competition Bureau.

Investment Canada Act Thresholds

Unlike the Competition Act review threshold which will remain the same as last year's, Innovation, Science and Economic Development Canada announced today that certain review thresholds for investments by non-Canadians under the Investment Canada Act (the ICA) will increase by approximately 13 percent for 2023, effective later this month. The federal government adjusts these thresholds annually based on changes in nominal GDP.

The 2022 threshold for World Trade Organization (WTO) investors that are not state-owned enterprises increased to $1.287 billion (from $1.141 billion in 2022) for direct investments involving Canadian non-cultural businesses, based on the enterprise value of the Canadian business’ assets. Private sector investors from the United States, Australia, Chile, Colombia, the European Union, the United Kingdom, Honduras, Japan, Mexico, New Zealand, Panama, Peru, Singapore, South Korea and Vietnam benefit from a higher "trade-agreement" investor threshold, which increased also to $1.931 billion (from $1.711 billion in 2022), based on the same enterprise value calculation. The 2023 threshold for WTO investors that are state-owned enterprises increased to $512 million based on the book value of the Canadian business' assets, up from $454 million in 2022.

The thresholds for review for direct and indirect investments by non-WTO investors ($5 million and $50 million, respectively) and for direct and indirect investments in Canadian cultural businesses ($5 million and $50 million, respectively) remain the same.

If you believe your acquisition may be subject to mandatory Competition Act or Investment Canada Act filings, please feel free to contact the authors or other members of the Bennett Jones Competition Antitrust group for assistance.

Authors