Canadian Budget Implementation Bill Includes Foreign Investment and Competition Amendments

Written By Adam Kalbfleisch and Imran Ahmad

On February 6, 2009, the Canadian government introduced Bill C-10, An Act to implement certain provisions of the budget tabled in Parliament. Bill C-10 includes several significant amendments to the Competition Act and Investment Canada Act which are generally consistent with the recommendations to the Government of Canada in the Competition Policy Review Panel's report, Compete to Win, released in June 2008.

Competition Act

Merger Review

• Instituting a two-stage merger notification and review process that resembles the process in the United States. Bill C-10 proposes to establish an initial review period of 30 days with a discretionary “stage 2” review triggered by a request for additional information by the Competition Bureau. This second stage would end 30 days after compliance with this “second request” for information, unless the Bureau approves a shorter review period.
• Increasing the current financial thresholds that trigger an obligation for merger pre-notification from CDN$50 million to CDN$70 million in assets in Canada or gross revenues from sales in or from Canada with a formula for potential annual increases based on growth of GDP.

Broadly speaking, the notification provision amendments will affect the timing and may increase the cost of merger review.

Criminal Conduct

• Repealing existing conspiracy provisions and replacing them with a per se criminal offence to address “hard core” cartel agreements and an ancillary agreement defence.
• Institute a civil conspiracy prohibition to deal with other types of non-hard core cartel agreements between competitors that prevent or lessen competition substantially while also permitting parties recourse to an efficiencies defence.
• Removing provisions dealing with criminal price discrimination and predatory pricing.
• Repealing the criminal price maintenance provisions and replacing them with new civil price maintenance provisions based on an adverse effect on competition test and permitting price maintenance private actions to be brought before the Competition Tribunal.
• Expanding the scope of bid-rigging to include agreements or arrangements which withdraw bids or tenders and increasing prison sentences to up to 14 years.

Abuse of Dominance/Monopolization

• Instituting for the first time non-industry specific administrative monetary penalties (AMPs) for abuse of dominant position of up to CDN$10 million for an initial offence and CDN$15 million for subsequent offences.
• Repealing all provisions dealing specifically with the domestic airline industry.

Misleading Advertising

• Allowing courts to order restitution for misleading advertising as well as to freeze assets in order to preserve restitution orders. Broadly, the proposed amendments seem to indicate a significant toughening of penalties throughout the Competition Act, from cartel fines and sentences to those related to obstruction, destruction of documents and prohibition orders.

Investment Canada Act

• Increasing the review threshold for direct acquisitions of Canadian businesses by WTO investors to CDN$600 million immediately and gradually to CDN$1 billion (with inflation-indexed increases thereafter) and replacing gross asset book value with “enterprise value” of the acquired business as the standard of threshold measurement.
• Introducing a new “national security” review for investments, independent of the transaction review process, allowing the Federal Cabinet to take any measures that it considers advisable in order to protect national security, including prohibiting non- Canadians from implementing an investment or requiring divestiture where the investment has already been implemented.
• Providing that only acquisitions of “cultural businesses” will be subject to the lower CDN$5 million review threshold, so that the three other traditional “sensitive sectors” (transportation, financial services and uranium mining) will now be subject to the higher value threshold described above.

As noted, these amendments to the Competition Act and Investment Canada Act are included in Bill C-10, a budget implementation bill, which is unusual and unexpected. Since the amendments are included in the budget bill, a confidence matter, it is quite likely that they will pass notwithstanding the lack of the type of consultation process that would typically be expected given the sweeping nature of the proposed amendments. In addition, the timetable for review of these amendments is likely to be significantly compressed.

For further information about the proposed Competition Act and Investment Canada Act amendments and their potential impact on specific sectors or businesses, please contact a member of our Antitrust & Competition Group.