In this global economy, companies are doing more and more business in foreign jurisdictions. One of the first international jurisdictions in which many U.S. companies seek to do business is Canada. Attorneys for U.S. companies that have purchased, or have entertained purchasing, a Canadian company or have otherwise sought to establish a presence in Canada will be familiar with two important federal statutes – the Investment Canada Act (the “ICA”) and the Competition Act (the “CA”). Attorneys should be aware of recent amendments to these statutes which may impact on U.S. companies entering into cross-border transactions, directly or indirectly, involving Canadian entities.

Competition Act – Merger Provisions

(i) Threshold Amendments Under the CA, the parties to certain mergers must comply with the pre-merger notification obligations and mandatory waiting periods where both the “size-of-parties” and “size-oftransaction” monetary thresholds are exceeded. While the “size-of-parties” threshold will remain at Cdn$400 million, the amendments to the CA generally increase the “size-oftransaction” threshold from Cdn$50 million to Cdn$70 million. This threshold will be revised annually based on a formula tied to changes to the national gross domestic product. (ii) Process Amendments Previously, where the thresholds were exceeded, the parties would have to file a notification and wait either 14 or 42 days (depending on whether a short-form or long-form application was required) before closing the deal.

The amendments replace these waiting periods with a U.S. “second-request” type of process for merger notification and review. There will be an initial 30-day waiting period following the filing of a pre-merger notification. This waiting period can be extended by the Commissioner of Competition if, within the initial 30-day waiting period, she issues a “second request” notice requiring the production of additional information. Closing would be prohibited until 30 days after compliance with the Commissioner’s second request, however long that takes. The changes to the CA also establish the potential for administrative monetary penalties of up to Cdn$10,000 per day for failure to comply with the pre-merger notification regime.

While it is expected that the changes to the ICA will make more U.S./Canada cross-border transactions subject to one less hurdle, U.S. attorneys will want to carefully consider the potential application of the new “second request” process for mergers under the CA because it may make certain U.S./Canada cross-border transactions lengthier and more involved than they have been in the past.