Key takeaways

The Standing Committee Amendments are part of a series of amendments – some already adopted and implemented, some still proposed – to modernize Canada's competition law and policy over the past few years. Significantly, the Government of Canada repealed the longstanding efficiencies defense in December 2023, and Bill C-59, which remains in the legislative process, already proposes amendments that would update the pre-merger notification financial thresholds, extend the time period for the Commissioner to challenge non-notifiable transactions from one to three years and introduce additional factors into the SPLC assessment.¹ 

Subject to further amendments to Bill C-59, the Standing Committee Amendments will come into effect upon Bill C-59 receiving Royal Assent. The structural presumptions will not apply to mergers where formal pre-merger notifications were filed prior to, or the merger was completed before, Bill C-59 receives Royal Assent.

New market concentration structural presumption

If Bill C-59 is passed in its current form, the Standing Committee Amendments will create a rebuttable presumption that a merger that results in a "significant increase in concentration or market share" will result in a SPLC in the relevant market. A "significant increase in concentration or market share" is specifically defined and would occur if, as a result of the merger or proposed merger:

1. The concentration index (defined as the sum of the squares of the market shares of the suppliers or customers, or as alternatively prescribed in regulation) increases or is likely to increase by more than 100; and
2. Either (1) the concentration index is or is likely to be more than 1,800, or (2) the market share of the parties to the merger or proposed merger is or is likely to be more than 30%.

In a significant policy shift, the parties to such a merger will be responsible for establishing, on a balance of probabilities, that the merger would not result in a SPLC. Historically, the Act prohibited the Competition Tribunal ("Tribunal") from finding that a merger would result in a SPLC on the basis of an increase in concentration or market share alone, and the Commissioner had the burden of establishing that the merger would result in a SPLC. The Standing Committee Amendments will significantly reduce the evidentiary burden on the Commissioner and are likely to lead the Commissioner to challenge more mergers where there is a significant increase in concentration or market share in a relevant market. 

The proposed structural presumption for market concentration is consistent with the structural presumption in the US 2023 Merger Guidelines ("US Guidelines") issued by the Antitrust Division of the US Department of Justice and the Federal Trade Commission in December 2023. The US Guidelines establish a presumption that a merger is anticompetitive if: (1) the post-merger concentration index is 1,800 and there is a change of 100 from pre-merger levels; or (2) the post-merger market share is 30% and the concentration index changes by 100 from pre-merger levels.² In recent appearances before the House of Commons, the Commissioner advocated that adopting structural presumptions would harmonize Canadian law with the US Guidelines, increasing predictability for businesses and improving cross-border merger reviews. 

Strengthened merger remedy standard

The Standing Committee Amendments will also strengthen the existing remedy standard for mergers. If Bill C-59 is adopted, the Tribunal will be empowered to issue orders to "restore" or "preserve" competition to levels that would have prevailed but for the merger. The current standard only empowers the Tribunal to issue an order to ensure that the merger does not substantially prevent or lessen competition, with the Tribunal opining that the remedy standard does not require that competition be restored to pre-merger levels.³ Indeed, in a recent decision, the Tribunal expressly disavowed that the test for a remedy was "whether it restores the parties to the pre-merger competitive situation".⁴ 

Combining structural presumptions with a stronger merger remedies standard is likely to have a significant impact on mergers in Canada, particularly complex mergers. It will increase the importance of developing a comprehensive competition strategy in the early stages of transaction planning, including assessing all elements of the competitive landscape and ensuring relevant product and geographic markets are properly defined. 

1 See our Client Alert that discusses other recent amendments to Canada's merger control regime.

2 See our Client Alert that discusses the US 2023 Merger Guidelines.

3 This interpretation is contained in the Supreme Court of Canada decision Canada (Director of Investigation & Research, Competition Act) v. Southam Inc., [1997] 1 S.C.R. 748.

4 Canada (Commissioner of Competition) v Secure Energy Services Inc., 2023 Comp Trib 02 at para 382.