As mentioned in our prior blog post titled Commissioner Points to More Active Enforcement, Greater Transparency and Refined Approach to Efficiencies Defence, the Commissioner of Competition announced during his keynote speech at the Canadian Bar Association’s Competition Law Spring Conference on May 7, 2019 that the Competition Bureau intended to release for public comment a draft model timing agreement for merger reviews where the parties raise the efficiencies defence. The draft agreement was released yesterday and interested parties have been invited to provide their views to the Bureau by no later than August 30, 2019.

As stated in the Bureau’s News Release announcing the consultation, “[t]he purpose of the timing agreement is to ensure that the Bureau has the time and information it requires to properly assess the parties’ claimed efficiencies”. In this regard, “[t]he model agreement establishes timed stages for the parties’ engagement with the Bureau, including the production of evidence and information, throughout the review process”. It also describes the general categories of information that the Bureau will require from the parties in order to conduct its efficiencies analysis, including (a) information on parties’ operations and assets; (b) plans for the merging parties’ businesses in the absence of the merger; (c) analysis and planning documents relating to the implementation of the merger; (d) analysis of merger efficiencies; and (e) information from past comparable integrations.

While the draft agreement is intended to “establish a schedule for the expeditious resolution of [proposed transactions]”, it may actually increase the length of the Bureau’s review (at least in certain cases). In this regard, while the Bureau’s draft Practical Guide to Efficiencies Analysis in Merger Reviews encourages parties to provide their initial efficiencies submissions and available supporting information at an early stage in order to “allow the Bureau sufficient opportunity to analyze potential effects and efficiencies concurrently”, the draft agreement contemplates that efficiencies submissions will now be provided within 30-40 days after full compliance with supplementary information requests (SIRs). This, combined with recent statements made by the Commissioner during an interview sponsored by the American Bar Association on July 10, 2019, suggests that the Bureau will no longer be willing to consider potential effects and efficiencies simultaneously. Rather, even if parties choose to provide an efficiencies submission at an earlier stage, it appears that the Bureau will not be willing to consider efficiencies until after it has determined whether the proposed transaction is likely to result in a substantial prevention or lessening of competition. Using the maximum timelines set out in the draft agreement, the Bureau’s assessment of the parties’ efficiencies claims likely will not be completed until 110 days from the date of full compliance with the SIRs.

In the absence of the parties entering into a timing agreement that the Bureau deems acceptable, it appears that the Commissioner will not be willing to exercise his discretion to consider the efficiencies defence as part of the merger review process. If this is the case, efficiencies, and, in particular, whether the efficiencies likely to arise from a merger are greater than and offset its anti-competitive effects, will likely be analyzed for the first time by the Competition Tribunal rather than by the Bureau in advance of any prospective litigation.