If you read between the lines, some of the country's top competition lawyers say, the federal government's anti-monopoly watchdog recently sent Canadian companies a warning: If you are merging with a rival, you could face extra scrutiny.
What some see as a salvo from the Competition Bureau, which obtained sweeping new powers in 2009, appears between the lines in the regulator's recently released merger-review guidelines.
The document, issued in January, lays out when the bureau can be expected to request reams of extra information from companies as it investigates whether a proposed merger can go ahead.
The "supplementary information requests," known as SIRs, are dreaded by deal makers and lawyers.
SIRs can result in hundreds of thousands or even millions of dollars in extra costs, given the compiling of e-mails, internal documents and economic studies about how the merger is expected to effect competition and prices. The process can hold up mergers for months.
The bureau recently issued such a request as it looks into the contentious bid by Maple Group Acquisition Corp., a consortium of financial institutions, for the company that runs the Toronto Stock Exchange, TMX Group Inc.
Some legal observers say the new guidelines are worded in a way that suggests there may be more information requests in future.
Brian Facey, co-chair of the competition practice group at Blake Cassels & Graydon LLP, said the guideline revisions are a clear signal from the Competition Bureau: "This is a change that we see as shifting in the direction of additional burden."
In the previous guidelines from 2009, he said, the bureau said that it would be "unlikely" to issue frequent information requests, so as to minimize the burden on merging companies.
Now, that cautious language has been taken out, Mr. Facey said.
"They've lowered the threshold for when they're going to issue an SIR, in the sense that there's no more of this 'unlikely' language," Mr. Facey said. "… It is a bit splitting hairs, but it is a significant change, I think."
Historically, Canadian competition law allowed mergers between rivals that lessened competition provided the mergers also produced "efficiencies" that could be passed on to consumers. This was meant to address that fact that, as a small country, Canada would not likely be able to foster strong companies for global markets if competition laws always broke up domestic mergers.
Mr. Facey argues that imposing onerous information requests on companies creates, in effect, a "merger tax" that would discourage the creation of national champions.
"I think it is a slippery slope," he said of the bureau's apparent willingness to use its new powers, which allow it to issue these requests and delay mergers without having to first make its case in court. "I'm not sure [this is what]Parliament really intended, and in fact I think they'd be surprised if they saw the system that we actually have in place."
Adam Fanaki, a competition lawyer at Davies Ward Phillips & Vineberg LLP in Toronto, agrees that the wording changes could be a sign of a tougher approach from the bureau.
Mr. Fanaki, who was in charge of the bureau's merger branch and was involved in drafting the original 2009 guidelines, said the new guidelines contain "potentially negative changes" that suggest the bureau is gearing up to issue more supplemental information requests.
"In a number of instances, the revised guidelines remove what I would call moderating language," Mr. Fanaki said, adding that the concern is that it "suggests that the restrained approach adopted by the bureau may change."
In addition to the Maple Group-TMX Group case, the bureau recently issued two requests in other transactions: United Rentals Inc.'s acquisition of RSC Holdings Inc., and AbitiBowater Inc.'s bid for Fibrek Inc.
Not everyone sees the rewording of the guidelines as a warning sign, however. Most agree that, so far, the Competition Bureau has been fairly cautious about issuing information requests.
Dany Assaf, of Torys LLP in Toronto, said few mergers in Canada require the scrutiny of a supplemental information request. He doesn't anticipate major changes as a result of the new guidelines.
"They are more neutral in tone … they are very matter of fact," Mr. Assaf said.
Since receiving more powers in 2009, the bureau has maintained it would use them sparingly. In a 2010 speech, Melanie Aitken, the commissioner of competition credited with toughening up the regulator's image, promised that her officials would use their authority "judiciously."
The bureau said that from January, 2009, to the end of 2011, it reviewed 404 mergers and issued only 15 supplemental information requests.
"The guidelines reflect our practice as it has developed and as a result we would expect the number of SIRs issued to continue tracking the numbers to date," bureau spokesman Greg Scott said in an e-mail.
He said the bureau recognizes that these requests can be "demanding." But he said it must issue them when it needs more information to properly review a deal: "The bureau will not compromise the integrity of the review by being placed in a situation where it does not have the information required to conduct a sufficiently thorough and responsible review of a proposed transaction."
The federal Competition Bureau has issued new guidelines for the way it reviews mergers. Some say the revised wording is a sign of a tougher approach, and an increased willingness to use its new powers to issue extensive "supplementary information requests" that can delay deals.
Old guideline (2009):
"Very few mergers raise a serious risk of a substantial lessening or prevention of competition. As such it is unlikely that the [supplementary information request]mechanism will be employed by the Bureau on a frequent basis."
"Where a notifiable transaction raises concerns regarding a potential substantial lessening or prevention of competition, the Bureau will determine what additional information is required."
"The Bureau is committed to adhering to certain practices and procedures so as to ensure that a party's burden in responding to a [supplementary information request]is not greater than necessary."
"Pre-issuance dialogue with the party may also assist in reducing the scope of a [supplemental information request]"
Source: Blake Cassels & Graydon LLP