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Competition Act and Investment Canada Act thresholds for Canadian M&A transactions confirmed for 2020

By Adam Goodman, Sandy Walker, Barry Zalmanowitz, and Simon Kupi
April 10, 2020
  • Regulatory
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Two key financial thresholds relevant to the review of proposed transactions under Canada’s Competition Act and Investment Canada Act were recently confirmed for 2020 as a result of annual adjustments.

1. Competition Act

On April 1, 2020, the Competition Bureau announced that the “size of transaction” threshold would remain unchanged from its 2019 level, staying at CA$96 million for the remainder of the year.1 While the Minister of Innovation, Science and Economic Development (ISED) generally increases the size of transaction threshold in the first weeks of a new year as a result of a GDP-based indexing formula, the Minister is also permitted to refrain from adjusting the threshold, which results in the previous year’s threshold applying. We note that the Minister’s decision to maintain the former threshold comes in the midst of the COVID-19 pandemic and the economic uncertainty engendered by the public health crisis. The last time a Minister refrained from adjusting the size of transaction threshold was 2010, during a global recession, and the indexing formula would have resulted in the threshold decreasing from the year prior.

Under the Competition Act, parties to transactions over certain financial thresholds must notify the Competition Bureau in advance of closing and pay a $75,055.68 filing fee.2 While these thresholds vary by type of transaction, in 2020, a transaction will generally require notification if it is above both of the following thresholds:

  • The target’s assets in Canada, or revenues from sales generated from those assets, exceed $96 million; and
  • The assets in Canada or revenues in, from or into Canada, of all of the parties to the transaction and their affiliates, on a combined basis, exceed $400 million.

2. Investment Canada Act

On February 15, 2020, the government also published increased 2020 Investment Canada Act thresholds for review of various categories of transactions in which non-Canadian investors may acquire control of Canadian businesses. If the threshold regarding any particular transaction is exceeded, the relevant Minister (either the Minister of ISED or the Minister of Canadian Heritage, depending on whether the target business is involved in a “cultural business”) must review and approve the transaction based on whether the investment results in a “net benefit to Canada.”

Private sector trade agreement investments in non-cultural businesses

For direct acquisitions of Canadian businesses by private sector investors from certain countries with a free trade agreement with Canada (currently, EU member countries, the United States, Mexico, Australia, Japan, New Zealand, Singapore, South Korea, Chile, Peru, Colombia, Panama and Honduras), the threshold has increased from $1.568 billion to $1.613 billion, measured by the enterprise value of the target Canadian business.3 Indirect acquisitions by these investors are not subject to review.4

Private sector World Trade Organization (WTO) investments in non-cultural businesses

For direct acquisitions by other private sector WTO investors, the government increased the threshold from $1.045 billion to $1.075 billion in enterprise value. As with trade agreement investors, indirect acquisitions by these investors in non-cultural businesses are not subject to review.

State Owned Enterprise (SOE) WTO investments

The government raised the review threshold for direct acquisitions of a non-cultural Canadian business by an SOE of a WTO member country from $416 million to $428 million in the book value of the target’s assets.

Non-WTO investments and investments in cultural businesses

For direct acquisitions of cultural businesses (such as those involving the production, publication, distribution, sale or exhibition of books, magazines, film and music recordings), and direct acquisitions of non-cultural businesses by investors from the few countries that are not WTO members, the threshold remains unchanged at $5 million in book value of the target’s assets. Indirect acquisitions of cultural businesses and indirect acquisitions of non-cultural businesses by non-WTO investors are subject to a $50 million threshold, based on the book value of the target’s assets.5 

For more information, please contact a member of Dentons’ Competition and Foreign Investment Review group.

For the latest information and developments in regulatory law across Canada, see our Canada Regulatory Review blog.

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Competition, foreign investment
Adam Goodman

About Adam Goodman

Adam’s practice focuses on class action defence, cartel defence, and merger clearance under the Competition Act and the Investment Canada Act. He has represented clients at all levels of Ontario and Federal courts. Adam’s experience includes representing clients participating in Canada’s Immunity and Leniency programs, leading internal investigations, and representing clients in contentious public inquiries.

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Sandy Walker

About Sandy Walker

Sandy Walker is co-Chair of Dentons' Competition and Foreign Investment Review group and is recognized as one of the country’s leading competition and Investment Canada Act lawyers. Sandy's practice focuses on securing government approvals for mergers and acquisitions from the Competition Bureau, Investment Canada and other regulatory agencies, including navigating complex “net benefit to Canada” reviews and the national security review process on behalf of foreign investors, both state-owned and private sector.

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Barry Zalmanowitz

About Barry Zalmanowitz

Barry Zalmanowitz is a member of Dentons Canada LLP's Edmonton office and co-chair of the Firm’s national Competition Law group. He advises and represents clients in all aspects of the Competition Act, including mergers and notifiable transactions, conspiracy and other criminal provisions, private damage actions, reviewable practices and misleading advertising. He also represents clients in compliance with the Investment Canada Act and establishes competition and antitrust compliance programs and policies.

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Simon Kupi

About Simon Kupi

Simon practices in Dentons’ Energy Regulation group in Calgary and in the firm’s national Competition and Foreign Investment group. In his energy and utilities practice, Simon focuses on economic regulatory, public, Indigenous and environmental law.

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