2022 thresholds for Canadian merger reviews

Thresholds for mergers and acquisitions under the Competition Act and Investment Canada Act have been announced for 2022. The two monetary thresholds under the Competition Act remain the same (including the size-of-transaction threshold, which is typically adjusted annually), but certain review thresholds under the Investment Canada Act have increased significantly.

Under the Competition Act, annual threshold adjustments are not mandatory, and the size-of-transaction threshold of $93 million will remain the same in 2022 (when it could have increased per a statutory GDP formula). This follows decisions not to change the threshold in 2020 (when it could have increased) and to decrease it in 2021 (when it could have remained the same). The government’s recent approach to the annual adjustment suggests a belief that the notification threshold should remain low. In his announcement, the Minister of Innovation, Science and Industry said he decided to leave the threshold unchanged to “[give] the Competition Bureau a greater field of view in its efforts to detect potentially harmful transactions, ensure that they are properly reviewed before taking hold in the marketplace, and help protect Canadian consumers and businesses”.

A belief that more and not fewer transactions should be reviewed is consistent with the Competition Bureau’s (Bureau) increase in the review of non-notifiable transactions in recent years. It is also consistent with a recent policy paper issued by the Bureau in which it makes several enforcement-friendly recommendations regarding Canada’s merger review regime, among other things. For our views on this Bureau paper, see our recent bulletin here.

By contrast, similar thresholds under the Investment Canada Act and United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 increased by nearly 10% above 2021 thresholds.

What you need to know

• The size-of-transaction threshold for merger notification under the Competition Act (typically adjusted annually) remains the same at $93 million for 2022.
• The 2022 thresholds for reviews of direct investments in Canadian businesses (that are not “cultural businesses”) by foreign investors under the Investment Canada Act have increased from:
  • $1.565 billion to $1.711 billion in enterprise value of the Canadian business for trade agreement investors, which includes investors from the U.S., EU and Japan, among others;
  • $1.043 billion to $1.141 billion in enterprise value of the Canadian business for other investors from countries that are members of the World Trade Organization (WTO); and
  • $415 million to $454 million in asset value of the Canadian business for state-owned or influenced enterprises.

The details

Competition Act thresholds

Pre-merger notification under Canada’s Competition Act is generally required for transactions where the target has assets in Canada or revenues in or from Canada generated from those assets of $93 million or more and where the parties to the transaction have assets in Canada or revenues from sales in, from or into Canada of $400 million or more. In some cases, additional share or partnership interest ownership levels must also be satisfied.

Investment Canada Act thresholds

The Investment Canada Act generally requires that a non-Canadian investor proposing to acquire direct control of a Canadian business receive approval that the investment is of “net benefit” to Canada if enterprise value of the Canadian business exceeds at least $1.141 billion or $1.711 billion in the case of “trade agreement investors.” A lower threshold of $454 million, based on the book value assets of the Canadian business, applies to acquisitions by state-owned or influenced enterprises. Lower thresholds of $5 million (for direct acquisitions) and $50 million (for indirect acquisitions) apply in connection with investments by an investor who is not a "WTO investor" or the acquisition of Canadian “cultural businesses,” which includes businesses involved in the production or distribution of books, music, film and other media such as video games. Any investment (either in part or in whole) in, or the establishment of, a Canadian business by a non-Canadian investor could be reviewed if there are reasonable grounds to believe that the investment could be injurious to national security, regardless of whether the relevant financial thresholds are met.