Gun-jumping

Buyer and seller may be competitors until the day of closing. Before then, ask a competition lawyer what the parties may share or coordinate. For what may be shared in diligence, see whether competitors can share information during merger due diligence.

What the sources say

Section 123(1) of the Competition Act says a proposed transaction referred to in section 114 shall not be completed before the end of the waiting periods it sets out, subject to s. 123(2). The Competition Bureau says that during the initial waiting period the parties are prohibited from completing the merger unless they receive a waiver. Section 45(1) makes it an offence to conspire, agree or arrange with a competitor, with respect to a product, to fix or control its price, allocate sales, territories, customers or markets, or fix or control its production or supply, subject to the ancillary restraints defence in s. 45(4) and the other defences and exceptions in s. 45(5) to (7).

The Bureau’s Competitor Collaboration Guidelines list, as an example of an ancillary restraint it will generally not assess under section 45, an agreement to abstain from making material changes to a business pending the consummation of a merger, though such restraints may still be reviewed under Part VIII of the Act. The restraint must be directly related to, and reasonably necessary for giving effect to, a broader and lawful agreement.

What to ask

• Whether the deal is notifiable, and when the waiting period ends
• Who may see pricing, customer and supplier information before closing
• Whether any interim-conduct term in the agreement goes beyond what a merger needs