Amid growing global scrutiny of big technology companies, Canada’s competition watchdog is adding resources to investigate smaller mergers that might otherwise fly under its radar.
The bureau is expanding its Merger Intelligence and Notification Unit to allow for more work on “non-notifiable” mergers or acquisitions that may raise competition concerns.
By law, merging companies must notify the bureau of transactions when the target company’s assets or revenues from sales in Canada exceed $96-million, but the watchdog says it will be actively looking for and investigating deals that don’t meet that threshold. Experts say the bureau is following a trend among antitrust agencies in other counties that are trying to more closely watch large players in the digital economy that might acquire upstarts that threaten their businesses.
“Competition agencies globally are looking at the implications of small deals, particularly in the tech sector, where smaller companies that might otherwise have been competitively disruptive might be acquired by incumbent companies before they grow,” said Brian Facey, chair of the competition law practice at Blake, Cassels & Graydon LLP. “The notification thresholds capture big deals, not necessarily bad deals.”
Competition Commissioner Matthew Boswell referenced an increased focus on non-notifiable transactions in a speech in the spring and the bureau said in a press release last week that it has “expanded the role” of its merger unit to actively investigate such deals. The Globe and Mail was not able to reach the bureau on Sunday for a comment on what specific new resources it has dedicated to this role.
Earlier this month, the bureau published a “call out” asking for information and complaints from companies and individuals about dominant players in the digital space. It cited concern over increasing concentration in markets such as online search, social media, display advertising and online marketplaces − areas dominated by a handful of big players, including Facebook Inc., Apple Inc., Amazon.com Inc. and Alphabet Inc., the parent of Google.
Those two moves are “signs of a greater focus on the digital economy and bringing the bureau into line with a lot of agencies around the world,” said Antonio DiDomenico, co-leader of the competition law practice at Fasken Martineau DuMoulin LLP.
“Europe has been looking at these issues for quite some time. North America has been trailing a bit behind that, but now we’re starting to see North America follow suit …,” he said, pointing to recent events in the United States.
In early September, attorneys-general in a number of U.S. states launched antitrust probes against Google and Facebook, adding to an ongoing congressional investigation of the pair, along with Apple and Amazon. The U.S. Federal Trade Commission is also conducting wide-ranging antitrust investigations of big tech companies.
With last week’s announcement, the Competition Bureau is trying to encourage parties involved in transactions that could give rise to competition concerns to bring them forward, Mr. DiDomenico said. “The bureau is telling Canada and the business community that it will use whatever techniques it can to detect these transactions in any event.”
In an apparent flex of those muscles earlier this year, the bureau challenged a deal involving two companies that provide software to manage oil and gas reserves.
U.S. private equity player Thoma Bravo acquired Aucerna, a Calgary-based maker of oil and gas software, in a deal that closed in May. One month later, the bureau challenged the transaction, alleging it was a “merger to monopoly,” because Thoma Bravo also owned Quorum, another maker of energy-reserves software in Canada. By the end of August, Thoma Bravo had reached a settlement with the bureau, agreeing to divest the second reserves software platform.
Mr. DiDomenico said that assuming the transaction did not meet the notification threshold (the financial terms were not disclosed), “that’s a good example of the kind of transaction the bureau wants to be made aware of – before they close.”
Robert Jackson worked as an investigator with the Competition Bureau and its predecessors for nearly 30 years and is now retired. He also cited the increasing focus on the digital economy as a possible factor in the move to look more carefully at small deals, while cautioning that he has no current knowledge of internal workings.
“We’ve seen many examples in recent years where companies are prepared to pay huge premiums to acquire relatively small tech startups. The combined physical assets or sales revenue might fall well below the notifiable thresholds, yet the acquisition could still result in a considerable increase of market power.”
As an example of a competition-killing transaction, some have pointed to Google’s 2012 acquisition of Waterloo-based startup BufferBox, which developed a locker business for accepting package deliveries. The terms of the deal weren’t disclosed, but reports at the time put it in the range of $20-million. Two years later, Google shut down BufferBox.
With a report from Susan Krashinsky Robertson
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