Given the Canadian government’s increasing scrutiny over M&A activity in the food, transportation and critical infrastructure sectors, Canadian businesses operating in these sectors should plan accordingly and remain prepared for the possibility of scrutiny and longer regulatory review timelines.

The Canadian government announced a public interest review under the Canada Transportation Act of the proposed acquisition of Viterra Ltd. by Bunge Ltd this past September. While the review is still ongoing, a public consultation was conducted and a public interest assessment will be completed by Transport Canada on or by June 2, 2024.

The Minister of Transport stated that he ordered the review primarily due to 1) the companies’ interests in various port terminals across Canada and 2) his desire to encourage competition in the transportation and agricultural sectors to ensure fair prices for Canadian farmers and consumers. The federal government's decision reflects a growing trend of heightened political interest in the food industry in Canada and comes on the heels of amendments to the Competition Act and proposed amendments to the Canada Transportation Act, aspects of which provide for the review of mergers in Canada.

Moving forward, businesses operating in the food and transportation industries should anticipate the federal government keeping a close eye on M&A activity, which could potentially result in political scrutiny and extended transaction timelines.

Public Interest Review Process under the Canada Transportation Act

Transactions that are notifiable under the Competition Act must be notified to the Minister of Transport under the Canada Transportation Act where the transaction involves a federal “transportation undertaking”. Although there is no set definition of a “transportation undertaking”, it is widely understood to include companies that operate interprovincial or international transportation activities such as airlines, railways, trucking companies, pipelines and electricity transmission lines and may also include businesses that charge third parties for the carriage of people or goods of any kind across provincial borders, even if this is not the principal purpose of the business.

Notably, proposed amendments to the Canada Transportation Act will require parties to notify the Minister of Transport and the Commissioner of Competition of a proposed transaction that relates specifically to a “transportation undertaking in a port”, even where the transaction is not otherwise notifiable under the Competition Act, as long as the target assets or gross revenue from sales in or from Canada exceed C$10 million.

Canadian businesses should note that merger review timelines under the Canada Transportation Act can be significantly longer than those under the Competition Act. More specifically:

• Phase One. Notifiable transactions under the Canada Transportation Act trigger an initial 42-day waiting period during which the Minister of Transport must decide whether the transaction raises public interest issues regarding national transportation.
• Phase Two. If the Minister believes a transaction raises public interest issues, he may direct the Canadian Transportation Agency to examine these issues. The Agency has 150 days (or longer) to complete its public interest assessment and provide this report to the Minister, although extensions are frequent. Any transaction subject to a phase two public interest review can only proceed if approval is granted by the federal Cabinet.

Interplay between Competition and Transportation

During a Phase Two public interest review, the Commissioner of Competition is also required to examine the transaction and provide a public report to the Minister outlining any concerns regarding competition that may occur as a result of the transaction. The Commissioner’s conclusions are considered by the Minister but are not binding.

Canadian businesses should note that as part of its public interest review the government will consult a wide array of stakeholders (for example, Canada’s ports and marine industry, as well as other government departments). Public interest is determined with consideration to a number of factors (set out in Guidelines published by Transport Canada), including economic, social, environmental, safety and security considerations. As the Commissioner of Competition does not have the authority to challenge a transaction subject to a Phase Two public interest review, for transactions that may raise material competition issues the merging parties may prefer a public interest review given the broader range of factors taken into account in the approval process.

Key Takeaways for Canadian Businesses

While the public interest review process under the Canada Transportation Act has been in place for over 15 years, there have only been three previous public interest reviews – all of which related to airlines, and all of which were ultimately cleared by the federal government subject to certain conditions.

The Minister of Transport’s decision to conduct a public interest review of the Bunge/Viterra transaction is consistent with this government’s recent enhanced scrutiny over the food and transportation industry and reflects increasing political oversight over merger control and regulatory processes in Canada. This trend needs to be properly weighed as part of an effective transaction regulatory review planning process.

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