Revised Foreign Investment Policy in Book Publishing and Distribution

I : Amendment to the Investment Canada Act

An amendment to the Investment Canada Act will be introduced into Parliament empowering the Minister responsible for the Act to determine whether a business in the cultural sector which meets prima facie, the definition of Canadian control under-the Act is indeed Canadian-controlled.

II : Policy Guidelines

i) Foreign investment in new business enterprises will be limited to Canadian-controlled joint ventures.

ii) Acquisition of an existing Canadian-controlled business by a non-Canadian will not be permitted. Under extraordinary circumstances, the Government may consider an exception to this guideline. In such a situation, the Government must have credible evidence from the vendor that:

1. the business is in clear financial distress; and
2. Canadians have had full and fair opportunity to purchase.

If a non-Canadian is the successful bidder, its proposed investment will be subject to the net benefit test set out in (iv) below.

iii) If a non-Canadian wishes to sell an existing Canadian business independent of any other transaction, the vendor will be expected to ensure that potential Canadian investors have full and fair opportunity to purchase; if a non-Canadian is the successful bidder, its proposed investment will be subject to review under the net benefit test as set out in (iv) below, and credible evidence from the vendor that Canadians had full and fair opportunity to purchase will be required.

iv) Indirect acquisitions will be reviewed to determine whether they are likely to be of net benefit to Canada and to the Canadian controlled sector and will be assessed on their merits by reference to the factors set out in Section 20 of the Act. More specifically, Investment Canada will typically seek from the foreign investor one or more commitments such as:

• a commitment to the development of Canadian authors, such as undertaking joint ventures with Canadian-controlled publishers which would introduce the partner's Canadian authors to new markets both domestically and abroad;
• a commitment to support the infrastructure of the book distribution system, e.g.:
  1. through distributing imported titles via a Canadian controlled publisher/agent;
  2. through maintaining a fully integrated warehousing and order fulfillment operation in Canada for both frontlist and backlist titles;
  3. through active participation in industry co-operative ordering/distribution/marketing endeavours;
• accessibility of the company's Canadian marketing and distribution infrastructure (or international network) to interested and compatible Canadian-controlled publishers on a contractual basis;
• a commitment to education and research through financial and professional assistance to institutions offering programs in publishing studies.

These guidelines will be strictly enforced and any undertakings negotiated under the net benefit test will be closely monitored. The Act provides remedies for non-compliance and the Government will apply them when necessary.