Canada’s Competition Bureau appealing tribunal decision that cleared way for Rogers-Shaw merger
The federal Competition Bureau is appealing the Competition Tribunal’s dismissal of its case against Rogers Communications Inc.’s $26-billion takeover of Shaw Communications Inc., the companies said as they expressed their disappointment in the move.
The telecommunications companies said Friday that they were informed of the bureau’s intent to appeal the tribunal’s decision, released late Thursday. They said they were also told that the bureau will apply for an injunction to block the deal from closing until an appeal is heard.
“We are deeply disappointed that the Commissioner continues to attempt to deny Canada and Canadians the advantages that will come from these proposed transactions,” the companies said in a joint statement.
The Competition Bureau did not immediately respond to a request for comment. Commissioner of Competition Matthew Boswell said in a statement late Thursday that he was very disappointed by the tribunal’s dismissal and was carefully considering its next step.
The Competition Tribunal issued only a summary of the decision, with plans to release the full text by late Saturday.
It concluded that the merger was not likely to result in higher prices for wireless customers in Western Canada and that the tribunal was satisfied the plan to sell Shaw’s Freedom Mobile to Quebecor Inc.’s Videotron was adequate to ensure competition isn’t substantially reduced.
Quebecor agreed to buy Freedom Mobile in a $2.85-billion deal earlier this year.
The tribunal’s decision cleared a path for the deal to go ahead, requiring only approval from federal Innovation, Science and Industry Minster Francois-Philippe Champagne.
Champagne’s spokesperson, Laurie Bouchard, said the department will review the decision in detail and will have more to say in due course. Conservative Leader Pierre Poilievre told a news conference that he has serious concerns about more consolidation in the telecom sector.
Injuction would push back closing date
Earlier on Friday, Rogers and Shaw thanked the tribunal for its swift decision, as they had set a closing date for the deal of Dec. 31 and face additional payments to bondholders if it went beyond that. On Friday, they said they had extended the close to Jan. 31, 2023.
An injunction, if granted, would push the closing date back further still.
What the grounds for appeal could be is difficult to say without the full text of the decision, said Jennifer Quaid, an associate professor and vice-dean of research at the University of Ottawa’s law faculty.
Any potential precedents will also have to wait to be seen in the full decision, but for now it looks like a fairly standard decision, Quaid said.
“It’s basically, unfortunately, par for the course merger law here … it’s fair to say that most of us who know merger law were perhaps disappointed but not surprised.”
The tribunal has never fully blocked a merger, as the Competition Bureau was seeking, while only in a couple of cases has it forced companies to sell some assets to approve a deal, she said.
More detailed decision to come
Concerns that Bell and Telus — the closest competitors to Rogers in Canada’s telecom market — would be unable to compete with the merged company were also dismissed.
“The tribunal has also determined that the strengthening of Rogers’ position in Alberta and British Columbia, combined with the very significant competitive initiatives that Telus and Bell have been pursuing since the merger was announced, will also likely contribute to an increased intensity of competition in those markets,” the decision read.
It says a more detailed decision will be released in the next two days.
The Competition Tribunal held four weeks of hearings earlier this year to discuss concerns about the proposed deal.
Throughout the hearing, the Competition Bureau argued that the merger would lessen competition in the telecom market, trigger higher prices and lead to poor service.
Rogers and Shaw argued that the deal would enhance competition and be better for consumers.
Calls for consumer laws to change
Ben Klass, a PhD candidate at Carleton University’s School of Journalism and Communication in Ottawa who specializes in research on telecom companies, said he’s not surprised by the tribunal’s ruling.
“While it’s been expected for a long time, I had nevertheless maintained hope that the tribunal would make the right decision and agree to block the merger,” he said.
Earlier this year, the Canadian Radio-television and Telecommunications Commission approved Rogers’ acquisition of Shaw for broadcast services. The Competition Tribunal was tasked with looking at how the merger would impact markets for mobile wireless services in B.C. and Alberta, Klass said.
In Canada, the criteria of assessment is “very narrow and legalistic,” based on whether a merger results in substantial lessening or prevention of competition, he said.
“Even in a case where the merger would result in a lessening of competition, if the tribunal doesn’t determine that that lessening is substantial … if it doesn’t result in a price increase of a certain quantum, they can still let the merger go ahead,” Klass said.
Ottawa reviewing Competition Act
Matt Hatfield, campaigns director of Open Media, a grassroots group advocating for free internet, said he’s also not surprised but is disappointed.
“Our competition laws favour these kinds of buyouts so strongly,” he said. “There was not a very good chance that they were going to be able to block it.”
In March, the federal government announced that it’s reviewing the Competition Act, with an eye to addressing such issues as wage-fixing and deceptive pricing.
Hatfiled said Ottawa should remove the “efficiencies defence” from the Competition Act, which allows big mergers to take place if companies can prove they’re efficient for them — even if they dampen competition.
“All of the gains that we saw in competition from Shaw over time, they’re now at risk with Shaw going away,” Hatfiled said. “We’d prefer to see something that can’t be ended by simple buyouts like this by the big three.”
Earlier this year, Champagne, the industry minister, said he would not allow Rogers to acquire all of Shaw’s wireless licences, suggesting the final approval for the merger required concessions, including the sale of Freedom Mobile.