Competition Tribunal approves Rogers-Shaw merger, making Trudeau government last hurdle

In a decision released late December 29, the three-member tribunal rejected arguments that the merger of the two telecom giants would significantly reduce wireless competition.

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The Competition Tribunal has rejected the Competition Commissioner’s attempt to block the $26 billion merger of telecom rivals Rogers Communications Inc. and Shaw Communications Inc., agreeing that Rogers’ plan to sell Freedom Mobile’s assets from Shaw to Quebecor Inc. would guarantee that there would be four strong players in the major markets.

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Now the only thing standing in the way of one of the largest corporate consolidations in Canadian history is the endorsement of Innovation, Science and Economic Development Canada, led by Francois-Philippe Champagne.

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In a decision released late Dec. 29, the three-member tribunal rejected arguments that the merger of the two telecom giants would significantly lessen wireless competition, particularly after the merged companies entered into a side deal to sell Freedom to Videotron Ltd. of Quebecor, a major player. in Quebec, but a company with little presence elsewhere.

During four weeks of hearings, Competition Bureau lawyers argued that selling Liberty to Quebecor would not be enough to seriously challenge Rogers and the country’s other two major telecommunications companies, BCE Inc. and Telus. Corp., insisting Freedom would be weaker outside of Shaw.

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But the court rejected those arguments, saying the three-party arrangement stipulates that Shaw would first transfer Freedom to Videotron, and that Rogers would only then acquire the rest of Shaw through a merger agreement.

“The court has determined that the proposed transactions and the ancillary agreements comprising the arrangement … are not likely to prevent or lessen competition substantially,” the decision states.

« In other words, the merger and divestiture is unlikely to result in materially higher prices, relative to those that would likely prevail absent the arrangement. »

The tribunal also concluded that the merger and divestiture would not likely result in materially lower levels of non-price competition – namely service, quality, variety and innovation – than would likely exist in the lack of arrangement.

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Rogers announced its intention to take over Shaw more than a year ago. The agreement was accepted fairly easily by the Canadian Radio-television and Telecommunications Commission, but with more onerous conditions than initially expected. But Rogers and Shaw ran into an unexpected problem when the Competition Bureau requested a « full package » of the acquisition.

Freedom emerged as a sticking point, as the brand’s success was seen in Ottawa as proof that a fourth player could keep BCE’s Bell, Rogers and Telus on their toes. Rogers turned to Quebecor, which analysts saw as an obvious buyer of Freedom because the assets would allow chief executive Pierre-Karl Péladeau to expand wireless services outside his home province.

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Quebecor had been excluded from earlier talks due to contentious past relationships with Rogers. The $2.85 billion price for Freedom was below analysts’ estimates of its value and about $900 million less than Anthony Lacavera said his company, Globalive, was willing to pay.

Some said it would take an outsider like Lacavera to disrupt the clubby Canadian telecommunications industry. However, the court sided with those who said that only an established company with plenty of resources could realistically challenge companies as large and entrenched as BCE, Rogers and Telus.

« Videotron is an experienced market disruptor that has had substantial success in Quebec, » the court said. « He drew on this experience to develop very detailed and fully costed plans for his entry and expansion into the relevant markets of Alberta and British Columbia, as well as Ontario. »

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Once Videotron buys Freedom, the court found that a bundle with recently acquired VMedia will likely be the same price as the bundles of Shaw Mobile and Freedom would have cost absent the merger.

The court determined that the same is likely true for Freedom’s « wireless-only » offers and Videotron’s « Fizz » digital brand, as compared to the corresponding offers from Shaw Mobile and Freedom.

Additionally, the court said Videotron, which is in the process of rolling out 5G services in Quebec, will likely do the same in Alberta and British Columbia within a timeframe that will ensure competition is not substantially prevented or lessened.

“It should be noted that there will continue to be four strong competitors in the wireless markets in Alberta and British Columbia, namely Bell, Telus, Rogers and Videotron, just as there are today” , indicates the decision.

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“Videotron’s entry into these markets will likely ensure that competition and innovation remain robust.

The dismissal and the original reasons were contained in what was called a briefing note, posted on the Competition Tribunal’s website. The tribunal « endeavours to release a public version of its full decision in both official languages ​​within approximately 48 hours, » the filing said.

The tribunal included Federal Court Chief Justice Paul Crampton and two lay members, Wiktor Askanas and Ramaz Samrout.

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