TORONTO — The Commissioner of Competition for the nation of Canada has lost its bid to try to stop the blockbuster $19.2 billion USD merger between Shaw Communications and Rogers Communications, and its divestiture arrangement with Videotron Ltd. of Shaw’s Freedom Mobile unit.
With the decision, released late Thursday (12/29), the Canadian Minister of Innovation, Science and Industry now holds the final judgment call on whether or not to approve a transaction the companies hoped would close by the end of 2022.
As such, it all comes down to Francois-Philippe Champagne.
For Matthew Boswell, the Commissioner of Competition fighting against the blockbuster mega-merger, the Competition Tribunal’s decision leaves him with few options.
“I am very disappointed that the Tribunal is dismissing our application to block the merger between Rogers and Shaw,” Boswell said in a brief statement late Thursday shared by Rogers’ CityNews. “We are carefully considering our next steps.”
Boswell argued that combining Shaw and Rogers would diminish competition in Canada’s telecommunications marketplace, resulting in higher wireless services bills for customers and a decline in service. Rogers has already been hammered for its massive July 8, 2022 service outage.
For the Tribunal, the core issue in this proceeding was whether a proposed acquisition of Shaw by Rogers, modified to include the Freedom Mobile spin to Québec-based Videotron Ltd., “is likely to prevent or lessen competition substantially in the provision of wireless telecommunications services” in two key provinces — Alberta and British Columbia.
With the spin of Freedom Mobile, Rogers would require the remainder of Shaw through an amalgamation arrangement.
For Boswell and his team, that wasn’t enough. The Competition Tribunal disagrees, and determined that the proposed transactions and ancillary agreements comprising the merger and divestiture “are not likely to prevent or lessen competition substantially.”
In other words, “materially higher prices” won’t likely result from the transaction, the Tribunal ruled.
At the same time, wireless service, quality, variety, and innovation won’t be hampered by the combination of Shaw and Rogers, the Tribunal declared.
In doing so, it rejected “various allegations” made by Boswell, including the viewpoint that combining Rogers and Shaw “would likely facilitate the exercise of collective market power by Rogers, BCE Inc. (parent of iHeartMedia partner Bell) and Telus.
Commenting specifically on Videotron, the Tribunal described the company as “an experienced market disrupter that has achieved substantial success in Quebec.” Furthermore, the Tribunal says Videotron “has drawn upon that experience to develop very detailed and fully costed plans for its entry into and expansion within the relevant markets in Alberta and British Columbia, as well as in Ontario.” Those plans, the Tribunal explained, were buttressed when Videotron acquired VMedia Inc. earlier this year, with a view to accelerating its rollout of new bundled offerings.
“The Tribunal has concluded that the evidence establishes that the bundled offerings of Freedom and VMedia will likely be priced at a level that is at least as competitive as the level at which the bundled offerings of Shaw Mobile and Freedom likely would have been priced in the absence of the merger,” the Tribunal said, adding that the same is also likely to be true for the “wireless only” offerings of Freedom and Videotron’s digital “Fizz” brand, relative to the corresponding offerings of Shaw Mobile and Freedom.
“In addition, the Tribunal has found that Videotron, which is in the process of rolling out 5G services in Quebec, is likely to do the same in Alberta and British Columbia within a time-frame that will ensure that competition is not substantially prevented or lessened,” the Tribunal said.
Thus, the Tribunal determined “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 is today.”
And, it concluded, 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.”
Rogers’ post-merger market share in Alberta (approximately 26%) will be “well below” the 35% “safe harbour” threshold set forth in the Competition Bureau’s Merger Enforcement Guidelines in relation to unilateral market power. Rogers’ share in British Columbia (approximately 40%) “will only be moderately above that threshold.”
The Tribunal expects that those market shares, as well as the market shares of Telus and Bell, will erode as Videotron grows.
Closing is now on track for January 31, 2023.
— With reporting from RBR+TVBR in North York, Ont.
