The Federal Court of Appeals has set Jan. 24 as the date when it will hear the Competition Bureau’s appeal of a ruling that would clear the path for Rogers’ $26 billion takeover of Shaw.
The Competition Tribunal – an independent adjudicative body that hears cases brought by the Competition Bureau – dismissed the Competition Bureau’s application to block the Rogers-Shaw merger in late December. The Bureau is appealing on the grounds that a rush to issue a ruling just 15 days after closing arguments were made led to legal errors. The federal court has also issued a stay in the merger’s proceedings until the appeal process concludes.
The appeal will be heard one week before the Jan. 31 deadline for the takeover to go through. Lawyers for Rogers and Shaw have said the deal, the deadline for which has been extended multiple times since it was first announced nearly two years ago, would be in jeopardy if it does not close by the end of the month, when Videotron’s financing to acquire Shaw’s Freedom Mobile expires.
The merger was brought before the Tribunal in November when mediation sessions failed to resolve issues risen by the Competition Bureau.
Competition Commissioner Matthew Boswell had sought to block the deal on grounds it would lessen competition in the wireless market, resulting in higher prices for consumers. The proposed remedy of selling Shaw’s Freedom Mobile to Videotron did not address these concerns, as the Bureau argued Videotron’s ownership would make it a less viable due to the nature of that deal. This is due to severing Freedom’s access to Shaw’s cable network, as well as provisions of the deal that would create a “dependency” on Rogers’ cable infrastructure in Western Canada, which the Bureau claimed would leave it vulnerable to anti-competitive behaviour.
Rogers and Shaw countered during tribunal hearings that Videotron is in a better position to run Freedom, which had yet to be profitable for Shaw. The companies also argued that the merger would create a more viable competitor to Telus in Western Canada, to whom Shaw says it has been losing ground.
In its full ruling, released this week, the Tribunal said the sale of Freedom would create a “more aggressive” wireless competitor and that the Bureau did not prove that the merger would result in higher prices or poorer service for customers. It cited Videotron’s track record of competing through lower prices, which have allowed it to earn sizeable market share in its home market of Quebec. Bringing Freedom into that mix would result in higher revenue, more subscribers and a larger portfolio of wireless licences that would make it more able to compete.
The Competition Bureau claims it has ground for appeal because the Tribunal made a legal error in focusing on the Freedom sale in its ruling, which was announced after the Bureau made its initial effort to block the deal. The Tribunal, the Bureau claims, should have focused on issues within the Rogers-Shaw deal first, before considering whether or not the sale of Freedom to Videotron resolved those problems. In its ruling, the Tribunal said that approach was “divorced from reality,” which led it to consider the merger and the Freedom sale together.
In a statement, Rogers said it was “deeply disappointed” about the Bureau’s decision to appeal and further attempt to block a deal that would “bring more choice, more affordability and more connectivity to Canadians.” A statement from Shaw urged Boswell to reconsider his decision to appeal.
The Competition Bureau’s review had largely been concerned with the impacts of the deal on Canada’s wireless market. In March, the CRTC – which had been examining the potential impact on the broadcasting sector, especially in regards to local news – approved the deal, though it came with a lengthy list of conditions.
The deal also still needs approval by Industry Minister François-Philippe Champagne, who had previously said he will not make a decision until the Competition Bureau’s process is complete. Before hearings began, Champagne said his two main conditions for approving the merger would be that Videotron keep Freedom’s existing wireless licences for at least 10 years, and that wireless prices in Ontario and Western Canada were lowered by 20%, roughly in line with Videotron’s current prices in Quebec.
