The Rogers-Shaw deal is the biggest merger to be challenged earlier than the Competitors Tribunal. THE CANADIAN PRESS/Adrian Wyld
Practically two years after it was introduced, the $26-billion takeover of Shaw Communications by Rogers Communications stays within the information — and in a state of limbo.
Rogers and Shaw have pushed the cut-off date of the deal to March 31 as they anticipate Canada’s Minister of Innovation François-Philippe Champagne to approve the switch of wi-fi spectrum licences from Shaw to Quebecor’s Videotron subsidiary.
Champagne is in a fragile place. Ever for the reason that Competitors Tribunal rejected the Commissioner of Competitors’s utility to dam the deal on Jan. 24, 2023, opponents of the deal have urged Champagne to override the tribunal determination.
No matter what Champagne decides, the tribunal determination — endorsed by the Federal Court docket of Enchantment — has created a brand new rule that raises vital questions on merger evaluate going ahead.
With a session on the way forward for competitors coverage in Canada underway, it’s critical to grab the chance to right a problematic new precedent.
Implications for merger legislation
Most specialists thought the Rogers-Shaw case would concentrate on the controversial efficiencies defence, which has been a main goal for reform.
Distinctive to Canada, the efficiencies defence permits a merger to proceed if financial efficiencies, equivalent to slicing employees and mixing enterprise models, are adequate to compensate for the upper costs and fewer shopper alternative attributable to the merger.
Ultimately, there was no want to think about whether or not the efficiencies would compensate for any anti-competitive results, for the reason that tribunal dismissed the appliance. The tribunal was unconvinced the merger would negatively have an effect on competitors for wi-fi providers in British Columbia and Alberta.
Innovation, Science and Business Minister François-Philippe Champagne rises throughout Query Interval within the Home of Commons on Parliament Hill in Ottawa in February 2023.
THE CANADIAN PRESS/ Patrick Doyle
On the floor, this seems like an open and shut case, however one thing unprecedented occurred — the unique deal challenged by the commissioner in Could 2022 — a one-step full takeover of Shaw by Rogers — was changed by a two-step course of, introduced in June and finalized in August, wherein Rogers would promote Freedom Cellular to Videotron earlier than buying Shaw.
Primarily based on its interpretation of the legislation and making use of “widespread sense,” the tribunal determined the merger evaluate should have a look at the deal the events really intend to do, despite the fact that the brand new deal is the results of a change made after the commissioner began litigation.
The commissioner requested the Federal Court docket of Enchantment to overturn this a part of the choice. The Court docket refused, saying it might not have modified the end result of the case as a result of the tribunal had rejected all the commissioner’s proof.
Merger evaluate course of
In Canada, mergers will not be topic to formal approval. The aim of the Competitors Bureau’s evaluate of mergers is to determine and resolve issues.
Our merger regime has two components: notification and enforcement. Most merger evaluate occurs on the notification stage when the bureau critiques transactions by events to see if a deal raises competitors considerations.
More often than not, the bureau has none and takes no motion. However when instances do increase considerations, the bureau might ask for extra info to higher perceive the impacts of the merger. Often merging events have options for easy methods to treatment considerations forward of time, and the commissioner and the events can attain a decision without having litigation.
Very not often, the hole between the commissioner and the events can’t be bridged and the commissioner will problem the merger. The commissioner can problem any merger, together with these accomplished throughout the final yr or these, just like the Tervita case, that don’t should be notified.
The commissioner begins a problem by making use of to the Competitors Tribunal for an order to repair the anti-competitive issues attributable to the merger. The commissioner should show the deal will doubtless trigger a “substantial lessening or prevention of competitors.”
As soon as he does that, he should present how his proposed treatment will deliver the extent of anti-competitive hurt under the substantial stage.
Events that suggest alternate options to the commissioner’s treatment should persuade the tribunal their treatment is ample and achievable. Generally the commissioner and the events are capable of agree on a treatment to settle a contested case. This could then be filed as a consent settlement, which is binding on either side.
Upending the merger evaluate course of
The Rogers-Shaw determination upends the merger evaluate course of in two methods. First, permitting post-litigation adjustments removes the inducement for events to work with the commissioner to resolve competitors points within the early phases of merger evaluate.
For events in search of a treatment the commissioner objects to, a late deal change is a means they’ll suggest a treatment. Baking a treatment instantly right into a deal means the treatment isn’t checked out individually from the general query of whether or not the deal is anti-competitive. This implies events don’t have to indicate their treatment is more likely to work — it’s assumed to.
Tony Staffieri, president and chief government officer of Rogers Communications Inc., proper, and Paul McAleese, president of Shaw Communications Inc., arrive on the Standing Committee on Business and Expertise investigating the proposed acquisition of Shaw by Rogers in Ottawa in January 2023.
THE CANADIAN PRESS/Spencer Colby
Second, merger challenges take months of preparation. To do that correctly, the Competitors Bureau has to know what deal it’s taking a look at so it may well construct a robust case.
When a deal is considerably modified after the commissioner information a proper utility, he has to regulate his proof and technique on the fly. In Rogers-Shaw, the tribunal and the Federal Court docket of Enchantment mentioned there was no unfairness to the commissioner, however this ignores the potential for strategic abuse of the rule in future instances.
Proposals for reform
Whereas it may well generally take years to alter judge-made guidelines, the second section of competitors legislation reform, anticipated within the coming yr, provides us an opportunity to nip the problems raised by Rogers-Shaw within the bud.
Listed here are two concepts for easy methods to strike a steadiness between the necessity for flexibility when offers change after litigation begins, and making certain merger evaluate serves the general public curiosity.
First, when post-challenge deal modifications incorporate treatments, events ought to should persuade the tribunal these treatments are adequate to handle any anti-competitive considerations, except the commissioner agrees they’re ample.
This ensures personal events can not select their very own treatment with out convincing the commissioner or tribunal it’s within the public curiosity. This could discourage self-serving low-ball treatment presents.
Second, there should be circumstances that decide when a deal change is just too late or too vital to be folded into an ongoing merger problem, with out placing an unfair or unreasonable burden on the commissioner or harming public curiosity.
One answer is to create a default rule saying main post-challenge adjustments to the unique deal require a brand new notification, triggering a contemporary evaluate, except events can show it’s not wanted. This could permit the commissioner to review a brand new deal correctly, finally resulting in a quicker decision with out litigation.
Jennifer Quaid holds analysis grants from the Social Sciences and Humanities Analysis Council of Canada. She is a Senior Fellow on the Centre for Worldwide Governance Innovation (CIGI) and the chair of the Authorized Committee of Transparency Worldwide Canada.
