Rogers – Shaw: how wireless consumers lost (but not for the reason you’re thinking).

Competition Bureau Commissioner Matthew Boswell [Dave Chan/Globe & Mail]

January 10, 2023

The least surprising thing about the Rogers-Shaw merger was that the Competition Tribunal rejected Competition Commissioner Matthew Boswell’s attempt to block it.

Rogers’ acquisition of Shaw’s wireline cable TV (already approved by the CRTC) and Internet broadband operations in provinces where Rogers had no presence meant the Commissioner could never seriously contest the lion’s share of the $26 billion merger.

What was left to fight over was wireless. Boswell got a helping hand in March 2022 from Innovation Minister François-Philippe Champagne who made it clear he would veto the transfer of radio spectrum unless Brad Shaw found a different buyer for most of his wireless assets held in Shaw Mobile and Freedom Wireless.

Québecor’s P.K. Pélédeau emerged in August as the divestiture winner, agreeing with Shaw to take the larger Freedom operations off his hands at a discount

Not in the least appeased, Boswell said the divestiture to Québecor changed nothing for him because its Vidéotron operation would be too weak a replacement for the market disrupting Freedom.

In due course Commissioner Boswell realized that he couldn’t make his case of “substantially prevented and lessened competition” stick in Ontario, home to the vast majority of Freedom’s 2.2 million customers, and abandoned that line of attack against the merger.

That left him seeking to block the entire merger by zeroing in on Rogers’ acquisition of Shaw’s wireless businesses in Alberta and British Columbia: Shaw Mobile (a discount plan bundled with Shaw’s wireline customers) and Freedom Wireless (which Vidéotron was buying).

On December 31st the Commissioner lost even that claim in a lop-sided Tribunal decision that one industry analyst cruelly but accurately described as a “smackdown.”

In a 413-paragraph ruling written by federal court judge Paul Crampton presiding as panel chair, the Tribunal rejected all of Boswell’s pricing projections in both a no-merger and a post-merger market.  In doing so, it preferred Rogers’ expert witnesses over the Commissioner’s experts with a candour that was stinging at times.

The Tribunal also categorically affirmed Vidéotron as an equally (or even more than equally) strong wireless provider as the existing Freedom, whether bundling service with Québecor’s VMedia wireline or as stand-alone wireless. In fact the Tribunal observed with satisfaction that divestiture of Freedom to Vidéotron would give birth to Canada’s elusive fourth national wireless carrier, the holy grail of government policy in wireless competition over the last decade.

Not taking its foot off the pedal, the Tribunal also said that the cumulative effect of the Shaw-Rogers merger, the expansion of Vidéotron’s national footprint, and the competitive response of Telus and Bell in capital-intensive competition in fifth generation wireless networks is a pro-competitive outcome for consumers.

With so many findings of facts going against the Commissioner’s case, the Tribunal left little room for a successful appeal of its ruling. Of course the Commissioner remains undaunted and the Federal Court of Appeal will hear his case on January 24th.

If as some reports indicate Boswell will be telling the Court that the Tribunal erred in law by failing to review the merger in its original form without divestitures, he is going to struggle.

As a more practical alternative, he is prepared to argue that the mitigating effect of the Freedom/Vidéotron divestiture should only have been considered by the Tribunal once a finding was made about the competitive effects of the merger as initially proposed in March 2021.

Making that case requires the Commissioner to convince the Court of the pivotal importance of a hair-splitting legal argument over who bears the evidentiary burden of proof on whether Vidéotron is a suitable heir to Freedom’s mantle as market disruptor, him or Rogers. 

Anticipating this appeal argument, the Tribunal ruled that even if Rogers carried the burden of proof on the divestiture issue, it met it.

As a labour arbitrator once told me when I tried to tip a difficult case my way based on which litigation party bore the evidentiary onus, “in forty years I’ve never decided a case on that basis.” I expect the Federal Court of Appeal will feel the same, but we’ll see.

When it’s over, the post-mortem will begin. Or continue, because it’s already begun with critics describing this iconic merger as the bellwether case for badly needed reforms to Canadian competition law.

It may or may not be that, but in the meantime as everyone agrees there are millions of Canadian wireline and wireless subscribers who would appreciate lower monthly bills.

If the Commissioner loses his appeal, he will have to consider whether he squandered his considerable litigation leverage over Rogers and Shaw who have hardly disguised their desperation to obtain approval of their merger before a January 31st financing deadline. 

At least the question will be asked of the Commissioner whether he could have obtained greater concessions from all parties concerned, including the federal Minister, on long-term pricing or even improved access for re-sellers of wireless and broadband services to national fiber and 5G networks.

That might be an even better outcome for consumers than a Tribunal decision based on expert projections.

***

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Howard Law

I am retired staff of Unifor, the union representing 300,000 Canadians in twenty different sectors of the economy, including 10,000 journalists and media workers. As the former Director of the Media Sector and as an unapologetic cultural nationalist, I have an abiding passion for public policy in Canadian media.

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