One of Canada’s largest corporate mergers ever is facing delays and may be in jeopardy over antitrust concerns raised by the federal Competition Bureau. Toronto-based Rogers Communications Inc. entered into a deal to acquire Calgary-based Shaw Communications Inc. for $26 billion in March 2021. This deal has since been reviewed by a number of parties in anticipation of closing in June of this year. The federal Competition Bureau, however, recently announced that it opposes the transaction, citing concerns about monopolies and how it might affect consumer prices and services.
Canadian Radio-television Telecommunications Commission Approved Deal in March
The federal broadcasting commission was one of the key approvals required for the transaction to proceed, which was granted in March of this year. The CRTC was responsible for assessing the impact of the deal from a broadcasting standpoint and found that the transaction would be in the public interest with minimal impact on the competition. However, the CRTC did make its approval conditional upon Rogers Communications Inc.’s acceptance of several mandatory modifications, including:
- It must agree to contribute $27.2 million to various funds, an amount five times the original proposal. The beneficiaries of this amount include the Canada Media Fund, the Independent Local News Fund, the Broadcasting Accessibility Fund and the Broadcasting Participation Fund.
- It must establish an Indigenous news team with reporters in each province and territory, dedicated to reporting on issues pertinent to Canada’s First Nations, Métis, and Inuit communities.
- It must commit to broadcasting at least 45 independent French and English services on each of its cable services.
What Role Does the Competition Bureau Play in Merger & Acquisition Transactions?
While the CRTC approval was a significant hurdle, the deal still requires approval by Innovation, Science and Economic Development Canada and the federal Competition Bureau. The Competition Bureau reviews transactions such as this one to determine the potential impact on competition in the relevant industry and what it could mean for the public interest. Some of the issues the Bureau examines include:
- the level of economic concentration in the relevant industry
- the market shares of the merging parties
- the conditions of entry and barriers to entry into the market
- the likely anti-competitive effects of the proposed transaction
As part of their analysis, the Bureau may consult with experts such as competitors, industry associations, consumers, and others. Once the review is complete, the Bureau can opt to provide an Advance Ruling Certificate, stating that the proposed merger does not appear to pose a threat to competition in the industry, or a non-action letter, which indicates the Bureau has no plans to object to the deal. If it does have concerns, it may opt to propose remedies to resolve them, such as divestitures or the sale of certain portions of a business. Alternatively, it may apply to the Competition Tribunal to attempt to block the merger or certain aspects of it altogether. In the case of the Rogers-Shaw merger, the Competition Bureau has announced that it filed an application with the Tribunal to block the merger outright, as well as for an injunction preventing the deal from closing until the Tribunal can hear and rule on the Bureau’s objections. Both Rogers and Shaw have indicated that each party remains committed to closing the deal and will oppose the Bureau’s application.
Competition Bureau Raises Antitrust Concerns
While both Rogers and Shaw each offer three primary services, including wireless mobile, wired telecom services (such as phone, cable, and internet), and broadcasting services, the primary concern is with the wireless service. Currently, Rogers is the largest wireless provider in the country, with 11.3 million customers. Shaw is the fourth-largest wireless company, through various Shaw options as well as Freedom Mobile (formerly Wind Mobile), which it acquired in 2016. Shaw currently has a total of 2.1 million wireless users in Ontario, Alberta, and British Columbia. In each of those three provinces, Shaw and Rogers are one another’s primary competitors for wireless services.
While wireless services in Canada are more expensive than in most other developed countries, Shaw’s entry into the wireless market has put pressure on the ‘big three’ wireless companies (Rogers, Bell, and Telus). This pressure has helped to reduce wireless prices overall and make services more accessible across the country as the ‘big three’ competed to retain customers. The Bureau’s fear is that a merger between Rogers and Shaw will relieve that pressure on the ‘big three’ companies and therefore result in price increases across the board.
Rogers and Shaw have responded to the concerns by proposing a divesture of Shaw’s Freedom Mobile business before the merger takes place. While both companies plan to oppose the Bureau’s application to the Tribunal, they have said they remain committed to addressing the Bureau’s concerns in the pursuit of an approval. In a press release in the wake of the Bureau’s objection, the companies highlighted several benefits of the transaction, such as:
- A $2.5 billion investment in expanding 5G network in Western Canada
- The creation of a $1 billion Rogers Rural and Indigenous Connectivity Fund, aimed at improving access to services in Western Canada’s rural and Indigenous communities
- The creation of 3,000 new jobs in Canada’s Western provinces
While the merger was originally set to close in June, the date has been extended to July 31, 2022, to allow all parties more time to find a satisfactory resolution to the Competition Bureau’s objections.
Calgary Business and Corporate Lawyers Providing Solutions for Mergers and Acquisitions
Contact the corporate lawyers at DBH Law in Calgary to obtain responsive and concise legal advice on mergers and acquisitions matters. Our experienced lawyers draw on more than twenty-five years of business and corporate law experience to provide risk management throughout the duration of a deal and tailored and comprehensive solutions. Contact us online or by phone at 403.252.9937 to schedule a consultation today.