Last Tuesday, two days before parties in the Rogers-Shaw merger entered a second round of mediation to attempt to address competition concerns, Industry Minister François-Philippe Champagne laid out the conditions needed for his department to approve the deal, paving the way for a settlement and undermining the Competition Bureau’s ongoing efforts to block the transaction outright.
A dominant firm buying a disruptive rival in a market where Canadians pay some of the highest prices in the world should be a non-starter, but Canada’s weak competition laws lead regulators to craft complex and risky solutions instead of simply saying no to harmful mergers.
Through his statement, the minister created a path for the merger between Rogers Communications Inc. and Shaw Communications Inc. to be approved — with the existing competition of Freedom Mobile being replaced with the hope that Vidéotron, owned by Quebecor Inc., will be able to pick up the competitive slack going forward.
That Canada’s competition law is willing to trade away existing competition for the hope of future competition is emblematic of our permissive treatment of mergers, where the guiding principle has long been getting the deal through rather than protecting Canadians.
On the surface the minister’s conditions appear reasonable. Quebecor would need to agree to hold onto any spectrum licences, a key input to providing wireless service, for a minimum of 10 years, and the minister would expect Vidéotron to have pricing in Ontario and Western Canada comparable to what it currently offers in Quebec, an average reduction of 20 percent. But both provisions reveal the limitations to our current thinking about competition law.
First, the 10-year provision puts a best-before date on wireless competition in Canada, ignoring the lesson of the Competition Bureau’s 2017 decision to not challenge BCE Inc.’s acquisition of Manitoba Telephone System (MTS). Rather than fight to block the merger, the bureau instead negotiated a remedy agreement to prop up a new competitor, which announced it would be pulling out of the wireless market soon after a similar spectrum sale restriction clause elapsed.
Second, although it may sound promising, the minister’s price commitment would fall short of delivering benefits to Canadians in Ontario and Western Canada. Leaving aside the administrative complexity of the remedy, as telecom researcher Ben Klass and I pointed out months ago, Freedom’s pricing in Ontario and Western Canada is already more competitive than Vidéotron’s offerings in Quebec. In effect, the minister’s condition is a request not to make things too much worse for Canadians.
If we expected these proposed solutions to protect competition, we wouldn’t have to request companies keep their prices down. Instead of the simple solution of blocking the deal, a settlement along these lines introduces complexity and the real risk that Canadians are made worse off going forward. Ultimately, this is the logic underlying Canada’s competition law: allowing competition to deteriorate at a politically acceptable rate.
In a new paper for the Centre for International Governance Innovation, I argue that Canada’s merger law has long discounted the harms caused by mergers like Rogers-Shaw, and recommend how Canadians can create a set of laws that deter these harmful mergers in the first place. Among other benefits, these changes would make it easier for the Competition Bureau to block harmful transactions outright, as the regulator is correctly attempting to do in this case.
Canadians deserve laws that push firms to compete fairly rather than swallowing up their rivals and snuffing out competition. This government has already taken an important first step in updating our competition laws and signalled its intention for deeper review and reform, and its efforts in this policy area should be recognized. In spite of his position on Rogers-Shaw, Mr. Champagne now has the opportunity to build on these initial steps and bring in a broad range of voices and perspectives to create a set of laws that truly protect competition in Canada.
This article first appeared in The Globe and Mail.