The Competition Bureau is attempting to block the merger of Canada’s two largest cable companies, arguing that the deal would reduce competition and result in higher cellphone bills, poorer service and less choice for consumers.DADO RUVIC/Reuters
The Competition Bureau says it will only accept a full block of Rogers Communications Inc.’s RCI-B-T acquisition of Shaw Communications Inc. SJR-B-T, despite a federal judge suggesting that the watchdog and the telecoms find common ground before an appeal hearing starts Nov. 7.
In a hotly contested virtual hearing on Tuesday, Competition Bureau lawyer Derek Leschinsky said that anything less than a full block of the merger “would not eliminate the substantial prevention and lessening of competition that arises from this transaction,” asserting that the deal would have significant harmful impacts for customers and the economy as a whole.
The Competition Bureau and telecom companies will be facing off before the Competition Tribunal, led by Chief Justice Paul Crampton of the Federal Court, in the appeal hearing.
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Accusations of stubbornness flew from both sides during the case management conference, attended by nearly 300 lawyers and members of the public. It revealed the deep rifts that remain between the telecom giants and the Competition Bureau over the deal and exactly which matters the two sides will argue before the tribunal.
The Competition Bureau has suggested that it intends to pursue the case based on the original deal struck in March, 2021, between just Rogers and Shaw, and that a more recent proposal to divest Freedom Mobile should not be considered as it wasn’t part of its May 9 application.
Meanwhile, Rogers and Shaw argue their proposed sale of Freedom to Quebecor QBR-B-T should be considered as part of the proceedings. Kent Thomson, a lawyer representing Shaw, said the Competition Bureau is considering an application for a deal that no longer exists.
Chief Justice Crampton sided with the telecom companies and recommended the Competition Bureau’s lawyers focus their case on the deal that’s now on the table.
The Competition Bureau has continued to dismiss Shaw’s pending divestiture of Freedom Mobile, Canada’s fourth-largest mobile carrier, to Quebecor Inc.-owned Videotron.Nathan Denette/The Canadian Press
The hearings are scheduled for four weeks, with a possible fifth-week extension. Chief Justice Crampton sent a letter to all parties Monday night encouraging them to work toward a solution to “streamline” the process.
Mr. Thomson called the Competition Bureau “removed from reality” for continuing to dismiss Shaw’s pending divestiture of Freedom Mobile, Canada’s fourth-largest mobile carrier, to Quebecor Inc.-owned Videotron.
“There is no world in which Rogers will acquire Freedom Mobile,” Mr. Thomson said. “Freedom will be gone, in the hands of an independent company called Videotron, before Rogers acquires a single share of Shaw.”
“What you’re witnessing is a remarkably stubborn refusal by the commissioner to recognize reality,” he added.
Mr. Leschinsky said the Competition Bureau believes that separating Freedom Mobile from Shaw’s cable network will result in a weakened competitor because Videotron will have to rely on its competitor, Rogers, for access to the underlying wireline infrastructure needed to deliver cellular service.
“The competitive effects will linger in Videotron to the extent it is deprived of the wireline interconnection that is taken by Rogers in this transaction,” Mr. Leschinsky said. “This is a harm that requires the whole transaction to be looked at.
“The wireless business is not an independent entity. It is a dependent entity,” Mr. Leschinsky said.
Rogers and Shaw declined The Globe’s request for comment.
In a statement, the Competition Bureau said that “the Commissioner’s views of the inadequacy of the divestiture of Freedom to Videotron as a remedy to Rogers’ acquisition of Shaw is a matter of public record.”
Shaw’s share price jumped 5 per cent on Tuesday as the hearing played out, closing at $35.65 on the Toronto Stock Exchange. Shaw’s stock continues to trade well below Roger’s $40.50-per-share offer, reflecting investor concerns that the government will block the takeover.