A Freedom Mobile telephone outlet is seen in Ottawa, Ont. on May 10.Spencer Colby/The Globe and Mail
Someone needs to tell Matthew Boswell he’s a winner.
In recent months, the head of the federal Competition Bureau has fought Rogers Communications Inc.’s RCI-A-T $26-billion takeover of Shaw Communications Inc. SJR-A-X Mr. Boswell argued that allowing the country’s largest and fourth-largest cellphone operators to merge would result in higher wireless prices and poorer service.
Earlier this month, Rogers conceded the battle. To win government approval for a deal that unites the country’s two largest cable networks, the Toronto-based company agreed to sell Shaw’s Freedom Mobile cellphone division, with 1.7 million customers, to Quebecor Inc. QBR-A-T Pierre Karl Péladeau, Quebecor’s chief executive who is also known by his initials, gets his long-cherished chance to show he can do on a national stage what he’s done in Quebec, where his Montreal-based company has captured 22 per cent of the cellphone market.
By ensuring the majority of Canadians have four deep-pocketed telecom companies competing to put iPhones in their pockets, Mr. Boswell won this showdown. The regulator achieved both its own stated goal and that of its political masters. Federal Minister of Innovation, Science and Economic Development (ISED) François-Philippe Champagne also made it clear his department would only allow the Rogers-Shaw deal to go forward if it preserved a wireless cage match between Rogers, BCE Inc., Telus Corp. and one other player.
Like a successful gambler, Mr. Boswell should now take his winnings off the table, celebrate and head for the exit. As analyst Adam Shine at National Bank said last week, the Competition Bureau ought to be “thrilled” at playing a role in unleashing the disruptive force that is PKP on the rest of Canada.
Yet the Competition commissioner seems intent on pressing his luck by trying for an even larger score. Doing so raises questions about Mr. Boswell’s motivation in opposing the Shaw takeover and opens the regulator to charges of government overreach.
Globalive chairman urges Ottawa to block sale of Freedom Mobile to Quebecor
Rather than sign off on the deal once Quebecor got involved, the Competition Bureau announced last Friday it is heading to mediation with Rogers and Shaw in early July. If the two sides fail to reach an agreement during those sessions, the fate of this takeover may end up being decided at the Competition Tribunal.
In the legal community, there is near-universal agreement the Competition Bureau will lose this case at the tribunal. That’s because Canada, alone among industrial nations, allows companies seeking approval for takeovers to make an “efficiencies” argument. If a deal’s overall benefit to the economy – its efficiencies – exceeds the costs of lost competition, then the tribunal is compelled to approve the transaction.
The Competition Bureau has lost a series of cases at the tribunal over the efficiencies argument. Lawyers say a hearing over the Shaw takeover would extend that losing streak, as Rogers and Shaw can credibly claim that combining the two companies will trim costs by more than $1-billion annually, providing significant benefits to the Canadian economy.
Why would Mr. Boswell – an experienced litigator prior to joining the Competition Bureau 11 years ago – press forward with a case he’s bound to lose?
The Competition commissioner isn’t talking, but lawyers who know him well say one of Mr. Boswell’s goals over his five-year term is to re-establish the regulator’s power by forcing the government to water down the efficiencies argument. What better way to convince politicians and the public a takeover defence is misguided than to show the policy translates into higher monthly cellphone bills?
However, there’s a time and place for Mr. Boswell to dispute the merits of the efficiencies argument and the government’s approach to competition. That time and place is not in the middle of a major commercial transaction around an essential service, when the companies involved have already made concessions that give the regulator exactly what it asked for.
Now Quebecor has arrived, Mr. Boswell should approve Rogers’ takeover of Shaw and declare victory, knowing he’s set the stage for national competition among cellphone providers. By continuing to oppose the takeover, the Competition commissioner risks being that gambler who walks away empty-handed after staying in the game too long.
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