Freedom Mobile sale not enough to offset competition blow if Rogers buys Shaw, tribunal hears
The Competition Bureau kicked off its case against the $26-billion merger of telecom giants Rogers Communications Inc. and Shaw Communications Inc. Monday by telling Chief Justice Paul Crampton that selling Shaw’s wireless operations would not sufficiently offset reduced competition from the merger.
John Tyhurst, a lawyer representing the competition watchdog before the three-member tribunal, said the sale of Freedom Mobile to Quebecor Inc.’s Vidéotron subsidiary contains a number of decades-long agreements that would make Rogers both a supplier and competitor to Vidéotron, with too much sway over the Montreal-based company’s business.
“This is not merely hypothetical,” Tyhurst said, referring to existing litigation between the two companies over a network-sharing arrangement. Around a year ago, Vidéotron sued Rogers for $850 million, claiming breach of contract and “bad faith” negotiations over the shared network in Quebec.
Tyhurst said the proposed sale of Freedom and the entire merger should be rejected by the Competition Tribunal.
The judge overseeing the trial set the stage before opening arguments Monday by telling the companies and the Competition Bureau what he’ll want to hear during the four-week proceedings, including what the companies would do if the deal does not go ahead.
Chief Justice Crampton said the three-member Competition Tribunal panel will also want the competition watchdog to spell out any “pro-competitive effects” of the proposed merger that are not in dispute. They would like other questions answered, including why Vidéotron opted not to purchase Shaw wireless, which is separate from Freedom, and whether there’s an alternate buyer for Shaw. In addition, the panel wants to hear about any arrangements between Shaw and Rogers to transfer wireless spectrum if the merger is not allowed.
Kent Thomson, a lawyer for Shaw, said he would use his opening arguments to “reorient” the tribunal to the “once in a generation opportunity” for enhanced competition — particularly in Western Canada — presented by the Rogers and Shaw merger and the sale of Freedom Mobile to Vidéotron.
“It is now time to reframe the debate,” Thomson said following opening arguments from the Competition Bureau, much of which took place behind closed doors due to a discussion of confidential corporate information. Thomson told the tribunal the Competition Bureau’s case is based on “fundamental misapprehensions” of facts and law, as well as speculation and conjecture.
He said the competition watchdog is basing its case on blocking the original Rogers-Shaw transaction, without the divestiture of Freedom Mobile, and said its arguments are “without merit because they are divorced from the market realities.”
Thomson contended that “the only winners” if the deals are blocked would be telecom rivals Telus Corp. and BCE Inc.’s Bell.
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He later accused Telus of having “joined hands” with the Commissioner of Competition in pushing the case forward because the Vancouver-based telco would benefit if the Rogers-Shaw merger was blocked.
Thomson said Shaw, which became a wireless player after purchasing Wind Mobile in 2016 — was far outgunned by rival Telus and was forced to “balance the competing needs” of the fledging business and its existing wireline business with limited capital.
As a result, Telus displaced Shaw as the leading broadband internet provider in Western Canada. If Rogers were permitted to own those wireline assets, Thomson contended, the larger company with a more established wireless business would be able to compete “on an equal footing” with Telus.
“Rogers will be able to hammer away at Telus in a way that Shaw could not,” Thomson said.
When it comes to the case against the merger, Thomson argued that the Commissioner of Competition is “playing with numbers” — including by lumping together the post-deal wireless market shares of Rogers, Freedom and Shaw, even though Vidéotron will be buying Freedom.
Jonathan Lisus, the lawyer who laid out opening arguments for Rogers, said it will be up to the tribunal to determine whether the evidence backs the Commissioner’s “strident characterization of the years-long agreements forged between Rogers and Vidéotron along with the $2.85-billion Freedom sale. He contended that it will instead reveal the arrangement to be typical commercial relationships and industry agreements.
Lisus said the evidence presented will also challenge the perception that Vidéotron, which has been described as a disruptor, formidable and a key aggressor, will somehow be transformed into a “vulnerable dependent” upon purchasing Freedom Mobile.
He suggested that the tribunal will not have to weigh whether the efficiencies created by the merger and asset spinoff outweigh any lessening of competition — a provision in the Competition Act — because the transactions are “manifestly pro-competitive.”
John Rook, who presented opening arguments for Vidéotron, pointed out that the Montreal-based telecommunications operator had paid hundreds of millions of dollars for wireless spectrum in 2021 to expand across the country from its base in Quebec, many months before striking the agreement to buy Freedom Mobile. With regard to the favourable commercial arrangements made with Rogers, Rook said the evidence will show that Shaw, too, relied on negotiated agreements with third-party providers and competitors such as Bell to operate the wireless business.
Rook said Quebecor chief executive Pierre Karl Péladeau would be presenting evidence at the trial.
Late in the day’s proceedings, Chief Justice Crampton notified the lawyers for both sides that his email was being inundated by emails purporting to object to the Rogers-Shaw transaction, a campaign the judge suggested was orchestrated and inappropriate. He said the emails would be deleted, unopened.
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