Yahoo Finance Terence Corcoran: The absurdity of Canada's competition and telecom policies
A little more than a year ago Ottawa’s commissioner of competition received a knock-down blow from the Competition Tribunal over the takeover of grain elevators on the Prairies. The commissioner wanted to block Parrish & Heimbecker, a century-old family-controlled corporation based in Ontario, from buying one of the grain elevators because the purchase was “likely to cause a substantial reduction of competition in the supply of grain handling services” to local agriculture.
When the case went to the Competition Tribunal, the legal body that oversees the application of competition law in Canada, the commissioner suffered a hard defeat. “The Tribunal finds that the Commissioner’s proposed product market is not grounded in commercial reality and in the evidence.” Moreover, the approach to product market definition “fails on the facts, from a precedential and legal standpoint, and from a conceptual and economic perspective.”
It wasn’t the first time Commissioner Matthew Boswell was dismissed by the tribunal. In mid-2021, the presiding judge assessing the commissioner’s attempt to block a $1-billion merger of two oil industry firms — Tervita Corp. and Secure Energy Services — denied the application on the grounds that Boswell was attempting to “seriously curtail” the companies’ rights to “procedural fairness” in contravention of the Competition Act. The Federal Court of Appeal agreed with the tribunal, sending the commissioner off with an embarrassing lost case — and a loss of face.
Which brings us to what now looks like another Boswellian blunder. In a ruling just after Christmas, the tribunal shot down the commissioner’s attempt to block the $26-billion Rogers-Shaw telecom merger, a transaction portrayed by the academic and populist guardians of competition mythology as a threat to the fundamental right of Canadians to an essential service: cheap cellphones. Anything less than cheap is the evil product of monopoly market power wielded by conniving corporate executives and billionaire controlling families.
That’s the dominant economic conclusion sweeping through political and academic circles — and the media. The Globe and Mail published a piece by Keldon Bester, a member of the Canadian Anti-Monopoly Project, which sees monopoly power everywhere. Bester said the Rogers-Shaw merger posed a threat to Canadians already burdened with high wireless prices under a competition regime that favours monopoly structures. The Financial Post joined the anti-monopoly campaign with a commentary from political scientist Vass Bednar, who also believes the Rogers-Shaw merger is a blow to consumers and exposes the flaws in Canada’s competition law.
The Competition Tribunal’s assessment of the Rogers-Shaw deal runs in the opposite direction. The tribunal ruled that if Rogers and Shaw merge, and Shaw’s Freedom Mobile wireless service is sold to Quebec-based Videotron as planned, the deal is “not likely to prevent or lessen competition substantially. In other words, they are not likely to result in materially higher prices relative to those what would likely prevail in the absence of the arrangement.”
To reach its decision, the tribunal outlined its disdain for the commissioner’s approach to the Rogers-Shaw review. The tribunal rejected all of the key aspects of the commissioner’s claims, concluding at one point that the commissioner’s perspective is “divorced from reality.”
The focus of that divorce, according to the tribunal, is Boswell’s insistence that the Rogers-Shaw merger be reviewed as it was originally announced in March 2021, with the new merged company holding on to Shaw’s wireless subsidiary, Freedom Mobile. The Rogers-Shaw plan was later changed under a divestiture agreement to allow Freedom Mobile to be sold to Videotron, thereby creating the prospect of a more competitive wireless environment in parts of Canada.
In detailed commentary citing legal precedent, the tribunal dismisses the commissioner’s position. The fact that Rogers-Shaw would split off Freedom “cannot be ignored” as a matter of fact and law. “To the extent that the future ownership of Freedom is a major focus of this proceeding, the Commissioner’s insistence that the Tribunal spend scarce public resources assessing something that will never happen is divorced from reality.” Citing a legal precedent, it adds that the tribunal is not “obliged to pretend such an ignorance of realities.”
Terence Corcoran: The Rogers-Shaw hearings: Courtroom melodrama worthy of Netflix
Matthew Lau: Let Rogers and Shaw merge, then let AT&T and Verizon in
Jack Mintz — I stand firm: Canada’s telecom policy is failing
The Rogers-Shaw deal now moves to the Federal Court of Appeal for an emergency review. Despite the squeals and squawks of the anti-monopoly crusaders, chances are that Canada’s competition commissioner is heading for another knockdown.
Much of the fundamental absurdity of the competition review process is on detailed display in the tribunal’s 88-page decision.
All sides testified and brought witnesses along with speculative long-term forecasts of where wireless prices might go in different competitive circumstances based on modelling and guesswork and confidential corporate information. Key passages that support various conclusions are redacted (see Paragraph 354 insert for a sample), which means that no outsider can see the data to assess the decision.
Given Videotron’s schmoozy relationship with politicians through the Péladeau family in Quebec, and its dependence on Ottawa’s subsidized spectrum regime, one has to wonder about the plausibility of the tribunal’s confidence in the role of Videotron as a real competitor, a question raised recently on this page by Jack Mintz.
As the Rogers-Shaw merger rolls through the legal system, Canadians are witnessing another demonstration of the absurdity of the country’s competition and telecom policies.
• Email: tcorcoran@postmedia.com | Twitter: terencecorcoran
