Photo by Timusu (Pixabay)
Meena Alnajar is an IPilogue Writer, IP Innovation Clinic Fellow, and a 2L JD Candidate at Osgoode Hall Law School.
In March 2021, Rogers Communication Inc. announced an upcoming deal to buy Shaw Communications Inc for a US$26 billion takeover. If successful, Rogers will become Canada’s second-largest cellular and cable company operator. Canada would resultingly have three wireless providers to choose from instead of four. This deal is now facing opposition from some of Canada’s key regulatory powers. On March 3 2022, Canada’s Minister of Innovation, Science and Economic Development Francois-Phillippe Champagne stated that “The wholesale transfer of Shaw’s wireless licenses to Rogers is fundamentally incompatible with our government’s policies for spectrum and mobile service competition, and I will simply not permit it.” But why should Canada prevent industries from extremely profitable mergers and acquisitions?
Ottawa’s main concern with this deal is the monopolization of essential services like cell phones and Internet. With a monopoly, Rogers is free to raise prices because no other competitor could offer a better price matching Rogers’ breadth of services. Many smaller companies are concerned that they will not be able to compete with Rogers, and consumers worry they will suffer higher cell phone prices without other options. Rogers gave an assurance that it would not raise prices until at least three years after the deal’s closing. But that assurance may not be enough to stop Rogers from continuing to swallow up competitors in the future, leaving fewer choices for Canadian consumers. Financial analysts acknowledge that while the government may try to reject the deal, the government’s statements are not necessarily fatal. Analysts predict that the deal will close, but, to maintain competition in the industry, Rogers will not be able to buy all of Shaw’s wireless business.
The Rogers-Shaw deal is likely moving ahead. On March 24, the Canadian Radio-television and Telecommunications Commission (“CRTC”) approved Rogers’ acquisition. The CRTC stated that, subject to modifications, Rogers’ proposal would not unduly affect Canada’s competitive landscape. The CRTC made stipulations to its approval that could once again balance Rogers’ acquisition and fair competition in the wireless service marketplace. Rogers will contribute $27.2 million towards various initiatives promoting local news and independent projects. Rogers must also create an Indigenous news team with journalists in all provinces to provide news content to First Nations, Métis, and Inuit communities. These stipulations could help stimulate local journalism and production companies, addressing concerns regarding the survival of local wireless services after this big merger.
While Canadian government officials seek to discourage anti-competitive behaviours, Canada’s Competition Act was last reviewed in 2008. Since then, Internet giants like Google, Facebook, and Amazon have often participated in anti-competitive practices online to dominate the marketplace. In Canada, Google and Facebook pocket four-fifths of online advertising revenues, yet no laws have come in to stop them. Minister Francois-Phillippe Champagne announced on February 7, 2022, to modernize competition law through legislative reform of the Competition Act. Through a broad review, the Competition Bureau has suggested changing the “efficiencies defence” in the current competition law. This defence saves mergers that harm competition so long as the deal creates cost savings or other efficiency gains. Rogers may rely on this defence to keep the deal moving forward. Though not yet rejected, the Rogers-Shaw deal may be a catalyst for Minister Francois-Phillippe Champagne to implement changes to competitive practices.