⏸️ press pause
Rogers-Shaw merger should be paused in light of competition review
🗳️ I drafted this before the Standing Committee’s report on “Affordability and Accessibility of Telecommunications Services in Canada: Encouraging Competition to (finally) Bridge the Digital Divide” report came out on Friday.
Select excerpts from the report:
That, while the Committee believes the merger should not proceed, if it does, the Government of Canada ensure that, in implementing its decision, all conditions attached to the merger approval are fully enforceable and that resources are available to enforce them.
The Committee is puzzled by the arguments of Rogers and Shaw. Rogers has linked a number of commitments to the merger that the government has no way to enforce. The Committee therefore doubts Rogers’s promises to rural regions, as the size of a company does not change the profitability of a region.”
…the Committee was not convinced by the arguments of Rogers and Shaw regarding the merits of the proposed merger.
We are approaching the one-year anniversary of the Rogers-Shaw merger and therefore likely entering the end game for resolving it. Rogers’ CEO Tony Staffieri indicated on their recent quarterly call with analysts that they expect to close the deal in Q2.
The apparent ease with which Rogers is barreling forward with their acquisition of Shaw Communications should alarm everyday Canadians, despite a recent ruling by the Federal Court of Appeal confirming that the Competition Tribunal has the power to temporarily block mergers in urgent circumstances AND a federal committee’s advice that Ottawa deny the merger unless Shaw’s wireless businesses is sold.
It appears that the telecommunications juggernaut has little concern for the potential of the Bureau to require divestiture or even block the merger altogether. Is the Rogers legal team bullying the Competition Bureau, like Chairman Ed Rogers strong-armed his Board and his family?
One of the well-documented reasons that the merger is concerning is that acquisitions of this scale are going to lead to layoffs - a merged company doesn’t need duplicative marketing, HR or Finance departments. In a 2021 report from the Canadian Center for Policy Alternatives, “Check and Balance,” analysts Robin Shaban and Ana Qarri demonstrated that Canada’s Competition Act needs to be improved in order to protect workers. They also noted that though the Bureau has the power to block mergers that undermine wages or job quality, there is no evidence that the Bureau has considered workers when reviewing any merger.
Another reason that this merger is sailing forward has to do with something called the “efficiency defence.” Recently, the Competition Commissioner, Matthew Boswell, called it “cause for concern,” noting that no other G-7 has followed the approach. Boswell further noted the “significant practical challenges for the Bureau to estimate and measure anti-competitive harm” that the efficiency defence raises. The defence has been used to rationalize mergers that are likely to result in anti-competitive effects, including higher prices.
The defence is one of the many facets of Canada’s current competition regime that is currently being seriously re-evaluated. In a recent consultation examining the Canadian Competition Act in the Digital Era led by Senator Howard Wetston, respondents urged the Senator to re-think the efficiency defence. A merger from last year between two waste management firms (“Tervita”) exemplified the Bureau’s weak merger controls. Last week, the Competition Bureau formally advocated that “efficiencies should not be given primacy in merger review.”
How can Minister Champagne have a Mandate Letter that asks him to review Canada's competition law framework and at the same time let this merger go through, paving the way for consolidation in Canada's already concentrated telecom industry? Surely the Prime Minister doesn’t want a country with one national phone company and one national cable company after announcing that he has met his promise to reduce Canadians’ cell phone bills by 25%?
The competition file is at a critical moment in Canada; on the cusp of being comprehensively re-evaluated for a digital-first era.
The Rogers-Shaw transaction should not go forward as policymakers concurrently seek to, “undertake a broad review of the current legislative and structural elements that may restrict or hinder competition….including telecommunications.”
Telecommunications researchers Dwayne Winseck and Ben Klass have noted that the firms could build on existing network sharing agreements in order to achieve the shared goals they have on 5G connectivity. Another creative option is something conditional on the prospective broadband links to rural and Indigenous communities; but the Commissioner has noted that the Bureau lacks the ability to assess mergers for compliance after the fact. While Rogers has made promises on these topics, they seem both gratuitous (unenforceable) and parsimonious. Other telecommunications companies are building indigenous and rural connectivity without merging and without the prospect of a massive layoff.
Rogers has also pledged a new research centre to compensate for the loss of Shaw HQ in Calgary - a “National Centre of Technology and Engineering Excellence,” in Calgary as part of the merger. While certainly enticing, the firms do not need to merge in order to invest in scholarship. It is simply a distraction.
And what must consumers be distracted from? Our toothless competition law, that sees no issue with one man assuming substantial power over the digital lives of Canadians. Ed Rogers has already demonstrated himself to be machiavellian and entitled to the fortune that his father built. While many of our country’s largest firms perpetuate substantial familial wealth, Ed Rogers himself controls the bulk of the power over the firm.
Once and if the Rogers-Shaw merger concludes, there will be a singular untested man overseeing the largest, arguably most important telecommunications company in the country.
Independent media firm Canadaland had a series on family dynasties; specifically the Rogers Family Compact. A low population, post-colonial nation tends towards “chumocracy” - this is evident with Rogers, look simply at how the Mayor of Toronto - Canada’s largest city - maintains a role in the Rogers family trust. So many regulatory spaces are already marred by a “revolving door,” that facilitates regulatory capture; there is a growing movement calling for CRTC chair Ian Scott to recuse himself from files on internet competition.
While comparisons to the satirical show “Succession” are funny, legislative frameworks shouldn’t be a farce. Regulators should not allow the merger to sneak through. Canada’s Competition Act delineates  abuses of dominance, but it's dated loopholes are being exploited by Bay Street and you don’t need a butt dial to know that. That butt dial turned into a big fat internet joke, but the inability of the CRTC and the Competition Bureau to pause this merger amid competition review is a tragedy.
Corporate power in Canada continues to consolidate to the detriment of consumers.
Vass Bednar is typing.