CALGARY – When the CRTC dives into the proposed purchase of Canwest Global’s TV assets by Shaw Communications next week, many industry stakeholders are asking for asking for safeguards and urging the Commission to be prudent.
(Cartt.ca editor and publisher Greg O’Brien will be in Calgary next week covering the hearing. For live updates, follow him on Twitter via @gregobr and surf back to Cartt.ca regularly.)
The $2 billion deal, which would make Shaw the largest vertically integrated media company in Canada, for now, appears to have the cautious support of many, as long as certain conditions – often described as “competitive safeguards” – are attached.
Shaw’s primary Western Canada competitor Telus told the Commission that the acquisition “has serious implications for the Canadian broadcasting system given the potential for self-dealing and anti-competitive behaviour which may negatively impact access and diversity”.
“Given the unprecedented scope of vertical integration which would be created in the approval of this transaction, Telus submits that the CRTC must adopt, as conditions of approval of this transaction, safeguards to limit any abuse of market power and anti-competitive behaviour by Shaw and its affiliates, particularly with respect to matters such as agreements with non-affiliated producers, programmers and broadcast distributors on linear and new distribution platforms”, reads its submission, dated August 23. “These safeguards must take the form of clear, unequivocal and enforceable rules.”
That concern was shared by the Canadian Media Production Association (CMPA) and by Pelmorex, owner of The Weather Network and MétéoMédia.
“It is critical that the Commission take the appropriate regulatory steps to ensure that the programming services between these two broadcasting groups, (a Shaw-owned CanWest and Corus), remain truly operationally separate, and fully competitive, with each other”, the CMPA wrote in its submission.
Pelmorex noted that vertical integration “provides both the incentive and opportunity for distributor-programmers to impair competitive market entry by unrelated programming services”.
“If the CRTC is to continue to pursue diversity of voices as a matter of policy, then it is obliged to ensure that the television market is not structured in such a manner that non-vertically-integrated independent services are foreclosed from competing”, the Oakville, ON-based broadcaster wrote in its submission to the CRTC.
The Independent Broadcasters Group/Le groupe de diffuseurs indépendants (IBG/GDI), an alliance of independent conventional, specialty and pay television broadcasters, expressed its collective support for the merger, but said that it was only “reasonably confident” that the Commission’s Diversity of Voices regulatory policy could be upheld.
“IBG/GDI is especially interested in ensuring that the broadcasting sector maintains a high degree of diversity, in all meanings of that term”, its submission reads. “A diversity of voices, including the editorial and programming diversity that flows from the diversity of ownership, is vital to the continued health of the broadcasting system and to the achievement of Canadian broadcasting policy objectives.”
Many of the interveners took issue with Shaw’s proposed tangible benefits package. CRTC policy dictates that benefits should total no less than 10% of the value of the transaction.
Telus, which openly criticized Shaw’s initial interpretation of tangible benefits, said that the Commission must undertake its own evaluation of the proposed deal, or “there would seem to be little value and considerable risk in approving this transaction.”
“Shaw’s proposal for a “pseudo” benefits package makes a mockery of the Commission’s policy which was established to ensure contributions to the broadcasting system as a tradeoff for the concentration that flows from such merger and acquisition activity”, Telus wrote. “For all intents and purposes, Shaw’s application contains no tangible benefits package at all.”
The CMPA called on the Commission “to impose specific safeguards with respect to the self-directed tangible benefits package in this transaction”, calling the tangible benefits policy “the “lifeblood” for the Canadian programming and the independent production sector”.
Many also put forth their own suggestions for the CRTC’s consideration.
“We argue that vertically integrated distributors-programmers that exceed specific quantitative thresholds in the upstream horizontal market for programming services merit careful attention in the following areas: carriage, packaging, commercial practices (including affiliation agreements, auditing and access to information) and dispute resolution”, Pelmorex continued.
The CMPA opined that “an independent producer who attempts to negotiate with a giant vertically and horizontally integrated Shaw/Canwest will be at an enormous – if not insurmountable – bargaining disadvantage”.
“Shaw should therefore be required, by condition of licence, to conclude a Terms of Trade agreement with the CMPA within sixty days of the Commission’s approval of the transaction”, it suggested, asking that a member of the Commission’s alternative dispute resolution department attend the negotiations as an observer.
Telus’ recommendations include that the Commission renew Shaw’s cable licenses for a two-year term only “in order to retain the power to make changes to conditions of license in the short term as needed due to the quickly changing environment and the unknown potential consequences to the broadcasting system of this transaction”, plus “strict obligations” with regard to the auditing and reporting of all of Shaw’s planned expenditures.
The Commission will then consider a housekeeping application by CanWest Global Communications for a multi-step corporate reorganization which would see its broadcasting and specialty channel assets fall under one entity.
Next up will be Shaw’s application to transfer the effective control of Canwest Global’s broadcasting entities to a wholly-owned Shaw subsidiary, currently listed as a numbered company.
The deal has already been cleared by an Ontario court, and by the Competition Bureau last month.
