The court did not need to hear from merging parties
By Ahmad Hathout
OTTAWA – The three-justice panel of the Federal Court of Appeal that initially went for a two-hour lunch during today’s hearing came back 45 minutes later than expected and delivered a verdict from the bench to reject the Competition Bureau’s challenge to a decision by the Competition Tribunal last month that allowed the Rogers purchase of Shaw to move forward.
The decision came after about two-and-a-half hours of arguments from the bureau, which failed to convince the court that the tribunal made errors sufficient enough to require it to send the decision back to the competition court.
Central to the bureau’s claim was that the tribunal failed in the order of its analyses. Instead of first analyzing the competitive effects of Rogers’s purchase of Shaw first and then the sale of Freedom to Videotron, it mixed the two together – forcing the bureau to prove that the sale would lessen competition.
But the appeal court denied the argument on two fronts: that the tribunal did not need to analyze it that way, and that, even if it did, the outcome would not have changed.
“Even if the Competition Tribunal erred on the narrow legal points the commissioner now raises in this court, we are not persuaded that the result could’ve been different,” Justice David Stratas read. “Considering the force of the evidentiary record before it, the Competition Tribunal concluded…that the result would’ve been the same even if it accepted the commissioner’s view of the burden of proof.
“Thus it would be pointless to send this case back to Competition Tribunal for re-decision,” he added.
The justices eviscerated the bureau’s central claim and agreed with the tribunal and the merging parties that examining the main deal first would have been moot, considering Rogers could never own Freedom, according to the innovation minister, who still must approve the deal.
In a statement, the minister Francois-Philippe Champagne said he is reviewing the decision “closely” and will decide on the transfer of spectrum from Shaw to Videotron “in due course.”
During the first hour of today’s hearing, the bureau’s lawyer argued that the tribunal and the merging parties were wrong to say that a Rogers-Shaw merger could not include Freedom, on the grounds that the minister only said that he wouldn’t allow the sale of Freedom’s spectrum assets to Rogers — not necessarily the physical entity. That key difference, the bureau argued, meant the proper ordering of analysis should have been triggered.
But the justices — one of which argued during the hearing about the usefulness of a wireless business without spectrum –disagreed.
“Examining the merger alone – a merger which by itself will not and cannot happen without the divestiture would be a foray into fiction and fantasy,” Stratas read in the decision.
The decision noted that the separate analysis might have been justified if the case was a close one. But “close this case was not,” Stratas said.
The justices also argued that sending the case back to the tribunal would have necessitated starting the entire process again, which included a month-long hearing, suggesting that the bureau had a very high bar to clear to prove its case.
That, they said, would have seemed “contrary” to “efficiency,” another purpose of the Competition Act. “In some cases this delay – potentially substantial – could cause the transaction that is, in fact, pro-competitive and in the public interest to die,” Stratas read.
The bureau had further argued that the tribunal’s decision relied on “behavioural” commitments that are not legally enforceable by the tribunal. These commitments included promises by Rogers to give wholesale wireline access to Videotron at below market rates, and promises by Videotron to provide low wireless prices. The bureau said that, because it is the competition watchdog, it had to provide consent to these commitments.
But the court agreed with Rogers’s argument, submitted to court before the hearing, that this consent is only required where there is a finding of lessened competition emanating from the deal – called remedial jurisdiction. This jurisdiction “was not engaged,” Stratas said because the tribunal “found no substantial lessening of competition to begin with.”
The court also denied a motion by the Competition Bureau to bring TekSavvy’s application to the CRTC challenging Rogers’s commitment to Videotron on lower wholesale internet access.
“The fact that just days ago but months after the divestiture became known, someone has started a proceeding before another administrative body has nothing to do with our task to decide whether the Competition Tribunal committed reversal error in making the order it did.”
While the decision could be appealed to the Supreme Court within 60 days, a National Bank analyst said that’s unlikely.
“The FCA expeditiously rendered its decision, as it unsurprisingly agreed with the Tribunal and rejected the CB’s case which has presumably finally run its course,” according to telecom analyst Adam Shine. “Of course, the latter can, in theory, appeal to the Supreme Court within 60 days, but we don’t see this happening as a stay probably wouldn’t necessarily be granted and it’s unlikely that the Supreme Court would even agree to hear it. We’ve also written before that we can’t imagine how senior members of the Justice Department would allow such an appeal to be attempted to the top court.”
In a statement, the executive director of the Public Interest Advocacy Centre said the advocacy group is “horrified” by the decision.
“The public can only be suspicious that the powers that be want this deal to close – even if it means a decade of high wireless and Internet prices for Canadians,” said John Lawford in a press release. “We also believe that the Court’s ruling means the Canadian Competition Act is utterly broken and needs to be radically rewritten to actually provide tools to block anticompetitive mergers.”
In a statement late Tuesday, Rogers and Shaw said, “We welcome this clear, unequivocal, and unanimous decision by the Federal Court of Appeal. We continue to work with Innovation, Science and Economic Development Canada to secure the final approval needed to close the pro-competitive transactions and create a stronger fourth wireless carrier in Canada and a more formidable wireline competitor.”
The House industry committee is lined up to hear about the deal tomorrow.
