Canada Judge Calls Into Question Regulator’s Argument to Block Rogers-Shaw Deal

Ethernet cables are seen in front of Rogers and Shaw Communications logos on July 8, 2022. Dado Ruvic/Illustrations/Reuters

A Canada federal judge called into question the competition bureau’s argument to block Rogers Communications Inc’s C$20 billion ($14.9 billion) bid for Shaw Communications Inc as the court hearing kicked off on Tuesday.

The proceeding in a Federal Court of Appeal in Ottawa is the antitrust bureau’s latest attempt to kill the deal, saying the transaction will lessen competition in Canada’s telecoms industry, which has some of the highest mobile bills in the world.

But the bureau failed to convince the competition tribunal, a quasi court that handles merger disputes, that the deal is harmful for Canadian consumers. It was approved on Dec. 30.

“According to the tribunal, this was not a particularly close case,” the judge told the court on Tuesday. “It found, I would say, on the evidence rather decisively that there was no substantial lessening of competition.

“They also found a number of pro-competitive considerations.”

Jonathan Hood, a lawyer for the bureau, later noted that while the tribunal identified pro-competitive aspects of the deal, it never found that markets would benefit from reduced costs.

“We never get a finding by the tribunal that overall customers in the relevant markets are going to benefit from lower prices,” Hood said.

Announced nearly two years ago, the deal has become a test case for the competition bureau’s ability to increase choices for consumers in Canada, where a handful of companies control large swaths of businesses.

At stake is one of Canada’s biggest-ever M&A deals, along with millions of dollars in legal and financial advisory fees. Investors have been closely watching the outcome and Shaw shares have rallied in recent months on optimism over the deal’s success. In early Tuesday trades, Shaw shares were up 1.3%, while Rogers rose 1%, bucking a drop in the benchmark Canada share index.

CONCESSION

Rogers offered to sell Shaw’s Freedom Mobile unit to Quebecor’s Videotron for C$2.85 billion to address anti-competition concerns, but the competition bureau argued that a merged Rogers-Shaw would not have a viable competitor in Quebecor.

Alexander Gay, another counsel for the bureau, told the court that the divestiture of Freedom to Videotron was a “parasitic agreement.”

“What we have is a parasitic agreement that’s attached to it, which is a divestiture agreement, which lives or dies based on whether the arrangement agreement survives,” Gay said.

Shaw and Rogers intend to finalize the deal by Jan. 31, though the deadline can be extended in agreement with Quebecor.

“I think the appeal is going to be dismissed,” said Michael Osborne, a competition lawyer at law firm Cozen O'Connor. “I think it’s a bad appeal. For that reason, I think the Court of Appeal will make sure to do it in time for the parties to close.”

A spokesperson for the competition bureau declined to comment while the matter was before the court.

It is not known whether Tuesday’s hearing will result in a same-day verdict. Canada Industry Minister Francois-Philippe Champagne, who has the final say on the matter, has said that he would give a separate decision only after there is “clarity on the ongoing legal process.”

“It’s possible that the FCA could hear the (competition bureau’s) arguments and render its decision without even listening to the companies or the hearing could run its course on Jan. 24 with a decision from the bench at its conclusion,” National Bank of Canada analysts said in a note last week.

They noted that the bureau could also appeal to the Supreme Court and would have 60 days to do so, but Osborne said whether they can progress with the appeal depends on the outcome of the hearing.

“If the Federal Court of Appeal dismisses this thing from the bench on the day of the appeal, the likelihood of them getting leave to the Supreme Court is not good,” Osborne said.