Videotron Buying Freedom Would Harm Consumers, Says Competition Bureau’s Closing Arguments

Vidéotron’s acquisition of Freedom Mobile in a $2.85 billion side deal tethered to the proposed $26 billion merger of Rogers and Shaw Communications would put the Quebecor-owned telecom company in an “unprecedented relationship of dependence” on Rogers, the Competition Bureau said in closing arguments on Tuesday (via The Star).

The evidentiary portion of the Competition Tribunal hearing between Canada’s competition watchdog and Rogers-Shaw over the latter’s proposed merger concluded earlier this month. Both sides are now slated to deliver their closing arguments.

Rogers and Shaw offered to sell Shaw-owned Freedom to Vidéotron as a remedy to the Bureau’s antitrust concerns.

However, the Bureau reiterated throughout the trial that divesting Freedom alone isn’t enough to gain its approval. The regulator maintained its stance that a combined Rogers-Shaw would weaken competition in the country’s already oligopolistic wireless space and raise prices.

In its final oral arguments, lawyers for the Competition Bureau argued that Vidéotron won’t be as strong a competitor as Shaw. They added that Western Canada in particular will lose the benefits of competition and “the “economy will suffer an overall loss” as a result of the merger.

“I cannot emphasize to you how serious the task before you truly is,” Derek Leschinsky, a member of the Bureau’s counsel, cautioned the tribunal. “It should weigh on your conscience. It’s weighed on mine since the start of this case.”

John Tyhurst, another lawyer for the Bureau, noted that Vidéotron’s ability to compete in regions outside its home province of Quebec after acquiring Freedom hinges on a “complex web” of 13 agreements with Rogers.

These include deals for preferential rates for access to Rogers’s networks and other provisions, all of which the regional telecom needs to expand its wireless business to Ontario and Western Canada. This would leave Vidéotron dependent on Rogers and, therefore, less likely to aggressively compete with its larger rival.

“Such arrangements are routinely rejected by competition law,” Tyhurst noted, adding that they would “put Vidéotron in the position of severe vulnerability to the goodwill of a competitor, Rogers.”

Lawyers for the Rogers-Shaw-Vidéotron side of the proceedings are scheduled to make their closing arguments on Wednesday.

However, they argued against the Bureau’s narrative of a dependency in written submissions, noting that Vidéotron entered into the contracts with Rogers voluntarily. The companies said Freedom should be “entrusted to the experienced hands of Vidéotron, a bold, proven competitor with a rigorous business plan.”

In addition, they emphasized that Shaw’s leadership has determined the company can no longer compete effectively in the long term. Shaw executives said during the Tribunal hearings that the telco doesn’t have “a viable path forward” if the merger falls through.

Federal Court Chief Justice Paul Crampton, who leads the three-member panel overseeing the proceedings, again said he would like to release a ruling before Christmas if possible.

The Canadian Radio-television and Telecommunications Commission (CRTC) already green-lit the Rogers-Shaw deal back in March. If the Competition Tribunal rules in favour of Rogers and Shaw, they would only require approval from Innovation, Science and Economic Development Canada (ISED) Canada.

That said, Minister Champagne has already committed to approving the merger if Vidéotron agrees to certain conditions, namely that it would hold on to Freedom’s wireless licences for at least 10 years and lower wireless prices in Ontario and Western Canada to Quebec levels.