In a concentrated market where prices are among the highest in the world, the divestment of Freedom Mobile now appears necessary to get the deal through
Rogers/Shaw deal initially secured competition clearance: On 29 December 2022, Canada's Competition Tribunal approved the merger of Rogers and Shaw, stating that it did not consider the transaction would result in materially higher prices or substantially affect competition or innovation. During December, the Tribunal held hearings on the proposed deal, in which lawyers representing the parties highlighted the potential benefits for consumers, including new jobs, increased investment in 5G in both cities and rural areas, and stronger competition to Telus in the west of the country. In contrast, the Competition Bureau urged the Tribunal to prohibit the deal, arguing that a Rogers/Shaw tie-up would cause higher mobile bills and worse services for end users (particularly in the provinces of Alberta and British Columbia where Shaw is present, in addition to Ontario).
An appeal to the decision has been brought to the Federal Court: While the Competition Tribunal’s decision should have cleared a path to finalising the C$26bn merger, the Competition Bureau quickly submitted an appeal to the ruling. On 1 January 2023, the Federal Court of Appeal temporarily suspended the Tribunal’s decision on an ‘emergency basis’ and will hear the Bureau’s case on 24 January. Rogers and Shaw have extended their deadline for completing the transaction to the end of the month, although this cannot be pushed back further without permission from Quebecor, to whom the parties have agreed to sell Shaw subsidiary Freedom Mobile. The deal will also require final approval from government department Innovation, Science and Economic Development (ISED); however, ISED has stated that this decision will not be announced until legal proceedings have been completed.
Competition and pricing at the centre of this saga: A key issue in the merger debate has been the potential impact on competition in a concentrated market where prices are among the highest in the world. With ISED adopting a more consumer-oriented approach to telecoms policy, the parties have sought to offload Freedom Mobile (Canada’s fourth largest operator) to Quebecor’s Videotron, which they consider would alleviate authorities’ competition concerns. However, there are concerns that such a sale would undermine Freedom Mobile given the separation from Shaw’s cable assets and Quebecor’s lack of presence and track record in Western Canada. While the outcome of the appeal remains to be seen, ISED has already ruled out the wholesale transfer of Shaw's licences (and spectrum) to Rogers. For the parties, getting the deal through therefore appears contingent on the divestment of Freedom Mobile.
