The Competition Bureau has filed an application to block the purchase from Rogers Communications Inc. of Shaw Communications Inc., as it claims that the deal will lead to poorer service and higher prices, although experts say this move is not necessarily the end of the road.
The federal regulator wants the Competition Tribunal to block the $ 26 billion deal and wants a ban to stop the two companies from closing the deal until the bureau’s request is heard.
The merger will lead to “higher prices, lower quality services and fewer choices,” the bureau said, especially in the wireless sector, where Rogers, Bell and Telus Corp. currently serve about 87% of Canadian subscribers.
An investigation by the March 2021 deal into the deal found that the proposed acquisition would eliminate Shaw’s “established, independent and low-cost” competitor. It will also prevent existing competition in wireless services in Ontario, Alberta and British Columbia and suppress further competition in areas such as 5G.
“Eliminating Shaw would eliminate a strong, independent competitor in the Canadian wireless network market – one that has reduced prices, made data more accessible and offered innovative services to its customers,” said Competition Commissioner Matthew Boswell in a statement.
He and the bureau claim that Shaw “consistently challenged” the big three telecommunications companies.
WATCH The deal with Rodgers-Shaw raises concerns about competition, pricing:
Rodgers’ plan to buy the $ 26 billion Shaw raises competition concerns, prices
Rogers Communications has signed a $ 26 billion deal to buy Shaw Communications pending approval from the Competition Bureau of Canada, CRTC and the Canadian government. The deal has raised fears that reduced competition will further increase Canadians’ mobile phone bills. 1:49
Shaw now provides wireless services to more than two million customers in Ontario, Alberta and British Columbia, its wireless subscriber base has recently doubled and data prices have fallen where they previously increased compared to the previous year, the bureau said.
However, his opposition may not kill the transaction.
Rodgers and Shaw, who revealed the bureau’s intentions over the weekend, have already announced plans to continue the deal and fight the commissioner’s efforts to block it.
It’s not the end of the road, Rodgers, Shaw
Neither company responded immediately to a request for comment, but tried to dispel some of the bureau’s criticism by trying to sell Freedom, which makes up most of Shaw’s wireless services. New Brunswick-based rural ISP Xplornet Communications Inc. and Quebecor Inc. from Montreal are interested in Freedom.
Canada’s Innovation, Science and Economic Development, which has not yet approved the deal, may also block progress on the deal, although the Canadian Broadcasting and Telecommunications Commission signed it earlier this year.
Analysts also doubt that the resistance of the bureau will be a big obstacle.
“Despite this apparent reversal in this process, we continue to believe that the deal is likely to remain approved,” RBC Capital Markets analyst Drew McReynolds said in a note to investors on Sunday.
He believes there will be a number of things Rodgers can do to address the bureau’s concerns and push the deal forward.
“We do not believe that the Commissioner’s statement is an indication that the Rodgers-Shaw deal cannot be rectified, and we continue to believe that the Competition Bureau focuses on the nature of the protection package rather than directly prescribing who he must be this partner for legal protection, “he wrote.
The bureau also has “very bad experience in winning cases,” said Bednar, executive director of the Master of Public Policy in Digital Society program at McMaster University.
Vas Bednar is the Executive Director of the Master’s Program in Public Policy in Digital Society at McMaster University. (Vas Bednar)
She pointed to the bureau’s move last year to try to block what Secure Energy Services Inc. offered. acquisition of Tervita Corporation to protect competition in the oil and gas services sector in Western Canada.
The Competition Court found that “irreparable damage to the competition process and to service buyers … has begun to happen”, but let the merger move forward, as Boswell can only meet two of the three conditions necessary to suspend or even stopping a deal.
Boswell had an “egg on his face”, said Bednar, who believes this could happen again because he sees the case as a “tough battle” with “odds against him”.
However, she said that even the opposition to the deal showed that the bureau had “done its homework”, which may have shocked Rodgers and Shaw.
“I think Rodgers’ lawyers, Shaw, underestimated the teeth and capacity of the bureau. … They thought it would pass and let’s give five, “Bednar said.
“I think they were arrogant and seem genuinely surprised that they would oppose it.
Rodgers and Shaw have 45 days to file a response with the Competition Tribunal. Once these answers have been received, the bureau must respond within 14 days.
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