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Canada’s Competition Tribunal says it approved Rogers Communications Inc.’s RCI-B-T $20-billion takeover of Shaw Communications Inc. SJR-B-T because it expects that the sale of Shaw’s Freedom Mobile to Videotron Ltd. will create a “more aggressive and effective” wireless competitor.

The tribunal dismissed an application by the Competition Bureau late last week that sought to block the deal between Canada’s two largest cable companies, saying that the agreement is not likely to result in higher cellphone bills or other anti-competitive effects, such as poorer service. The tribunal is a quasi-judicial body that adjudicates cases brought by the bureau, an independent law-enforcement agency that promotes competition in Canada.

The Competition Bureau has already appealed the ruling and applied for an injunction that, if granted, would prevent the deal from closing until the case can be heard.

The appeal creates an additional hurdle for a takeover that has dragged on for close to two years and has already secured the approval of Canada’s telecom regulator, the Canadian Radio-television and Telecommunications Commission, which reviewed the transfer of Shaw’s broadcasting assets to Rogers.

The deal still requires sign-off from Industry Minister François-Philippe Champagne, who has said that he will wait for the legal process to play out before deciding whether to allow the transfer of Shaw’s wireless licences to Quebecor Inc.’s QBR-B-T Videotron.

Shaw urged Matthew Boswell, the Commissioner of Competition, to withdraw his appeal, which was launched before the tribunal had published its detailed reasons on Monday.

“It is now clear that the tribunal rejected the evidence of the most important witnesses of the Commissioner, as well as all of his key complaints and theories. In the circumstances, Shaw urges the Commissioner to reconsider his decision to pursue an appeal,” the company said in a statement Monday evening.

“We are confident that these pro-competitive transactions will bring more choice, more affordability, more innovation and more connectivity to Canadians, and that the Competition Tribunal’s decision was the right one.”

In its reasoning, the tribunal outlined how it arrived at its decision to permit the takeover, which would see Rogers pay $20-billion in cash and assume $6-billion of Shaw’s existing debt. The tribunal sided with the cable companies on a number of key issues that influenced the decision, including how to measure market share and how to model the impact of the deal on wireless prices.

The tribunal noted that Videotron has a track record of competing aggressively through lower prices, which has allowed the Quebec-based telecom to capture considerable market share in its home market. This could strengthen Freedom, currently Canada’s fourth-largest wireless carrier, which serves roughly 1.7 million customers in Ontario, Alberta and B.C.

Rogers and Shaw are aiming to close their deal by Jan. 31, with counsel for Shaw telling the tribunal during its hearing that there is a “very, very, very substantial risk” that the transaction will fall apart if that deadline is not met.

The Federal Court of Appeal on Sunday temporarily suspended the tribunal’s decision on what it calls an “emergency basis” until it can hear and decide on the bureau’s application for an injunction. The timing of that hearing has not been set.

The Competition Bureau says in its notice of appeal, filed on Friday, that the tribunal made legal errors in its rush to issue a judgment.

A spokesperson for the Competition Bureau said the watchdog is “carefully reviewing” the tribunal’s decision and its detailed reasons.

“We remain very disappointed by the Competition Tribunal’s decision to dismiss our application against Rogers-Shaw,” Jayme Albert said in a statement.

The month-long hearing in front of the tribunal focused heavily on Freedom Mobile’s ability to compete under Videotron’s ownership. The Competition Bureau had argued that the sale of Freedom to Videotron would weaken the carrier.

According to the bureau, separating Freedom from Shaw would hamper its competitiveness by reducing its scale, severing its access to Shaw’s cable network and creating a dependency on Rogers because of a “complex web” of agreements that would leave the smaller, Quebec-based telecom vulnerable to anti-competitive actions by its larger rival. The contracts govern the terms under which Videotron could access cable infrastructure in Western Canada to connect cellphone calls.

The Competition Tribunal disagreed with the bureau, noting that rather than reducing scale, Videotron’s acquisition of Freedom would create a wireless carrier with higher revenue, more subscribers and a larger portfolio of wireless licences.

The $2.85-billion that Videotron is paying for Freedom is “substantially less” than the $4.5-billion that Shaw has invested in the carrier since 2016, the tribunal added, which gives the carrier a “much more advantageous cost-base from which to compete.”

“Indeed, to the extent that Videotron is much more committed than Shaw to be a long-term participant in the relevant markets, the tribunal expects that Videotron would be a more aggressive and effective competitor than Freedom and Shaw Mobile likely would have been in the absence of the merger,” the tribunal wrote.

A total of 40 witnesses appeared before the tribunal – 13 experts and 27 laypeople, including employees at the telecom companies. Overall, the tribunal found the expert witnesses who testified on behalf of Rogers more persuasive than those enlisted by the Competition Bureau.

The bureau also called on four senior executives from BCE Inc. and Telus Corp. as witnesses, but the tribunal found that their testimony “strained credulity” given the companies’ spirited opposition to the deal. In particular, the tribunal noted that the witnesses from Telus were evasive and repeatedly unable to recall certain key facts.

The bureau’s appeal argues that the tribunal should not have included the divestiture of Freedom in its initial consideration of the takeover, and instead should have heard the case based on the deal solely between Rogers and Shaw. The cable companies initially blocked Videotron from the sale process for Freedom and only struck a deal with the Montreal-based company in June of last year, more than a year after the Rogers-Shaw deal was announced.

The companies, the bureau said, did not follow proper legal protocol in striking the divestiture agreement, which took place after the watchdog had already applied to block the sale, and that therefore it was “irrelevant and beyond the jurisdiction of the tribunal.”

However, the Competition Tribunal disagreed with this interpretation, saying that the approach suggested by the bureau is “divorced from reality,” a waste of time and inconsistent with the Competition Act. As a result, the tribunal considered the takeover with the divestiture included, an approach that critics say opened the door for a decision in favour of the companies.

Jennifer Quaid, a law professor at the University of Ottawa, said she was surprised that the tribunal’s explanation of their decision to focus on the divestiture was so brief and “legally thin,” considering how important that approach was to the final outcome.

“This is the linchpin of the decision, in my opinion,” Ms. Quaid said.

Ms. Quaid also said it was “unfortunate” that the tribunal did not weigh in on the cost savings, or efficiencies, that would result from the takeover. Canada’s competition laws allow mergers or takeovers to go ahead if private benefits, such as cost savings for the merging parties, outweigh the potential harms to consumers.

The efficiencies defence comes into play when a deal is deemed anti-competitive by the tribunal. However, despite the large volume of evidence during the hearing that concerned efficiencies, the tribunal concluded that it was “unnecessary” to consider those cost savings because the deal is unlikely to substantially lessen competition.

Editor’s note: An earlier version of this story incorrectly attributed a quote to Rogers counsel rather than Shaw counsel. The Competition Tribunal made the mistake in the document outlining the reasons for its decision and misquoted the lawyer.