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The Competition Tribunal has dismissed an application from Canada's competition watchdog to block Rogers Communications Inc.'s proposed purchase of Shaw Communications Inc., clearing a path for the deal to go ahead.Adrian Wyld/The Canadian Press

A federal tribunal’s endorsement of the deal between Rogers Communications Inc. and Shaw Communications Inc. is raising questions about the role and influence of the Competition Bureau, the country’s mergers and acquisitions watchdog, and the possibility of new precedent for future transactions by Canadian companies, lawyers say.

Late Thursday, the Competition Tribunal rejected the Competition Bureau’s attempts to block the telecom sale after a month of hearings and dozens of witnesses. Friday afternoon, the bureau appealed the decision and applied for an injunction to halt the deal.

The result of that appeal may determine whether the tribunal set a precedent by considering a business deal that took place after the hearing dates were set.

When the bureau filed its application to block the cable takeover in May, Rogers RCI-B-T and Shaw SJR-B-T had not yet announced their agreement to sell Shaw’s Freedom Mobile cellphone network to Videotron Ltd., owned by Quebecor Inc. Whether the tribunal would consider just the original deal, or include the Freedom divestiture, was hotly debated in the run-up to the hearings.

Yet the tribunal’s summary of its decision makes clear that it was more convinced with the companies’ approach than that of the bureau: The deal should be considered including the later proposed divestiture. The tribunal called it part of the “core issue” at hand.

Michael Osborne, a competition lawyer at law firm Cozen O’Connor said the decision could have significant implications for other companies attempting to merge in Canada. The tribunal has now set a precedent by taking into account business deals made after a sale has been challenged by the bureau, and having such a deal play a major part in its final decision. Indeed, the divestiture “proved to be the key to winning this case,” Mr. Osborne said.

Jennifer Quaid, a law professor at the University of Ottawa, said the tribunal’s decision to consider the “modified case” likely has significant implications for the bureau’s persuasive power. “If you take that as the baseline starting point, then I think the capacity to make the anti-competitive arguments becomes a lot harder,” Prof. Quaid said.

She said any value from the precedent will come from the tribunal’s detailed decision report, expected by Saturday night.

Mr. Osborne said the decision also challenged the bureau’s ability to veto deals if it does not provide assent. The bureau argued that the divestiture of Freedom was not an adequate remedy.

“If the tribunal is of the view that a deal works because it’s already written down in contracts and enforceable contracts, all they have to do is dismiss the case. That’s what they did,” Mr. Osborne said.

By including the Freedom divestiture in its consideration, the decision could also have removed a useful tool for Matthew Boswell, the Commissioner of Competition, to argue that certain elements of the Competition Act should be updated, the lawyers said.

Mr. Boswell has long called on Ottawa to review the act, and in particular, the efficiencies defence, which allows deals to go forward if they create significant cost savings for the Canadian economy, even if it lessens competition. That review is currently under way, launched in November.

The efficiencies defence was expected to play a significant role in the legal proceedings, but in the end was not factored in because the tribunal decided there was no loss of competition as a result of the Freedom divestiture.

Had the companies won on merit of the efficiencies defence, Ms. Quaid said, it would have served Mr. Boswell well as evidence that the act needs to be changed.

“This outcome really takes a lot of the force out of that argument, because they failed to prove anti-competitive effect,” said Ms. Quaid.

The deal is also dependent on approval from Industry Canada, which is currently reviewing the transfer of wireless licences from Shaw to Quebecor.

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