Federal Industry Minister François-Philippe Champagne is asking Rogers Communications Inc. and Quebecor Inc. for firm commitments to maintain affordable and accessible wireless service after their planned transactions, including signing written undertakings that impose consequences if the companies fail to keep their promises, sources with knowledge of the situation say.
In a two-step deal, Quebecor Inc.’s Videotron has agreed to acquire Shaw’s Freedom Mobile wireless carrier for $2.85-billion, while Rogers takes over Shaw for $20-billion.
The three companies on Monday extended the self-imposed deadline for their deal by about two weeks, from Tuesday to Feb. 17, in order to meet the government’s conditions, the sources say. The Globe and Mail is not identifying the sources because they aren’t authorized to speak publicly.
The fate of the takeover now rests with Mr. Champagne, who is facing some political pressure to delay his approval of the deal. In an open letter published last week, several Conservative members of Parliament urged the minister to wait for the outcome of an investigation by the Canadian Radio-television and Telecommunications Commission.
Mr. Champagne has said his approval is dependent on two conditions: that Quebecor not sell Freedom’s wireless licences for 10 years, and that it bring down prices outside its home market of Quebec. Although Quebecor has agreed to these conditions, critics of the deal have warned that the commitments are not legally enforceable, potentially leaving the federal government without recourse should Quebecor break its word.
It remains unclear how exactly the undertakings would be enforced, including how wireless service prices would be measured. Legal experts say there is currently no designated statutory regime that would govern such a deal, and while agreements made between private entities can be adjudicated in court, ad-hoc contracts between companies and the government are typically more complex than a simple signed agreement.
Igor Ellyn, a commercial lawyer at Toronto-based firm Ellyn Law LLP, said an undertaking is, legally, a promise to do something in the future. Any undertaking between Mr. Champagne and the companies would likely need to clearly state the conditions, the consequences and the body to which the companies would be responsible.
“If it’s vague, it might be hard to figure out what to enforce,” Mr. Ellyn said.
The undertaking would also need to lay out what steps the government would need to take in order to enforce the conditions. This could include a lawsuit, an application to the court or possibly a legal remedy without the involvement of a court. Creating a binding agreement “could be complicated,” Mr. Ellyn said.
In a decision in December, the Competition Tribunal said the conditions set by Mr. Champagne did not appear to be legally enforceable, but that it expects they would not be “taken lightly by Videotron” given the company would have to deal with the minister in the future.
Mr. Champagne recently indicated to the Toronto Star that he is in no rush to approve the transfer and that he wishes to ensure that commitments made by Videotron, such as to bring down wireless prices outside of its home province of Quebec, are enforceable.
In extending their deadline until Feb. 17, the three companies said they remain committed to the deal, which has faced obstacles and delays, having been in the works for nearly two years.
The telecoms won a major victory on Jan. 24 when the Federal Court of Appeal dismissed a motion by the Competition Bureau, which was attempting to block the deal that would combine Canada’s two largest cable networks and provide an opportunity for Videotron to expand into new markets. The bureau is an independent law enforcement agency that seeks to protect competition among businesses in Canada.
The competition watchdog had argued at the Competition Tribunal, a quasi-judicial body that adjudicates cases brought by the bureau, that the deal would result in higher prices and poorer service for wireless customers in Western Canada.
However, the tribunal found that the takeover, with the divestiture of Canada’s fourth-largest wireless carrier to Videotron, was unlikely to materially increase cellphone bills. The bureau has decided not to seek a challenge of the appellate court’s decision to uphold the tribunal’s findings at the Supreme Court.
The CRTC will review whether a series of agreements between Rogers and Videotron, which underpin the Montreal-based telecom’s ability to offer internet and wireless bundles in Western Canada, give Videotron an unreasonable advantage over its competitors.
The CRTC, which has jurisdiction over the broadcast aspects of the deal, has already approved the takeover. It’s unclear what bearing, if any, the new probe would have on the deal closing.