Federal committee set to launch new review of Rogers’s takeover of Shaw

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A House of Commons committee is preparing to call a second public hearing into Rogers Communications Inc.’s proposed $20-billion takeover of Shaw Communications Inc. before the end of the month, according to sources.

The House industry and technology committee, which recommended against the deal in a report published in March of 2022, plans to take another look at the takeover, as it now involves the divestiture of Shaw’s Freedom Mobile to Quebecor Inc.’s QBR-B-T Videotron Ltd., according to four people familiar with the matter. The sources declined to be identified as they are not authorized to discuss the committee’s plans publicly.

The committee comprises MPs from the Liberal, Conservative and New Democratic parties and the Bloc Québécois. Its recommendations are non-binding but could put pressure on Industry Minister François-Philippe Champagne, whose approval is required for the deal to close.

Mr. Champagne has said that he will not issue a decision on whether to permit the transfer of Shaw’s wireless licences to Videotron until there is clarity around the unresolved legal process. The Competition Bureau is scheduled to face off against Rogers and Shaw at the Federal Court of Appeal on Jan. 24 over the Competition Tribunal’s decision to permit the takeover.

Explainer: How the Rogers-Shaw deal ended up in front of the Competition Tribunal

One of the issues that the committee hearing plans to explore is the process through which Rogers RCI-B-T and Shaw SJR-B-T chose Videotron as the buyer for Freedom Mobile, Canada’s fourth-largest carrier, according to three of the sources. Videotron has agreed to pay $2.85-billion for Freedom, nearly a billion less than the $3.75-billion offered by Globalive Inc., which launched the carrier in 2008 and sold it to Shaw in 2016.

Globalive has previously criticized the sale process for Freedom, calling it “closed and secretive” and a “non-competitive sham.” Its chairman, Anthony Lacavera, alleged in a letter sent to Mr. Champagne, Competition Commissioner Matthew Boswell and the Prime Minister’s Office last year that he and other potential bidders were “deliberately excluded” from participating in the bidding process.

The committee is planning to call witnesses from the cable companies, as well as Mr. Champagne and Mr. Boswell.

A spokesperson for Videotron said Pierre Karl Péladeau, Quebecor’s president and CEO, will appear before the committee on Jan. 25 to discuss Videotron’s plans to compete as the fourth national wireless carrier.

Globalive and Distributel Communications Ltd., an internet service provider that also attempted to acquire Freedom, might be called as witnesses in the hearing, according to several of the sources. (Distributel has since been acquired by BCE Inc.) Representatives of Globalive have been working behind the scenes to encourage the committee to launch a new inquiry, one of the people said.

“We look forward to sharing our perspective toward ensuring the minister has all of the information as he makes this critical decision for Canadians,” Simon Lockie, Globalive’s chief legal officer, said in a statement.

Rogers, Shaw and Videotron are aiming to close their deal by Jan. 31, with counsel for both Rogers and Shaw arguing that the takeover could fall apart if that deadline isn’t met.

The committee’s first hearing into the takeover took place in March of 2021, shortly after Rogers and Shaw first announced their agreement. During that hearing, MPs grilled Rogers and Shaw executives about their claims that the deal – which, at the time, did not contemplate a divestiture of Freedom – was good for competition.

In its report, published roughly a year later, the committee recommended against approving the takeover and urged Ottawa to force Rogers to divest Shaw’s wireless business. Sources said the committee wishes to revisit the issue in light of the planned sale of Freedom and the outcome of the month-long hearing in front of the Competition Tribunal, a quasi-judicial body that adjudicates cases brought by the Competition Bureau.

Late last year, the tribunal decided to permit the takeover, finding that it is not likely to result in substantially higher cellphone bills or otherwise harm competition substantially.

The Competition Bureau, an independent law-enforcement agency, continues to oppose the takeover, arguing that Freedom will be a significantly weakened competitor in Videotron’s hands. The bureau is asking the Federal Court of Appeal to overturn the tribunal’s decision, arguing that three-member panel made legal errors in its rush to issue a judgment.

The competition watchdog argues in documents filed with the Federal Court of Appeal on Friday afternoon that the tribunal’s approach to the case was “an error with profound policy implications.”

Rogers and Shaw entered into a deal with Videotron only after the Competition Bureau moved to block the takeover and rejected a number of other potential buyers. The bureau argues that the tribunal should have first considered how the overall deal between Rogers and Shaw would affect competition, before considering whether the divestiture removes those competitive issues. Doing so would have placed the burden on the cable companies to prove that the divestiture remedies any potential harm to competition.

Instead, the tribunal evaluated the version of the deal that includes the divestiture of Freedom to Videotron, stating that it would be a waste of time and resources to consider a deal that no longer exists.

In its factum, the bureau said the tribunal’s decision sets a precedent that reduces the incentive for settling contested mergers before going to court.

“Parties to a merger will be incentivized to put forward tactical mergers as nothing more than trial balloons, knowing that they can modify the proposed merger after the jurisdiction of the Tribunal has been invoked,” the bureau wrote.

With a report from Irene Galea