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Postmedia deal will force regulator to rethink mandate

Postmedia's proposed takeover of Quebecor's SunMedia newspaper chain has thrown down the gauntlet to Canadian regulators, and forced the country to have a conversation that it has long avoided: How much are we willing to compromise the principles of a diverse and competitive press in the name of keeping it alive?

The deal, announced Monday morning, would (among other things) give Postmedia unprecedented control over major daily newspapers in most of the biggest markets across the country. It would have de facto monopolies in Ottawa, Calgary, Edmonton and Vancouver, and an English-language monopoly in Montreal. This doesn't just alter Canada's print-media landscape, it takes a bulldozer to it.

That is, if it ever clears regulators. The federal Competition Bureau will have its work cut out for it, as it tries to balance the importance of competition in a fast-changing industry against the financial realities of newspapers that in many cases are fighting for survival.

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Those with long memories will recall the Royal Commission on Newspapers, popularly known as the Kent Commission, which was formed in 1980 to address rising concerns about increased concentration and thinning competition in the newspaper business. Back then, newspapers were considered to play such a critical cultural and democratic role that the government launched the Kent Commission within days of the two biggest newspaper chains of the time (Thomson and Southam) simultaneously closing newspapers in Ottawa and Winnipeg that gave each of them a monopoly in one of the cities. The very idea was seen as a serious societal threat.

But the economic reality of the business has changed dramatically over the ensuing generation, and the high principles on which the Kent Commission was based have necessarily been compromised. As the industry fights for survival against Internet competition that has severely eroded its revenue base, newspaper ownership has grown increasingly concentrated, independently owned smaller-market papers have been absorbed by the big chains, and readers in many cities have seen their range of choices thinned.

With the industry shrinking and willing investors becoming fewer and farther between, allowing increased concentration has generally been considered better than the alternative – the prospect of papers shutting down entirely. Meanwhile, the Internet has provided readers with a new range of choices and voices for their news, making the old rules about competition in local markets seem increasingly irrelevant.

As Postmedia rightly points out, it has been free to operate both of Vancouver's two dailies (the Sun and the Province) for more than 30 years. That was tolerated as a less-than-ideal arrangement that at least kept both papers going, and gave the market at least a modicum of choice. But this deal pushes that precedent to a whole new level, basically saying that if it can work in Vancouver, why not Calgary and Edmonton and Ottawa?

The Competition Bureau was quick to attempt to narrow public expectations about how it will deal with the proposed Postmedia/Sun deal. In a statement the bureau issued shortly after the deal was announced, Commissioner of Competition John Pecman said that "While media ownership concentration can raise other public interest concerns, under the Competition Act, the Bureau's mandate is to review mergers exclusively to determine whether they are likely to result in a substantial lessening or prevention of competition."

Perhaps this can be seen as a pre-emptive attempt to punt the responsibility for the public-trust principles of newspapers to a higher authority, namely the federal government. If there's a broader societal good to be protected here, it already sounds like the Competition Bureau doesn't want to touch that issue. Still, even on a pure completion level, the proposed deal will certainly challenge the bureau to rewrite how we define newspaper "competition" in the 21st century.

The big unspoken threat underlying the whole discussion is that if the regulator were to block Postmedia from assuming these print monopolies, they may happen by default anyway. The decline in advertising revenue will make it increasingly unrealistic for many markets to support two competing newspapers. A hard line from the Competition Bureau could, ironically, result in even less choice for readers.

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Perhaps the best route for regulators, be they the Competition Bureau or the federal government, would be to consider what organizational structures should exist to assure that Canadians continue to get meaningful choice in their mainstream print news media. Separations of newsroom functions may be more meaningful than separations of ownership, especially if the alternative is seeing newsrooms closed down entirely.

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