The Federal Court of Appeal has decisively rejected the Commissioner of Competition’s bid to overturn a tribunal decision approving the $26-billion merger between telecom giants Rogers Communications Inc. and Shaw Communications Inc., paving the way for one of the biggest corporate combinations in Canadian history.
“It will be pointless to send this case back to the Competition Tribunal for re-decision,” Justice David Stratas told the court in dismissing the appeal during a one-day hearing in Ottawa Jan. 24.
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In its appeal application, the Competition Bureau had alleged the tribunal “made four legal errors,” and that a different outcome would have been reached if those “legal errors” had not been made. The Court of Appeal, however, did not agree.
“Even if the Competition Tribunal erred on the narrow legal points the Commissioner now raises in this court, we are not persuaded that the result could have been different,” Stratas said.
The merger now only requires approval from Innovation, Science and Economic Development Canada (ISED), led by Industry Minister François-Philippe Champagne. A House of Commons committee, which plans to make recommendations to the minister, is set to hold meetings on Jan. 25 to review the updated deal, including the proposed remedy to sell Freedom Mobile to Vidéotron.
Earlier Tuesday, the judges had asked questions about the Competition Bureau’s legal arguments, reminding the parties that the court could only interfere if the tribunal had committed “palpable and overriding errors” in its decision, which one judge said was “a very high test.”
“We disagree with Commissioner,” Stratas said later in the day, adding that the burden of proof would only matter if there is a gap on the key evidence or where overall the case is so close that a makeweight or tiebreaker is needed. “Close, this case, was not,” he said.
The Commissioner’s appeal came after the Competition Bureau had failed to resolve its objection to the deal with the companies in mid-2022 and then had its attempt to block the deal dismissed by the Competition Tribunal on Dec. 29.
In that decision, the three-member tribunal rejected the Bureau’s arguments that combining the two telecom giants would substantially lessen wireless competition, particularly in light of a side deal to sell Shaw’s Freedom Mobile to Quebecor Inc. subsidiary Vidéotron for $2.85 billion.
Rogers and Shaw have argued throughout the tribunal proceedings that the divestiture of Freedom Mobile ought to allay concerns about reduced competition stemming from the merger. The telcos argued that Vidéotron, a major player in Quebec but with little presence elsewhere, would make for a “stronger” fourth competitor in Canada’s wireless market, in place of Shaw.
Sending the case back to the tribunal for re-adjudication could have had significant consequences for the deal, the court said Tuesday.
“In some cases, this delay, potentially substantial, could cause a transaction that, in fact, is pro-competitive and in the public interest, to die,” Stratas said.
The finding mirrored arguments laid out by lawyers for Rogers in their request to dismiss the Bureau’s appeal in a court filing last week.
“Respectfully, this pro-competitive transaction has been delayed long enough and must be allowed to proceed,” Rogers’ legal counsel wrote.
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Rogers and Shaw have extended the outside date for the merger’s closing to Jan. 31 from Dec. 31. The telecom giants had originally expected to close the transaction in the second quarter of 2022.
Lawyers for Rogers stressed during the tribunal hearings that if a decision wasn’t reached before Dec. 31, the company would have to pay out an additional $250 million to bondholders.
In a note to clients, analysts for National Bank of Canada said following the Federal Court of Appeal’s rejection, the Competition Bureau can, in theory, appeal to the Supreme Court within 60 days — but it is unlikely that the Supreme Court would agree to hear the case.
“We can’t imagine how senior members of the Justice Department would allow such an appeal to be attempted to the top court,” analyst Adam Shine wrote.
Rogers’ stock closed up nearly three per cent at $66.49 in Toronto while Shaw shares closed up a similar amount at $39.50.