opinionRogers-Shaw resolution units a worrying precedent for future takeoversJennifer QuaidJanuary 4, 2023
Jennifer Quaid is an affiliate professor and vice-dean of analysis within the civil regulation part of the College of Ottawa’s School of Regulation.
Regardless of all of the hype in regards to the proposed Rogers-Shaw takeover turning on the notorious efficiencies defence, the choice as a substitute hinges on the Competitors Tribunal’s reply to a preliminary query: Which deal was being reviewed – the unique Rogers-Shaw merger or the modified, two-step deal that will divest Shaw’s Freedom Cell to Videotron earlier than Rogers acquires Shaw for $20-billion and takes on $6-billion of its debt?
This query had by no means been raised on this method earlier than, and the Dec. 29 resolution of the tribunal – that the modified deal was the suitable one to evaluation – units a worrying precedent, probably smoothening the trail for such large mergers by altering the best way they’re scrutinized. It isn’t a shock that the Commissioner of Competitors has determined to enchantment the choice on this level, a matter the Federal Courtroom of Attraction will hear this month.
In taking the modified deal because the baseline for his or her evaluation, the tribunal has implicitly determined that divesting Freedom is an effective treatment earlier than even contemplating the complete vary of anticompetitive results from a takeover of Shaw by Rogers.
Merger evaluation is a three-step course of: 1) an analysis of any anticompetitive results to find out if they’re substantial; 2) if sure, consideration of the countervailing affect of any efficiencies generated by the merger; and three) if there are nonetheless substantial aggressive impacts after step 2, an evaluation of the suitable treatment.
Towards this backdrop, the choice by Rogers and Shaw to vary their deal by including the sale of Freedom to Videotron – after the Commissioner had filed his problem – was basically an alternate treatment proposal, cleverly offered as a brand new however important situation with out which the deal wouldn’t occur in any respect.
This has three essential results. First, eradicating Freedom from the evaluation up entrance narrowed the evaluation to the residual anticompetitive issues exterior of Freedom, a extra restricted foundation on which to conclude that the deal brought on a considerable lessening of competitors. Second, it grew to become legally pointless to think about the affect of efficiencies, an unlucky end result since a lot of the listening to was dedicated to proof and argument on that time. Third, there was no evaluation of the Freedom divestiture as an efficient and enough treatment, although it was clearly added to the deal to handle issues about anticompetitive results. As a sensible matter, treating the divestiture as a part of the deal does an finish run round the best way merger evaluation is meant to work.
Some have instructed that the tribunal’s evaluation of which “merger” is beneath evaluation is a mere technical matter and that the Commissioner’s enchantment is an pointless and unfair waste of time. I concede it’s fairly attainable that an enchantment received’t change something for the Rogers-Shaw deal. Even when the Federal Courtroom of Attraction finds that the tribunal made a mistake and will have seemed on the complete deal first, then examined the divestiture on the treatment stage, given the tribunal’s evaluation of the proof, it might very effectively resolve the divestiture is an acceptable and enough treatment and the deal can undergo.
However focusing solely on the specifics of the Rogers-Shaw case overlooks the longer term ramifications of the tribunal’s novel evaluation, which stretches present interpretations of the regulation and raises a basic query: How a lot deference must be afforded to deal modifications unilaterally proposed by the merging events, the place these are meant to allay issues about their post-merger potential to have interaction in anticompetitive practices? Notably when a merger is modified after it’s challenged, is it within the public curiosity for the brand new deal to easily substitute the unique one, given the appreciable time and enforcement sources more likely to have been expended in preparation for a problem of the unique deal? How can we guard in opposition to the foreseeable threat of tactically timed last-minute deal adjustments? What scrutiny must be delivered to bear on unilaterally proposed cures as to their effectiveness? And what proof must be required to determine that the treatment is within the public curiosity when the Commissioner doesn’t agree with the treatment?
Many anticipated the choice on the Rogers-Shaw merger to be consequential for competitors regulation, given the stakes for either side. Nevertheless, few would have predicted the best way issues have really performed out. Slightly than being a lightning rod for these looking for to change or eradicate the efficiencies defence, the Rogers-Shaw case must be the impetus for a severe rethink of the merger evaluation course of and the principles that govern contested instances earlier than the tribunal.