Is the Competition Bureau’s efficiency defence still defensible? 

Rogers is relying heavily on the defence, which says a merger can go ahead if cost savings outweigh negative impacts on competition

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Last year, Jennifer Quaid, a professor specializing in competition law at the University of Ottawa, predicted a “holy battle” over the efficiency defence in an interview with the Financial Post.

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The defence (Section 96 of the Competition Act), which says a merger can go ahead if cost savings outweigh negative impacts on competition, is used to rationalize mergers likely to result in anti-competitive effects, including higher prices. Competition Bureau Commissioner Matthew Boswell has called it “cause for concern,” and noted the defence raises “significant practical challenges for the Bureau to estimate and measure anti-competitive harm.”

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Even C.D. Howe’s Competition Council is divided on it. Meanwhile, during an invitation-only Senator-led consultation held late last year, many respondents questioned the durability of the defence and urged a rethink. In the Competition Bureau’s fascinating and important response to the consultation, it said, “efficiencies should not be given primacy in merger review.” 

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Strangely, no other G7 country has emulated Canada’s approach to efficiency in considering mergers. It’s starting to feel like a weird little loophole, not a compelling cornerstone for a country’s competition law.

The Rogers Communications Inc. and Shaw Communications Inc. tie-up relies heavily on this defence as a get-out-of-not-merging card. Claimed efficiencies are a major pillar of their argument, and another is their claim that there is no anti-competitive effect to the wire-life aspect of the merger. Throughout their official filings, both Rogers and Shaw have denied the Bureau’s allegation that there are anti-competitive effects to the merger. 

Soon after the intention to merge was announced in March of 2021, my research collaborator Robin Shaban explained how Canada’s efficiencies defence would likely enable the deal to go ahead. At the time, the Competition Bureau was already receiving an unprecedented volume of feedback on the proposal. Since then, we have learned more about the logic offered by Rogers and Shaw through the media and in filings with the Competition Tribunal, which are publicly accessible.

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One thing this proposed merger has done is illuminate the stark differences that go into arguing efficiency to the Tribunal under the current Competition Act, while showing at the same time how that same argument isn’t at all compelling to ordinary people. That is probably why Rogers isn’t trumpeting the cost-savings arguments it is making to the Tribunal in the press.

Recall that in a House of Commons report from March of this year, the Standing Committee on Industry and Technology threw some serious shade at Rogers — not just because the committee revealed it “believes the merger should not proceed,” but because the report noted the committee was, “puzzled by the arguments of Rogers and Shaw. Rogers has linked a number of commitments to the merger that the government has no way to enforce.” Ultimately, the cross-party committee was “not convinced by the arguments of Rogers and Shaw regarding the merits of the proposed merger.”

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Roger’s filings from June 16th (“cost savings through headcount reductions”) and August 19th (“labour-related savings”) clearly imply savings through job cuts. These admissions seem contrary to their public narrative of job creation. Researchers have noted that though the Bureau has the power to block mergers that undermine wages or job quality, there is no evidence the Bureau has ever considered workers when reviewing any merger in the past. 

Why are we still letting Canada’s competition law hinge on this defence, when it doesn’t make sense to everyday people and is disingenuously reflected by the firms that leverage it to their advantage? It’s from another era and is reminiscent of Jack Welch, the man now recognized for breaking capitalism. While the efficiency defence delivers value for shareholders, it inflicts irreparable harm to Canadians. It consistently robs the public of a more robust marketplace. In 2015, the Supreme Court of Canada noted the efficiency defence recognizes that consolidation can be more beneficial than competition in an international trade context. Even former commissioner John Pecman has called the defence a “vestige of the past,”  and said it is “losing its relevance in a digital economy.”

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Canadian competition law should embody a broader range of economic values than just efficiency. Right now, the defence has Rogers telling one story to the Competition Tribunal and another to the Canadian public. For example, in its March 2021 press release, Rogers said the merger would “create new jobs,” yet its submissions to the Tribunal frequently mention anticipated job losses. Which one is it?

If the government is planning to comprehensively review the Competition Act and potentially eliminate this antiquated defence, why should this merger squeak through and in the process, result in the firing of thousands of people? If you are one of the thousands of Shaw employees in British Columbia and Alberta who are “efficiencies,” wouldn’t you want the government to step up now?

Just over a month ago, thousands of Canadians were in virtual darkness during the Rogers outage. No one should be in the dark over the anticipated outcomes of this merger, who they hurt (workers and consumers), and who they reward (investors). Should the merger move forward, it will do so because we have so far lacked the courage to substantively challenge the contemporary utility of a rationale designed in, and better suited to, 1986.



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