Back-to-Business: Upcoming merger of Rogers and Shaw yields collusion concerns

Anyone living in Canada is familiar with the names Telus, Bell, and Rogers: the three major cell service carriers. While there are some other noteworthy, smaller providers, such as Shaw and Quebecor, these three companies and their subsidiaries make up the bulk of the telecommunications industry. Rogers was set to acquire Shaw by the end of January 2023, but the date was recently postponed to February 17, 2023, as the firms await government approval—specifically, they need François-Philippe Champagne, minister of Innovation, Science and Economic Development Canada, to approve the merger. 

The companies secured support for the merger from the Competition Tribunal—an independent body that deals with matters pertaining to business and legal affairs. This occurred despite resistance from the Competition Bureau—an enforcement agency responsible for safeguarding market competition, which argued that the merger could raise prices and reduce service quality. 

In conversation with The Medium, David Soberman, a professor of Marketing at the Rotman School of Management, explains that antitrust concerns arise from a lack of proper competition. “With less than four major competitors, what we get is usually a tacit collusion.” Tacit collusion, as he describes, occurs when individual firms all refrain from lowering prices—without any formal agreements. They anticipate their competitors following suit in changing prices, which means lowering prices offers no competitive advantage to the business. “Without competition,” says Professor Soberman, “prices go up, and consumers lose.”

On a global scale, Canadians pay some of the highest prices for cell service and internet in the world, and the oligopolistic nature of the telecommunications market is a primary cause. This problem extends to many large, heavily regulated industries, such as the banking and airline industries. In this way, the government gets tied into what Professor Soberman refers to “as a Catch-22”—strengthening regulations would stop collusion, but it tends to decrease competition. 

The second issue he identifies as a problem for the telecommunications sector is the ban of foreign competition. While the protectionism in the telecommunications sector is intended to support Canadian cultural content, Professor Soberman argues that cell service “doesn’t have the same cultural value” as Canadian media like the news, radio, and television. 

The high prices for cell service and internet negatively affect everyone, but in many cases, students are especially vulnerable. Any working or studying person cannot afford to reject these high prices. “People need these telecommunications services,” emphasizes Professor Soberman. “Especially for international students, cellular connection is usually the first thing you need after stepping off the boat.” The same incentive to not lower prices also discourages offering deals for students and new customers. As such, students’ introduction into the marketplace comes at the same price as it would for a full-time worker.

Prior to being acquired by Rogers, Shaw plans to sell its subsidiary, Freedom Mobile, to Quebecor’s Videotron, which the companies argue will resolve the competition issues of the merger. However, in Professor Soberman’s opinion, the extant competition issues in the telecommunications sector will not be changed for better or worse by this. Ultimately, so long as the market remains centrally concentrated, reduced competition and high prices will remain a concern.

Associate News Editor (Volume 49) — Emily is a third-year at UTM, studying Environmental Science and Political Science. Her academic career is best illustrated by terminal indecisiveness between the humanities and sciences. As a passionate writer, she looks forward to igniting her own creativity for The Medium and hopes to learn from others and grow in her work. Aside from speed typing thousands words worth of analyses, essays, and articles, Emily enjoys spending her spare time running miles through the woods, assembling the perfect outfits, reading on public transit, and drinking copious amounts of coffee. She can be found on Instagram and LinkedIn.


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