On February 1, 2011, the Competition Bureau issued a statement in respect of the proposed
acquisition of CTVglobemedia Inc. by BCE Inc. The statement noted
that the Bureau was "cognizant of the growing trend toward
vertical integration in the broadcasting industry" and that it
was reviewing issues of vertical foreclosure. The statement also
noted that the Commissioner of Competition would "closely
monitor" the CRTC's vertical integration hearings and
subsequent regulatory developments in that same regard.
On September 21, 2011, the CRTC released its decision, Broadcasting
Regulatory Policy CRTC 2011-601, setting out a regulatory framework
for vertical integration among broadcasting and programming
companies. In its decision, the CRTC imposes a number of
restrictions on the activities of "vertically integrated"
companies, which for the purposes of the decision it defines as
companies that control both programming services (such as
conventional television stations) and distribution services (such
as cable or satellite systems). More specifically, some of the
restrictions imposed by the decision include:
Restriction on Exclusivity: In proposed
amendments to the Exemption order for new media broadcasting
undertakings1, to be published later this year, no
person operating under that order will be allowed to offer
programming designed primarily for conventional television on an
exclusive (or otherwise preferential) basis in a manner that is
dependent on a consumer's subscription to a specific mobile or
retail internet service. However, to encourage innovation in
programming, exclusivity may be offered for programs created
specifically for new media platforms (e.g., content
designed specifically for mobile phones). A notice of consultation
will be published, calling for comments on the draft
Programming Services Must Be Independently
Available: Before the end of 2011, the CRTC will issue a
notice of consultation containing draft regulatory amendments that
will include a provision that all programming services must be made
available to independent broadcasting distribution undertakings
(BDUs) on a stand-alone basis. Therefore,
vertically integrated firms will not be allowed to use their most
popular programming services to encourage sales of less valuable
"No Head Start" Rule: Before the end
of 2011, the CRTC will issue a notice of consultation containing
draft regulatory amendments stating that, whenever a programming
undertaking is ready to launch a new pay or specialty service, it
will be obligated to make that service available to all BDUs. If a
commercial agreement between the parties cannot be reached, the
CRTC will be able to manage the dispute and impose rates. The
"no head start" rule will also apply to television
programming distributed on new media distribution platforms
(including mobile phones and retail internet).
"Code of Conduct" for Commercial
Interactions: The CRTC concluded that there was a
potential for abuse of market power by vertically integrated
entities, and imposed a code of conduct to ensure no party
"uses its market power to engage in anti-competitive
behaviour". The code of conduct, which establishes the
guidelines for commercial arrangements between BDUs, programming
undertakings and new media exempt undertakings, is attached as
Appendix 1 to the CRTC's decision. The CRTC noted that it would
refer to the principles in the Code of Conduct when making
determinations on complaints or other applications.
Penalties for Non-Compliance: In
"appropriate case[s]", the CRTC said that it would impose
financial remedies on non-compliant entities in the form of orders
to pay amounts into a fund for the "benefit of the Canadian
As noted above, several of the new restrictions will be
implemented though regulatory amendments, and will be subject to
further consultation before they are set out in their final form.
The Competition Bureau has not commented on the CRTC's
1. This order applies to, among others, Bell, Rogers,
Shaw, and Quebecor Media.
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