Canada: Who´s On First?

Last Updated: February 24 2003

Article by Robert Malcolmson and Michael Koch

Introduction

A recent jurisdictional tussle pitted the Bureau of Competition Policy’s general mandate under the Competition Act against the specific mandate of the Canadian Radio-television and Telecommunications Commission ("CRTC" or the "Commission") under the Broadcasting Act.

The Federal Court of Canada had been asked to rule on the respective jurisdictions of the CRTC, and the Competition Tribunal in the context of a proposed sale of media assets. The matter was recently settled by way of a consent order that saw the purchaser agree to the divestiture of certain assets. If the matter had not been resolved consensually, the Federal Court’s decision could well have had far reaching implications for future mergers of media companies that are regulated both under the Broadcasting Act and the Competition Act.

The dispute began on December 21, 2001 when the Commissioner of Competition Policy (the "Commissioner") filed an Application with the Competition Tribunal seeking an order prohibiting Astral Media Inc. ("Astral") from acquiring certain radio stations owned by Telemedia Radio Inc. The request for an order of prohibition flowed from the Commissioner’s determination that the proposed transaction would result in a substantial lessening of competition in certain French-language radio markets in the Province of Québec. The Commissioner concluded that the radio advertising market in question was a separate and distinct market from other forms of advertising media such as print (including newspapers, periodicals and outdoor advertising) and television. Consequently, these other forms of media were not viewed as effective substitutes.

In response to the Commissioner’s request for an order of prohibition from the Competition Tribunal, Astral Media asked the Federal Court of Canada to issue a declaration stating that the Competition Act did not apply to the proposed transaction and that the Commissioner did not have jurisdiction under the Act to conduct an inquiry in respect of this transaction.

Five months after the Commissioner sought to block the merger, the CRTC issued Decision 2002-90 approving Astral’s acquisition of the Telemedia radio stations. In approving the transaction, the Commission determined that the acquisition was in furtherance of the statutory objectives of the Broadcasting Act, consistent with the Commission’s Commercial Radio Policy and would "improve the competitive position of private French-language radio in Québec" (CRTC Decision 2002-90, paragraph 3).

The CRTC’s Decision stands in stark contrast to the conclusions of the Commissioner of Competition Policy. In its Decision, the CRTC took the view that the radio advertising market is not a separate and distinct market but rather a subset of a larger advertising market that includes television and print media. To this end, the CRTC accepted evidence led by Astral that in recent years both AM and FM radio stations in Québec have lost considerable market share to television and daily and weekly newspapers. Second, the Commission accepted Astral’s argument that a greater concentration of radio and the establishment of strong radio networks with Québec-wide coverage were essential for radio to compete with other highly concentrated media mega-companies in the Province of Québec, notably Québecor/Vidéotron. Third, the Commission noted in its Decision that save and except for one limited exception, Astral’s proposed acquisition was consistent with the Commission’s Commercial Radio Policy which permits an entity to own or control as many as two AM and two FM stations in a single language in markets with eight commercial radio stations or more, and to own or control as many as three stations (with a maximum of two stations in any one frequency band), in markets with fewer than eight commercial radio stations.

In its Decision, the Commission held that the various daily newspaper, television and other media operating in each of the markets in question, while not "perfect substitutes" for radio, did serve as "effective alternatives" and that the evidence demonstrated that television offered local advertisers inventories and costs that are competitive with those offered by radio in certain of the markets in question. Moreover, the Commission made these findings of fact while also recognizing that the transaction "will position Astral Media as the largest player in Quebec’s radio industry, whether measured by the number of radio stations owned, audience share or revenues".

Traditionally, the CRTC and the Competition Bureau have peacefully co-existed by asserting parallel jurisdiction with respect to merger reviews. Both bodies have taken the view that any transaction must comply with the Competition Act and the Broadcasting Act, as administered by the Commissioner of Competition Policy and the CRTC respectively. Based on the CRTC’s findings and the findings of the Commissioner of Competition Policy following its merger review, the concept of parallel jurisdiction threatened to be tested to its fullest extent. Specifically, the Astral case raised some key questions:

  1. Was there a true operational conflict between the exercise of the CRTC’s jurisdiction under the Broadcasting Act and the exercise of jurisdiction by the Commissioner of Competition Policy pursuant to the Competition Act? If so, how will the Federal Court of Canada resolve this operational conflict?
  2. In a proceeding before the Competition Tribunal, was Astral entitled to avail itself of the "regulated conduct" defence by relying on the CRTC’s findings in its Decision?
  3. Did the CRTC exceed its jurisdiction under the Broadcasting Act by making findings of fact and applying economic tests typically associated with merger reviews under the Competition Act?

Operational Conflict?

Traditionally, the Courts have found that an operational conflict exists where two administrative tribunals reach decisions that are truly in conflict, meaning compliance with one necessitates the violation of the other. In this particular case, the CRTC decided that the acquisition by Astral of the Telemedia radio stations was in furtherance of the statutory objectives of the Broadcasting Act and as such could proceed. By way of contrast, the Commissioner of Competition Policy referred the transaction to the Competition Tribunal on the basis that if it were to proceed, it would result in a substantial lessening of competition in the relevant market. The Court might have found that there is no true operational conflict. Rather, the Court may have found the Astral acquisition, while permissible under the Broadcasting Act, simply was not compliant with the provisions of the Competition Act. As a result, Astral would have been required as it ultimately did, to address the Commissioner of Competition Policy’s concerns (i.e. through conditions such as the divestiture of certain stations in certain markets) in order to be able to proceed with the transaction. A restructuring of the transaction of course necessitates another round of regulatory filings and approvals by the CRTC pursuant to the Broadcasting Act to deal with regulated assets being reallocated or otherwise spun-off.

If the actions of the Commissioner of Competition Policy and the CRTC were viewed as true operational conflicts, the question would have been how does the conflict get resolved? In the leading case of British Columbia Telephone Co. v. Shaw Cable Systems (BC) Ltd. the Supreme Court of Canada held that the court should employ a pragmatic and functional approach and decide in light of the policy schemes surrounding each of the administrative tribunals and the nature of the conflicting decisions which the legislature would have intended to take precedence.

Factors taken into account include the legislative purpose behind the establishment of each administrative tribunal, the extent to which an administrative tribunal’s decision is central to the purpose of that tribunal and the degree to which an administrative tribunal in reaching a decision is fulfilling a policy-making or policy implementation role. It is this last criterion which might very well have been determinative in the case at hand. The Courts have consistently recognized the CRTC’s broad policy-making role pursuant to the Broadcasting Act. In the Astral case, the high level of curial deference traditionally accorded to the CRTC would have been tested.

Regulated Conduct

The regulated conduct defence generally provides that activity specifically required or authorized pursuant to a valid scheme of regulation is deemed to be in the public interest. In its submissions to the Federal Court of Canada, Astral Media asserted that the regulated conduct defence or exemption applied to its acquisition of the Telemedia radio stations. By way of contrast, the Commissioner of Competition Policy took the position that the regulated conduct defence or exemption was inapplicable. It would certainly appear that the applicable criteria established by the Supreme Court of Canada in R. v. Canadian Breweries Ltd. and Canada (A.G.) v. Law Society (British Columbia) to establish the regulated conduct defence were present. To summarize, in order for the regulated conduct defence to apply the following key factors must be present:

  1. An industry must be subject to regulation pursuant to validly enacted legislation.
  2. The defence is limited to those activities or types of conduct specifically subject to regulation.
  3. It is not enough for the regulatory body merely to possess the authority to control the activity or conduct in question, the regulatory authority must be exercised in order for the defence to apply.

Each of these factors was present in the Astral case. The radio stations acquired by Astral were all licensed radio programming undertakings pursuant to the Broadcasting Act and ownership transfers require the CRTC’s prior approval pursuant to the Radio Regulations made under the Broadcasting Act. Finally, in this case the CRTC rendered a Decision approving the acquisition. Accordingly, it would appear that all of the constituent elements of the regulated conduct defence were operative.

Prior to Astral’s settlement with the Commissioner, The Federal Court of Canada had an opportunity to clarify the scope of the regulated conduct defence in the Astral case. Uncertainty has traditionally surrounded the scope of the regulated conduct defence. Most of the cases involving the application of the regulated conduct defence have involved a potential conflict between the Federal competition law and a Provincial regulatory regime. Moreover, most of the cases have dealt with a potential conflict between the criminal provisions of the Competition Act and specialized regulation. Accordingly, criminal justice concerns have weighed heavily in some Courts’ decisions to restrict the scope of the Competition Act.

None of the above factors were present in Astral. In Astral, we had two Federal laws and hence no constitutional issue. The provisions of the Competition Act in issue were the civil provisions surrounding merger reviews rather than the criminal components of the Competition Act. Accordingly there was no criminal justice overhang in Astral. As a result, the Court would have had an opportunity to apply the regulated conduct defence in its purest form.

Did The CRTC Exceed Its Jurisdiction Under The Broadcasting Act?

This is another interesting question raised by Astral. Pursuant to the Broadcasting Act the Commission has the broad jurisdiction to "regulate and supervise all aspects of the Canadian broadcasting system with a view to implementing the broadcasting policies set out in subsection 3(1)". Section 3 of the Broadcasting Act contains an extensive list of statutory objectives described therein as the "Broadcasting Policy" for Canada. This policy generally pertains to the development of a broadcasting system that is effectively owned and controlled by Canadians, that promotes the primacy of Canadian programming and ensures a diversity of voices in both official languages. While this statutory mandate does not explicitly empower it to regulate competition issues per se, the CRTC has, since the legislation was first introduced in 1968, imposed a significant degree of competitive regulation on the Canadian broadcasting system through policies on ownership concentration, restrictions on cross-media ownership and most recently in policing anti-competitive behaviour between regulated entities pursuant to an overall prohibition on undue preference. Moreover, the Director of Competition Policy has traditionally acknowledged that the CRTC’s merger review process necessarily involves competition issues such as the impact of mergers on advertising markets.

Consequently, it could be that the Court would have concluded that the CRTC’s assessment of the competitive state of the Quebec radio market was nothing more than a necessary adjunct to the exercise of its jurisdiction under the Broadcasting Act. However, a contrary view can also be taken. For example, in Astral, the Commission made a determination that radio was part of a larger advertising market and that other components of that larger market functioned as effective substitutes for any lessening of competition that would result from the position Astral would occupy in the market. These conclusions led in part to the Commission’s decision to approve the merger.

With the settlement of this case, we will have to wait and see how the Federal Court addresses this issue of jurisdiction.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions