On May 28, 2014, the Competition Bureau (the "Bureau") announced that it had entered into a Consent Agreement (the "Agreement") with Transcontinental Inc. ("Transcontinental") in connection with its acquisition of Quebecor Media's ("Quebecor") portfolio of 74 community newspapers throughout the Province of Québec. The Agreement requires the divestiture of 34 local community newspapers. The Agreement states that there is no minimum sale price for the papers to be divested and that Transcontinental may be allowed to retain ownership of papers that cannot be sold.

Background

On December 5, 2013, Transcontinental agreed to acquire Quebecor's entire community newspaper portfolio, including web, mobile and printed formats, as well as regional offices and pre-press hubs located in Rimouski, Saint-Georges and Val D'Or (the "Proposed Transaction"). 

Bureau's Analysis

The Bureau's review focused on the potential enhancement of market power by Transcontinental in the (i) door-to-door distribution of community newspapers and third-party flyers; and (ii) the sale of advertising in community newspapers, which could lead to higher prices for advertisers.

The Bureau's analysis indicated that Transcontinental and Quebecor were vigorous competitors and that they had launched or acquired newspapers in certain local markets in the Province of Québec where the other party was the historical incumbent.  Another relevant factor also considered by the Bureau was that many of the community newspapers were facing serious financial difficulties – consistent with the general decline in the print newspaper industry in Canada and other jurisdictions.

The Bureau concluded that Transcontinental and Quebecor were each other's closest competitors in the areas where they both owned a community newspaper. For this reason the Bureau took the position that the Proposed Transaction would result in Transcontinental owning the only community newspaper(s) in those markets, leading to a substantial lessening or prevention of competition in those markets.

Under the terms of the Agreement, Transcontinental is obligated to sell 34 community newspapers through a specified sale process. The Agreement states that there is no minimum price below which Transcontinental is not obliged to complete a sale.  Additionally, the Agreement requires that Transcontinental supply distribution and printing services to any potential buyer for at least an initial period – at trade terms equivalent to those provided to the newspapers prior to the announcement of the Proposed Transaction. Transcontinental will be permitted to retain ownership of the newspaper if a sale cannot be completed for a given newspaper. 

Conclusion

The Agreement appears to have been designed to ensure maximum flexibility for the sale process (e.g., sale process is to occur at no minimum purchase price and Transcontinental be permitted to retain ownership if a sale cannot be completed for a given newspaper). The Commissioner of Competition's stated goal for the sale process is to "maintain competition in local markets through a sale process in regions where [Transcontinental and Quebecor] strongly compete against one another."

Whether a sale of some or all of the newspapers in question will be effected remains to be seen.  Given the poor economics of the print news media, the fact that papers service small, French-speaking communities and the foreign ownership restrictions applicable to the print media industry, there are likely to be very few interested buyers.  Further, even if a buyer can be found, if they are not well-resourced with industry experience, it is questionable how effectively they will be as competitors and for how long.

For a copy of the Bureau press release, please click here.

For a copy of the Bureau's Position Statement, please click here.

For a copy of the Consent Agreement, please click here.  

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