On September 3, 2014, the Competition Bureau (the
"Bureau") announced the outcome of the divestiture
process in the Transcontinental/Quebecor deal, which resulted in
the sale of only 14 of the 33 community newspapers that were to be
sold off. The unsold papers will cease publication (with the result
that Transcontinental will own the only remaining community
newspaper in several communities). This outcome is not surprising
and illustrates the difficulty in effecting divestiture remedies in
As discussed in our previous blog post (see our blog post from
May 28, 2014), in December 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").
Following its review, the Bureau concluded that Transcontinental
and Quebecor were each other's closest competitors in the areas
where they both owned a community newspaper. In many markets, 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
To address the Bureau's concerns, the parties entered into a
Consent Agreement (the "Agreement"), which required
Transcontinental to sell 33 community newspapers. The Agreement did
not set a minimum price below which Transcontinental was not
obliged to complete a sale. Additionally, the Agreement required
Transcontinental to supply distribution and printing services to
any purchaser of the divested newspapers for at least an initial
period – at trade terms equivalent to those historically
provided to those newspapers.
Majority of Newspapers Not Sold
The sale of 14 community newspapers approved by the Bureau
includes three traditional weekly newspapers (Le Journal de
Saint-Hubert, Rive-Sud Express and
L'Écho du Nord) and 11 online format
Despite the incentives built into the sale process (i.e., no
minimum price and the requirement that Transcontinental provide
distribution and printing services to potential purchasers), no
buyer was found for a majority of the community newspapers. This is
not surprising given the poor economics of the print news media
(especially in rural communities), the fact that the circulation
areas of many of these papers were small, French-speaking
communities as well as the foreign ownership restrictions
applicable to print media industry.
Given that no buyer could be found for these community
newspapers, Transcontinental was allowed to retain ownership. Not
surprisingly, immediately after the Bureau's announcement that
the divestiture process had been completed, Transcontinental
announced that it would reorganize its weekly newspaper portfolio
and as a result, would cease publishing 20 community newspapers and
lay-off 80 employees.
This case illustrates the difficulties associated with
attempting to effect a divestiture process in a dying industry.
While the result in this case was not perfect (in that many papers
remained unsold and will be shut down) it is preferable to the
alternative – had the Bureau blocked the transaction,
Quebecor would have likely wound down all of the community
newspapers over time.
For a copy of the Bureau's press release, please click here.
For a copy of Transcontinental's press release, please click here.
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The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
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