On August 19, 2014, the Competition Bureau (Bureau) announced
that Bragg Communications Inc. (Eastlink) has decided not to
proceed with its proposed acquisition of Bruce Telecom from the
Municipality of Kincardine, Ontario, after the Bureau informed the
parties that it would challenge the proposed acquisition before the
Competition Tribunal. This followed the Bureau's determination
that the acquisition would likely have substantially lessened
competition in the sale of telecommunications services in Port
Elgin and Paisley, Ontario.
The proposed transaction between Eastlink and Bruce Telecom is
interesting for a few reasons. This transaction was not notifiable
under the Competition Act, but nevertheless prompted a
Competition Bureau investigation.1 Also of note, the
Bureau highlighted that although the transaction impacted
relatively small communities, it would not hesitate in taking
enforcement action given the importance of competitive
telecommunications markets to a modern digital economy. Finally,
this is the second time this year that the Bureau has reported that
a transaction has been abandoned by the parties as a result of
Earlier this year, Eastlink, a telecommunications company
operating across Canada, agreed to purchase Bruce Telecom from the
Municipality of Kincardine. This transaction was not notifiable to
the Bureau under the Competition Act's financial
thresholds. Instead, the deal was brought to the Bureau's
attention by several consumer complaints.
The Bureau found that the proposed acquisition would likely have
substantially lessened competition for the sale of (i) wireline
broadband Internet services and (ii) bundles of home telephone,
television and/or wireline broadband Internet services in Port
Elgin and Paisley.
The Bureau found that Eastlink and Bruce Telecom were direct
competitors in home telephone, television and wireline broadband
Internet services in the two communities. According to the
Bureau's position statement,3 had the proposed
acquisition taken place, customers in Port Elgin and Paisley would
likely have paid higher prices, had less choice and received lower
quality service for certain wireline services. The Bureau also
found that Eastlink's incentives to innovate, invest in its
network and deploy the latest technologies would have been
substantially lessened if it had been allowed to acquire Bruce
The Bureau also considered barriers to entry into wireline
telecommunications. It determined that barriers were high due to
sunk costs related to building out a network and establishing a
market presence; economies of scale in achieving viability; and the
difficulties in competing against entrenched incumbents. The
relatively low population densities in Port Elgin and Paisley were
also seen to compromise the likelihood of entry into those
As part of its analysis, the Bureau found that wireless
telecommunications services (mobile and fixed) are not close
substitutes for wireline broadband Internet services due to
performance and price differences. It also determined that it was
unlikely that improvements in wireless services (quality and
pricing) could be made in a sufficient or timely manner to
constrain the merged entity's enhanced market power in wireline
broadband Internet services. The Bureau also found that there are
no close substitutes for bundles of telecommunications services.
Bundles typically are priced significantly lower than the aggregate
price of individual components and offer consumers the convenience
of receiving a single bill from one service provider.
The Eastlink-Bruce Telecom transaction highlights the risk of
regulatory challenge of mergers. It is a reminder that mergers of
any size may be reviewed and challenged by the Competition
Bureau. As a result, a substantive competition analysis (including
possible opposition to the deal by customers or other stakeholders)
should be part of the assessment of proposed transactions of any
size which may give rise to competition issues.
The Commissioner of Competition addressed innovation, enforcement and policy initiatives at the Competition Bureau in his keynote speech, "Strengthening Competition: Innovation, Collaboration and Transparency."
Used car listing website operator CarGurus Inc.'s attempt to force rival Trader Corporation to supply it with vehicle listing data has encountered a dead end as the Competition Tribunal denied it leave to commence a private application under several provisions of the Competition Act.
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