On March 25, 2015, after a five month review, the Competition
Bureau cleared the purchase by Postmedia of Sun Media's English
language assets. Postmedia publishes the National Post as well as
local daily papers in towns and cities across Canada, including
Vancouver, Calgary, Edmonton, Ottawa, and Montreal. Sun Media's
principal English language assets are its online Canoe network as
well paid circulation daily newspapers in towns and cities in
Canada including Ottawa, Winnipeg, Calgary, Toronto, Edmonton and
London. As a result of the merger, there will be only one owner of
daily paid circulation newspapers in a number of Canadian cities
including Calgary, Edmonton, and Ottawa.
Historically the Competition Bureau has been quite concerned
about mergers in the newspaper business – taking the
Southam case to the Supreme Court of Canada in
1997.1 It has also historically taken the view that
different types of media (print, online, broadcast, etc.) are not
particularly close substitutes for one another. However, times
change. In its background release with respect to the merger the
Bureau noted a number of factors which lead to its decision not to
challenge the transaction, including:
A lack of close rivalry between Postmedia's broadsheet
newspaper and Sun Media's tabloid newspapers, including their
different editorial focus.
Competition from free local daily newspapers.
The increasing competitive pressures from digital alternatives
in an evolving media marketplace.
The ongoing incentive for the merged company to obtain
readership and maintain editorial quality in order to continue to
attract advertisers to its newspapers.
The Bureau's review of the merger considered the expected
impact both on advertisers in newspapers and readers of newspapers.
This is an interesting aspect of the review. Historically, the
Bureau's focus in media mergers has concentrated very heavily
on advertisers and the effect on advertising – much less so
on readers. In this case the Bureau noted that the merged company
would have an incentive to maintain editorial quality to retain
readers, and that in turn would lead to retaining advertisers.
The Bureau's focus on the merger's impact on both
advertisers and readers, and its focus on the impact of editorial
quality changes on advertising, is an explicit recognition by the
Bureau of the two sided nature of newspaper marketplace. Newspapers
are a classic two sided platform. They must appeal to both
advertisers and readers to be successful. With no readers, they
will have no advertisements. With no advertisements, they will go
out of business. This has always been true for newspapers but had
not been as expressly recognized by the Bureau in its previous
media reviews. It is likely to be a constant and explicit aspect of
future media merger reviews – and likely a feature of all
mergers in industries involving two sided platforms.
Another interesting development is the Bureau's recognition
that, while newspapers are not in the same market as other media,
they face competitive pressure from other media. This is a shift
for the Bureau – one hinted at in its Transcontinental
decision of last year2 – and may have implications
for mergers in other types of media settings.
While the Bureau did not rely specifically on the "failing
firm" defence in its review of this transaction, it was also
clear that the financial state of newspapers, and the fact that
they operate in declining markets, was relevant to the Bureau's
decision to clear the transaction. It took note of the significant
efficiency savings which Postmedia expected to achieve.
The decision likely has implications for media mergers –
and analysis of other sorts of conduct under the Competition
Act for media companies. More broadly, as noted, it reflects
the increasing mainstream understanding of the prevalence of two
sided platforms. While the fact of two sided markets is now well
accepted, there remains an open question as to whether the Bureau
– and other enforcement agencies and courts – as yet
fully appreciate the implications of mergers or other conduct
involving two sided platforms. This decision is at least a step
along the route.
1.Canada (Director of Investigation and Research v
Southam Inc,  1 SCR 748.
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
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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