Competition Bureau statement regarding BCE and Rogers’ acquisition of GLENTEL

OTTAWA, May 14, 2015 — This statement summarizes the approach taken by the Competition Bureau in its review of the proposed acquisition of wireless retailer GLENTEL Inc. (GLENTEL) by BCE Inc. (BCE) and Rogers Communications Inc. (Rogers).

The Bureau announced on May 5 that it had reached a consent agreement with BCE and Rogers that resolves its concerns that the transactions would likely substantially lessen competition in the wireless sector. Administrative firewalls will be put in place between BCE, Rogers and GLENTEL to prevent the sharing of competitively sensitive information, including subscriber information, pricing and promotional offers.

In the course of its review, the Bureau consulted with a broad range of market participants, including other wireless carriers and retailers. The Bureau also analyzed a substantial volume of documentary evidence and made use of a range of qualitative and quantitative analytical tools.

Background

Pursuant to an agreement announced on November 28, 2014, BCE proposes to acquire all of the outstanding common shares of GLENTEL, and pursuant to an agreement announced on December 24, 2014, Rogers proposes to indirectly acquire 50% of GLENTEL from BCE such that following completion of the transactions BCE and Rogers will each have 50% direct or indirect interest in GLENTEL.

In Canada, GLENTEL operates over 359 wireless retail stores under the banners WIRELESSWAVE, WAVE SANS FIL, Tbooth Wireless, MacStation and Samsung, as well as Costco’s WIRELESS etc… and SANS-FIL etc… mobile kiosks. Currently, the vast majority of GLENTEL locations exclusively supply the wireless products and services of BCE and Rogers. The exceptions are in British Columbia, where GLENTEL’s Samsung stores distribute Telus products, and in Saskatchewan, where GLENTEL distributes SaskTel products. GLENTEL is a sales agent for these carriers.

Analysis

The focus of the Bureau’s review was on determining whether the proposed transactions would substantially prevent or lessen competition in local markets across Canada for the retail sale of wireless telecommunications products and services. In particular, the Bureau’s assessment focussed on two questions:

  1. Would the transactions likely prevent competition substantially by hindering the retail expansion of other wireless carriers?
  2. Would the transactions likely lessen competition substantially through coordinated effects by leading to less vigorous competition between BCE and Rogers?

Substantial prevention of competition

There are a number of retail channels available to consumers in Canada to purchase wireless products and services, including wireless carriers’ corporate stores and multi-carrier retailers, such as GLENTEL, that offer products of two or more competing carriers.

The Bureau assessed whether the transactions would likely limit the development of future competition by preventing another carrier from being distributed through GLENTEL locations, or by generally raising barriers to entry or expansion for other wireless carriers. After examining a significant volume of company records and speaking with a wide range of market participants, the Bureau did not find evidence of likely entry that would be prevented by the transactions.

The evidence demonstrated that timely entry by another carrier into GLENTEL locations was not likely absent the transactions due to, among other things, the nature of the agreements that BCE and Rogers already have with GLENTEL, which contemplate continuation of GLENTEL’s two carrier business model with BCE and Rogers.

The Bureau found that access to real estate in some large malls can be challenging at times for wireless carriers, partly because the landlords believe that these malls already have a sufficient number of wireless retailers. However, the Bureau determined that the transactions would not significantly affect the ability of other carriers to obtain real estate in malls where GLENTEL is located or in the same local area as those malls.

The Bureau determined that the sale of wireless telecommunications products and services through GLENTEL itself is not likely a relevant antitrust market since a price increase would be constrained by consumers’ ability to purchase from other retail locations in close proximity, often in the same mall. GLENTEL accounts for a relatively small proportion of total wireless activations in Canada, with wireless carriers’ corporate stores serving as the most common location for consumers’ wireless purchases.

Coordinated effects

The Bureau has previously alleged that the wireless telecommunications industry in Canada is one in which there is pre-existing market power. The Bureau’s review considered whether competition for the retail sale of wireless products and services would be substantially lessened as a result of joint ownership of GLENTEL by BCE and Rogers.

In most of its locations, GLENTEL is a sales agent exclusively for BCE and Rogers. Based on the Bureau’s analysis, GLENTEL does not have a material influence on wireless prices. GLENTEL has no pricing discretion over carrier rate plans offered in its locations, and does not have a material influence on promotions. The timing and nature of promotions in GLENTEL are largely determined by BCE and Rogers, and this will continue post-transactions.

However, GLENTEL has and will continue to have access to the subscriber information, pricing and promotions of BCE, Rogers and other carriers for whom GLENTEL provides distribution services. The ownership of GLENTEL by BCE and Rogers could facilitate access to each other’s competitively sensitive information, as well as that of competing carriers for whom GLENTEL provides distribution services in Saskatchewan and British Columbia. The competitive effects that could arise from BCE and Rogers’ ability to access each other’s confidential information through joint ownership of GLENTEL are not limited only to consumers in GLENTEL locations. Having notice of competitors’ promotions and subscriber information through GLENTEL could affect all sales channels, and would likely give the parties the ability to substantially lessen competition, leading to consumers paying higher prices for wireless products and services.

Remedy

The Bureau determined that firewalls, in the form of a confidentiality protocol in a consent agreement, will ensure competition for the retail sale of wireless telecommunications products is preserved.

Pursuant to the consent agreement, BCE and Rogers will maintain exclusive control over their respective pricing and promotion in GLENTEL and will not exchange this information with the other party. Further, the confidentiality protocol prevents BCE and Rogers from obtaining information from GLENTEL’s management relating to any subscriber, or forward-looking pricing, promotions or marketing strategies of other carriers. It also limits the historic sales and revenue information that GLENTEL management can share with BCE and Rogers.

A monitor has been appointed to ensure the proper implementation and compliance with the consent agreement.

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.

However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.


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