Measure in years the wait for
a real competition policy
By Gordon Mclntosh
think monopoly in
anything is a bad thing for the public, but I like it for myself. I
always like monopolies when I am operating them because, obviously,
they are very profitable"
Roy Thomson, September, 1961
Ottawa may have given the illusion its Combines Investigation Act has
some authority over newspaper monopolies when federal investigators
were rooting about the offices of Thomson Newspapers and Southam Inc.,
in the wake of the simultaneous closings of the Ottawa Journal and
this summer. And it may have shown itself to be concerned when it
anounced the creation of the Kent commission into the effects of
concentrated newspaper ownership.
But within a few months, the public is likely to
what lawyers and monopoly experts have known since 1976, when the
Supreme Court of Canada effectively nulled Canada's merger policy by
ruling that the K.C Irving chain did not have a monopoly detrimental to
the public, even though it owned all five English-language newspapers
in New Brunswick. The feds have little regulatory control over mergers
and monopolies in general, and almost none when it comes to newspapers.
The combines investigators are supposed to
whether there is evidence the two newspaper chains enjoy a monopoly to
the public detriment and have lessened competition. But it's actually
another round between old acquaintances in an ongoing game of monopoly,
in which the country's newspaper giants have been under scrutiny at
least five times in the last 20 years, while the feds rarely have been
able to get past go, frustrated by legislation some say is absurd.
In the most publicized case, the government did
win a conviction against the Irving chain in the New Brunswick Supreme
Court in 1974, when prosecutors argued successfully that the company
enjoyed a full monopoly with detrimental effects to the public. Irving
was ordered to divest itself of the two Moncton newspapers.
But things turned in Irving's favor, when the
Court of Canada ruled in 1976 that Ottawa had only proven there was a
monopoly. It had not proven there was detriment to the public. The
government had to go back two spaces and an entire province retained
its right to read Irving newspapers.
If you have trouble understanding that case, try
one. Earlier this year, the court ruled the country's three giant sugar
companies had indeed lessened competition, but not unduly.
Economist William Stanbury says that if one were
the supreme court's logic in the Irving case a step further, one firm
could acquire all the daily newspapers in Canada, and provided the
newspapers were not in direct competition with each other and the
papers appeared to give wide coverage to national and local news, it
could not be convicted of a merger of monopoly offence.
"There's a total vacuum in policy...the emperor
has no clothes," he says.
Lawyer Jeff Sack, who acted for The Newspaper Guild in making
application for the current combines investigation, says the Combines
Investigation Act is more than absurd, it's obscene.
It's not enough to say one could drive a truck
the loopholes in the law, he says. There isn't very much there to drive
"One of the myths of society is that the
look after your interests with corporate mergers," says Gil
Reschentaler, a professor at the University of Alberta. "The fact of
the matter is no one is looking after your interests."
It shouldn't be any surprise for anyone to
Ottawa has never been able to win a contested merger or monopoly case,
since it was given powers to conduct such cases in 1910.
The truth of Canada's merger and monopoly law is
recognizes the right of a monopoly to exist. Because it's Criminal
law, it presumes all monopolies are innocent until proven guilty, as it does with ordinary citizens. But
while monopolies' rights are so strenuously defended, the government
must go through a maze of requirements that can be as arbitrary as
those found on the cards of a Parker Brothers' game.
The government must prove in tangible detail the
has been hurt. How is that applicable in the abstract question of how
newspapers serve the democratic process? It isn't.
"Logically, it doesn't make sense to have the
prove beyond a reasonable amount of doubt future possibilities," says
Jack Quinn, an associate professor of law at the University of Western
Should Ottawa go ahead with a case against Thomson
Southam, it will have to do more than show the court a complicated
whodunit. It would have to show the court very clearly who it was done
to and that would be impossible without very specific evidence, says a
lawyer close to the court who asked not to be named.
What's needed, according to those most familiar
Canada's competition policy, is a civil law that takes into account
economic and social consequences of gargantuan mergers. Then the
government would not have to show proof beyond a reasonable doubt of
public detriment, just a balance of probabilities.
In other words, criminal law is the wrong arena to
deal with most merger and monopoly cases.
Andre Ouellet, minister of consumer and corporate
says he intends to work for the passage in 1981 of tougher
anti-monopoly legislation. "It's our last chance," he says. "We have to
act now because if we don't it might be too late."
Determined words, but, ironically, it was the
before their hiatus from office in 1979 who shelved a set of amendments
to the Combines Investigation Act that would have given federal
officials some powers under civil law.
First proposed in 1977, the anti-monopoly reforms
have included creation of a review tribunal. But the reforms were
withdrawn after strenuous protests from the business community. Since
1971, the Combines Investigation Act has been undergoing an overhaul in
its other areas of jurisdiction, giving the Crown tougher powers that
have resulted in convictions, particularly for misleading advertising.
The reforms Ouellet wants would bring Canadian
competition policy closer to that of the United States and United
Kingdom where civil law is used. Even if Ouellet's reforms are passed
in 1981, by the the time they are tested in the courts it could be
years before Canada has any kind of effective competition policy.
After the sale of FP newspapers to Thomson Jan.
in the news business took comfort in thoughts the takeover might mean
an infusion of new money and competitive vigor for an ailing newspaper
chain, even from a group not noted for editorial expertise or
generosity. Such thoughts were naive and the Canadian newspaper
industry—had it been willing to look— would have
the medicine from such a merger was bound to mean severe surgery and
Because of a furious bidding war, Thomson paid an
inflated price for FP, $164 million. Of that, the company would have to
realize an after-tax profit of $25 million to make the investment
worthwhile. That would have been almost twice what FP earned in its
best year in 1974.
In other words, the merger of FP and Thomson,
making business sense to somebody, was bound to be bad news for any one
who cared about diversity in Canadian journalism.
Through its consolidation and amputations of the
it didn't want, Thomson has cut the purchase price by more half for the
parts it did want, including The
Globe and Mail, a prize that had eluded the Thomson family
since the late Roy Thomson lost a bidding war for it in 1955. In other
words, Thomson has gone from paying a price considered excessive by most
analysts to what amounts to a steal.
In the same fashion that the Toronto Telegram
was worth more dead than alive, FP has turned out to be worth more to
its new owners dismembered. There's no question the cannibalism of FP
would have been an issue before a tribunal since it could have been
predicted by anyone owning a calculator and an unclouded mind.
In fact, Ouellet says that had there been a
that companies report mergers to the federal government that are likely
to create monopolies, Black Wednesday might have been averted.
Ken Thomson, himself, in an interview after the
FP, may have provided the most telling commentary on Canada's
newspapers and the law.
He said that at some point there is a limit to how
newspapers one man should own. He hasn't reached it yet, he says, but
he'll know when he does.
Whether the courts will know by then is another
Mclntosh is a reporter-editor at The Canadian Press in Toronto, and former managing
editor of the Woodstock (Ont.) Sentinel-Review.
in Sources Winter 1980/81
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