Law Times

LAW TIMES / MAY 5, 2008 NEW An online resource tool 1.800.263.3269 Bestcase earlug.indd 1 3/26/08 11:52:01 AM Focus On IT/TELECOMMUNICATIONS LAW Canadian market could be forgiven for looking up the Competition Bureau. Their next choice would be the Canadian Radio-television and Telecommunications Commission, and that would be more fruitful. The problem is, there's a hazy jurisdictional divide between the two regulatory bodies, a complica- tion that emerges clearly from the CRTC's new cross-media owner- ship policies, issued in January. "While the new rules are help- ful to business in terms of shedding light on the CRTC's approach to broadcasting ownership issues, they have also raised new questions that highlight the jurisdictional divide between the CRTC and the bu- reau," says Jeffrey Brown of Stike- man Elliott LLP's Ottawa office. They fall under three rubrics: • Cross-media ownership policy: ownership of only two of three types of media (radio, conven- tional over-the-air television, and newspaper) in a local mar- ket will be allowed; • Television ownership policy: no one will be allowed to control any combination of conven- tional, specialty, and pay under- takings which have more than a 45-per-cent share of the national television audience. The CRTC will closely examine transfers generating a share between 35 and 45 per cent, and will review expeditiously applications for a share less than 35 per cent; • BDU ownership policy: no one will be allowed to control all broadcast distribution under- takings (cable or satellite TV) in a given market. "The stated purpose of the new New rules helpful, but also raise questions S CRTC's cross-media ownership policies are issued BY JULIUS MELNITZER Law Times omeone looking for the rules governing restrictions on cross-media ownership in the policies is to preserve the diver- sity of voices in the Canadian broadcasting system, including the diversity of editorial voices at the local level and the diversity of programming at the local, re- gional, and national levels." Interestingly, the CRTC ex- pressed no concern regarding the existing state of diversity; rather, it aimed its policies at an expect- ed round of consolidation result- ing from the trend to audience fragmentation. The commis- sion also confirmed its existing policies regarding conventional television and commercial radio ownership. Brown says the policies raise some important questions. "Are they actually necessary?" eral regulatory powers are broad enough to preserve a diversity of voices in Canadian broadcasting. "But by formally extending the CRTC's consideration to news- papers, the new policies also raise questions about whether the CRTC may be exceeding its ju- risdiction, which is limited to the broadcasting system," he says. That's not the only jurisdic- He says the CRTC's gen- he asks. "What impact will they have on the interface between the CRTC's regulation of the Cana- dian broadcasting system and the Competition Act's impact? Will the new policies result in the block- ing of potentially beneficial licence applications or mergers? And will the CRTC inject any real meaning into the words 'in general' that are found in these rules?" On the last question, Brown suspects the CRTC will stick close- ly to the rules it formulated. "It's sometimes difficult to sway regu- lators to deviate from the policy, even though the rules contemplate some exceptions to their own black and white language," he says. Brown notes that among the New cross-media ownership poli- cies raise important questions, says Jeffrey Brown. proposals received by the CRTC were a number of submissions in favour of a case-by-case policy over hard and fast written guidelines. "What I read into the rejection of that proposal is a good chance that the CRTC will be following these rules quite strictly," he says. But not arbitrarily. "When a policy of this nature is articulated, it's hard to make a case that goes against the four corners," says Brown's partner Gregory Kane. "But it's not impossible." While certainty and predict- ability — goals espoused by the CRTC — will certainly flow from the articulation of the new policies, Brown wonders whether the rules are too blunt an instrument to achieve the purposes intended. "Take a city like Toronto where someone who is already into TV and newspapers wants to take a run at the radio market with an innova- tive product offering . . . The pro- hibition against ownership in three media would preclude that offer- ing, and perhaps do some harm to the diversity of voices objective because, from a competitive stand- point, a new player could shake things up in the radio business." He also questions whether reviews and approves a broadcast- ing merger, however, parties may challenge the bureau's jurisdiction pursuant to the regulated conduct doctrine, which courts have used to oust the Competition Act's ap- plication to conduct authorized by other legislation," he says. Officially, the CRTC and the tional problem. The Competi- tion Act requires prior notifica- tion of mergers that meet certain thresholds. It also allows the bureau to challenge mergers that substantially prevent or lessen competition, whether or not they meet the thresholds. "To the extent that the CRTC bureau agree that they have concur- rent jurisdiction over broadcasting mergers. There's no question that the CRTC has a broader jurisdic- tion over all broadcasting matters. But whether its jurisdiction is ex- clusive remains an open question. In January the CRTC called for clarification of its role in communi- cations mergers. It even went so far as to advocate that it have "ultimate responsibility" for such mergers. It isn't just an academic issue. there's a need for new rules. "The CRTC recognized that none of the transactions reviewed by it during the recent wave of consolidation would have raised concerns under its new policies," he says. Fasken Martineau DuMoulin LLP, says current stakehold- ers are "not disappointed" in the policies. But the people try- ing to get into the market are. "Not only the new players, but perhaps even the small indepen- dent broadcasters who have dif- ficult competing against larger in- tegrated media companies, are not happy with the new rules," he says. Nor is the independent program- production community. "Their concern is that they have The CRTC has a more simplistic focus on concepts like ownership and audience share, without dis- tinguishing between similar but different products. Finally, the CRTC's BDU poli- cy seems to preclude consideration of the potential efficiencies in a merger. By contrast, the Compe- tition Act allows anti-competitive mergers if they are "likely to bring about gains in efficiency that will be greater than, and will offset, the effects of any prevention or lessen- ing" of competition. "The CRTC's policies would seem to promote rather than dis- courage a dispute over jurisdic- tion," Brown says. But also, "the CRTC has recognized that concen- tration of economic aspects is not wholly divorced from the question of diversity of voices, as each is con- cerned with control of media un- dertakings. This suggests that there is potential for significant overlap in the respective reviews." Scott Prescott of Ottawa's "The jurisdiction question is im- portant, owing to the different ana- lytical approaches followed by the CRTC and the bureau," he says. The bureau tends to focus on the economic aspects of a merger, carrying out detailed analyses of the relevant products and markets to determine the economic impact. fewer and fewer doors to knock on to sell their program rights, and they find it increasingly difficult to negotiate what they believe are equitable terms of trade with the larger broadcasters." If and until the expected con- solidation that prompted the rules begins to emerge, the status quo will reign. LT PAGE 9 Generate, search and submit documents for registration, then manage the transfer of closing funds — all from your desktop. 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