Canadian Heritage Committee on Feb. 23rd, 2016

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

All right. I wonder if Ms. Bujold is here to speak about the digital media.

[The Chair, Liberal, Hedy Fry]

After this first round, we were going to ask for a presentation, because I don't think the department was able to present everything it wanted, so we would give five minutes to—

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

I apologize, because most of my questions are directed toward the digital perspective, which is where I have more of an interest. If there's going to be a separate presentation by Ms. Bujold—

[The Chair, Liberal, Hedy Fry]

No, I don't think the group is going to do digital, so you can ask your questions.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

We've been talking about how there's been a great change in the markets over these past 10 years, and that the digital side is definitely picking up. Do we have any analysis as to why that shift is happening in our markets, and what's pushing the digital market? Is there access to more private funding for digital media?

[Helen Kennedy]

We've been following and looking at the various trends in what's going on with broadcasting and digital communications. You have your technological changes that are happening with new devices and new capacities technologically to create and consume content, while at the same time we've been monitoring the changes in consumer behaviours and the expectations that have gone along with that.

We see in the millennial group, for instance, that they are much more mobile. They are much more connected. They don't have the same expectations as older-age cohorts who grew up in a more traditional media world, where the broadcasters curated the content and scheduled the programming. People chose which programs to watch and would follow the schedule of the broadcaster's programming.

Now, we see that people are more mobile. They expect more personalization in their content. They expect to get it when and where they want it. It's about the access piece, being able to go and get something, and you see an industry adapting to that. You see an industry that has put much more content and much more focus on demand and that is moving towards higher-quality content as well, content that will stand out. As well, you see the technology supporting that with the development of very high-quality digital signals. We're now seeing 4K and so on being generated.

In broad strokes, we follow both what's happening with the technology and what's happening with the consumer behaviours and the expectations that go along with that. The market right now is extremely diverse, not just in the kinds of content available, but also in the kinds of business models and consumer preferences that we see.

You have everyone from the traditional senior citizen, who has a very different set of expectations around how he or she wishes to be informed and entertained, versus someone in high school, university, or the millennial group, who has a different set of expectations about how he or she wants to be informed and entertained. We see these industries trying to adjust to that and trying to serve those different market segments.

In terms of the digital and the diversity, one of the big things we've seen in the broadcasting sector over the last number of years—and the commission can speak much more eloquently to this than I can, I'm sure—is the growth in third-language services in Canada. Also, we've seen more foreign services being authorized for distribution in Canada. You have services coming in from other parts of the world that Canadians are interested in as well.

On the production side of things, we haven't done any studies internally as to the employment of creators, as such, from different cultural backgrounds. There may be some of that in the academic...or in the industry itself. There may be some of it in the profile. I'm not sure. But we do see that it is an area of activity as well. We see it, for example, also in the Canada Media Fund. There is some support going to programming that's created in third languages. Where there's a market demand for that and where the programming is eligible as per the broader criteria of the program, it does receive funding from the Canada Media Fund.

[The Chair, Liberal, Hedy Fry]

Thank you, Ms. Kennedy and Ms. Dabrusin.

Now we will go to the second round, but before we do, we have with us Ms. Jeanne Pratt, senior deputy commissioner at the mergers and monopolistic practices branch of the Competition Bureau, and Paul Halucha, associate assistant deputy minister, strategic policy sector, Department of Innovation, Science, and Economic Development.

I will allow you to have about five minutes to present. I'm sorry that we didn't get you into the first round.

[Jeanne Pratt, Senior Deputy Commissioner, Mergers and Monopolistic Practices Branch, Competition Bureau]

Good morning, Madam Chair.

I am the Competition Bureau's senior deputy commissioner responsible for the mergers and monopolistic practices branch.

I will begin my remarks by providing some context about the Competition Bureau and its mandate. Then, I will move on to our role as it relates to merger review and the factors we consider in our examination of mergers. Lastly, I will speak to recent merger reviews within the Canadian media sector.

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian consumers and businesses prosper in a competitive and innovative marketplace. Headed by the commissioner of competition, the bureau is responsible for the administration and enforcement of the Competition Act.

Under the Competition Act, mergers in all sectors of the economy are subject to the review of the commissioner of competition to determine whether they will likely result in a substantial lessening or prevention of competition. The question for us in our review is whether there is evidence to support that the combined company will be able to exert market power as a result of the merger to the detriment of customers, suppliers, or ultimately Canadian consumers.

Where we find this to be the case, the act also requires the bureau to assess evidence of economic efficiencies gained by the parties as a result of the transaction. If the efficiencies gained are greater than the anti-competitive effects, the act mandates that the merger be permitted to proceed. The bureau's role in merger review is to obtain the necessary evidence and undertake careful analysis and consideration before reaching a determination. The factors involved in our evidence-based economic analysis are governed by our legislation and jurisprudence in this area.

When the bureau does determine that a merger is likely to substantially affect competition, we seek to remedy those effects either through a consent order of the Competition Tribunal that is negotiated with the merging parties, or failing agreement, through an application to the Competition Tribunal for an order to prevent, dissolve, or alter the merger.

As part of the bureau's approach in examining a merger, we consult with a wide range of industry participants, suppliers, competitors, industry associations, customers, and industry experts. We consider many different factors, including the definition of the relevant economic market, the level of economic concentration, and the level of competition remaining in the market. Our mandate requires us to analyze the anti-competitive effects of mergers that result from an enhanced exercise of market power. All bureau merger analyses are grounded and bound by the legal and economic tests laid out in our act and associated case law. In line with this, our reviews of media concentrations under the act have consistently adopted an economic lens in assessing potential anti-competitive effects.

In media concentration, there have been a number of recent reviews. In 2014 the bureau reviewed Transcontinental's acquisition of 74 Quebecor community newspapers and determined that transaction could have potentially resulted in a substantial lessening of competition in certain regional markets. We required Transcontinental to sell 34 newspapers within these regional markets in order to preserve competition within those markets. In 2013 the bureau also reviewed Bell Canada's proposed acquisition of Astral Media. Following our review, we determined the transaction would have led to increased prices and reduced choice and innovation in the television distribution industry. We addressed these issues through a consent agreement that required significant divestitures from Bell in relinquishing ownership of over 10 channels, as well as behavioural restrictions that prevented them from imposing restrictive bundling requirements.

[The Chair, Liberal, Hedy Fry]

You have one minute to wrap up, Ms. Pratt.

[Jeanne Pratt]

Okay. I have one last one.

The Sun-Postmedia merger we reviewed in October 2014. In that examination we interviewed over 50 market participants, examined thousands of documents, compelled significant data and documents from the merging parties, and engaged an independent economic expert. We also sought the views of Canadian consumers. Our review focused on the effect of the transaction on competition for both advertising and readership in the cities where both parties operated local daily newspapers. Based on the evidence gathered, we concluded that a single owner of both papers would have insufficient additional power in the market to be able to materially increase prices.

The commissioner of competition recognizes that the public is served by a diversity of voices in the media landscape. It provides citizens with the freedom to form their own opinions, which in turn contributes to a healthy democratic society. As with our counterparts at other competition law enforcement agencies in other countries, our act is a general framework legislation applicable to all sectors of the economy, and it is not intended or designed to address issues of a social or cultural nature.

Thank you. I'll turn it over briefly to my colleague, Paul—

[The Chair, Liberal, Hedy Fry]

We were giving you five minutes for both of you to speak.

[Jeanne Pratt]

My apologies.

[The Chair, Liberal, Hedy Fry]

That's all right. That's fine.

I'll move to the second round, and we begin with Mr. Waugh, for five minutes.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

I'm interested in Sun Media and Postmedia. How can you have a reporter, let's say, in Edmonton covering city council feeding to the Edmonton Sun and feeding, under the same byline, to the Edmonton Journal with a paragraph removed, and you've allowed it?

There is no competition that way. For the ethics of the broadcast industry I had a lot of trouble with this. From coast to coast to coast there are differing views of reporters, but you have the same view now represented in these newspapers. I want to know, as a former broadcaster, how you got around that.

How can I report for both newspapers on my views? You want me to buy the Edmonton Sun and the Edmonton Journal, and yet it's the same view.

[Jeanne Pratt]

I would just answer that by saying that we're a law enforcement agency and our mandate is under the Competition Act. It is to look at the economic impact of the transaction. For that transaction, we did a full deep dive. We interviewed all the market participants: competitors, suppliers, customers.

At the end of the day, we're looking at the economic leverage that is going to result from the proposed transaction. In that particular transaction, that meant looking at advertising markets. This has consistently been the bureau's focus in newspaper mergers. As I said, while we agree that the diversity of voices is potentially an issue for study, it's not one that we have a mandate to examine under the Competition Act. We're examining whether or not they're going to be able to leverage their market powers to the detriment of suppliers, customers, or ultimately, Canadian consumers in the marketplace, whether prices for advertising are going to go up, and whether prices for the paper are going to go up.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Usually, the fewer players in the business area...even the Astral-Bell merger, I had difficulty with. You have two major players in the industry and now you've eliminated one.

[Jeanne Pratt]

In that particular transaction, we also had significant concerns. As a result of that, they had to divest 10 of the channels that they were proposing to acquire. In addition, the CRTC examined that transaction and had issues with the radio broadcasting side. We accepted the resolution that the CRTC negotiated or imposed on the parties there. Again, we're looking at the economic impact.

In terms of the Sun-Postmedia merger, we looked at all the evidence. We did a five-month intensive review, and we looked at the econometric data. At the end of the day, what we concluded was that those papers and those markets were not close rivals. As a result of that, the evidence did not suggest that their ability to influence the market and have the ability to substantially lessen competition—and that's our threshold—was at the level where we could challenge the transaction.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

It has been an interesting time in the media business.

I live in a city where the anchors are in Toronto for local news, and I'm in western Canada. I have the full team out of Global Toronto telling me how it was today on 2nd Avenue in Saskatoon.

That, to me, is ridiculous. I'll never accept that.

Will the viewers accept it? The ratings have plummeted. The competition...you guys have to realize that local is where it's at, and local is the face. I don't care how many guys they have on the street in television. If you don't present in front of the television set from the city you're from, you're ratings are going to go zip. I just don't see where this industry is going, with someone in Toronto telling me what's going on in Saskatoon, in Kelowna, in Winnipeg, and in Regina. I get my national news, but my local news should be, underlined, local, and we're not seeing it in these four areas with the recent Global moves.

I just share that with you.

[The Chair, Liberal, Hedy Fry]

Thank you, Mr. Waugh.

Mr. O'Regan, you have five minutes.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Former broadcasters on Parliament Hill, Mr. Waugh, Madam Chair, is an awful thing. Next they'll be allowing the lawyers and teachers into politics as well.

I am very interested in the issue of diversity, and I just want to explore that.

As the Broadcasting Act says, the system is to:

serve the needs and interests, and reflect the circumstances and aspirations, of Canadian[s]...including equal rights, the linguistic duality and multicultural and multiracial nature of Canadian society and...aboriginal peoples....

We're going through a tremendous amount of, as the act says, “scientific and technological change”. I appreciate the fact that, Ms. Pratt, when you're looking at mergers and acquisitions, you're looking at them purely from a competitive point of view. I want to know, from any of you, where exactly the guardianship of diversity falls. Who polices that? Who gauges that? Who measures that?

I'm looking at nobody in particular, because I don't know the answer.

[Helen Kennedy]

According to the Broadcasting Act, as you pointed out, you have those objectives there. The act also requires the regulator to regulate and supervise the system in a way that implements those objectives. When it comes to the broadcasting system, people who want to operate a broadcasting undertaking in this country have to get a licence to do that. They go to the CRTC. The CRTC runs a process and goes through the examinations and the reviews that it considers it needs to do in order to decide who will be licensed to operate a broadcasting undertaking in Canada and who will have access to the airwaves. They have to make sure the system is supervised and regulated in a way that achieves the objectives. In broad strokes, I would say that from a broadcasting perspective it's the commission who on a day-to-day basis grapples with how they're regulating the system so that in general overall terms those objectives are being met. When you take a step back and you look at the system as a whole, you can see these objectives are being met.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Let me pick up again on Mr. Waugh's point about local news. This is a problem that not only people in the industry but also people who hold public office have seen for quite some time. When we talk to people there is a frustration with the lack of local news, and I'll say when it comes to television in particular. As you rightfully pointed out, Mr. Bernier, newspapers seem to be picking that up at least weekly. What do we do? People need to make money; companies need to make money, and people demand local news. The model doesn't seem to be there.

Is there a role for Canadian Heritage? Is there a role somewhere within the federal government to work on creating a framework that is fair to industry, but still allows for that diversity of voices in the local broadcasting that people demand? You were talking about Toronto and Saskatoon. If you broadcast from the east end of St. John's and give the weather, it is very different from what's happening in the west end of St. John's, so I sympathize. Putting all that aside, quite seriously, are we working on that?

[Helen Kennedy]

I don't want to scoop my CRTC colleagues, but the commission has just held hearings on local and community television. They are actively looking into the issues around the provision of local programming and community programming in Canada.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Does the Department of Canadian Heritage work with them on it?

[Helen Kennedy]

The department doesn't guide or intervene in the CRTC's proceedings. They operate independently of the government. They're an independent regulator. Certainly from our perspective this work the commission is doing will not only inform the committee, but will inform the department as well. Having heard from all these witnesses, and having looked at what's going on in the terrain, they will come up with some recommendations. They will come up with some decisions around this area, and this will inform us.