Months after rejecting the Commissioner of Competition’s application to challenge the merger between Rogers and Shaw Communications, the Competition Tribunal ordered the commissioner to pay nearly $13 million in costs to Rogers and Shaw.
On Aug. 28, the tribunal ruled that the commissioner’s approach to block the merger was “unreasonable,” although the Competition Bureau stands by its decision to challenge it.
Since the costs will be covered by the Competition Bureau’s tax-funded budget, some think the commissioner was wrong to challenge the merger. They argue the tribunal’s decision shows that Commissioner Matthew Boswell’s approach is ineffective and should be abandoned.
However, this interpretation is incorrect. Awarding costs is not an indictment of the losing party. Typically in cases like this, the winner receives some compensation for the expenses they incurred while presenting their case. The losing party is required to make a reasonable contribution to the winning party’s costs, but the amount imposed cannot be excessive or punitive.
The costs merely reflect the reality of litigation. Since winners typically get some of their legal costs covered, it was never a question of whether Rogers and Shaw would be awarded compensation, but how much.
How costs are calculated
In competition cases, the tribunal has the final say on costs. Parties are strongly encouraged to agree on what the winning party should receive before the outcome of the case is known.
When an agreement cannot be reached, like in the Rogers-Shaw case, the tribunal looks at the claims made by each side and makes a decision using the principles and rules applied in the federal courts.
Coming to a final number is not an exact science. Besides which side wins, several factors play into deciding how much is appropriate.
In the Rogers-Shaw case, the tribunal recognized the public interest in the litigation, but noted the commissioner did not prevail on any of the issues. The tribunal also rejected most of the commissioner’s arguments that the cost claims were excessive.
THE CANADIAN PRESS/Spencer Colby
It’s worth noting that this case was expensive for both sides, and their cost claims were relatively similar. Though Rogers-Shaw claimed a higher amount, the commissioner would have sought $10.9 million had he won the case.
To better understand the tribunal’s decision we need to distinguish between two categories of costs: disbursements and legal fees. Disbursements are specific expenses incurred to prepare a case, like hiring experts, or document management.
If a disbursement is reasonable, necessary and justified, there is less scope to reduce expense amounts. In the Rogers-Shaw case, all but two disbursement claims were accepted as reasonable.
Claims for legal fees are different. Courts have rules and tables — called tariffs — that standardize how to calculate costs while accounting for factors like case type, complexity and, when relevant, how the parties behaved during the case.
Since tariffs have not kept pace with increasing legal costs, it has become more common for amounts to be calculated as a percentage of actual fees. Regardless of the method used, however, the reimbursement is meant to cover only some of the actual legal fees incurred.
The tribunal’s decision
In the Rogers-Shaw case, the main issue was the proportion of legal fees the commissioner should pay. Rogers and Shaw argued elevated legal fees — above what would normally be awarded — were justified, given the commissioner’s persistence in challenging the original deal that proposed Rogers buy all of Shaw, rather than focusing on the updated deal that saw Quebecor’s Videotron buy Freedom Mobile from Rogers.
Rogers-Shaw case unexpectedly rewrote merger law, but there’s still time to change that
The tribunal agreed this was an appropriate consequence for the commissioner’s refusal to adjust his strategy during the hearing — especially in the face of strong hints from the tribunal to do so — since it increased the costs and time it took to conclude the case.
THE CANADIAN PRESS/ Patrick Doyle
However, it’s important to put this part of the tribunal’s decision in perspective. Its impact on the $13 million total was very small, since the vast majority (about 94 per cent) of it was for disbursements, not legal fees.
The tribunal also chose to impose the lower of two estimates that Rogers and Shaw proposed. Keen to avoid imposing costs at a level that could deter the commissioner from taking future responsible cases, it imposed an amount using the applicable tariff ($414,720 to Rogers and $416,187 to Shaw) — much lower than the 25 per cent of actual legal costs ($1.9 million for Rogers and $2.4 million for Shaw) that Rogers and Shaw wanted.
More crucially, the tribunal made it clear that even though it believed the commissioner should have adapted its trial strategy after the Freedom part of the deal was announced, it recognized that the strategy was connected to the commissioner’s unsuccessful position on a novel legal point.
“It was by no means vexatious or irresponsible of him to [continue to pursue the case]. It raised some novel issues, and there was a broad public interest in bringing the case.”
This judicial acknowledgement refutes the claim that challenging the merger was a mistake and a waste of time and taxpayer money.
Contested cases are uncertain
Enforcement agencies like the Competition Bureau have a duty to pursue cases they consider to be well-founded and in the public interest. But it’s unrealistic to expect they will win every time. Fighting uphill battles that require sophisticated arguments, or test new theories, are part of the job.
The bureau can sow the seeds of future successes and point out where reform is needed. One prominent example is the 2015 Tervita case in which the Supreme Court rejected the commissioner’s interpretation of the efficiencies defence, which allows a merger to proceed if the cost savings outweigh the negative impacts on competition.
The court’s decision became the subject of much debate and the federal government announced on Sept. 14 they will amend the act to remove the defence.
Supreme Court ruling makes need for Competition Act reform urgent
Given this context, it’s worrying that the cost order in the Rogers-Shaw case is being portrayed as an indictment of the vigorous enforcement and outspoken advocacy that has characterized Boswell’s tenure.
This criticism comes at a crucial juncture. A long overdue modernization of competition law, of which Boswell is a champion, is underway. A recent public consultation shows a broad spectrum of individuals and groups are interested in reform.
Since Boswell’s term ends in March 2024, the choice of his successor, who will take on the reins of our competition enforcement agency midway through the reform process, will be consequential. As people assess whether Boswell’s legacy should be continued, it’s important to base it on more than a few misunderstood lines in a judgment.
