On February 1, 2011, the Competition Bureau issued a statement in respect of the proposed acquisition of CTVglobemedia Inc. by BCE Inc. The statement noted that the Bureau was “cognizant of the growing trend toward vertical integration in the broadcasting industry” and that it was reviewing issues of vertical foreclosure. The statement also noted that the Commissioner of Competition would “closely monitor” the CRTC’s vertical integration hearings and subsequent regulatory developments in that same regard.
On September 21, 2011, the CRTC released its decision, Broadcasting Regulatory Policy CRTC 2011-601, setting out a regulatory framework for vertical integration among broadcasting and programming companies. In its decision, the CRTC imposes a number of restrictions on the activities of “vertically integrated” companies, which for the purposes of the decision it defines as companies that control both programming services (such as conventional television stations) and distribution services (such as cable or satellite systems). More specifically, some of the restrictions imposed by the decision include:
- Restriction on Exclusivity: In proposed amendments to the Exemption order for new media broadcasting undertakings1, to be published later this year, no person operating under that order will be allowed to offer programming designed primarily for conventional television on an exclusive (or otherwise preferential) basis in a manner that is dependent on a consumer’s subscription to a specific mobile or retail internet service. However, to encourage innovation in programming, exclusivity may be offered for programs created specifically for new media platforms (e.g., content designed specifically for mobile phones). A notice of consultation will be published, calling for comments on the draft regulations.
- Programming Services Must Be Independently Available: Before the end of 2011, the CRTC will issue a notice of consultation containing draft regulatory amendments that will include a provision that all programming services must be made available to independent broadcasting distribution undertakings (BDUs) on a stand-alone basis. Therefore, vertically integrated firms will not be allowed to use their most popular programming services to encourage sales of less valuable programming.
- ”No Head Start” Rule: Before the end of 2011, the CRTC will issue a notice of consultation containing draft regulatory amendments stating that, whenever a programming undertaking is ready to launch a new pay or specialty service, it will be obligated to make that service available to all BDUs. If a commercial agreement between the parties cannot be reached, the CRTC will be able to manage the dispute and impose rates. The “no head start” rule will also apply to television programming distributed on new media distribution platforms (including mobile phones and retail internet).
- “Code of Conduct” for Commercial Interactions: The CRTC concluded that there was a potential for abuse of market power by vertically integrated entities, and imposed a code of conduct to ensure no party “uses its market power to engage in anti-competitive behaviour”. The code of conduct, which establishes the guidelines for commercial arrangements between BDUs, programming undertakings and new media exempt undertakings, is attached as Appendix 1 to the CRTC’s decision. The CRTC noted that it would refer to the principles in the Code of Conduct when making determinations on complaints or other applications.
- Penalties for Non-Compliance: In “appropriate case[s]”, the CRTC said that it would impose financial remedies on non-compliant entities in the form of orders to pay amounts into a fund for the “benefit of the Canadian broadcasting system”.
As noted above, several of the new restrictions will be implemented though regulatory amendments, and will be subject to further consultation before they are set out in their final form. The Competition Bureau has not commented on the CRTC’s decision.