Canada's broadcast regulator is raising some tough questions about the relationship between Shaw Communications Inc. and Corus Entertainment Inc. as it prepares to review Corus's $494-million acquisition of several television channels from BCE Inc.
Corus is attempting to buy a group of cable networks, including Teletoon and Cartoon Network (Canada), that would build on its position as Canada's largest provider of children's programming. The Canadian Radio-television and Telecommunications Commission will hold a hearing into the deal in November.
But before it can decide whether to approve it, the regulator is looking for proof that Corus is indeed independent from Shaw Communications.
Both companies are controlled by the Shaw family of Alberta through special voting shares. Shaw Communications spun off Corus in 1999, and both have maintained separate listings on the Toronto Stock Exchange since then.
In documents filed on Wednesday, the regulator noted that "Corus and Shaw are ultimately controlled by J.R. Shaw" and said it might look at the "relevance to Corus of remedies against anti-competitive behaviours."
The question of how separate the two companies really are is relevant because of the combined market share of the two companies.
On its own, Corus is relatively small, and the acquisition of the BCE channels would put its market share at 13.4 per cent, prompting little concern from the regulator. But when combined with Shaw's media division, which includes the Global Television Network, that number jumps to slightly more than 35 per cent.
That number is key. The CRTC closely reviews any deal that would put a company above that threshold to ensure that it couldn't use its size to withhold key content from competitors.
If the regulator determines that Shaw and Corus are not truly independent of each other, it could hamper the ability of either to acquire more TV stations.
"Given the applicant's ownership structure, the Commission may wish to discuss the applicability and relevance to Corus of remedies against anti-competitive behaviours," the commission wrote. In this case, that would mean giving preferential treatment to Shaw and its cable and satellite TV customers, while denying access to programming to competitors such as BCE or Rogers Communications Inc.
Corus's television services already include kids' brands YTV, Treehouse, Nickelodeon Canada and the women's brands W Network, Cosmopolitan TV and OWN: The Oprah Winfrey Network.
Shaw, meanwhile, owns Global and 19 specialty channels, including Food Network Canada, HGTV Canada, History, Slice and Showcase.
Earlier this year, Corus said it would buy two radio stations and Astral Media Inc.'s stake in a number of TV joint ventures, including the bilingual Teletoon/Télétoon service, Cartoon Network (Canada), and three French-language stations.
The deal helped BCE Inc. secure its $3-billion deal for Astral, because it helped the companies slip under ownership concentration levels that had previously caused concern.
Shaw did not wish to comment, while Corus didn't respond to a request.
The hearing will be held Nov. 5 in Gatineau, Que.