Government intended competition like Rogers’ Chatr brand: Addy

A former head of the Competition Bureau says he is scratching his head at reports that new wireless entrant Mobilicity plans to challenge Rogers Communications Inc.’s new Chatr brand before the Competition Bureau. “What’s happening in the marketplace now is exactly what the government intended when they auctioned this spectrum off and invited new entrants into the business,” George Addy, a senior partner with Davis, Ward, Phillips & Vineberg and former head of the Competition Bureau, told The Wire Report. “What they wanted to do is stimulate more competition in the market and that’s exactly what’s happening.” He added: “I’m sort of scratching my head wondering on what basis they are suggesting there’s something inappropriate with Rogers’ actions.” Addy’s firm represented Rogers in business transactions in 2008 and 2009. Last Friday, John Bitove, Mobilicity’s chairman, said he would submit a formal complaint with the Competition Bureau if Rogers went ahead with the launch of its discount Chatr “flanking brand.” “They're trying to destroy our success,” Bitove said last week to The Globe and Mail. Mobilicity is one of three new wireless entrants that launched after DAVE Wireless, the brand’s operating company, paid $243 million for 10 spectrum licences covering Toronto, Vancouver, Calgary, Edmonton and Ottawa in 2008. Like Wind Mobile and Public Mobile, new entrants that also purchased spectrum during the 2008 auction, Mobilicity has focused on urban areas with unlimited, contract-free, talk-and-text plans. According to early reports, Rogers' Chatr brand will target the same urban consumer base as the new entrants and offer similar, contract-free plans. Mobilicity is expected to refer to sections 78 and 79 of the Competition Act in its case against Rogers. Sub-section 78(d) of the Act defines the idea of a “fighting brand.” It says such brands are “introduced selectively on a temporary basis to discipline or eliminate a competitor.” Iain Grant, a Montreal communications industry analyst with the SeaBoard Group, told The Wire Report that Mobilicity has a convincing argument under the “fighting brand” section of the Competition Act. “If you read the section of the Competition Act that they are citing and look at the various facts that present themselves, it would seem that what Rogers is doing is what the act is trying to prevent,” Grant said. According to the Competition Act, a competitor that uses a fighting brand is not expressly defined as monopoly-owned. It is defined as a competitor that is large enough that it can influence the price of products to an uncompetitive degree. But many say that the Canadian wireless market has a healthy amount of competition. “This is not a market that Rogers dominates to begin with,” Michael Hennessy, senior vice-president of regulatory affairs with Telus Corp., said in an interview. “So I think the first step is to ask if Rogers is the dominant player, and the answer is no.” Addy said the creation of Rogers’ Chatr brand is pro-competitive because the company is responding to market forces by matching a competitor’s prices. “From what I’ve read, the Mobilicity people are almost inviting Rogers to agree not to match the prices,” Abby said. “That, frankly, could be an offence under the Act because that would be two competitors agreeing on pricing.” But Grant said the timing of Rogers’ plans to launch a new brand could play in Mobilicity’s favour with the Competition Bureau. “Waiting until right now to launch a brand that looks exactly like the other brand does look a little predatory,” he said. If the Competition Bureau believed Mobilicity had a case, it would first ask Rogers to address the concerns and modify its product. If Rogers refused, and decided to fight it, the case would be referred to the Competition Tribunal where an order could be issued and a penalty imposed—but it is rare that cases reach that point. Grant said the threat of legal action alone could impact Rogers’ plans to market the Chatr brand. Rogers, he expects, will now proceed cautiously with the roll out of the discount brand. But Hennessy said Mobilicity’s statement that it is going to file a complaint with the Competition Bureau are more of a public relations stunt than a real threat to Rogers. “I think the new entrants have really overestimated how much unserved demand there really is in the market,” Hennessy said. It wasn’t clear by deadline Monday whether Mobilicity had filed a complaint with the Competition Bureau. Greg Scott, a spokesman for the bureau, would not say whether a complaint had been received. “If there are any allegations of ant-competitive behaviour, that is something we take very seriously,” Scott said. John Boynton, executive vice-president and chief marketing officer at Rogers, said through an email passed on by company spokeswoman Kathy Murphy that the company wants to offer more choice and competition to customers. "With chatr, we're addressing a small and growing segment of customers that use their handsets primarily for voice and text and want unlimited talk and text on a national network they can trust," Boynton said. Mobilicity could not be reached for comment Monday. Neither Rogers nor Mobilicity have been accused of any wrongdoing or violating any laws. jmigneault@thewirereport.ca

Government intended competition like Rogers’ Chatr brand: Addy

News | July 12, 2010

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