Competition Bureau searches Postmedia, Torstar head offices

The Competition Bureau conducted searches at the Toronto headquarters of both Postmedia Inc. and Torstar Corp. on Monday in relation to a publication swap between Canada’s two largest newspaper chains.

In November, Postmedia, owner of the National Post, and Torstar, owner of the Toronto Star, announced a trade of 41 publications, followed by news that 36 of them would be shut down. No money changed hands in the deal, but the companies said they expect to save between $5 million and $7 million in annual operating costs.

Postmedia and Torstar did not report the transaction to the Competition Bureau before making their announcement because it does not meet the threshold for the Competition Act, which typically applies only to deals where Canadian assets or sales revenues exceed $88 million.

In a statement issued after the bureau executed a search warrant at its offices, Postmedia said it remains “strongly of the view that there has been no contravention of the Competition Act with respect to this matter” and that it is “cooperating with the Competition Bureau in connection with their investigation.”

Spokesman Bob Hepburn said Torstar would also cooperate “completely,” including “voluntarily providing the bureau with additional company documents relating to the transaction” this week.

Although the Competition Bureau confirmed it was investigating the Postmedia-Torstar deal, a statement from Commissioner of Competition John Pecman said “there is no conclusion of wrongdoing at this time and no charges have been laid.”

He was not able to answer further questions. “By law, the Bureau’s investigations and inquiries are conducted confidentially,” he said.

At the time of the transaction, the regulator noted that transactions of all sizes are subject to a review by the competition commissioner to determine whether they will substantially reduce or prevent competition in any market. The commissioner has one year from a transaction to launch a challenge with the Competition Tribunal.

In its statement, Torstar pointed to challenges facing Canada’s newspaper industry. The share of advertising dollars going to newspapers dropped to 16.4 per cent in 2016 from 36 per cent in 2007, when it was the leading media channel, Torstar stated.

“The Torstar transaction with Postmedia involved publications that represented a very small proportion of the total media advertising dollars spent in 2016,” Hepburn said.

The deal, which eliminated 291 jobs, reduced the number of newspapers competing in certain markets in Ontario, Winnipeg and Vancouver.

At the time, Postmedia CEO Paul Godfrey said tough decisions had to be made in a digital era in which newspapers must compete for ad dollars against global players such as Facebook and Google.

Of the $5.5 billion spent on internet advertising in Canada in 2016, an estimated 72 per cent went to Google and Facebook, according to the Canadian Media Concentration Research Project.