By SUSAN KRASHINSKY ROBERTSON
Thursday, December 6, 2018
A federal watchdog wants senior executives at Torstar Corp. to outline how competition and market share have changed in regional markets, after a 2017 deal with Postmedia Network Canada Corp. in which the companies exchanged a total of 41 newspapers and subsequently shut down all but five of them.
On Tuesday, the Competition Bureau announced it had obtained a court order to require six Torstar executives - one of whom has since left the company - to be interviewed under oath. The order is part of the bureau's criminal investigation into the deal.
Court documents obtained by The Globe and Mail outline the information that the bureau is seeking in those interviews. It includes "factors considered by Torstar relating to the geographic areas covered by each of the acquired properties" and in choosing which papers to sell. The bureau also wants to know who the "primary negotiators" were, as well as who was involved in planning job cuts related to the deal.
Among other things, investigators are also looking for details about Torstar's competition and market share for print advertising, digital advertising and flyer printing and/or distribution in all affected markets.
The information is outlined in an affidavit sworn by Pierre-Yves Guay, acting associate deputy commissioner of competition for the Competition Bureau's cartels and deceptive marketing practices branch.
The document says that the bureau has "reasonable grounds to believe" that the companies conspired or arranged to "allocate sales, territories, customers or markets" for those advertising and flyer services, and/or to "fix, maintain, control, prevent, lessen or eliminate the production or supply" of those services in certain geographic areas. Such arrangements fall under the conspiracy provisions of the Competition Act, which can carry fines of up to $25-million, or up to 14 years imprisonment. Lawyers for both companies have communicated with the bureau to object to the criminal investigation, according to the documents.
The bureau has not concluded any wrongdoing and no charges have been laid.
Mr. Guay wrote that the bureau's grounds for investigating the matter under conspiracy rules include the fact the companies agreed and arranged, as part of the deal, to cut most of the jobs at the papers that each acquired, "thereby effectively closing most of the acquired properties," and that they struck an agreement not to operate competing services in certain areas for a period of time.
The affidavit was part of the application for the order requiring the interviews, which was submitted to the east region of the Ontario Superior Court of Justice on Nov. 21. The order was granted the next day.
The deal - which was known at Torstar by the code name Project Lebron, and at Postmedia by the name Project Ice, according to the court documents - was announced in November, 2017, and immediately led the bureau to ask to review the transaction documents. In March, Mr. Guay, who is responsible for the criminal investigation, secured warrants to search the companies' head offices in Toronto, as well as the head offices of Torstar-owned Metroland Media and The Hamilton Spectator.
As a result of information obtained during those searches, the bureau identified the Torstar executives believed to have information relevant to its inquiry. Indicators included internal e-mails and memos discussing the negotiations. One executive, Dana Robbins, a vice-president and regional publisher at Metroland, was asked in an e-mail two months before the deal to provide input on costs and Metroland's exposure "if we are not 'allowed' to close publications right away if/when the Lebron deal closes," according the court documents.
The executives required for interviews are Torstar chief financial officer Lorenzo DeMarchi; Ian Oliver, president of Torstar's community brands and operations; Metroland's vice-president and CFO, Derek Fleming; Mr. Robbins; and Dean Zavarise, executive vice-president and general manager of Torstar Printing Group.
The order also includes Sandy MacLeod, Torstar's former chief operating officer for print, according to the bureau.
Asked why this application requires Torstar executives to be interviewed but none from Postmedia, Marcus Callaghan, a spokesperson for the bureau said. "As the bureau is required to conduct its investigations confidentially, I can't provide any further details."
In an e-mailed statement on Tuesday, Torstar spokesman Bob Hepburn wrote, "Torstar has been clear in its position that this transaction was conducted legally, ethically and in the long-term interest of all the markets we serve."
TORSTAR (TS.B) CLOSE: 87¢, DOWN 1¢
A sworn affidavit says the Competition Bureau has 'reasonable grounds to believe' Postmedia and Torstar conspired or arranged to 'allocate sales, territories, customers or markets' for advertising and flyer services, and/or to 'control' those services in certain geographic areas.
FRED LUM/ THE GLOBE AND MAIL