Media @ McGill

Testing Foreign Ownership an Old Favourite for CanWest

Submitted by claire on

Gregory Taylor

The recent $2.3 billion purchase bid by CanWest Global for Alliance-Atlantis has received substantial coverage in Canadian news circles, as well as foreign press like the New York Times and Hollywood Reporter. Absent from much of the reporting is that this is not CanWest's first time pounding at the door of national ownership restrictions. CanWest caused similar headaches for Australia's public regulators in the 1990s. History has shown this is a company quite willing to flaunt national policies and keep its intentions well-hidden.

The Alliance-Atlantis purchase agreement is obviously playing fast and loose with Canadian foreign ownership regulations by allowing its purchase partner, Goldman Sachs of New York, to foot nearly 85 per cent of the bill while claiming CanWest somehow holds control. The proposed guidelines for increased CanWest ownership by 2010 appear sketchy, but in the end that will be for the CRTC to decide. Financial players both home and abroad, are watching closely. Depending on perspective, this could represent an unprecedented opportunity for an influx of capital into the Canadian media system; or the beginning of the end of Canadian sovereignty over our communications system.

Canada is not alone in trying to decipher issues of ownership and control regarding CanWest. In the 1990s, CanWest was found guilty of playing a media ownership shell game down under. It took over five years and two investigations by the Australian Broadcasting Authority (ABA) to reach a final conclusion in that case. Much like the current Canadian example, the devil was in the details and great efforts were made by CanWest to hide the truth from public view.

In 1992, the ABA carried out an investigation into whether CanWest had broken Australia's national ownership laws by assuming de facto `control' over the Ten Network. Much like the current Canadian system, Australian broadcasting did not allow for majority foreign ownership. The Winnipeg-based CanWest denied the charges and protested to the ABA. During the investigation that followed, ABA deputy chair Gareth Grainger noted a distinct trend “in the number of phone calls or faxes to and from particular telephone numbers in particular places in Canada.” CanWest vociferously claimed they were not guilty of this offence citing the fact they held only 15% of the voting shares in the company.

The ABA initially agreed. The 1995 report cleared CanWest of any regulatory violations, stating unequivocally that “CanWest Global Communications Corp. is not in a position to exercise control of the Ten Network”.

However, the case was reopened and the decision reversed in 1997.

It seems CanWest had been using subsidiary companies from Denmark, the Netherlands and Australia whose sole purpose was to acquire shares in Ten Group Ltd. The combined clout of these CanWest shell companies gave the Canadian corporation 52.49 per cent of the voting shares - a clear violation of Australian law. After the second investigation CanWest was ordered by the ABA to remedy this breach of policy. CanWest unsuccessfully appealed the decision and they were forced to comply by July 1998. In the aftermath, the ABA faced criticism as to how they had so clearly misread the issue to begin with.

Now CanWest is involved in a similar battle at home and their position remains consistent. At a hearing before the House of Commons Standing Committee on Canadian Heritage in 2003, Leonard Asper stated he saw nothing wrong with Canada moving toward 100% foreign ownership - a statement he has repeated publicly many times.

The current purchase bid for Alliance-Atlantis is certainly a test for Canada's media regulator which has been asked to believe Goldman Sachs' 85 per cent ownership does not constitute majority control. Speaking before a parliamentary committee hearing examining foreign ownership rules in 2002, then Alliance-Atlantis CEO Michael McMillan was frank in his assessment that outside ownership will clearly bring a shift in media control: “In our business, he who pays the piper calls the tune”.

As the Australian example and now the Alliance-Atlantis purchase bid reveals, when CanWest is involved, the piper can leave a very complicated money trail.