The Competition Bureau has ruled that Transcontinental can acquire Quebecor Media’s 74 regional newspapers in Quebec, but in order to preserve competition, it must then sell 22 of those papers and 12 of its own.

In its decision, the bureau said it looked closely at the financial situation of the Transcontinental and Quebecor papers, noting that rivalry between the two intensified in 2009:

Since 2009, Transcontinental and Quebecor Media have engaged in aggressive competition for advertisers, entering markets where the other Party was the historical incumbent and cutting advertising prices. While a few independents remain in certain markets, Transcontinental and Quebecor Media own the only community newspapers in many of Quebec’s local communities and, as such, the Proposed Transaction may allow Transcontinental to have the only community newspaper(s) in numerous local markets.

…

The Bureau determined that at least one of the Parties’ newspapers was in financial distress in the vast majority of markets where the Parties compete. These were typically the newspapers that had been launched in recent years.

The competition rules by which the bureau operates allows for mergers that would reduce competition if the alternative is that one of the parties goes bankrupt and nobody picks up its assets, which would reduce competition anyway. The bureau’s assessment shows the community newspaper sector isn’t doing that well, but that Transcontinental should nevertheless put the newspapers on the block, and for no minimum price, for a period of 60 days, and managed by a third party.

“Following the completion of the sale period defined in the Consent Agreement, if no potential purchaser is identified for a particular paper, Transcontinental will be entitled to retain ownership of the newspaper,” the bureau writes. So Transcontinental could end up keeping many of these papers (or being allowed to shut them down and merge them with their competitors in each market) if no one else is interested in buying them for even $1 (with printing and distribution provided by Transcontinental for a limited time).

The papers affected, most of which face direct competition from papers in the same market or regional papers nearby that encompass that market, are the following:

Transcontinental’s TC Media (12)

• Abitibi Express – Rouyn-Noranda (competes with Quebecor’s Le Citoyen)
• Abitibi Express – Val d’Or (competes with Quebecor’s Le Citoyen)
• Chambly Express, Chambly (competes with Quebecor’s Le Journal de Chambly)
• Châteauguay Express, Châteauguay (competes with Quebecor’s Le Soleil)
• Courrier du Saguenay (Courrier du Fjord, Courrier de Jonquière, Courrier de Chicoutimi)  (competes with Quebecor’s Le Réveil, also for sale)
• Édition Beauce Nord, Sainte-Marie (competes with Quebecor’s Beauce-Média)
• Point de vue Laurentides, Mont-Tremblant (competes with Quebecor’s L’Information du Nord)
• Rive-Sud Express, Longueuil (competes with Quebecor’s Courrier du Sud)
• Roussillon Express, La Prairie (competes with Quebecor’s Le Reflet in Delson)
• Sorel-Tracy Express, Sorel-Tracy (competes with Quebecor’s Les 2 Rives)
• Vallée du Richelieu Express, Mont-Saint-Hilaire (competes with Quebecor’s L’Oeil Régional in Beloeil)
• Valleyfield Express, Valleyfield (competes with Quebecor’s Le Soleil)

Quebecor’s Sun Media (22)

• Agri-Vallée, Valleyfield (competes with Transcontinental’s Valleyfield Express)
• La Voix de la Matanie, Matane (competes with Transcontinental’s L’Avantage out of Rimouski)
• La Voix Gaspésienne, Matane (competes with Transcontinental’s L’Avantage out of Rimouski)
• L’Écho de Laval, Laval (competes with Transcontinental’s Courrier Laval)
• L’Écho de la Rive-Nord, Sainte-Thérèse (competes with Transcontinental’s Nord Info/Voix des Mille-Iles)
• L’Écho de Repentigny, Repentigny (competes with Transcontinental’s Hebdo Rive-Nord)
• L’Écho de Saint-Jean-sur-Richelieu, Saint-Jean-sur-Richelieu (competes with Transcontinental’s Le Canada Français)
• L’Écho de Shawinigan, Shawinigan (competes with Transcontinental’s L’Hebdo du St-Maurice)
• L’Écho de Trois-Rivières, Trois-Rivières (competes with Transcontinental’s L’Hebdo Journal)
• L’Écho de Victoriaville, Victoriaville (competes with Transcontinental’s La Nouvelle Union)
• L’Écho du Nord, Saint-Jérôme (competes with Transcontinental’s Journal Le Nord)
• Le Courrier du Fleuve, Rimouski (competes with Transcontinental’s L’Avantage)
• Le Journal de Joliette, Joliette (competes with Transcontinental’s L’Action)
• Le Journal de Magog, Magog (competes with Transcontinental’s Le Reflet du Lac)
• Le Journal de Saint-Hubert, Saint-Hubert (competes with Transcontinental’s Rive-Sud Express)
• Le Point du Lac-Saint-Jean, Saint-Félicien (competes with Transcontinental’s Journal Nouvelles Hebdo in Dolbeau-Mistassini)
• Le Progrès Écho, Rimouski (competes with Transcontinental’s L’Avantage)
• Le Réveil, Saguenay (competes with Transcontinental’s Le Courrier, also for sale)
• Le Rimouskois, Rimouski (competes with Transcontinental’s L’Avantage)
• Le Riverain, Sainte-Anne-des-Monts (competes with Transcontinental’s L’Avantage out of Rimouski)
• L’Impact de Drummondville, Drummondville (competes with Transcontinental’s L’Express)
• Pub Extra Magazine, Laval-Laurentides (competes with Transcontinental’s Courrier Laval and others)

The bureau also looked at Le Sac Plus, Quebecor’s competitor to the Publi-Sac, which it shut down shortly after announcing the community newspaper deal. There, the bureau concluded that this business “is in a state of financial distress, despite past strategic changes aimed at getting the business to a break-even level. The evidence also clearly indicated that there was no likely buyer for the distribution network (alone or in concert with the sale of certain newspapers) due to the network’s current financial state, high fixed costs, and the need for a strong reputation.”

Transcontinental says it will close the transaction to acquire the papers “over the next few days”.

“Once the sale period has expired, Transcontinental Inc. will review its portfolio in order to ensure the sustainability of the weekly press in Quebec, by continuing to offer relevant local information on a multitude of platforms, in all the regions of the province where it is present.”

That’s a press-release-speak way of saying that the big cuts will happen after the sale process. If Transcontinental is left with some of the papers listed above, expect many or all of them to be liquidated to ensure the company isn’t competing with itself.