Canada's competition watchdog says it will review a deal between Torstar Corp. and Postmedia Network Inc. announced Monday to sell newspapers to each other and close most of them down.
Postmedia said in a news release that the transaction was not subject to merger notification provisions of the Competition Act but Competition Bureau spokesman Jayme Albert said in an email that a review is planned.
"Under the Competition Act, transactions of all sizes and in all sectors of the economy are subject to review by the commissioner of competition to determine whether they will likely result in a substantial lessening or prevention of competition in any market in Canada," he said, adding the transaction can be challenged before the Competition Tribunal for up to a year.
The deal announced Monday was roundly criticized by observers and unions who said it will lessen competition and hurt local news coverage in the affected communities, but defended by the companies as necessary to reduce costs as advertising revenues shrink.
Postmedia (TSX:PNC.A, TSX:PNC.B) announced it will cut 244 jobs as it plans to shutter 21 of the 22 community newspaper properties it is acquiring from Torstar as well as the Metro Winnipeg and Metro Ottawa free dailies.
READ MORE: A list of affected Canadian newspapers in the Torstar-Postmedia deal
Torstar's Metroland Media Group Ltd., meanwhile, said it will close three of the seven daily newspapers in Ontario it's buying from Postmedia as well as all eight community newspapers it's purchased, resulting in the loss of 46 jobs.
Torstar (TSX:TS.B) said one job will disappear as it buys and closes the free dailies 24Hours Toronto and 24Hours Vancouver.
"The scale of it, I think, is stunning and will be stunning for people who live in these communities who are going to lose access to, really, their local news," said April Lindgren, an associate professor at the Ryerson School of Journalism.
More than 200 local news sources — newspapers, online publications and others — have closed for various reasons in Canada since 2008, she said, citing data she's helped compile for the Local News Research Project.
"What they're doing is shutting down newspapers in their immediate environs so the circulation can be taken over and the news coverage can be expanded by their existing papers in the area," she said.
Lindgren said Postmedia, for instance, is shutting down Torstar newspapers in the coverage area of Postmedia's Ottawa Citizen, and Torstar is buying and closing Postmedia products in southern Ontario that might compete with its Toronto Star.
The loss of local news titles will likely get worse, not better, as advertising dollars continue to migrate to online sites such as Facebook and Google, said Mitch Diamantopoulos, an associate journalism professor in the University of Regina.
"An attempt to cut costs by eliminating competition is bad news for Canadians," he said.
Media union CWA Canada demanded the federal government strengthen the Competition Act to prevent such deals, which it charged are designed to eliminate competition.
In September, Heritage Minister Melanie Joly said she would not "bail out" the industry by enacting urgent recommendations in a report from the Public Policy Forum to free up more funding sources for local newspapers.
"What makes this particularly difficult is that it means we will say goodbye to many dedicated newspaper people," said Postmedia executive chairman and CEO Paul Godfrey in a statement on Monday.
"However, the continuing costs of producing dozens of small community newspapers in these regions in the face of significantly declining advertising revenues means that most of these operations no longer have viable business models."
Metroland said the daily publications it will close are the Barrie Examiner, Orillia Packet & Times and Northumberland Today, while it expects to continue to publish the St. Catharines Standard, Niagara Falls Review, Welland Tribune and Peterborough Examiner.
"This transaction will allow us to operate more efficiently through increased geographic synergies in a number of our primary regions," Torstar CEO John Boynton said in a statement.
"By acquiring publications within or adjacent to our primary areas and selling publications outside our primary areas we will be able to put a greater focus on regions where we believe we can be more effective in serving both customers and clients."
The companies said the transaction is effectively a non-cash deal, as the consideration for the publications being purchased is roughly equal to that of the publications being sold.
Torstar holds an investment in The Canadian Press as part of a joint agreement with a subsidiary of the Globe and Mail and the parent company of Montreal's La Presse.