Competition Bureau Expands Google Investigation

In 2021 the Competition Bureau announced it was investigating Google’s practices in the digital advertising market. Since then, the enforcer has been tight lipped about the investigation, leaving it unclear whether the investigation was ongoing or had been shuttered.

That changed this week when the Bureau confirmed that not only was the investigation still ongoing, but also that its scope had increased. Though details are scarce, the update hints that the Bureau is concerned that Google is leveraging its monopoly power across markets and engaging in predatory pricing.

The expanded scope of the investigation is clearly good news. Google is a behemoth in the sprawling online advertising market, controlling how display ads appear on its search results, products and a huge swath of the internet. The technology behind digital advertising is complex. In the fraction of the second before your page loads, an auction occurs to determine which ad will be served to you. With its dominant market shares of the ad server, audience data networks and the “ad exchange,”Google has vertically integrated the adtech technology stack. Ahead of their Canadian counterparts, last year the U.S. Department of Justice launched a suit against Google after its own investigation of the giant’s ad market power last year.

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A diagram of the adtech stack and the portions controlled by Google. Source: U.S. Department of Justice.

Returning to the Bureau’s announcement, the development is exciting for two reasons. First, the language of the announcement suggests the Bureau is putting to work its recently strengthened abuse of dominance powers that allow it to pursue conduct with the intent to harm competition. Second, by investigating predatory pricing, the Bureau is pursuing an important unfair method of competition. While lower prices is a benefit of competition, predatory pricing is the temporary lowering of prices below sustainable levels to kill even more effective and efficient competitors. Once those challengers have died off, monopolists can return to squeezing their customers. Allowing predatory pricing to occur trades off short term gains for consumers for the long-term benefits of fair competition.

While the Bureau’s announcement is welcome news, how long will be the businesses affected by this conduct have to wait for relief? Before the expansion of the investigation, the Bureau had already spent four years looking into Google’s conduct. Last year, Unifor, representing Canadian news outlets, squeezed by Google's outsized control over their primary revenue source, sought an update to the inquiry. With each day that Google's monopoly persists unchecked, the harms multiply for an independent news industry already struggling to survive, to the detriment of the informed public debate that democracy demands.

Quebecor Calls Out Bell’s Fibre Pricing Practises

Montreal-based media giant Quebecor and subsidiary VMedia have filed multiple complaints against telecom goliath Bell Canada, alleging that Bell is engaging in anti-competitive practices related to its fibre optic network pricing and access. The complaints filed with the Competition Bureau center on three main issues: market dominance, anti-competitive practices, and the impact on competition.

Echoing the Bureau’s Google investigation, Quebecor’s allegations concern predatory pricing and anti-competitive practices in the markets for internet connections into individual homes and businesses as well as the networks that link together major urban centers. The core of their grievance is that Bell, leveraging its dominant position in the market, has engaged in practices designed to undermine competition and unfairly maintain its market dominance. They argue Bell can leverages its power to inflate prices where it faces little competition and use those gains to offer prices below sustainable levels in more competitive markets.

In response to regulatory decisions by the Canadian Radio-television and Telecommunications Commission (CRTC), Bell has sought to appeal a decision that would make it easier for independent companies to sell internet services using its fibre network assets. The CRTC's decision was intended to stimulate competition in the internet services market in Ontario and Quebec, where independent internet providers have seen a significant decrease in customers. In response to the decision, Bell announced cuts to its network investment plans, a familiar threat from Canada’s telecoms monopolists.

Pharmacy Middleman Sparks Bureau Complaint

The Canadian Pharmacists Association (CPhA) has filed a complaint with the Competition Bureau against Express Scripts Canada, a pharmacy benefit manager (PBM) and subsidiary of the U.S.-based health insurance giant Cigna Corp. Pharmacy benefit managers like Express Scripts act as intermediaries between pharmacies and insurance companies, adjudicating people's coverage so they don't have to pay the full costs of their drugs at a pharmacy. The CPhA's complaint alleges that the new fee could steer customers away from independent pharmacies who are unable to swallow the cost increase.

The CPhA is concerned that the fee arrangement and ESC's practices, including audits and potential reimbursement claim clawbacks, are anti-competitive and could disadvantage rival pharmacies, leading to a less competitive market that ultimately harms consumers. The complaint also highlights issues about patient choice and access to medications, particularly in rural areas where pharmacy options are limited.

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Statistics Canada Finds Low Competition Means Low Investment

This week Statistics Canada released a study with a gloomy conclusion: Canadian businesses are investing less in capital than they were 20 years ago. One cause? High industry concentration and fewer new firms challenging incumbents.

The statistical agency found that since the mid-2000s, Canadian companies are investing less per worker, with the effect most pronounced in large and foreign-headquartered companies. These investments are key to increasing the productivity of Canada’s labour force, and reduced investment has resulted in stalling productivity growth in Canada.

One reason for the slowdown flagged by Statistics Canada is the decline of competition in Canada. With competition, firms are forced to invest in innovative new offerings and steal share from rivals. The report found that industries characterized by a few dominant incumbents have led the way in reducing investment. While industry concentration levels have largely remained steady, the rate of new firms entering the market has cratered, a long-running trend made worse by the pandemic.

The report is a reminder that Canada needs to play both defense and offense to improve competition in the economy. On defense, we need to stop harmful mergers and abuses of corporate dominance. But on offense, we need to make Canada a more attractive place to start and grow a business free from the grip of our oligopolies.

Another Bad Bad Not Good Week for News Media

This week also brought more bad news for the ailing Canadian and American news industries. Vice Media, an icon of the now-aging wave of digital journalism outlets, announced layoffs and the shuttering of its flagship site Vice.com. It's a poignant moment that underscores the relentless upheaval in the industry, even for yesterday’s disruptors, a saga of survival and adaptation in the shadow of digital giants.

The crisis in news is widespread, and scattershot policy responses continue to be band aids on a structural problem. The future of Canada’s Local Journalism Initiative, a program to subsidize the hiring of journalists in underserved communities, is unclear as the program is set to expire by April of this year. This week also brought coverage of Google testing the removal of the News tab from search results, disrupting how audiences access daily stories. One level below the ad tech monopolists, news industry goliaths continue to tighten their grip on the market, scooping up cherished publication brands, former print and online outlets alike, and sidelining the journalists who've long been the backbone of our news ecosystem.

While the decline of advertising revenue began before the rise of Google and Facebook, their dominance in online advertising markets has exacerbated the crisis. The U.S. Department of Justice’s Google ad tech antitrust case, set to go to trial later in 2024, argues that Google’s illegal monopoly allows it to hoover up 30 cents of every digital advertising dollar at the expense of the news organizations that rely on those dollars. While the hunt for new business models for news continues, the closure of once-disruptors like Vice point to a problem that we may not be able to innovate our way out of.

In Screwing Workers, Grocers Prove Collaborative

The New Republic recently spotlighted the contentious proposed merger of U.S. grocery giants Albertsons and Kroger, valued at $24.6 billion, which is being met with significant legal and regulatory push back. Colorado Attorney General Phil Weiser has filed a lawsuit to block the merger, arguing that it would eliminate head-to-head competition and consolidate an already heavily concentrated market. This would lead to higher prices, fewer jobs, and worse customer service as Americans, like Canadians, continue to struggle with the increased cost of living.

But beyond the need to protect competition there is more that will ring familiar for Canadians. The lawsuit brought to light allegations of a "no-poach" agreement between Kroger and Albertsons, aimed to suppress worker’s leverage during a strike by unionized King Soopers workers, a Kroger subsidiary. If proven to be true, the allegations could have consequences beyond antitrust law, including violations of U.S. labour law.

This story hits close to home in Canada, where not only is the grocery market highly concentrated, but our grocers have also proven willing to cooperate on suppressing wages. During the pandemic it came to the light that Canadian grocers had given one another a cordial heads up on the ending of pandemic “Hero Pay” so that other grocers could sunset the program in unison. While the event led to the long-needed inclusion of wage-fixing in Canada’s competition law, it was a reminder of the kind of harmful cooperation that concentrated markets foster.

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