Keldon Bester

Michael Leger: The history of Canada’s competition law holds lessons for today’s reform efforts

Canada’s competition law, the Competition Act, was introduced nearly forty years ago in 1986, and is in urgent need of reform. That the Act has been largely ineffective is more clear than ever as Canadians are facing the consequences of highly concentrated markets. From groceries to telecoms, industries have seen monopoly power grow, leading to fewer options and higher prices for consumers, all while undermining conditions for small and medium-sized businesses to thrive. 

In the last decade the rise of global titans such as Amazon, Google and Meta have brought about a surging tide in global anti-monopoly sentiment. The U.S. has taken bold steps to challenge the prevailing economic ideology on multiple fronts, including by putting anti-monopoly at the centre of its domestic economic policy. ​The Canadian government has an opportunity to build on this economic paradigm shift in its ongoing review of the Competition Act, Canada’s primary competition legislation. 

In a time of transformation, a return to history is helpful. In the 1970s, when the development of what would become the Competition Act was underway, inflation was on the rise, peaking to nearly 13% at several points throughout the decade. The last time food inflation was as bad as it is today was in 1981. Mergers were also increasing in frequency and in size: by the early ‘80s the largest mergers taking place in Canada were twice the relative size of the largest in the US. Proponents of reform envisioned a more robust competition law that would have the power to protect consumer interests, help combat volatile inflation and encourage innovation. Canada’s economy was quickly becoming highly concentrated, and the existing tools at the government’s disposal were not up to the task. 

A genuinely competitive marketplace depends upon the government to keep the power of massive companies in check. But with deep pockets and highly organised lobbying networks, big business is well-positioned to shape policy in its favour. Small and medium sized businesses, who benefit the most from a strong competition law, have had their voices overpowered time and time again.

This has been the story since 1889: Canada’s first attempt at curbing monopoly power, the Combines Investigation Act, was famously ineffective. Legislators included the word unduly – as in, ‘what unduly lessens competition’ – which left ample room for lax interpretation. More importantly, the law was exclusively under the Criminal Code, and was limited to the industrial sector, leaving out the growing services sector. Seventy years after its introduction, enforcement was minimal with very few cases tried before the courts.

Under Prime Minister Pierre Elliott Trudeau, the Liberals attempted to bring forward reform under an omnibus bill in 1971. Largely inspired by a government advisory report hailing the benefits of dynamic efficiency and prioritising economic performance over structure, Bill C-256 envisioned a Tribunal that would have broad oversight of competition in the Canadian economy. Its drafters wanted the Tribunal to become a driving force of national economic development, but the original proposal was met with intense hostility from big business and provoked a wave of lobbying in response. The bill elicited 161 responses from business associations, but only 2 were received from consumer associations, reflecting the highly uneven influence driving the bill’s development. 

Big business, with the help of the media, was quick to cast the reform effort as one of overreaching government against all business. UBC Professor W.T. Stanbury, in 1977, found that small media outlets across the country published identical articles under different authors’ names, suggesting a well coordinated national media strategy. Business media overall was highly critical: one American columnist brashly insisted that the proposals amounted to “the toughest set of business regulations anywhere in the free world.” A Globe and Mail piece argued: “the [proposed] competitive practices tribunal would be lawmaker, policeman and judge.” 

In a major win for the business lobby, the government caved and withdrew the original bill. They eventually split the bill into two stages. The first amendments were passed in 1976, and the modern Competition Act, watered-down by the influence of lobbyists, passed ten years later in 1986. André Ouellet, twice Minister of the file, asserted that the spirit of the reforms was to protect businesses and consumers alike, but corporate Canada had already succeeded in villainizing the legislation.

What finally emerged in 1986 was a competition law that was decidedly ambivalent about the very competition it was intended to protect. Though the legislation stressed the importance of equitable opportunity for small businesses and consumer choice, the ultimate prioritisation of efficiency meant these broader goals fell by the wayside. Where corporations could show cost-savings, mergers were not just allowed, but encouraged.

The law we live with today has performed as big business intended. Successful interventions against harmful mergers, such as in waste management markets last year, are few and far between, and our abuse of dominance provisions – intended to police the conduct of major corporations – go dormant for years at a time with little transparency into ongoing investigations. Critical sectors such as telecommunications continue to consolidate, and markets appear to be becoming increasingly concentrated.

Critics today continue to assert that a stronger Competition Act – and a more muscular Competition Bureau – would impede efficient mergers and get in the way of Canada’s economic growth. But this view is out of touch with reality, as it obfuscates the real harms that an excessively pro-merger business culture has had on the Canadian economy. Recent polling suggests the public believes high market concentration is driving up prices across sectors, and that our competition laws are made to serve large companies as opposed to consumers and small companies. The hope for new challengers to unseat incumbents seem increasingly slim, as the rate at which Canadians start new businesses has fallen by half in recent decades.

A more competitive Canada is not a pipe dream, it’s a much needed antidote to our current economic ills. If history can teach us anything on this, it’s to not be duped by straw man characterizations of government overreach and boosters of merger mania. The ongoing review process needs to ensure the perspectives of small businesses and consumers are put at the centre. For the first time, Canada could have a Competition Bureau that sets an example for the world, rather than continuing to lag behind our peers. 

Michael Leger is a PhD Candidate in Political Economy at the University of Cambridge, originally from New Brunswick.

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by Keldon Bester