Rogers outage demonstrates Canada’s misplaced focus on efficiency in its competition law
CAMP statement in response to Rogers’ outage:
“Today’s nationwide outage of the Rogers network showcases the far-reaching effects of Canada’s oligopoly telecommunication markets, and the consequences of our misguided focus on efficiency over resilience in our competition law and other areas of economic policy.
The economic and social costs of this event are a reminder of the value of diverse, dynamic, and democratic markets, and the fragility and risk associated with the consolidation of economic power.
Canada’s competition law must be reformed to halt the efficiency-driven consolidation that harms Canadian consumers and businesses , and makes our economy less resilient.”
-CAMP
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“Under European competition laws, businesses can be fined for abusing their dominant position in a market to exploit purchasers or sellers… Canada has no equivalent exploitation doctrine in its competition law. It is not illegal for dominant firms to leverage their market power to earn excess profits, exploit consumers or even exploit workers.”
How the COVID 'hero pay' scandal prompted Ottawa to make wage-fixing illegal
Financial Post
Following uproar from grocery stores ending pandemic pay bonuses in unison, federal law makers criminalized wage-fixing and no-poach agreements under Canada’s competition law starting June 2023.
Competition Policy Series: What Steps Must Canada Take to Address the Challenges from Digital Technologies?
The Centre for International Governance Innovation (CIGI) held its third virtual event in the Competition Policy Series, “What Steps Must Canada Take to Address the Challenges from Digital Technologies?”, on Wednesday, June 8, 2022.
The digital economy has upended competition policy and presents complex new challenges for policy makers. What challenges have been witnessed over the past few years, and what have been the implications for innovation and for society more generally? What is the role of competition policy to address these issues? Do we need greater emphasis on antitrust or on regulations to address these issues? Is greater coordination required across regulatory bodies and, if so, what mechanisms can be used to achieve it?
These and other questions were addressed by our panel of experts:
Keldon Bester, Fellow, CIGI
Denise Hearn, Senior Fellow, American Economic Liberties Project
Jennifer Quaid, Senior Fellow, CIGI
Bob Fay, Managing Director of Digital Economy, CIGI
See the full panel here.
Competition Policy Series: The Competition Act and Canada’s Digital Future
Digital technologies are reshaping markets in many profound ways, and these changes are creating new challenges for competition authorities. As Canada looks ahead to a consultation on the modernization of the Competition Act, now is the right time to discuss why competition matters, why the Competition Bureau and the Competition Act are critical to our economic recovery, and how today’s digital marketplace is disrupting and reshaping our economy. These and other questions were addressed at “The Competition Act and Canada’s Digital Future,” a CIGI event held on May 26, 2022.
Commissioner of Competition Matthew Boswell opened the event with some prepared remarks and then participated in a moderated panel discussion led by Vass Bednar, CIGI senior fellow and executive director of the Master of Public Policy in Digital Society program at McMaster University; Tahira Dawood, staff lawyer at the Public Interest Advocacy Centre; Brandon Schaufele, associate professor at the Ivey Business School at Western University; and Robin Shaban, senior economist and co-founder, Vivic Research.
Watch the panel here.
Canada’s Budget 2022 Offers Competition Reforms, but the Real Fight Lies Ahead
Tucked in the middle of the Government of Canada’s 500-page Budget Implementation Act, 2022, No. 1 — Bill C-19, tabled in Parliament in April — are the first material amendments to Canada’s Competition Act in more than a decade.
The amendments follow through on Minister of Innovation, Science and Industry François-Philippe Champagne’s statement in early February about the “critical role of the Competition Act in promoting dynamic and fair markets” and his embarkation on a careful evaluation of potential improvements.
The proposed changes are indeed meaningful upgrades to the current state of Canada’s competition law, particularly its ability to protect Canadian workers, despite the lack of deliberation common to budget omnibus bills. But, while the amendments place long overdue attention on gaps in Canada’s competition law, a bigger fight lies ahead, should the government also follow through on its announcement that it would engage in a “more substantive” review of the act. If Ottawa wants to create a Competition Act that truly protects Canadians, it will need to reform the area of competition law most valuable to Bay Street: mergers and acquisitions.
Amendments to the act proposed in the budget bill expand the scope of abuse of dominance (conduct by a dominant firm with a predatory, exclusionary or disciplinary effect); clarify the prohibition on drip pricing (the practice of advertising prices that are unattainable due to hidden fees); and expand the types of conduct that private parties can bring in front of the Competition Tribunal, independent of the Competition Bureau.
Beyond these, two proposed amendments that stand out are the expansion of the act’s cartel provisions to include wage-fixing and no-poach agreements, and the reform of the law’s anemic financial penalties.
The wage-fixing change is a response to good work by the Standing Committee on Industry and Technology, in particular, of member of Parliament Nathaniel Erskine-Smith, in the first year of the pandemic. It was prompted by the major grocery companies’ apparently synchronized decisions to reduce “hero pay” for their frontline workers, and the revelation of related communication among their senior executives. This led the Competition Bureau to seek legal advice that confirmed that neither coordination among employers to fix wages nor “no-poach” agreements (agreements not to hire away competitors’ staff) were currently covered under the act.
Workers benefit when employers have to compete for their time and effort, and wage-fixing and no-poach agreements attempt to blunt that competition at workers’ expense. As University of Ottawa professor and CIGI Senior Fellow Jennifer Quaid points out, the language of the amendments leaves a number of technical questions unanswered. Nonetheless, the proposed change is preferable to a status quo in which employers have been free to suppress wages and reduce workers’ mobility, especially as Canadians see their cost of living rise across the board.
Beyond addressing wage fixing, the proposed amendments also increase the penalties the Competition Bureau can request from the Competition Tribunal for violations such as abuse of dominance and deceptive marketing. Currently, penalties are capped at $10 million for a first offence, and $15 million thereafter. The bill proposes a higher ceiling, proportional to the impact of the conduct or the size of the company. Following the reform, firms could be forced to pay three times the value of the benefit gained from the problematic conduct or, if that cannot be reasonably determined, three percent of annual worldwide revenue.
To illustrate the scope of the proposed change, in early 2020 the Bureau reached a CDN$9 million settlement with Meta over its misleading claims to Canadians about their privacy on the company’s Facebook and Messenger platforms. This settlement, although close to the existing cap of $10 million, represented less than one hour of revenue relative to the company’s total 2020 earnings of approximately $110 billion. Under the worldwide revenue method, the potential ceiling for the fine under the amended act would have been closer to $3 billion.
Unfortunately, the proposed amendments also add unnecessary complexity by introducing two tests for determining the ceiling for fines. We should anticipate legal wrangling over terms such as “reasonably determined.”
But these reforms are nevertheless a step toward ensuring penalties under the Competition Act, particularly those levied for deceiving and misleading consumers. They go well beyond what has essentially been the threat of a parking ticket for major firms.
Far more important than fines, though, is the Bureau’s ability to influence the long-term structure of markets, often defensively, in response to anti-competitive mergers. These mergers can fundamentally restructure markets, often permanently eliminating competition, reducing consumer choice and increasing prices.
Canada’s current merger law is uniquely permissive, with a so-called “efficiencies defence” that allows harms to Canadians in exchange for alleged cost savings, savings that often come in the form of job losses. Even when the Bureau successfully challenges a harmful merger, the standard for addressing those harms favours narrow solutions that allow for lost competition rather than restore competition to pre-merger levels. This leads to the pursuance of complex and piecemeal solutions rather than the simple protection of competition by blocking a merger outright.
The ongoing Rogers-Shaw transaction is emblematic of this permissiveness. Although Canadians pay some of the highest rates for wireless service in the world, and the Competition Bureau has filed an application to block the merger, commentary suggests the transaction is likely to proceed with an assumed remedy carving off Shaw’s wireless assets and providing other concessions to support the growth of a buyer. Parliamentarians, including members of the Standing Committee on Industry and Technology and New Democratic Party leader Jagmeet Singh, have correctly diagnosed the potential harms to Canadians and called on the government to prevent the transaction. But Canada’s current merger laws are designed to smooth the rough edges of harmful acquisitions, not to decisively protect competition.
Although no change to Canada’s competition law comes without controversy, any reform intended to protect Canadians’ interests at the expense of monopolies will be fiercely contested by the latter. Despite empirical evidence of the harms caused by a permissive approach to mergers, change will challenge not only the monopolists looking to acquire their competitors, but also the large financial institutions and law firms that help execute these transactions. Reform will also help mitigate the assumption that, as a relatively small population, Canadians have no choice but to bear the costs of concentrated industries. A comprehensive reform of the Competition Act is an opportunity to push back on these outdated ideas, but doing so will test the resolve of parliamentarians to buck corporate interests.
The federal government should be commended for addressing problems that competition advocates, policy makers and our competition enforcer have identified. But the bigger battle will be over areas of the law with the power to shape markets for years to come. Changes of that magnitude will need to be worked out with more democratic oversight than an omnibus budget bill. By ensuring that perspectives beyond Bay Street are considered in a more comprehensive and public review of the Competition Act, the government can make that democratic oversight truly worthwhile.
Evidence at home and abroad suggests the power of firms to extract higher profits is playing a role as Canadians see material increases in the cost of living for the first time in years. Now more than ever, Canadians need a set of laws that protect them from the consequences of monopoly.
Read the original publication here.