Canada’s Competition Act needs an overhaul

The New York Senate voted recently to pass a bill that would make ambitious changes to the state’s anti-trust law. The bill, which must still be passed by the State Assembly before it becomes law, is novel in the North American context in that it would establish new legal standards for assessing abuses of dominance. These new standards, which mirror those of the European Union, would make it much easier for the state’s attorneys to sue businesses for anti-competitive conduct. The bill would also make changes that directly benefit workers, acknowledging the role of corporate dominance in suppressing wages and eroding work quality. At the federal level, U.S. lawmakers have released an “Anti-Monopoly Agenda” comprising five bipartisan bills intended to “restore competition to the digital marketplace and rein in the largest tech platforms.”

While lawmakers in the U.S. are pushing innovative and well-needed reforms to their anti-trust laws, Canadians are increasingly becoming frustrated by the growing dominance of oligopolies in our economy. There is no doubt that policy decisions in the pandemic have implicitly privileged larger firms. For instance, in several provinces people were restricted from purchasing “non-essential” items at dollar stores, but they were able to purchase those same items at Loblaw-owned Shoppers Drug Mart.

In the bigger picture, current data on the degree of corporate concentration across the Canadian economy highlights that oligopolies are not limited to just certain sectors. Concentration of publicly traded firms in half of Canadian industries has increased by 40 per cent since 1998, and one-third of Canadian industries saw concentration increase by over 50 per cent. This means that large firms have become more dominant and could have more market power. Publicly traded Canadian companies in highly concentrated industries have seen significant increases in profitability. This is likely driven by their ability to extract higher prices, and not by efficiency gains.

To promote a just and resilient economy through anti-monopoly law, we need comprehensive legislative reform. Current policy debates in the space avoid this idea for two main reasons. First, the Competition Bureau, as a subsidiary of its federal department, does not have the authority to speak on the subject. Second, corporate interests tend to crowd out any meaningful competition-related discussion, making it difficult for more people to engage.

Policy makers and the Competition Bureau are not consistently acknowledging reality. In an April appearance before Parliament’s Standing Committee on Industry, Science and Technology, Commissioner Matthew Boswell called for the Competition Act to be reviewed comprehensively, with an eye toward ensuring that our laws are up to date and properly protect Canadian consumers and businesses.

But later, at a recent summit held by the Competition Bureau, conversations quickly devolved into an anti-regulatory-burden cheer squad. Based on the discussions there, you could be forgiven for believing that Canada’s competition problem is not our declining dynamism, increasing concentration across the majority of our industries, or the unique dynamics of digital markets that undermine competition, but rather the continuing supply management of dairy, which makes up a whopping 1.2 per cent of our economy.

Canada’s competition law, which is designed to protect Canadians from monopoly, is woefully ill-suited to the task. For instance, Canada’s merger law allows firms to swallow rivals to attain monopolies in markets such as propane distribution. The last successful abuse of dominance case took an astonishingly long time – over seven years – to reach a conclusion. Canada’s sole competition regulator, the Competition Bureau, only just received its first budget increase in over a decade.

The growing dominance of certain corporations in the Canadian economy has considerable implications for a fair postpandemic economic recovery. There has been ample coverage of Canada’s largest businesses receiving government COVID-19 support while also paying out dividends and bonuses to executives. Many of Canada’s and The globe’s largest digital companies grew through this pandemic. Meanwhile, small firms have recorded almost double the rate of job losses as mid-sized and large firms.

As large firms gain dominance, they can accrue market power – including the ability to set prices and wages – without opposition from consumers or workers. The OECD estimates that, absent excessive market power, the incomes of the poorest 20 per cent of Canadians could be 20 per cent greater and the wealth held by the top 1 per cent could be 24 per cent lower. As competition continues to decline, inequalities caused by imbalances in market power will only widen.

Read the original publication here.