Canada’s Competition Law: Is It Really Up to the Task?

Despite growing calls for scrutiny and reform of competition law around the world in the wake of rising corporate power, the urgency to curb monopolies is lacking in Canada.

While legal experts and think tanks work to assure policy makers we have the right rules in place, a close look at Canada’s record should give observers pause. Whether Canadian law can address challenges to competition is an increasingly open question, particularly in light of the rise of digital markets.

The title of a recent report by the Macdonald-Laurier Institute, Up to the Task, captures the general mood in much of Canada’s competition community well. While its authors, Anthony Niblett and Daniel Sokol, concede there may be a need for tweaks at the margins — for example, higher fines to reflect the increased scale of digital companies — they see nothing more than incremental reform, if that, as necessary.

But actions by our international partners, and the limits of our current laws in protecting competition, suggest that the status quo is worthy of deeper investigation.

It could be, perhaps, that Canadian policy makers had the foresight decades ago to craft a legal regime with the flexibility to respond adequately to ensuing major economic shifts. However, the confidence in the current state should be tempered by a recognition that the performance of Canada’s competition laws has yet to be thoroughly studied. And it belies the evidence that serious problems already exist in key areas of enforcement.

To begin, Canada is one of a shrinking number of peer countries that have not conducted a formal review of the effectiveness of its competition laws in the context of the rise of digital markets. Indeed, the last formal review of the Competition Act concluded well over a decade ago, in 2008, the same year Apple released the App Store.

Meanwhile, governments and regulators in the United States, the European Union, the United Kingdom and Australia all have conducted in-depth analyses of the performance of their competition laws in digital markets — analyses that have since prompted legislative or fiscal action, with increased scrutiny of dominant players as a common theme. Canada can capitalize on the work already done, but a lesson we should take away is that our peers found their own status quo to be lacking, and have already responded decisively.

In 2019, Navdeep Bains, the minister of innovation, science and economic development at the time, requested that Commissioner of Competition Matthew Boswell work with Bains’s departmental staff to review the fitness of Canada’s Competition Act for digital markets. While commentary by the commissioner suggests this work is ongoing, no public reports have emerged from that request, nor is there any timeline for any to emerge. Competition does not appear to be an element of the government’s near-term digital policy agenda. There was just one reference to fair competition in the Liberals’ 2021 platform, and other digital policy priorities, such as broadcasting reform, online harms, and news media funding, compete for the government’s attention. In short, inertia persists, despite repeated public calls for a comprehensive review of the Competition Act by Commissioner Boswell, who has highlighted the limits of enforcement in less glamorous but important markets such as industrial waste management.

This lack of urgency is cause for concern when assessing the performance of merger enforcement, a cornerstone of Canada’s competition law. Canada’s merger laws provide the Competition Bureau with the authority to challenge transactions that have the potential, in the language of the law, to “substantially lessen or prevent competition.” Effective merger law is critical, because mergers can be employed by dominant players to quash nascent competitors, which can lead to lasting harms such as higher prices, lower quality and innovation stagnation for the individuals and businesses that depend on competitive markets.

Unfortunately, Canada’s enforcement track record regarding mergers is quite poor. For one, the Competition Act, in particular section 96, known as the efficiencies defence, allows for mergers to monopolize, where competition in a market is extinguished and consumers must rely on the sole remaining business for a given good or service. In the past, mergers of this kind have left Canadians at the whim of a single corporation for access to essential goods such as propane.

Further, in the nearly 20 merger challenges that have gone before the Competition Tribunal, which first hears civil competition cases, the Bureau has only been successful in a single challenge. While there is no magic number of cases for the government to win to prove our competition regime is up to snuff, a regime in which interventions are practically never successful does not inspire confidence.

It is no surprise, then, that rather than taking these potentially harmful transactions to court, the Competition Bureau is more likely to negotiate consent agreements with merging parties to remedy the harmful effects of a merger. These agreements can include conduct requirements, such as commitments not to raise prices for a set period of time, or divestment of assets away from the merged company to bolster another competitor, for example, gas stations in markets with few remaining competitors, in exchange for allowing a merger to proceed.

Read the full publication here.