Competition Bureau signals worker welfare is not a priority in Canada

Canada’s Competition Bureau recently issued a statement on how it plans to assess non-poaching and wage-fixing agreements. It’s worth paying attention to.

After seeking legal advice from the government, the bureau said it will not criminally prosecute companies that fix wages or actively prevent workers from getting jobs at other firms. Instead, these agreements will fall under civil provisions of the Competition Act, specifically section 90.1, and require a much higher threshold of proof.

The statement means that it will be much harder to prosecute firms that collude to suppress workers’ wages or, in antitrust jargon, “create and exercise monopsony power.” In order to do so, the bureau’s commissioner must first find that such an agreement exists. Second, they must find that the agreement substantially lessens or prevents competition. This is a hard test to meet, especially in a digital age where it’s harder to trace a paper trail.

Under criminal provisions, you only need to prove the first point (that an agreement exists). This is in stark contrast to U.S. guidelines that were issued four years earlier. In the United States, authorities have committed to criminally prosecute businesses that make these blatantly collusive agreements.

The core reason behind the Canadian bureau’s position was a tiny change to the Competition Act in 2009. Bill C-10 (the Budget Implementation Act) dropped the word “purchase” from the part of the act that deals with criminal conspiracies, price-fixing, and collusions to carve up and share markets. This means that it’s now a criminal offence to collude with competitors to sell something, but it’s not a criminal offence to collude to purchase something. Because of this change, what U.S. authorities characterize as hardcore, criminal cartels fall under much lighter civil law in Canada.

It’s tempting to think of this issue as just legal pedantics. But even at first blush the implications of dropping this one word – purchase – from the Competition Act are profound.

For instance, as the country roils through COVID-19′s second wave, only Sobeys has reinstated “hero pay” for grocery workers in lockdown areas. Under our competition law, it wouldn’t be criminal for other grocers like Loblaw, Metro and Safeway to conspire to withhold such a bonus despite initially offering it in the pandemic. Earlier this year, MP Nathaniel Erskine-Smith raised questions about the timing of the pay premium reduction and whether companies co-ordinated their decision to end the wage bump.

And it’s not just grocery store workers who would be harmed by unchecked collusion. The technology sector is rife with “no poach” agreements that unnecessarily limit the mobility of talent. A US$415-million settlement between the U.S. Department of Justice and some of America’s largest tech firms, reached 10 years ago, is an example. Given that the average tenure of a tech worker is around three years, artificially preventing workers from continuing their careers at similar firms not only inhibits their mobility, but also prevents them from getting jobs with competitors at higher wages.

Sure, the Competition Bureau could investigate firms that collude to fix wages for tech and grocery store workers through non-criminal parts of the act, like section 90.1. But the chances of a successful outcome are lower and fines could not be issued. There is no real incentive for firms in Canada not to collude to suppress wages.

The bureau’s public statement is a disappointing signal that worker welfare is not a priority in Canada. As the statement describes, our laws are simply weaker than those in the United States when it comes to collusion between competitors.

But even with the laws we have, the Competition Bureau’s leadership does not do enough to address monopsony power in Canadian labour markets. From what we can gather from publicly accessible information, the bureau has never done a serious investigation into anti-competitive conduct related to workers – either under criminal or civil law. This same publicly available information suggests it has also never considered the effect that a merger may have on labour markets and employer monopsony power when reviewing mergers.

Competition policy in Canada is ignoring and hurting workers across the income spectrum at a time when it is needed most. Collusive agreements, like non-compete clauses, enhance employers’ market power by depriving workers of their right to threaten to quit and find new employment if wages fall or stagnate. This is especially salient for technology companies that are seeing record profits in the pandemic but may choose to freeze worker wages.

Competition policy is fundamentally intended to promote competition and prevent practices that could restrict it such as price-fixing, monopolistic behaviours or restrictive trading practices. But, if anything, Canada’s competition policy shows ambivalence and overt favouritism for firms to the detriment of consumers and workers.

Through weak competition policy, we are reducing competition for talent, stifling worker mobility and hurting Canadian industries. We need to consider legislative reform that gives the Competition Bureau more power to fix labour market monopsony when it arises, and make it clear that we expect the bureau to use them.

Correction: Under the Competition Act, the Competition Bureau does not have the authority to prosecute, impose criminal fines or impose civil administrative monetary penalties. Incorrect information appeared in an earlier version of this column.

Read the original publication here.