Letters from CAMP

Letters: Big Bank Squeeze

June 16, 2024

Welcome to Letters from CAMP, a newsletter on anti-monopoly activity in Canada and abroad, brought to you by the Canadian Anti-Monopoly Project. In this installment we have:

  • Reporting on the cost of the big banks to everyday Canadians
  • Competition Bureau investigates Amazon’s potentially deceptive practices
  • Big Tech breaks the creative destruction flywheel

Let’s dive in.

Canada’s Big Banks Squeeze Amid Junk Fee Backlash

In a recent column for Corporate Knights, CAMP executive director Keldon Bester took aim at the billions in excess profits squeezed annually by Canada’s Big Five banks. Bester argues the higher fees Canadians pay for everything from monthly account fees to non-sufficient funds charges and the widening gap between saving and lending rates stem from the banks’ oligopoly power, with the Big Five controlling 90% of the market.

Citing consulting firm North Economics, Bester notes Canadians pay $8.5 billion more per year in bank fees compared to consumers in the UK and Australia. This amounts to about $250 per Canadian. Beyond fees, the growing gap between the low interest rates banks pay to savers and the rates charged to borrowers is also quietly squeezing billions from Canadians, with the banks pulling in an additional $5 billion since the Bank of Canada began raising interest rates.

To remedy the situation, Bester argues policymakers need to tackle the banks’ market power to enable more choice and higher value for savers and borrowers. Initial steps are underway, such as open banking and curbs on non-sufficient funds fees, but it will take much more to roll back the power of Canada’s Big 5.

In the U.S., the Consumer Financial Protection Bureau and Federal Trade Commission have launched sweeping measures to eliminate so-called junk fees across not just banking, but airlines and hotels as well. Addressing useless fees that drive up costs for consumers is one step towards a fairer economy, but tackling the power that allowed those fees to be charged in the first place remains the top priority.

Competition Bureau Intensifies Scrutiny of Amazon

The Competition Bureau has obtained a second court order as part of its ongoing investigation into Amazon’s potentially false or misleading marketing claims related to the reviews and prominence of products on its marketplace.

Recently covered by the podcast Lately hosted by CAMP Advisory Board member Vass Bednar, the wild west of online reviews has become an increasingly important battleground for consumers. As the importance of reviews to consumers has increased, so too have efforts to game the systems and deceive customers. While e-commerce platforms have an interest in maintaining a healthy review ecosystem, incentives remain to use those review systems to tip the scales in favour of dominant platforms.

While the scrutiny of review systems is welcome, the real test of the Competition Bureau’s new powers will be an abuse of dominance investigation into the power wielded by Amazon in e-commerce and the sprawling markets it looms over. Though the Bureau canvassed Canadians about these practices in 2020, the enforcer has been radio silent since.

Is “Acquire and Deny” the New “Embrace, Extend, Extinguish”?

Silicon Valley’s cycle of creative destruction, where startups disrupt incumbents with new technologies, is breaking down. In a guest essay for the New York Times, professors Mark Lemley and Matt Wansley argue that tech giants like Google, Microsoft, Amazon and Apple are co-opting this process by acquiring or licensing technology from AI startups before they can become significant competitive threats. While providing needed funding for startups in the short-term, in the long-run this consolidation harms innovation by blunting the competitive process.

Recognizing this worrisome trend, the FTC is now probing Microsoft’s $650M licensing deal with Inflection AI, which coincided with Microsoft poaching most of Inflection’s engineers, and U.S. antitrust enforcers have divvied up efforts investigating the raft of Big Tech partnerships and investments with AI startups.

Canada’s Competition Bureau should follow the FTC’s lead in scrutinizing Big Tech’s investments in and acquisitions of AI and other emerging technology startups. The acquisition of nascent competitors remains an open question in Canada’s competition law, and market studies could identify the need for enforcement or policy actions to maintain a competitive environment.

If you have any monopoly tips or stories you’d like to share, drop us a line at hello@antimonopoly.ca

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