Letters from CAMP

Letters: Movie Market Power

March 17, 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:

  • Monopoly market restrictions choking Canadian independent cinemas
  • Loblaws’ long reach pushes pharmacists to put profits over patients
  • A world-leading economist turns his back on the pursuit of efficiency

Let’s dive in.

To Save Canada’s Indie Theatres, Police Market Power

A new report from the Network of Independent Canadian Exhibitors (NICE) this week reveals the dire situation facing Canadian independent movie theatres. The financial landscape is bleak: 60% of independent theatres operated at a loss in their last fiscal year. In order to remain operational in the short term, theatres are seeking public funding to keep the doors open on these cultural landmarks.

But to preserve the long-term viability of independent cinemas, the harms of market power must be addressed up the cinema supply chain. A staggering 81% of independent exhibitors are required by studios to have “clean runs” where they can only play a single movie exclusively for 2-4 weeks. This severely limits a cinema’s programming flexibility and ability to diversify its audience should a major movie prove unpopular. Additionally, 53% of cinemas say they must wait for nearby Cineplex theatres to finish playing new releases before they can book the same film. This restriction is particularly problematic because Cineplex has a clear monopoly in film exhibition, accounting for about 75% of Canada’s box office market share.

These restrictions are a reflection of the power in both the film distribution and exhibition markets. Despite laws on the books against anticompetitive agreements and market allocation, these practices have been allowed to thrive in Canada’s cinema market. With stronger competition powers, conduct like this should be first in the crosshairs.

It’s Loblaws’ World, We’re Just Living In It

Two stories this week highlighted the sprawling dominance that the Loblaws corporation wields across Canada through its grocery and pharmacy empire. Loblaws has evolved far beyond just a grocery retailer into an “everything company” involved in pharmacy, healthcare, financial services, real estate and more. Its sheer size and diversification have allowed it to amass incredible market power and control over Canadian consumers’ lives.

This concentration is on full display with the scandal around aggressive corporate targets at its prominent pharmacy chain, Shoppers Drug Mart. Despite public denials, internal documents showed Shoppers was pressuring pharmacy owners to meet troubling quotas for billable services like medication reviews, raising ethical concerns about prioritizing revenues over the needs of patients. Owners who missed or refused to hit these targets faced punishment from corporate management who increasingly set standards for formerly independent pharmacists.

Shoppers’ conduct shows the real gains from economies of scale: control. The ability to dictate these controversial practices underscores the dominance Loblaws exerts in the pharmacy sector as the country’s largest drugstore chain. As more independent pharmacists become franchisees beneath national conglomerates, regulators must ensure that power is not abused at the expense of patients and taxpayers.

Nobel Economist Reflects on the Costs of the Efficiency Cult

Leading economist Angus Deaton is having second thoughts. In a recent article by the economics Nobel winner, Deaton reflects on the shortcomings of mainstream economic thought and the damage caused by a singular focus on economic efficiency. He acknowledges that economists have historically valorized efficiency above other important societal goals like equity and social justice. By equating human well-being too narrowly with income or consumption and de-emphasizing the ethical considerations of what constitutes a good life, economists have been blinded to the harms of their policy prescriptions.

Deaton admits to previously subscribing to the idea that any harm to American workers from union busting and free trade was an acceptable price for boosting economic efficiency and reducing global poverty. However, he now questions whether those assumed trade-offs were ethical or empirically sound. A previous proponent of unfettered globalization, Deaton now expresses skepticism that the benefits of globalization were worth the costs imposed on domestic workers.

Deaton advocates for economists to re-engage with the ideas from philosophers, historians and sociologists to develop a richer, more nuanced understanding of human welfare beyond just income and consumption metrics. Rather than dogmatically pursuing efficiency above all else, Deaton calls for recognizing competing perspectives and giving fuller consideration to other vital goals like equality, justice and social cohesion.

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