Letters from CAMP

Letters: On the Decline

Statistics Canada Finds Low Competition Means Low Investment

This week Statistics Canada released a study with a gloomy conclusion: Canadian businesses are investing less in capital than they were 20 years ago. One cause? High industry concentration and fewer new firms challenging incumbents.

The statistical agency found that since the mid-2000s, Canadian companies are investing less per worker, with the effect most pronounced in large and foreign-headquartered companies. These investments are key to increasing the productivity of Canada’s labour force, and reduced investment has resulted in stalling productivity growth in Canada.

One reason for the slowdown flagged by Statistics Canada is the decline of competition in Canada. With competition, firms are forced to invest in innovative new offerings and steal share from rivals. The report found that industries characterized by a few dominant incumbents have led the way in reducing investment. While industry concentration levels have largely remained steady, the rate of new firms entering the market has cratered, a long-running trend made worse by the pandemic.

The report is a reminder that Canada needs to play both defense and offense to improve competition in the economy. On defense, we need to stop harmful mergers and abuses of corporate dominance. But on offense, we need to make Canada a more attractive place to start and grow a business free from the grip of our oligopolies.

Another Bad Bad Not Good Week for News Media

This week also brought more bad news for the ailing Canadian and American news industries. Vice Media, an icon of the now-aging wave of digital journalism outlets, announced layoffs and the shuttering of its flagship site Vice.com. It’s a poignant moment that underscores the relentless upheaval in the industry, even for yesterday’s disruptors, a saga of survival and adaptation in the shadow of digital giants.

The crisis in news is widespread, and scattershot policy responses continue to be band aids on a structural problem. The future of Canada’s Local Journalism Initiative, a program to subsidize the hiring of journalists in underserved communities, is unclear as the program is set to expire by April of this year. This week also brought coverage of Google testing the removal of the News tab from search results, disrupting how audiences access daily stories. One level below the ad tech monopolists, news industry goliaths continue to tighten their grip on the market, scooping up cherished publication brands, former print and online outlets alike, and sidelining the journalists who’ve long been the backbone of our news ecosystem.

While the decline of advertising revenue began before the rise of Google and Facebook, their dominance in online advertising markets has exacerbated the crisis. The U.S. Department of Justice’s Google ad tech antitrust case, set to go to trial later in 2024, argues that Google’s illegal monopoly allows it to hoover up 30 cents of every digital advertising dollar at the expense of the news organizations that rely on those dollars. While the hunt for new business models for news continues, the closure of once-disruptors like Vice point to a problem that we may not be able to innovate our way out of.

In Screwing Workers, Grocers Prove Collaborative

The New Republic recently spotlighted the contentious proposed merger of U.S. grocery giants Albertsons and Kroger, valued at $24.6 billion, which is being met with significant legal and regulatory push back. Colorado Attorney General Phil Weiser has filed a lawsuit to block the merger, arguing that it would eliminate head-to-head competition and consolidate an already heavily concentrated market. This would lead to higher prices, fewer jobs, and worse customer service as Americans, like Canadians, continue to struggle with the increased cost of living.

But beyond the need to protect competition there is more that will ring familiar for Canadians. The lawsuit brought to light allegations of a “no-poach” agreement between Kroger and Albertsons, aimed to suppress worker’s leverage during a strike by unionized King Soopers workers, a Kroger subsidiary. If proven to be true, the allegations could have consequences beyond antitrust law, including violations of U.S. labour law.

This story hits close to home in Canada, where not only is the grocery market highly concentrated, but our grocers have also proven willing to cooperate on suppressing wages. During the pandemic it came to the light that Canadian grocers had given one another a cordial heads up on the ending of pandemic “Hero Pay” so that other grocers could sunset the program in unison. While the event led to the long-needed inclusion of wage-fixing in Canada’s competition law, it was a reminder of the kind of harmful cooperation that concentrated markets foster.

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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