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A Beer Store, part of Ontario’s beer retail monopoly, in Oakville, Ont. on May 14, 2013. (Deborah Baic/The Globe and Mail)
A Beer Store, part of Ontario’s beer retail monopoly, in Oakville, Ont. on May 14, 2013. (Deborah Baic/The Globe and Mail)

Why do we need monopolies on beer and milk? Add to ...

Competition laws that thwart rivals from illegally fixing prices and limiting supply cover all industries in Canada – except where governments arbitrarily rule they don’t.

Think about dairy and poultry markets, beer sales in Ontario or legal services. In each case, governments override the law in the name of the public interest to protect private monopolies.

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A report released Wednesday by the C.D. Howe Institute argues that the regulations used to stifle competition in these industries impose an unreasonable cost on consumers and should be revisited.

“While many of these regulations are designed to correct market failures, they are inconsistent with federal competition law, which aims to promote economic efficiency by maintaining the integrity of competitive markets,” said Robert Mysicka, a lawyer at Stikeman Elliott, who co-wrote the report with law student Marty McKendry.

The report – Beer, Butter and Barristers: How Canadian Governments Put Cartels Before Consumers – points out that regulated industries make up 20 per cent of Canada’s gross domestic product. And that’s a problem.

The normal rules of competition are suspended for large chunks of the Canadian economy, including the supply-managed dairy and poultry sectors, banking, telecommunications, broadcasting, taxi services, booze and various professional services.

“This market intervention involves a trade-off because anti-competitive regulations can drive up prices, limit product choices and restrict economic growth and opportunity,” the authors argue.

Canadian courts apply what’s known as the Regulated Conduct Defence (RCD) to avoid a conflict with normal competition law.

But the authors say that doesn’t make it right. They say government should rewrite the Competition Act to limit the RCD’s application.

It’s reasonable to use regulations to prevent market failures or to divert profits to pay for needed government services. But that’s not the case in many regulated industries, where the benefits flow to private interests, including food processors, banks and breweries.

“Where profits from monopoly prices accrue to private actors, the legalization of anti-competitive conduct amounts to a private tax imposed on consumers for the benefit of special interest groups,” according to the report. “Such private taxation is regressive and imposes aggregate economic costs.”

In many of these industries it’s difficult to see how diverting profits to private actors serves the public interest.

The authors point out, for example, that Brewers Retail Inc.’s three foreign-owned brewery owners use their Beer Store retail locations to steer consumers to their own products and restrict access to independent breweries by setting high listing and handling fees.

Likewise, the report said excessive restrictions in various professions, including lawyers, drive up costs, including legal fees, which now average $338 per hour in Canada.

The authors conclude that governments in Canada need to do more to insure these monopolies continue to serve the public good.

Follow on Twitter: @barriemckenna

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