Skip to main content
Open this photo in gallery:

Commissioner of Competition Matthew Boswell speaks at Canada's Competition Summit hosted by the Competition Bureau Canada in Ottawa on Oct. 5, 2023.Sean Kilpatrick/The Canadian Press

David Feldman is a competition lawyer

We’re living through a period of dramatic upheaval in Canada’s competition law. Significant changes were passed in 2022 and 2023, and even more important amendments have been included in Bill C-59, the implementing legislation for the government’s 2023 fall economic statement. Collectively, these amendments will give the head of Canada’s Competition Bureau, Matthew Boswell, almost all the changes he’s been hoping for.

But that’s still not enough for Mr. Boswell, who appeared before the House of Commons finance committee on Thursday in support of his most audacious request yet.

Speaking to the committee, Mr. Boswell reiterated a recommendation he had previously made in a letter last month. He asked that Bill C-59 be expanded so that it adds an explicit “structural presumption” to the Competition Act. His proposal would force the Competition Tribunal, when hearing a merger challenge, to consider a postmerger market share above 30 per cent to be presumptively anti-competitive, meaning that instead of the bureau having to prove that the merger shouldn’t be allowed, the merging parties would have to prove that it should.

This is not a new idea. U.S. antitrust agencies have endorsed it. The Conservatives and New Democrats have backed its principles. And it has not gone entirely unremarked upon in Canada: a Globe and Mail editorial mentioned Mr. Boswell’s letter shortly after it was sent.

But the whole debate remains niche. Virtually no other media have covered Mr. Boswell’s letter. We as a country aren’t talking about it enough. The relative obscurity of the matter belies the magnitude of its potential impact.

If implemented, this proposal by Mr. Boswell would represent a seismic change in Canadian competition law. Today, the agency Mr. Boswell runs says in its merger enforcement guidelines that it will usually not challenge a merger where the postmerger market share is less than 35 per cent. That has been its policy for decades. The bureau is free to attempt to block mergers below that threshold, though it might have difficulty prevailing in many of those cases under current law.

Now, though, Mr. Boswell wants anything resulting in shares over 30 per cent to be presumptively illegal by an act of Parliament.

The presumption would be onerous, and completely impractical in the context of the Canadian economy. Imagine a town with seven independent gas stations – three big ones, each pumping 20 per cent of the town’s gas, and four smaller ones pumping 10 per cent each. Now, imagine one of the smaller operators wants to retire and agrees to sell his station to one of the other little guys, making a fourth 20-per-cent competitor. The town gets a new larger player that might be big enough to invest in a few extra pumps or a car wash and make the other three big guys sweat a little, and drivers still have six competitors to choose from.

But even this would trip the concentration threshold Mr. Boswell wants to see added to the law, owing to the idiosyncrasies of the way market share would be calculated. (Technically, Mr. Boswell is asking for a concentration threshold of either 30 per cent or 1,800 on the Herfindahl-Hirschman Index scale. The latter is calculated as the sum of the squares of the market shares of each firm in the market.)

What’s more, most markets aren’t as clear-cut as litres of gas in a town. The question of how to define the relevant market is often the core issue in a Competition Bureau review, making structural presumptions based on market shares an analytical dead end. For example, is there a market for newspaper ads, or are social media ads part of the same market? To form an opinion about that, you would have to figure out how the price of social media ads would be affected by a newspaper merger – which is exactly the kind of analysis a structural presumption is supposed to avoid.

Andrew Coyne: Angry at businesses like Bell Media? Real competition – not anger – is the answer

Manulife, Loblaw need to ‘get the message’ on competition following deal, Champagne says

From one point of view, Mr. Boswell’s proposal simply brings Canada in line with the U.S., where the antitrust agencies’ recently updated guidelines already include these thresholds. And a rebuttable presumption isn’t a locked door – merging companies could still overcome the presumption at trial. But that’s the wrong way to look at things.

The U.S. guidance is just that – guidance. It doesn’t have the force of law, and it changes every few years without the involvement of Congress. More importantly, for all their faults, the U.S. courts can actually hear and decide merger cases on a relatively timely basis, which gives everyone a practical forum in which to get into the actual facts and numbers. Their courts can, and often do, decline to block mergers even where those thresholds are exceeded. In contrast, in almost three decades, fewer than 10 mergers have been fully litigated before the Competition Tribunal.

Of course, not every merger is good for Canadians – far from it. But excessively formalistic or rigid standards would inevitably have a chilling effect on mergers that could contribute to a more efficient, modern economy.

That’s why it’s so important for the commissioner and his team to continue to do the work, instead of moving the goalposts so that back-of-the-napkin calculations can replace a robust case-by-case analysis. In a complex and rapidly changing economy, Canadians need a competition watchdog that deals in proof, not presumption.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe