Canada needs to learn how to block harmful corporate mergers.
That advice comes from Tim Wu, a Columbia University law school professor who served as special assistant to U.S. President Joe Biden for technology and competition policy from 2021 to 2023.
Tech heads likely know him best for coining the phrase “net neutrality” more than two decades ago. But in legal circles, he is credited for being the architect of the Biden administration’s competition and antitrust policies.
Mr. Wu is offering his words of wisdom to Canadians at a pivotal moment. The federal government is updating the Competition Act for the third time since 2022, and remains at risk of not getting it quite right.
“Get away from consent decrees and start blocking mergers,” Mr. Wu said in an interview at the recent DemocracyXChange summit in Toronto.
“This whole thing where they make a bunch of promises; I think that those are just too wimpy,” he added, referring to the concessions companies make – and sometimes break – to get deals done.
Unfortunately, wimping out is the Canadian way.
Canada has never successfully blocked a merger – at least not through the court process – because our legislators lack the gumption to give the Competition Bureau a big enough stick.
It is a decades-long problem that is coming back to bite us because of inflation and a productivity crisis that is making us collectively poorer.
The United States, meanwhile, has spent years shaking up its competition policies. Mr. Wu, for instance, played a key role in crafting Mr. Biden’s executive order calling for an administration-wide approach to antitrust back in 2021.
But even before Mr. Biden came to power, former president Donald Trump was changing the mindset in Washington. Specifically, he honed in on waning competition in the tech sector, a shift that paved the way for former attorney-general Bill Barr to sue Google.
These days, antitrust has become a rare area of bipartisan agreement between Democrats and Republicans. As The Wall Street Journal reported last month, Lina Khan, chair of the U.S. Federal Trade Commission, is a Biden appointee who has earned the respect of many GOP members.
North of the border, meanwhile, antitrust is shaping up to be an election issue. The Liberal government is making all kinds of noises about stimulating competition, especially in the grocery, telecom and banking sectors. Conservatives are talking a blue streak about “Canada’s monopoly problem.”
Mr. Wu has some first-hand experience with corporate contempt for the consumer on this side of the border, too. He grew up in Toronto and his alma mater is McGill University in Montreal.
“There is a certain kind of ease with a small oligopoly or monopoly in Canada – an unwillingness to hold companies’ feet to the fire and force them to compete hard,” he said. “Sometimes it happens through trade and, you know, tolerance of mergers that seem to be highly suspect.”
Oh, we know. Canada has many lessons to learn from the U.S. experience.
“One thing we were determined to change was the problem of what we call chicken-shit lawyers, which is to mean government enforcers who were so determined to have a batting average of a thousand in their cases. So, they wouldn’t dare bring a case where there’s any possibility of losing,” Mr. Wu said.
That brings us to Canada’s Competition Commissioner, Matthew Boswell, who has proven that he isn’t afraid to take on a case that he might lose. Despite being hamstrung by outdated legislation, Mr. Boswell sought a full block of Rogers Communications Inc.’s $20-billion takeover of Shaw Communications Inc., a blockbuster deal that closed last year.
Just this week, under his leadership, the Competition Bureau opposed U.S. grain dealer Bunge Ltd.’s proposed US$8.2-billion acquisition of agriculture giant Viterra.
For his part, Mr. Boswell is urging the government to consider additional amendments to Bill C-59, which is proposed legislation to implement provisions of the fall economic statement including changes to the Competition Act. The goal would be to better harmonize the Canadian act with U.S. legislation, including recommendations relating to merger reviews.
First, he wants Canada to adopt a “structural presumption system.” That means a merger would automatically be considered anti-competitive if the postmerger market share of a combined entity exceeds a certain threshold – likely 30 per cent. In such cases, the onus would be on the merging parties to rebut that presumption.
“This is not a novel idea. The U.S. has taken this common-sense approach for over 60 years,” Mr. Boswell told legislators on April 18.
(At present, the Competition Bureau will not generally challenge a merger if the postmerger market share of the combined entity is less than 35 per cent.)
Second, Mr. Boswell also wants more powers to remedy anti-competitive mergers, noting the U.S. only allows merger remedies that fully maintain competition to prevent consumers from “bearing the cost of a risky remedy.”
He rightly argues that such changes would improve co-operation for cross-border merger reviews and provide regulatory certainty to companies.
Mr. Boswell is also encouraging our legislators to emulate Mr. Biden’s administration-wide approach to antitrust.
As for Mr. Wu, he frames the issue as one of economic democracy, stressing that governments that ignore public pressure will fall.
“Capitalism without competition, it’s not capitalism,” he said. “It’s exploitation.”
Rita Trichur