Call it Canada’s summer of discontent. Air travel sucked. The supermarket chains were gouging. Gas prices went crazy. And then, like a sour cherry on top of the sundae, Rogers managed to unlearn the meaning of “reliable service” with an outage that begat a torrent of outrage, and likely added more fuel to the federal Competition Bureau’s objection to the company’s $26-billion merger with Shaw Communications.
With all the obvious caveats about the macro context—global inflation, malfunctioning supply chains, war, pestilence, etc.—some of Canada’s most heavily concentrated sectors were wallowing around in the midst of this mess, prompting many consumers to wonder (and not for the first time) how we became the land of corporate oligopolies.
The answer is chock-a-block with excuses, some of them valid: small population, large geography; a general consensus, validated after the 2008 credit crisis, that a concentrated and heavily regulated banking sector is more stable than the alternative; and Bay Street’s insistence that size does, indeed, matter for firms aiming to compete in the global big leagues.
Still, critics of the status quo argue that Canada’s mealy-mouthed competition policies have allowed creeping consolidation, discouraged new entrants and hiked prices for consumers in core sectors, like cellphone service. Those voices, interestingly, include Matthew Boswell, Canada’s competition commissioner, who bluntly enumerated the shortcomings of Canada’s 37-year-old legal framework in advance of a promised parliamentary review scheduled to begin this fall. “We need to have a debate in Canada about what our competition law should look like in the 21st century,” he said in a speech last year, noting that the country’s competition rules are a complete outlier among our major trading partners.
Canada’s Competition Act, written before laptops and smartphones and browsers, reflects the very 1980s neo-liberal ethos of unfettered markets and the growing belief among many economists that the anti-trust laws of the early 20th century no longer mattered. It relies on commissioning complicated economic studies of markets to determine whether mergers prevent or weaken competition. The thing is, it doesn’t necessarily matter if mergers bring higher prices, evidence of abuse of dominance or reduced competition: Our rules allow mergers to proceed if they yield efficiencies, meaning higher profits.
“The core problem is Canada’s so-called efficiencies defence for mergers, contained in Section 96 of the Competition Act,” noted economist Robin Shaban, co-founder and principal at consulting firm Vivic Research, in a Globe and Mail opinion piece last year on the proposed Rogers-Shaw merger. “If a merger creates a significant amount of cost savings, it is legal under Canadian law, even if it hurts consumers.” In other words, if the Rogers-Shaw union creates $1 billion a year in “synergies,” as the companies claim, there may be little the Competition Bureau can do to take serious action against the deal.
Another shortcoming of our superannuated Competition Act is that it’s especially ill-suited to tech and data-driven markets, with their easily distorted platform economies and monopolistic tendencies. Shaban and other pundits delve into this conundrum in a 122-page study that Vivic published earlier this year. “What really matters in our increasingly digital society is the (potential) ability of data on the firm’s ability to do harm,” concludes the report, which calls on Ottawa to enact a “rules-based” competition law that clearly specifies the conditions that must be met for a merger to be approved. “When consumers are trading their digital data in exchange for a product or service, the harms are broader than just price.”
Amazon, for example, has a well-documented tendency to favour its own products on its online marketplace, an abuse-of-dominance tactic also used by Google in its search services. In response, competition regulators in both the European Union and the United States are implementing substantial fines and operating restrictions to keep digital titans like Google in check.
Last year, for example, the Biden administration signalled its intention to step up enforcement activities to push back against anti-competitive consolidation in agriculture, pharmaceuticals and tech; so-called anti-trust czar Lina Khan, who heads the U.S. Federal Trade Commission, is a champion for consumers. And a recent ruling by the European Commission restricted Google’s access to biometric user data gathered by activity tracker Fitbit, which the search giant acquired in 2019 for US$2.1 billion. The conditions prevent Google from accessing individual users’ Fitbit health profiles for the purposes of targeting them with personalized ads.
It’s worth noting that the EC, which also has robust privacy laws, imposed these conditions even though both companies are American. Meanwhile in Canada, the Competition Bureau has begun investigating Google and Amazon, but it has never levied fines or imposed any significant restrictions. “Canada is increasingly out of step with other jurisdictions,” says Vass Bednar, co-author of the Vivic study and executive director of McMaster University’s graduate public policy program. “Everyone else is looking at Amazon this way. Why not Canada?”
She says Canada’s approach has persisted not just because Ottawa policymakers continue to hew to an outdated laissez-faire philosophy. The laws, and the record of judicial decisions made by the Competition Tribunal, also reflect the influence of a small community of competition law experts with long-standing connections to corporate Canada.
There was also a resource issue, which the federal government finally acknowledged in its 2022 budget, with a five-year, $96-million funding infusion that Boswell says will build a new “digital enforcement and investigation” unit. Still, the Competition Bureau’s mergers branch continues to limp along on filing fees, even though, as Boswell points out, the investigations of proposed takeovers have become increasingly complicated and time-consuming, and sometimes produce utterly frustrating results.
Case in point: The Bureau sought an injunction to prevent the 2021 merger of two oil and gas waste management firms in Western Canada—Secure and Tervita—that its market analysis showed would create geographic monopolies in some regions and drive up prices. The Competition Tribunal, however, rejected the injunction, and the merger went ahead.
“The tribunal allowed a transaction to proceed that it concluded would likely cause irreparable harm to the public interest and competition,” Boswell said last year. “Yet, this transaction was allowed to proceed prior to the hearing of all of the evidence on the application.” The ruling, he added, “crystallizes” the case for far-ranging reforms.
The paradox of competition policy is that consumers generally know when they’re being hosed. In an Ipsos Reid poll this past December, for example, 88% of Canadians surveyed said there should be more competition in consumer markets to drive down prices, encourage more choice and enable startups to gain a foothold. Yet competition law itself is the province of experts steeped in legal arcana—concepts like “substantial loss or prevention of competition” tests, or the differences between a Section 92 application and Section 104 application.
Bednar and Shaban claim that a rules-based system—with clear market-share thresholds and guidelines that directly address the Looking Glass world of platform markets—is the only way Canadians can extricate themselves from the grip of sanctioned oligopolies or tech giants that know they can operate in Canada with impunity.
Will a summer of outages, staggering gas prices and cancelled flights finally push Canadians to demand change? “I really hope so,” says Shaban. “It’s been corporate representation steering the ship. But we need workers at the table. We need consumers at the table. We need small and mid-size enterprises at the table. We need a diversity of stakeholders that are shaping this [reform]. If we can have that, then I think there’s an inflection point.”
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