By Aaron Wudrick and Will Rinehart, June 15, 2023
Digital commerce has for years been revolutionizing how Canadians interact, do business, and consume products, giving rise to new and important digital firms.
Last fall, the federal Minister of Innovation, Science and Industry launched a public consultation to determine whether some aspects of the Competition Act should be amended to reflect this new economic reality. As part of that process, a discussion paper prepared by the federal Competition Bureau laid out a number of proposed changes to the Act, flowing from the Bureau’s concern that the power of digital firms has grown far beyond the reach of competition law in its present form.
In fact, a very different risk lurks: overreacting to unsupported assertions. Accordingly, Canada must guard carefully against making changes that are potentially damaging to sound competition law, and avoid following the same path as several peer nations, in particular the United States.
Far too many of the critical citations in the Bureau’s discussion paper – including those that do some of the heaviest lifting to support proposed changes – rely on unjustified assumptions that American analyses can be effectively substituted into the Canadian context, especially when there are significant differences in our respective economies and business cultures.
Clearly, the government has a role to play in fostering competition. The question is whether it risks inadvertently hampering robust competition by intervening too aggressively in areas where dynamic forces are evolving rapidly and are not well understood. In particular, the temptation to view the status quo in any given market as static must be resisted.
The digital economy certainly operates in novel and unique ways, so much so that the usual markers of anti-competitive behaviour in traditional business operations can, in digital businesses, be signals of healthy market competition that benefits consumers. This does not mean that policymakers should do nothing where it is clear and obvious anti-competitive behaviour. But it does mean that we require a better understanding of how digital platforms work in practice in order to parse the good from the bad.
Another major theme dominating the debate over reforming competition law grapples with the question of whether that law should be harnessed to address other pressing social concerns, such as inequality. Competition law is not a Swiss army knife, but a surgical tool that should remain focused on the consumer welfare standard — the principle that competition is good because consumers benefit from greater choice and lower prices — and the government should address these other important challenges with more appropriate tools.
The current competition regime has a proven track record of promoting competition and protecting consumers. To take one example among many, the Act has prevented monopolies from dominating markets, which has encouraged innovation and generally ensured low costs for consumers. The Act does not need a fundamental overhaul of its mandate. Rather, it needs more resources so that organs of government, such as the Competition Bureau, can effectively administer the existing regime. In sectors where oligopolies do dominate, the root cause is not a lack of Bureau intervention but legal barriers erected by government, most commonly foreign ownership restrictions. For those truly concerned about Canada’s lack of competition, these obstacles should be the main focus for repeal or reform.
If the framing of the Bureau’s discussion paper is an indication of the intended direction for competition policy, we are headed down a perilous path. Toying with dramatic changes to the Act, based on dubious evidence, would substantially alter how business is conducted and is likely to trigger significant unintended consequences, with negative repercussions for our economy.
It is imperative that the Competition Bureau protect the interests of consumers by ensuring the Act remains focused on promoting the “efficiency and adaptability of the Canadian economy”, and for this task the consumer welfare standard remains the proper tool.
Aaron Wudrick is Director of the Domestic Policy Program at the Macdonald-Laurier Institute in Ottawa.
Will Rinehart is a Washington-based Senior Research Fellow at the Center for Growth and Opportunity, specializing in the public policy of technology and innovation
