OTTAWA, ON (May 25, 2023): The rise of digital commerce revolutionized the lives of Canadians : digital firms have emerged to facilitate how Canadians interact, do business, and consume products. In November 2022, the federal government launched a public consultation to determine whether aspects of the Competition Act need to be amended to reflect this new digital economy. The Competition Bureau’s discussion paper indicates concern that the power of digital firms has grown far beyond the reach of competition law in its present form.
In this new MLI paper, Staying the course: Why competition law should remain focused on consumer welfare standards, Will Rinehart and Aaron Wudrick warn that Canada must guard against overreaction in reforming its competition law and avoid following the same path as several peer nations (the United States in particular).
“Far too many of the critical citations in the discussion paper… rely on unjustified assumptions that American analyses can be effectively substituted into the Canadian context,” write Rinehart and Wudrick. “Even when there are significant differences in our respective economies and business cultures.”
Rinehart and Wudrick note the discussion paper skips over contemporary economic literature on productivity and the organization of large firms and the nuance that literature demands. They also note that major digital platforms (such as Facebook or Amazon) operate using a business model that is fundamentally different from the traditional one-sided company business model. Traditional competition analysis that does not account for these differences and instead misrepresents their economic realities.
According to Wudrick and Rinehart, the discussion paper charts out a path that could seriously harm consumers.
Discussion around the proposed reforms grapple with the question whether competition law should be harnessed to address pressing social concerns, such as inequality. Rinehart and Wudrick argue that competition law is a precise surgical tool that should remain focused on the consumer welfare standard.
“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,” write the authors.
“The current competition regime has a proven track record of promoting competition and protecting 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 bureau, can properly administer the existing regime.”
To learn more, read the full paper here:
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Will Rinehart is a Senior Research Fellow at the Center for Growth and Opportunity, where he specializes in telecommunication, Internet, and data policy, with a focus on emerging technologies and innovation.
Aaron Wudrick is the Director of MLI’s Domestic Policy Program.
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