By Will Rinehart and Aaron Wudrick
May 25, 2023
Executive Summary
Digital commerce has revolutionized how Canadians interact, do business, and consume products, giving rise to new and important digital firms. In November 2022, the federal Minister of Innovation, Science and Industry launched a public consultation to determine whether some aspects of the Competition Act need to be amended and/or updated to reflect this new digital economy. Commissioned to lay out proposed changes to the Act, the Competition Bureau’s discussion paper suggests that it is concerned that the power of digital firms has grown far beyond the reach of the competition law in its present form.
But Canada must guard against overreaction and avoid following the same path as several peer nations, in particular the United States. Far too many of the critical citations in the 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, even 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. The bureau must resist the temptation to view the status quo in any given market as static.
Much of the current discussion over reforms to competition law grapple with the question as to whether competition law should be harnessed to address other pressing social concerns, such as inequality. Our view is that competition law is a surgical tool that should remain focused on the consumer welfare standard – and that the government should address any other important challenges with more appropriate tools.
The digital world certainly operates in novel and unique ways, such 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. Better analysis of how digital platforms work in practice is needed to parse the good from the bad.
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 bureau, can properly administer the existing regime.
Assuming that the framing of the bureau’s discussion paper reflects its 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. We urge the bureau to ensure the Act remains focused on promoting the “efficiency and adaptability of the Canadian economy.” The consumer welfare standard remains the proper tool for this task.
