Competition Ltd.: Why major players dominate Canada’s business landscape
April 5, 2023 By Amanda Stephenson, The Canadian Press
Runaway food prices. A massive day-long telecom outage that knocked out internet and phone service across the country. Flight delays, cancellations and stranded air travellers.
What do all of these things have in common, in addition to being the causes of headaches for Canadians in the last 12 months? Some would say the answer is competition — or, to be more precise, a lack thereof.
From grocery and banking to aviation and the wireless and cable industry, many of the services that Canadians rely on every day are dominated by just a handful of major players.
And in the last year, critics have pointed to many of the biggest challenges that consumers have faced — from spiking food prices to last summer’s Rogers outage to air travel chaos — as proof that this country’s competitive environment is broken.
There are many reasons why Canada’s biggest industries are dominated by just a few companies. Some say a large geography and small population make it more difficult for Canada to support more than a few major players in sectors such as aviation.
Others say Canada’s restrictions on foreign ownership in some sectors, such as transportation and telecommunications, play a role in limiting choice for consumers, while others put the blame on the supply management system and its role in Canadian agriculture.
But the federal Competition Bureau, the independent law enforcement agency that aims to protect consumers by fostering a competitive marketplace, believes the problem is that Canada’s competition laws themselves are weak.
In response to the government’s ongoing review of competition policy in Canada, the federal Competition Bureau said in a recent submission that it believes the majority of Canadians see the current competition framework as “outdated, weak, complex, slow and out of touch.”
A 2021 Ipsos poll appears to back that up. The poll of 1,001 Canadians found that 88 per cent agreed more competition is needed in Canada because it’s too easy for big business to take advantage of consumers. Nine out of 10 respondents polled agreed that this country should take steps so that small and medium-sized businesses can compete with the larger players.
“I think it’s fair to say that competition has become sort of a kitchen-table issue. People are seeing the impact or the ramifications of the lack of competition,” said federal Commissioner of Competition Matthew Boswell in a recent interview.
“They’re experiencing it every day, in terms of the prices they pay for many different things, the choices, the quality of service, and the lack of innovation in the Canadian economy.”
The Competition Bureau, which is responsible for administering and enforcing this country’s Competition Act — which hasn’t been updated since 1986 — has been lobbying for reforms it says are needed to bring Canada up to speed with other developed economies.
The Bureau — which has been unsuccessful in challenging some recent high-profile mergers, including the $26-billion acquisition of Shaw Communications Inc. by Rogers Communications Inc., which was approved by the federal government last Friday — has been lobbying for tougher merger review rules.
It also wants stronger rules against things like collusion and abuse of dominance, when a major player or group acts to stop or substantially reduce competition, things Boswell said are more of a risk in highly concentrated markets such as Canada.
But Michael Osborne, chair of the law firm Cozen O’Connor’s Canadian competition practice, said he doesn’t believe the state of competition in this country is as bad as some people like to think — nor is increased competition the answer to every problem facing Canada’s economy.
Osborne, who has helped to defend clients in inquiries and proceedings brought by the Competition bureau, said the price Canadians pay for groceries, for example, has far more to do with rampant global inflation than it does with the market dominance of Loblaw, Sobeys and Metro.
“When you have a bad harvest somewhere that pushes up the price of cauliflower … well, it’s not going to be competition law that fixes that,” Osborne said. “That’s just not what it’s for.”
He added that if the government gets too aggressive with competition law, it could actually have a chilling effect on economic growth and productivity.
“We don’t want a situation where the government is coming into a market and saying, ‘You know what guys? You’re not competitive enough. So we’re going to start making you do stuff,”’ Osborne said.
“Because what that really is, is a recipe for government control, centralized control of the economy, government picking winners and losers.”
But Boswell said he believes that improving competition in this country will mean better prices, better service, and better choices for Canadians.
“This is a really important issue and I’m glad Canadians are embracing it,” he said.
“I’m sorry that they’re doing it in the context of very difficult times in terms of inflation and food prices and all of that stuff, but I think what it’s done is really focused the minds of Canadians to say, ‘We need more competition in this country, so let’s get there.”’
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