Comments to the Minister of Innovation, Science and Industry of Canada Regarding the Future of Competition Policy
The Canadian Minister of Innovation, Science, and Industry launched a public consultation in November 2022 for potential amendments to the Competition Act, for which it published a discussion paper titled The Future of Competition Policy in Canada.
ITIF appreciates the opportunity to respond to the public consultation and recommends avoiding a regulatory Titanic: Europe’s stringent model will not transpose well to Canada, because Canada is a smaller market with fewer innovation capabilities, so global companies could determine that a commercial presence is not worth the regulatory risk The Canadian market is fundamentally different from the U.S. and EU markets in that respect. For example, while Europe’s flawed regulatory approach in the Digital Markets Act (DMA) will undoubtedly impose significant economic costs, the European market is unavoidable for most global companies. Similarly, given the size and importance of the U.S. market, companies are unlikely to pull out of it even if they are faced with onerous competition rules—although, given recent Congressional elections, the odds of the United States adopting such rules is low. In contrast, the Canadian market is commercially less essential for global companies, increasing the economic costs of a flawed regulatory approach. Importing into the Canadian Competition Act regulatory experiments from Europe or populist rhetoric from America thus may disproportionately harm the Canadian economy.
In 2002, the OECD reported that Canadian “policymakers have been sympathetic to fears that a strong competition policy could undermine economies of scale.” Twenty years later, Canadian policymakers are seemingly reneging on a wise tradition of protecting scale, competitiveness, and innovation, and they are poised to import foreign regulatory experiments.
In the proposed reforms, the Canadian government seeks to ban more mergers, ban certain business practices by online platforms, prevent collaborations among competitor, integrate labor effects into competition analysis, reform deceptive marketing provisions, bolster the Competition Bureau’s powers, and encourage private antitrust litigation.
Both the Canadian Chamber of Commerce and the Canadian Bar Association have expressed concerns about the proposed amendments to the Competition Act. The Canadian Chamber of Commerce has lamented “rushed amendments” in 2022, expressed “serious concerns” about the new round of amendments, and recommended postponing them until a broader consultation can study them. Equally, the Canadian Bar Association emphasized that “Canada’s competition laws aim to prevent anti-competitive conduct rather than industry consolidation itself.” Defending the efficiency defenses of the current Competition Act, the Bar Association warned that “in today’s highly competitive global economy, it seems counterintuitive to question legislation aimed at rewarding efficiency, productivity, and innovation.” It made clear that “concerns about the digital economy are in many ways related to consumer’s privacy rights, not competition law” and emphasized that any proposed changes must “not inadvertently stymie innovation and competitive behaviour.”
The suggested reforms of the Canadian Competition Act are wrong on economic and legal grounds at the wrong time:
- Wrong economics: Canada doesn’t need flawed competition reforms to break up corporations; it needs reforms to promote innovation and grow larger firms. The government must strengthen Canada’s competitiveness by encouraging innovative companies to gain more scale. Deconcentrating the economy through assertive competition policy, not dissimilar to the flawed view advocated by antitrust populists, would only speed up the ongoing decline of Canada’s competitiveness.
- Wrong law: Canada’s regulatory approach, including the Competition Act of Canada, is regularly praised as a model framework for promoting competition. Canada fosters a “total welfare standard” that appropriately integrates the diversity of pro-efficiency arguments. Rather than amending a well-respected law and adopting the misguided regulatory experiments Europe is testing across the pond, the Canadian government should preserve and reinforce the Competition Act with better enforcement and clearer guidance.
- Wrong time: The Canadian government has suggested a new round of amendments to the Competition Act even before the first round of amendments adopted in 2022 enter into force in June 2023. The best practice would be to implement these first amendments and independently assess their effects before adopting new amendments. Additionally, before any new amendments, Parliament should conduct hearings to assess the need for them and produce a report detailing the findings. It would be unwise for the Canadian government to hastily adopt a new round of amendments before the Parliament has done its due diligence.
The Canadian government must right the ship of excessive amendments to the Competition Act. It should pause and reflect on how European-style competition rules would damage an economy with insufficiently scaled firms. The path envisaged for Canadian competition rules will be tantamount to a Brexit—a self-inflicted cost that dissociates a relatively small market from the rest of the world, makes it less attractive for foreign investments, and acts as a costly barrier for Canadian companies that need to expand to achieve greater efficiencies of scale.
Read the comments. (PDF)