Corporate interests, big law firms and conservative thinkers guide the Canadian antitrust system even more than in the United States.
by Robin Shaban. Originally published on Policy Options
February 22, 2022
Compared with Canada’s, the U.S. policy ecosystem has a far better track record when it comes to fostering diverse views on antitrust law. From corporate-funded think tanks like the Connected Commerce Council to grass-roots organizations like the Institute for Local Self Reliance, there is a diverse network of political interests represented in America’s competition policy space.
By comparison, Canada’s competition policy landscape is dominated by corporate interests and as a result more homogenous. The overwhelming majority of Canada’s competition policy expertise outside of the Competition Bureau is inter-related. It’s either competition lawyers working at Bay Street’s major law firms, who in turn work for firms being investigated by or complaining to the bureau, or they are academic and consulting economists retained as expert witnesses for either the bureau or the firms it investigates.
The two think tanks that regularly do work in this space – the C.D. Howe Institute and the Macdonald-Laurier Institute – may be considered some of Canada’s most far-right think tanks, and they draw almost exclusively from this corporate community for their research reports and policy stances.
While the Competition Bureau has a wealth of expertise that could provide a countervailing perspective, its representatives don’t have the ability to share their views on the state of Canada’s competition policy in a formal capacity, because it answers to the minister of industry. It does not have the power to publicly opine about competition policy, unlike in other jurisdictions.
Why does this matter? The outsized representation of corporate perspectives in the space has significant implications for our competition legislation and the philosophy that motivates it, to the detriment of consumers, workers and other actors within the economy. Merger review and the laws that prohibit business from undermining competition (like the abuse of dominance and other non-criminal provisions of the Competition Act) are two examples of how corporate interests are given priority.
Most people would be amazed to learn that our competition law sanctions mergers that create monopolies that hurt consumers and lay off workers, all in the name of cutting costs. The act permits these types of mergers through a provision called an “efficiencies defence.”
One of the most notable examples of this defence had to do with the merger between Superior Propane and ICG propane in the 1990s. It led to monopolies in the sale of propane in 16 communities in Quebec, Ontario, Alberta, British Columbia, and the Yukon, was estimated to increase propane prices by about eight per cent, and led to about 200 job losses (which were counted as a benefit of the merger under the defence). No other major jurisdiction on the planet has an efficiencies defence for mergers that permits monopolies and is so blatantly unfair to consumers and workers.
Although less sensational, there are also problems with how the act considers abuses of dominance and other non-criminal behaviours. Unlike in other jurisdictions, for example, the European Union, in Canada it’s not enough to show that a firm has engaged in a clearly abusive and anti-competitive behaviour. The legal test for determining whether a firm has abused its dominant position requires the commissioner to show that the behaviour led to specific negative effects in the market.
This “effects-based” standard is difficult to meet and is anchored in the belief that it is more dangerous to have competition law that is too tough than it is to have a law that is not tough enough. Markets are assumed to be naturally competitive. So even if a behaviour is harmful to competition, in the long run the problem will resolve itself, as competitive forces will erode the market power of these abusive firms. The design of our legal test for abuse of dominance and other non-criminal behaviours (and mergers, for that matter) is based on this understanding of competition, competitive dynamics and the economy. It has not been critically examined since the act was brought into force in 1986.
Canada’s stricter legal test for abuse of dominance may be why no action was taken against Google in 2016, when the bureau investigated it for self-preferencing its comparison-shopping service.
The European Commission found that Google violated E.U. law and fined it €2.42 billion. Even if the bureau were to find that Google violated Canadian law, Google could only be fined at most C$10 million, or C$15 million if a second fine was warranted.
There are two core guiding principles that have been instrumental in shaping the competition law we have today. First, economies of scale are a more important consideration under competition law than fairness. Second, markets and firms are naturally competitive; therefore, competition law should use a light touch when intervening in the economy.
Recent works by more conservative experts and commentators show that some are keen to maintain this status quo. The Macdonald-Laurier Institute has consistently dismissed calls for substantial changes to strengthen the act as “populist” and a reflection of a “misguided” big-is-bad mentality.
In a recent consultation paper commissioned by Senator Howard Wetston, Edward Iacobucci makes the case that the act should prioritize efficiency even more than it already does, because it would make the law more effective. He goes on to argue that other policy tools, like the tax-and-transfer system, have a comparative advantage in making our economy fairer, echoing arguments made by Canadian competition policy experts for over half a century.
However, over the last year my collaborators and I have been working to raise awareness of competition policy to make space for more diverse views anchored in the interests of consumers, and workers in particular. The federal government and think tanks also have a critical role to play in fostering diverse voices in the competition policy space. There must be more research done by think tanks on the various facets of competition policy, and research funders must also prioritize this topic.
More fundamentally, as suggested by Vass Bednar at McMaster University, there’s a need for more democratic engagement, with the government fostering feedback through citizen assemblies and other democratic practices.
Having diverse perspectives at the table would improve our legislation by broadening our understanding of the current state of competition in our economy and its nature. The white, middle-aged executive of a mid-sized business named John (and his competition lawyers) may see the markets he engages in as naturally competitive and requiring minimal government intervention. But his experience and understanding of competition may be worlds apart from those of the black woman entrepreneur struggling to access capital. Having these and other perspectives at the table leads to a more accurate understanding of competition, and in turn better competition policy.
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Diversity in the policy conversation also allows for more modern understandings of economic policy that are anchored in principles of fairness, equity, and justice, like the notion of inclusive economic growth. These more modern, holistic understandings contrast with those on which our competition policy is built, which make a false distinction between “economic” and “normative” policy goals (like efficiency versus the fair distribution of economic gains). Modern approaches to economic policy are anchored in the understanding that our collective economic prosperity can only be fully realized when that prosperity is accessible to all.
This article is part of the Canada’s Competition Law is Overdue for an Overhaul special feature series.
This article first appeared on Policy Options and is republished here under a Creative Commons license.
