Canada is abound with industries dominated by a handful of players, resulting in higher prices for consumers, less innovation, and weaker economic growth. Ottawa aims to increase competition by revising its outdated legal framework, but a veteran economist says it’s government actions that have been undercutting competition and continue to do so.
“It’s farcical for the government to pretend that it’s encouraging competition through changes in competition law,” Philip Cross, former chief economic analyst at Statistics Canada and Munk senior fellow at the Macdonald-Laurier Institute (MLI), told The Epoch Times.
“The fundamental problem of competition in Canada is not the competition law—the whole culture of how governments in Canada interact or work with the business sector, in particular, shelter in large parts of the business sector.”
Cross wrote a paper on competition policy in April for the MLI in which he argued that there is little point in changing Canada’s Competition Act without broader changes in government policies and attitudes toward business, such as restrictions on foreign companies entering the market and with policies like supply management for certain agricultural products.
“The greater hindrance to competition in Canada is the behaviour of governments, not of firms,” Cross wrote.
Canadians pay among the highest prices in the world for wireless services, given the lack of competition with three major players Rogers, Bell, and Telus. The Canadian Radio-television and Telecommunications Commission (CRTC) announced on May 9 that it’s aiming to increase cellphone competition for consumers by having the large players share their networks.
Canadians don’t have much choice for domestic flights, with the industry dominated by Air Canada and WestJet. Banking is dominated by six big banks. Furthermore, the grocery sector is concentrated in the hands of Loblaws, Sobeys, and Metro.
Last October, the Competition Bureau of Canada, an independent law enforcement agency, launched an investigation into grocery store competition and expects to publish findings in June.
Matthew Boswell, commissioner of competition at the Competition Bureau, said in a May 4 statement that Canada has a “deep history with monopolies” and that the country “urgently needs more competition.”
One reason for his plea was that he wanted to address arguments against competition reform that had been raised after the bureau put forth recommendations for modernizing competition law in March, senior communications adviser for the Competition Bureau Marcus Callaghan told The Epoch Times.
The recommendations came after a consultation period and “simply aim to get us to the starting line alongside our global trading partners who make competition a pillar of their economic policy,” Boswell wrote.
Cultural Attitudes
Cross said in his paper that the government could rapidly foster more competition by easing regulations like inter-provincial trade barriers, opening up large segments of the economy that are currently insulated from competition, and fostering a more entrepreneurial culture.
“These initiatives would have a larger and longer-lasting impact on competition in Canada’s economy than the changes currently being contemplated to the Competition Act,” he wrote.
But one thing he points out about Canada is that, despite undertaking pro-growth policies like immigration and free trade, the country severely undermines itself by “an indifference bordering on hostility to business interests … as Canada mistakenly relies on its public sector to drive growth.”
Cross added that if the government tightens competition laws, the business community will interpret it as another government attack on business. He said it’s hard to imagine that stricter laws will encourage entrepreneurs to start firms and make investments that drive long-term growth.
“If the government wanted to improve competition in this country, it could do so through its own actions, not through changes to competition law,” Cross told The Epoch Times.
Nevertheless, one of the Competition Bureau’s three main recommendations focuses on re-tooling merger reviews to address increasingly uncompetitive markets and harm to public interest in competition.
“Our law can allow anticompetitive business mergers, creating more concentrated markets, and as a result, higher prices for Canadians,” Boswell said in his statement.
The bureau opposed the $26 billion Rogers-Shaw deal but the federal court of appeal ruled against it, and the government subsequently approved the takeover in March.
Online Streaming Act
Bill C-11, the online streaming act, became law on April 27, and many have pointed to the potential consequences for a free and open internet, said Timothy Denton, chairman of the Internet Society, Canada Chapter, in a May 9 statement from OpenMedia, describing it as a “dangerous expansion of government regulation in Canada.”
The legislation is another attempt to narrow the range of views in the public sphere, which is symptomatic of the lack of competition in media and broadcasting, Cross explains.
Internet advocates have stressed throughout Bill C-11’s evaluation process that efforts to promote Canadian content must respect internet users’ rights. The concern is the “enormous growth in power” for the CRTC as regulator, Denton wrote.
Cross has argued that correcting government actions that favour producers over consumers would increase competition in the marketplace.
The International Monetary Fund and former Bank of Canada senior deputy governor Carolyn Wilkins have said that when a few large firms dominate industries in an economy, it could be a drag on economic growth, innovation, and business investment.
Furthermore, the pandemic provided big business with a chance to gain even greater market share over smaller competitors, which were unable to weather the restrictions and also became less able to compete for labour.
