The rate at which Canadians start new businesses has collapsed over the past forty years.
While this fact alone should set off alarm bells across the country, there are many other competing realities that should inspire thoughtful policy review and action on competition-relevant files. For example, innovators have grown impatient with Canada’s dithering on payment modernization and open banking files.
Consumers are feeling squeezed by their cell phone and wireless bills, and confused about the permissibility of the Rogers-Shaw merger under the efficiencies defense. The price of groceries are going up, and yet farmers are earning less. If U.S. President Joe Biden’s executive order on competition isn’t a wakeup call for Canada, these facts should be.
MORE SIGNAL. LESS NOISE. THE HUB NEWSLETTER.
In a recent interview, federal Conservative leader Erin O’Toole showed he was aware of the bipartisan antitrust revolution occurring in the United States. Echoing a growing number of American conservatives, O’Toole raised the prospect of using antitrust regulation to address concerns of perceived censorship of conservative voices online.
Yet this appreciation of antitrust (in Canada, more commonly referred to simply as “competition policy”), a policy tool purpose-built to address the harms caused by monopolists, would be wasted if it only extended to concerns of online speech, which are likely to be addressed through Canada’s pending Online Harms Bill.
While the tech giants may hold enormous sway over what we say and do online, entrenched monopolists in Canada determine the markets that Canadians depend on to feed their families, travel across this vast country, manage their money, and communicate with one another.
The consequences of this for Canadian conservatives are twofold. First, there is a massive policy opportunity to deliver widespread benefits to the pocketbooks of everyday Canadians by thoughtfully examining the characteristics and trends in monopolized industries. Second, strong opposition to taking that opportunity will come — as it has in the past — from the upper echelons of Canada’s business community.
Expect vocal, persistent resistance from firms like RBC, TD, BMO, Scotiabank, AirMiles, Hudson’s Bay Company, Canadian Tire, Rogers Communications, Loblaws/Shoppers, Air Canada, and WestJet — dominant incumbents that have recently been coalition-building around the pandemic. Their corporate cooperation shouldn’t neutralize Canada’s competition opportunity.
(If this is starting to sound like a plea for a bit of passionate populism, it is).
Conservatives in North America lost the thread when they began to see the enforcement of any economic laws as harmful government intervention. Riding high off the intellectual successes of the 1980s, conservatives embraced free markets and the optimism and energy of the individual in their politics. Forty years later, a lax perspective on corporate dominance means that individuals are now beholden to unaccountable private power, and the earlier optimism has morphed into a muddy grievance-based politics that appears to be struggling to find an audience in Canada.
Yet an anti-monopoly impulse is far from foreign for Canada’s conservatives. Focusing on telecommunications, it was the Harper government that worked to bring in upstart wireless players and attempt to disrupt Canada’s comfy, oligopoly market. But a narrow focus that missed other levers to monopoly power — namely mergers and acquisitions — has largely dashed the hopes of those policy decisions, and the potential acquisition of Shaw by Rogers may be the final nail in the Harper-era attempt to break the stranglehold telecom companies hold on this country.
Weak competition hurts lower-income people the most, as their wages stagnant and the cost of living escalates.
Time will tell if Conservatives learned the hard lesson of these efforts: that without a comprehensive plan to tackle monopoly power, policy efforts will likely fall victim to it. But a shift towards an anti-monopoly ethos, not limited to censorship worries and anti-regulatory screeds, could serve as a real differentiator from the Liberals they so frequently accuse of being in the pocket of big business.
In fact, the Liberals failed to engage Canadians in a basic discussion around the opportunity to modernize the Competition Act despite publicly pledging to do so earlier this spring. While our international counterparts have modernized their regulatory regimes, Canada seems to be actively avoiding any sort of competition conversation.
A recent event hosted by the Macdonald-Laurier Institute, “Monopoly Games: Moving Past Populist Rhetoric on “Big Digital” to a Competition Policy for Post-Pandemic Growth,” failed to capitalize on the opportunity for some real talk on competition. Instead, discussants minimized concerns about competition, conflated any sort of regulatory instruction as “red tape,” glossed over the distinct dynamics of e-commerce, and dismissed imagined opponents as “populist.”
Even worse, one of the speakers vaguely alluded to a conflict of interest disclosure midway through the event — a stark reminder of how profoundly captured the competition space is in Canada. That same panelist mistakenly presented online dating as a competitive market, when it is well-documented that it is indeed monopolized. Future discussion would be well-served with the facts and proactive disclosure.
The timing of such a shift could not be more urgent for Canada. Over the past 30 years the rate at which Canadians start new businesses has fallen in half. That means each year fewer and fewer Canadians are striking out on their own as independent actors in our economic system.
Further, if the trend of labour market concentration and non-compete agreements we see in the U.S. is also present in Canada, workers are facing less and less competition for their valuable labour. Understanding and addressing these issues should be a key pillar of conservative platforms as Canadians look to restart their lives after a brutal year for the economy.
During the pandemic, governments of all kinds wisely urged business owners to “go digital” while regulators have failed to consider the competitive constraints of online markers. In the U.S., the American Economic Liberties Project report “A Ledger of Harms,” compiles research and data showing how concentration hurts consumers, workers, small businesses, entrepreneurship, job creation, and more. Another report, “The Other Red Tape,” focuses on how gatekeeping monopolists abuse and undermine entrepreneurs and small businesses. In lieu of a rich competition research environment in Canada, we should learn from these publications.
Big data can create barriers to enter and market power, especially where companies hold “unique” datasets that cannot be replicated by competitors. Data can also facilitate price discrimination, since companies with market power that collect data about their clients’ purchasing habits may be better able to assess their willingness to pay for a given good or service and use that information to set different prices for different customers.
While price discrimination is within the scope of Canada’s competition law, it does not appear that the bureau has taken any cases, and thus there has been no enforcement in a digital context.
It will take considerable courage to confront Canada’s competition failures. As it stands, we generally seem unwilling to acknowledge how Canadian technology firms rip from Big Tech’s playbook. When I recently merely asked the question of whether and how Shopify’s App Store might be anticompetitive I was met with public chill and private notes of support.
Why not at least protect and incentivize antitrust whistleblowers through creating a reward or bounty system (as has been called for by Senator Amy Klobuchar) for individuals who expose anti-competitive conduct or turn in cartels? If the bureau is so under-resourced, it should call on and protect Canadians that may be able to bring these examples forward. While Canada grants blanket immunity related to cartels, more courtship of tips from the public could empower more Canadians to connect with the bureau on anti-competitive behaviour of all kinds.
When we don’t have a competitive business environment, people don’t pursue their own dreams or take risks. Wages are lower and people have fewer opportunities in life. Consumers consider lower-quality goods. Weak competition hurts lower-income people the most, as their wages stagnant and the cost of living escalates. Refreshing Canada’s Competition Act can unlock economic opportunities for more Canadians.
Conservatives across the country are facing a trend of declining support, and several pundits have weighed in on what they believe ails the movement. But beyond these, a return to free markets, free not just from government regulation, but from the abuse of businesses and workers by dominant monopolists, may be a part of reversing that trend.
The opportunity to lower costs in banking, pharmaceuticals, cell phones, internet services, and even bread, is right in front of our faces and has been for some time. Don’t look away.
