Ottawa’s war on size is a gift to Canada’s global rivals

This approach confuses correlation with causation. Decades ago, UCLA economist Harold Demsetz explained why market concentration often reflects competitive success rather than abuse. Efficient firms grow because they deliver better products at lower cost. Less efficient rivals lose ground or exit. That process shows up as concentration on a chart, but for consumers it often means lower prices, better quality, and more innovation. Blocking mergers simply because they create large firms ignores how modern competition works. Economies of scale matter, especially in capital-intensive sectors such as mining, manufacturing, logistics, and technology. Scale spreads fixed costs, supports investment, and allows Canadian firms to compete abroad. Penalizing size in these sectors amounts to penalizing efficiency. The Bureau’s new thresholds reinforce the problem. Its adoption of a 1,800 Herfindahl-Hirschman Index trigger—a significantly lower bar than past Canadian practice—follows a controversial move by U.S. regulators. Yet empirical support for this shift remains thin. As University of Chicago economist Dennis Carlton has shown, changes in market share correlate only weakly with changes in competitive performance. Used as enforcement tripwires, these metrics capture far more benign transactions than genuinely harmful ones. Sound competition policy weighs errors. U.S. Judge Frank Easterbrook’s error-cost framework remains instructive. False positives—blocking mergers that would have benefited consumers—impose lasting damage. Efficiencies disappear. Investment flows elsewhere. Firms learn to avoid deals altogether. False negatives, by contrast, tend to self-correct. High prices attract entry. Rivals emerge. Markets respond. The Bureau’s draft guidelines lean heavily toward false positives, particularly for vertical mergers, where a firm acquires a supplier or distributor. The document fixates on “foreclosure”—the risk that a merged firm will deny rivals access to inputs. Yet decades of economic research point in the opposite direction. In a comprehensive survey of the literature, economists Francine Lafontaine and Margaret Slade found that vertical integration generally increases consumer welfare by eliminating double markups. The intuition is straightforward. When a bakery sells cakes to a grocery store, both firms apply a markup. Bring production in-house, and one markup disappears. Prices fall. Output rises. That logic applies just as forcefully in complex modern supply chains. The stakes grow even higher in the digital economy. Many platforms charge users nothing on one side of the market while monetizing the other through advertising or subscriptions. When prices sit at zero, traditional markup analysis breaks down. Treating scale as evidence of harm in these markets misunderstands how value is created and delivered. Perhaps the most consequential change to Canadian competition law came with the repeal of the efficiencies defence. That rule allowed mergers to proceed when efficiency gains outweighed competitive concerns—a practical feature of Canadian competition law. It recognized that lower costs, better services, and higher-paying jobs matter. That safety valve is now gone. In its place stands a review process dominated by post-merger market share, where firms must prove a negative: that their transaction will not harm competition. The burden has flipped, the economic analysis has receded, and a chill in dealmaking has set in. Canada wants globally competitive firms, yet now treats growth itself as a vice. That contradiction will not resolve itself. Scale is not the enemy of competition; it is often the reward for winning it. If Ottawa insists on punishing success at home while rivals abroad grow larger and stronger, the result is predictable: fewer deals, less investment, slower productivity growth, and smaller ambitions. Fear of size is not a competition strategy. It is a roadmap to irrelevance—and Canada cannot afford to follow it.