From controversy over Taylor Swift ticket sales to windfall profits for grocery companies and the now inevitable acquisition of Shaw by Rogers — competition law and policy are having a moment in Canada. Increased public awareness is a good thing because the rules governing the products and services we use every day have a significant impact on our pocketbooks — and right now, those rules are up for review.
A once-in-a-generation reform process aimed at strengthening and modernizing Canada’s Competition Act is underway. This rare policy window offers a significant opportunity to address critical issues like declining business dynamism and entrepreneurship, weak productivity growth and increasing levels of business concentration.
The regulation of competition has traditionally focused on enabling economic efficiency, even if it undermines economic fairness through layoffs or higher prices for consumers. However, against a backdrop of growing economic inequity and a better understanding of the economic, environmental and social harms associated with it, policymakers need to seriously consider promoting more inclusive growth through competition law.
Critics of a more inclusive approach argue that so-called “social issues” like inequality and uninclusive growth are best delegated to other policy areas, specifically tax and transfer programs like the Canada Child Benefit, the Guaranteed Income Supplement for seniors, and others. Core to this argument is the belief that pursuing greater economic efficiency and equity are in conflict.
However, modern economic research does not support this claim and there is no reason to think the tax and transfer system is more effective than competition law at cultivating economic inclusion and equity.
Instead, the evidence suggests that when economic inclusion and greater productivity and efficiency are pursued in tandem, they can be complementary and self-reinforcing. The approach can create a virtuous cycle where productivity growth in the economy begets broad-based increases in economic well-being, which, in turn, fosters more productivity growth.
Our argument is not that reforming competition law is a perfect substitute for redistribution programs. Rather, regulating competition in a way that fosters a more inclusive economy could help reduce demand for these programs. Given the billions of dollars annually that go into redistribution programs relative to the tens of millions that support competition law enforcement, retooling competition law to address economic inequities could lead to significant cost savings for government and more meaningfully address concerns around growing economic inequality and its associated economic, environmental and social harms.
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An inclusive and stringent competition law can also support the innovation critical to helping our society achieve greater levels of well-being, like meeting our greenhouse gas emission targets, protecting our natural environment and improving health care.
By keeping prices in check in these key sectors, competition law and its enforcement can help ensure goods and services critical to our future well-being are equally accessible to people in Canada.
The benefits of an inclusive approach to market competition are significant. But significant legislative changes must be made to make this a reality in Canada.
First, economic inclusiveness and/or inclusive growth should be incorporated into the purpose statement of the Competition Act.
Second, we must change how we evaluate anti-competitive behaviours under the act. Specifically, Canada needs to move toward a simpler method that makes the law more effective at addressing one of the root causes of economic inequity — market power wielded by dominant firms.
Finally, the efficiencies defence for mergers and competitor collaborations, which is clearly at odds with the goal of inclusive growth, should be removed.
The review of the Competition Act is a critical moment and a once-in-a-generation opportunity to align the act with modern policy challenges, economic knowledge, and government priorities. The issues raised by corporate power and monopoly in Canada will only worsen if not addressed; we must seize this opportunity to create a competition law that serves the interests of all Canadians.
Colleen Kaiser is a postdoctoral fellow and senior research associate with the Smart Prosperity Institute at the University of Ottawa. Colleen’s research expertise includes areas of agile regulatory systems, low-carbon and inclusive innovation and climate change governance. Colleen holds a PhD in environmental studies from York University and an MSc in environmental policy and regulation from the London School of Economics. Colleen also teaches at York University in Toronto.
Robin Shaban is an economist and co-founder of the Canadian Anti-Monopoly Project, a think tank dedicated to addressing the issues caused by monopoly power in Canada. As a leading voice in the space of Canadian competition policy and law, Robin has developed original research in this area and provided commentary through major media outlets. Robin is a recipient of the Globe and Mail’s 2021 Report on Business Changemakers Award.
I'm not an economist but I've got a comment regarding the following:
"Core to this argument is the belief that pursuing greater economic efficiency and equity are in conflict."
Aren't they? And is such conflict necessarily a bad thing? I read the entire article and believe I understand how this statement was subsequently fleshed out, yet...
For example, slavery. It's very iniquitous but, if a factor of efficiency determination is cost, isn't the saving of labour cost an efficiency (all else -- save freedom -- being equal, if that's a fair caveat for the argument)?
Another aspect of modernity not mentioned here is the shift to internet-mediated commerce which, by its very nature, tends towards monopoly (one storefront is accessible to the entire planet). iTunes, Amazon, Facebook, Google... the usual suspects and many, many more. Monopoly has more casualties than simply individual consumers.
Well, one problem is that it
Well, one problem is that it's very hard to define "efficiency" in any global way. Efficiency only becomes a very coherent concept when it exists in relation to some specific goal. Any system, if it is efficient, is efficient at doing some thing, and that will necessarily make it inefficient at doing some other things. A system that is efficient at delivering some product with minimum inputs will be inefficient at, say, creating employment, or perhaps creating good health outcomes.
The book "The Spirit Level" makes a strong case that economic GROWTH and equity are not in conflict, that highly unequal societies actually experience less economic growth (also worse health, shorter lifespans etc). Of course, there are reasons to worry about economic growth itself . . . but since the proponents of greater economic inequality tend to defend it on the basis of it leading to growth, that it turns out to be the opposite is kind of damning. And of course, inequity certainly, obviously, almost by definition leads to reduced well-being or "utility". Given that I'd want to interrogate very carefully just what an advocate meant by "efficiency".
“This association of poverty
“This association of poverty with progress,” he wrote, “is the great enigma of our times..... So long as all the increased wealth which modern progress brings goes but to build up great fortunes, to increase luxury and make sharper the contrast between the House of Have and the House of Want, progress is not real and cannot be permanent.”
This quote is by Henry George, nineteenth century American economist and politician. It appears on page xvii of “Plutocrats” by Chrystia Freeland, our Minister of Finance and Deputy Prime Minister.
Freeland would appear to understand the issue of inequality as well as anyone, and is the person best placed to do something about it. Yet, I have not seen evidence that she intends to do anything about it. This is very sad.