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Earlier this month saw a rare day on Parliament Hill: political unanimity delivered a major change that will produce benefits for years to come.
Justin Trudeau, Pierre Poilievre, Jagmeet Singh and the rest of the House of Commons all voted yes to significantly strengthen the law that governs competition in Canada.
The vote was part of an overhaul several years in the making. It marks a fundamental shift in the spirit, purpose and details of the Competition Act, written in the mid-1980s. The ethos then was Canadian companies needed to bulk up, and the law was designed to promote that goal, even if it came at the expense of smaller companies and domestic competition. The rules favoured businesses getting bigger and using their heft to their own advantage.
There’s a reason there were eight large grocers when the Competition Act became law and today there’s only five. The permissive rules reverberated over the years. Today, the economy is stuck in neutral – per capita GDP is the same as it was six years ago – and many sectors are defined by a small group of large companies. A recent report from the Competition Bureau underlined all this, quantifying what Canadians experience as they look at limited choices for essentials such as telecom, banking and groceries. This space summarized the state of competition as lacklustre and getting worse.
Other countries had pushed ahead of Canada in modernizing their competition laws. But Canada is now catching up, after increasingly loud calls for change, led by Competition Bureau boss Matthew Boswell. He has run the bureau since 2018 and on Wednesday his term was extended until 2026.
The federal Liberals in mid-2022 instituted initial changes – including the start of tighter rules on abuse of dominance by large companies. A broad review of the competition law began a year ago. Change this fall came rapidly. The Liberals tabled Bill C-56 in September. All parties contributed ideas and the result was unanimous approval. The legislative changes, along with the updates last year and a pending swath of amendments in the new year (another bill, C-59, is at second reading in the House), represent a big-time rewrite of the Competition Act.
Goodbye efficiencies defence: This clause made Canada an outlier. Businesses could claim that cost cuts, including job losses, justified reduced competition. Scrapping this legal trump card, a move supported across the political spectrum, is at the heart of the philosophical shift in the law.
Market studies: The bureau’s groceries investigation this year was marked by a lack of co-operation from the companies involved. The law did not allow, as in other countries, the bureau to compel the submission of key evidence. Now it can, which will serve as an important tool to assess existing and emerging problems.
Mergers: There is an array of changes. Ending the efficiencies defence was one. Another is the Competition Tribunal had been prevented from using a company’s market share as the sole factor in deciding whether competition is in peril. Mr. Boswell last year wasn’t exaggerating when he said the law enables “high levels of economic concentration – even monopolies.” The prohibition will be removed, pending approval of Bill C-59, and a new factor will be added, to assess “the change in concentration or market share.”
The bureau will also have more time to assess deals that fly below the radar. This will help in situations where a large company buys a series of small competitors. Each deal on its own might seem fine but in sum they may be detrimental.
Abuse of dominance: The law favoured big business with an unreasonably high bar to prove such cases. That’s been adjusted and fines increased. Ottawa also now allows private legal challenges on competitive grounds, as the United States does. It’s already working. A pharmaceutical dispute was quickly settled, after big drug makers seemed to slow the introduction of a cheaper generic. Such challenges will help, because the bureau can’t police the entire economy. In the U.S., a game maker this month won a competition case against Google.
The bureau also has a wider ambit on potentially anti-competitive deals, such as when a landlord and a grocer strike an agreement that prevents another grocer from locating nearby, or restricts what certain stores can sell.
The changes are a breakthrough. The next step is to put the tools to work and change the culture. Business in Canada is too stolid. The renewed Competition Act will help light a fire.
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