Promoting competition, innovation and growth in Saskatchewan and all of Canada
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Remarks by Commissioner of Competition John Pecman
Saskatchewan Economic Summit
Presented by the Saskatchewan Institute of the Conference Board of Canada
April 4, 2017
I’m pleased to be here in Regina to talk about competition, innovation and growth.
Saskatchewan has long been known as Canada’s breadbasket for producing more than half the country’s wheat. But today, that’s only the tip of the province’s economic iceberg. Not only is it Canada’s largest exporter of agricultural products, but it is a world leader in potash and uranium production, and Canada’s second-largest energy producer.
Unfortunately, that resource wealth meant Saskatchewan’s economy was hit particularly hard in 2015 by falling commodity prices. While times remain tough for the province, analysts like the Conference Board of Canada are predicting a slow return to growth in 2017.
That recovery is supported in part by the economic diversity represented by Saskatchewan’s significant manufacturing and construction industries, and its growing financial sector. In the last decade, the province has also emerged as a leader in biotechnology and life sciences, supported by world-class innovation clusters in both Regina and Saskatoon.
The Government of Canada has made promoting innovation a central focus of its economic agenda, and for good reason. Innovation is a vital part of a climate of sustained economic growth. And to maximize innovation, competition is key.
Competition, innovation and growth
Businesses in competitive markets are driven to innovate. They have a strong incentive to develop new and better products and services to attract and retain customers. They pursue more efficient production techniques and business models.
Competition drives innovation, which in turn drives productivity, efficiency and economic growth.
To protect and promote competition for the benefit of consumers, businesses and the Canadian economy, the Competition Bureau employs a three-pronged approach of targeted enforcement, advocacy and outreach.
I’d like to take a moment to unpack each of those by highlighting some of the Bureau’s recent work in those three areas.
First, we enforce the Competition Act by cracking down on cartels and abuses of market power, reviewing mergers and ensuring truth in advertising. One of our key objectives in this area is to protect consumers and businesses in the rapidly growing digital economy.
In our ongoing ebooks case, for example, we are working through the courts to put an end to what we have concluded to be an anti-competitive arrangement between a number of major ebook publishers. That arrangement prevents Canadian retailers from discounting prices in order to compete for your hard earned money. We are committed to restoring retail price competition for ebooks in Canada and look forward to a resolution that will benefit consumers.
We are also looking forward to resolving our ongoing litigation against the Toronto Real Estate Board, which is preventing its members from offering MLS sales data to prospective home buyers through innovative new online services.
Promoting consumer confidence
Misleading savings claims are also on the Bureau’s radar, through both digital platforms and more traditional advertising. The Competition Act contains provisions that ensure that when advertisers promote products at sale prices, consumers are not enticed by misleading references to inflated regular prices.
Amazon Canada paid a $1 million penalty earlier this year for comparing its prices to a higher “list price” without verifying that those list prices actually represented a prevailing market price. As a result of our investigation, Amazon corrected its pricing practices to ensure list prices were accurate, not only in Canada but also in other jurisdictions.
We also took legal action this past February against the Hudson’s Bay Company for deceptive regular price claims on mattresses and foundations sold together as sleep sets. Our investigation found that HBC used grossly inflated regular prices to then advertise deep discounts that suggested significant deals to consumers.
Whether retailers are advertising online or in stores, they must comply with the deceptive marketing provisions of the Competition Act. We will not hesitate to take action in order to promote consumer confidence in the marketplace.
Another important part of the Competition Bureau’s enforcement is reviewing mergers to ensure they do not result in a substantial lessening or prevention of competition. You may be aware of our ongoing reviews of the Agrium/Potash Corp, Dow/Dupont and Bayer/Monsanto mergers.
While I’m not able to speak to ongoing reviews, I can say that we are looking at the agricultural sector mergers very carefully. We expect some of these reviews to be completed within the coming weeks and others in the coming months.
Before moving on to our competition advocacy, I would like to touch on our recent agreement with Bell Canada related to its acquisition of Manitoba Telecom Services, or MTS.
We heard from a lot of concerned consumers about the Bell/MTS merger, and we shared their concerns about the impact of the deal on regional competition. Our analysis determined that prices were substantially lower in areas of Canada with a strong regional competitor who can disrupt the effects of price coordination among Bell, TELUS and Rogers.
It’s important to note that the Supreme Court of Canada has set the standard for addressing the effects of an anticompetitive merger. The legal requirement is not to restore the market to a pre-merger state, but rather to ensure that any lessening of competition is not substantial.
In our Consent Agreement, Bell committed to making significant divestitures to Xplornet and TELUS, and to provide transitional services to Xplornet. I was satisfied that these terms, and Xplornet’s planned entry into the mobile wireless market in Manitoba, were sufficient to meet that legal test.
The telecom sector remains very much on our radar, and any further merger proposals will be carefully reviewed in light of our findings that a regional competitor can disrupt the price coordination between the big three.
That brings me to the second area of the Competition Bureau’s work. To complement our enforcement, the Bureau engages in a variety of activities to advocate the benefits of increased competition in regulated sectors. These include our market studies and our pro-competitive recommendations to regulatory review boards.
FinTech Market Study
Since last May, the Bureau has been studying technology-led innovation in one of the pillars of the Canadian economy―the financial services sector. In 2014, the sector accounted for approximately 10% of Canada’s gross domestic product. In 2015, its 4.5% growth rate was five times that of Canada’s overall economy. That same growth is happening in Saskatchewan: while the province’s economy shrank by 1.3% in 2015, its financial sector grew by 4.4%.
A variety of transformative financial technologies―or FinTech―are emerging that have the potential to increase competition and spur even greater innovation and economic growth. As the Government of Canada noted in its 2017 Budget, “financial technology firms are at the forefront of digital innovation.” To support that innovation, the government has committed to working with stakeholders to assess developments in the FinTech sector, which will culminate in a review of the Federal Financial Sector Framework.
The Bureau’s market study will be an important part of that effort. The study is focussed on the competitive impact that innovation is having on the sector and the barriers to entry faced by new companies. We want to determine to what extent there is a need for regulatory reform to promote greater competition, and provide guidance for policy makers on how best to nurture an environment that allows Canada’s FinTech companies to innovate, grow and compete globally.
Since May, we’ve heard from nearly 100 stakeholders across all segments of the financial services sector: banks, FinTech entrepreneurs, consumer and business groups, regulators and international agencies. In February, we brought together leaders from each of these groups for a one-day workshop to discuss the key themes that have emerged from our consultations. We will be publishing highlights from that workshop on our website later this month, and we will be issuing our final FinTech report later this year. Stay tuned.
I’m looking forward to taking your questions, so I’ll just touch briefly on the final area of the Bureau’s work, which is our outreach. In our efforts to empower consumers and increase compliance with the law, we reach out to our government partners and to Canadian consumers and businesses.
Bid-rigging prevention and awareness
As the Government of Canada continues to allocate billions in public infrastructure funds, we are enhancing our efforts to equip the public procurement community with tools to prevent, detect, and deter bid-rigging on public contracts. Since the Government’s first announced its historic investment in infrastructure last year, the Bureau has made 28 bid-rigging awareness presentations to procurement officials at all levels of government.
Fraud Prevention Month
We also work with our broader community of partners every March as part of our annual Fraud Prevention Month campaign. The Bureau chairs the Fraud Prevention Forum, which brings together more than 80 law enforcement agencies and public and private sector organizations in an effort to help Canadians recognize, reject and report fraud.
Consumer and businesses
We’ve also been ramping up our outreach to consumers and businesses year-round. In 2016, we began issuing alerts to provide timely warnings to consumers about potential fraud and deceptive marketing, and to help businesses compete fairly in compliance with the law.
The Competition Bureau views compliance as a shared responsibility, and we expect businesses to take an active roll in ensuring compliance with the law. Businesses do their part to ensure fair play in the marketplace by implementing and adhering to a corporate compliance program. A credible and effective compliance program minimizes your risk of violating the law, and protects your business, your reputation and your employees.
We provide guidance for businesses of all sizes to help them play their part. That includes our recently revised Corporate Compliance Programs bulletin, which is available on our website along with a number of other compliance tools for businesses large and small.
We also launched a cross-Canada compliance road show last year, which has so far included 5 visits to Saskatchewan to promote compliance to businesses in both Regina and Saskatoon.
Because increasing compliance with the law strengthens competition, drives innovation and supports economic growth—in Saskatchewan and all of Canada.
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