Building a Culture of Competition in Canada

Speech

Remarks by Matthew Boswell, Commissioner of Competition

C.D. Howe Round Table Luncheon

November 19, 2019

Toronto, Ont

(As prepared for delivery)

Good afternoon, everyone. Thank you Bill, for that kind introduction. Thanks, as well to C.D. Howe for inviting me, and a few of my Competition Bureau colleagues, to join you here today. It is an honour to be here to talk to you about the importance of competition as a policy goal for Canada in the digital age.

Earlier this year, when I was sworn in as Commissioner of Competition, I vowed to “faithfully, truly and impartially, and to the best of my judgment, skill and ability, execute the powers and trusts reposed in me as Commissioner of Competition.”

Of course, one of my key trusts is to be responsible for the administration and enforcement of the Competition Act, the purpose of which is to “maintain and encourage competition in Canada.” My comments today spring directly from that key trust, for they aim to encourage a culture of competition in Canada – an objective that is vital for this country’s economic well-being.

Despite having enacted the modern world’s first competition law, competition is not at the forefront of Canada’s economic discussion, and traditionally, we have not had a strong culture of competition in this country.

When a competition culture is healthy, all actors – consumers, businesses, governments – understand the tremendous value of competition and work to see it thrive in all sectors of the economy.

A strong culture of competition also means that strong institutions are in place to maintain accountability for the rules and guardrails that support competition. While enforcers and the courts are responsible for addressing anticompetitive conduct, all levels of government, the legal community, business leaders, consumers, the media, and academia each play a vital role in bringing competition issues to the forefront of public discourse. Events such as today’s, which bring together thought leaders from within Canada, are a prime example of this.

So why does competition matter, and why now?

At the most basic level, competition is the force that drives us to do better. Competition encourages businesses to become more productive, to innovate, to improve quality and decrease prices. Competition ensures that businesses succeed through merit and not through anticompetitive behaviour.

Critically, competition helps markets work for Canadians. Competition ensures that consumers always have choices, allowing them to reward companies that earn their business and trust. By providing the freedom to choose, competition forces companies to fight for every consumer, protecting those same consumers from being taken for granted by entrenched players that get too comfortable.

Over 10 years ago, the federal government commissioned a report on the state of Canada’s competition policy regime. The final report of the Competition Policy Review Panel, entitled Compete to Win, included two noteworthy conclusions:

  • competition is the key to increasing Canadian productivity and prosperity, and
  • Canada does not place sufficient importance on competition.

The latter may be as true today as it was a decade ago.

Studies indicate Canadian industries are on average twice as concentrated as their U.S. counterparts, and a study published earlier this year shows that levels of consolidation have risen over the last 20 years, a trend that the authors attribute, in part, to “weak antitrust legislation and practices and increased barriers to entry.”

An increased focus on competition can bring significant value to Canadians. For example, economists have estimated that Canada could see a two to five percent boost in productivity through pro-competitive regulatory reform.

What all this says to me is that Canada is ripe with competitive potential.

The need for increased focus on competition to help us realize that potential has only grown with the rise of the digital economy in Canada, and in every corner of the world.

The digital economy is playing an increasingly important role in the lives of Canadians. From 2010 to 2017, this sector grew more than 30 percent faster than the overall economy. That explosive growth means that digital is now more important to our economy than many of the more traditional sectors.

If we truly want Canadian markets to thrive in the digital economy, we must develop a culture that embraces competition. Without it, Canadian companies will find it more difficult to develop innovative products and services for the global marketplace. As Harvard economist Michael Porter famously stated, “unless a firm is forced to compete at home, it will usually lose its competitiveness abroad.”

But what does a culture of competition mean for the Canadian economy?

For Canadians, a strong culture of competition will promote markets that meet their needs. Markets where they can benefit from innovative product offerings and have the power to choose from a wide array of more affordable goods and services. In the digital economy, this can come in the form of more control over the use and portability of Canadian consumer data, business models with built-in respect and protection for Canadians’ privacy, and protection from deceptive practices.

For businesses, a healthy, competitive market is one where they are free to compete on their merits and challenge incumbent firms, no matter the market.

In an interview last summer, Tobias Lütke, CEO of Shopify, talked about the importance of competition to businesses. He said, “it's … harder to build a company with a lack of competition than when one has significant competition. … Wanting to relentlessly create a better product every day is much easier when you are under threat by some competitor.”

And he’s right – competition boosts innovation and productivity. The 2008 Compete to Win final report made it clear that innovation is central to boosting productivity growth and that competition drives innovation. The report clearly and explicitly drew the link when it stated that “greater competition is the key to increasing productivity and prosperity.” Canada has long struggled to overcome slowing productivity growth, and more competition is just what we need to jump-start that growth.

With this in mind, my vision is for the Bureau to be a world-leading competition agency, one that is at the forefront of the digital economy and that promotes and encourages a strong culture of competition for Canada.

So how do we get there?

A key step is understanding the value of the Bureau’s role as both the enforcer of the law and as the voice and chief advocate for competition in Canada.

Strong, effective enforcement is essential for holding companies accountable and protecting markets and consumers. Enforcement is our primary tool against anticompetitive conduct and mergers, allowing new entrants to challenge the market power of incumbents, disrupt entrenched markets and improve the welfare of consumers. Vigorous enforcement also allows us to root out collusion, or as it’s referred to by the US Supreme Court, “the supreme evil of antitrust.” I am committed to vigorous enforcement of the Act during my time as Commissioner.

Over the last three years it is estimated that the actions of the Bureau have saved Canadians over eight billion dollars and we have no plans to rest on our laurels. One of our key partners, the United States Federal Trade Commission, estimates that every dollar invested in their enforcement programs saves consumers 40 to 50 dollars. So, investing in competition enforcement is a clear win for consumers.

Beyond enforcement, the Bureau is also an advocate for competition in the Canadian economy. Our advocacy work allows us to advance evidence-based recommendations for pro-competitive regulatory reform to all levels of government in Canada, with the goal of lowering barriers to entry for start-ups and unleashing the innovative potential of our economy.

While the benefits of competition can be clear in terms of greater choice, higher quality, and lower prices, the mechanics of competition law can be complex. It is, therefore, important for the Bureau to continue to make clear the case for competition in Canada.

But, to continue to deliver the benefits of competition to Canadians in the digital age, the Bureau must have a toolset that is up to the task. The nature of competition in the digital economy is rapidly and continually changing, and the sophistication of businesses that seek to impede competition is also growing at a rapid pace. While the disruptive digital and data-driven economy has delivered innovative products and services to Canadians, it has also increased the ability of actors to evade scrutiny by law enforcement agencies.

The complexity of investigating and litigating a competition case has grown tremendously. Today, our investigations routinely have five to ten thousand times more data than cases brought twenty years ago. In some of our cases, this new reality is combined with a higher burden on the Bureau to quantify the impacts of the behaviour. In this context, the Bureau needs to be equipped with the tools and policies to move at the same pace as technological change.

The Bureau is already taking steps to address these issues with initiatives such as:

  • our Digital Enforcement Outreach Project,
  • our work to develop “screens” to detect bid-rigging;
  • the creation of a Criminal Intelligence Unit;
  • the Merger Intelligence and Notification Unit, and
  • the hiring of a Chief Digital Enforcement Officer to guide all of our efforts in improving the manner in which we enforce the law in the digital economy.

But we still have much to do. The global economy will not sit back and wait for Canada to modernize its approach to protecting and promoting competition

Others have made similar observations. About a year ago, a C.D. Howe report stated that, “[the] federal government must make the rigorous enforcement of competition law a higher priority,” arguing for “greater prominence for the role of the Competition Bureau in the federal government’s economic agenda.”

Also last year, the Senior Deputy Governor of the Bank of Canada called on Canadians to “prioritize the modernization of anti-trust and competition policy,” and earlier this year the Public Policy Forum pushed for a “comprehensive review of the Competition Act” to ensure its suitability for the digital economy.

Our international partners are on board as well. Competition authorities in the U.K., E.U., Australia and Japan are already moving to modernize their approaches to competition in the digital economy. Our partners have identified this as a critical issue and are moving to invest and push for reforms that will future-proof their competition policy frameworks.

However, a strong culture of competition will not be created by the Bureau alone. As an enforcer and advocate, the Bureau has tools to promote and protect competition in the Canadian economy, and we will use all of the tools at our disposal to meet those objectives. But a culture of competition is about so much more than the actions of one law enforcement agency.

First, all levels of government must develop rules that encourage rather than hinder competition, and take the time to assess existing rules that raise barriers to new competitors. Competition and regulation do not have to work at cross-purposes, but this requires intentional and proactive consideration of the impact any regulation might have on competition. To support this shift in culture, the Bureau is ready to do all that it can to assist government agencies at all levels in creating rules that foster competition. We will continue to engage in regulatory processes where we believe the voice of competition should be present.

Businesses are also key contributors to this culture. While businesses obviously have a responsibility to comply with the Act, they’re also one of our best sources of information. We encourage them to bring forward concerns or complaints regarding anti-competitive behaviour in the marketplace. We recently launched our Digital Enforcement Outreach Project – a call-out to businesses and other interested parties to share information on potentially anti-competitive conduct related to the digital economy. We want to hear from the business community – this helps us to do our jobs to enforce the Act and advocate for competition more effectively.

My hope is that by emphasizing a competition culture, consumers will be most able to capitalize on the important power they wield in the competitive process. Consumers can tip the scales in their favour and stimulate competition in the marketplace by researching available options, actively negotiating for better services, and switching to providers that are more competitive. We are working to make it easier for consumers to do this. For example, we advocated for an Open Banking model, which would make it easier for Canadians to switch to more competitive financial service providers.

Canada has the potential to reap the real benefits of a strong culture of competition in this new economic reality, but it requires focus and collaboration. At the Bureau, we’re here to protect and support consumers through active enforcement and advocacy. I encourage all levels of government to engage with us to work toward a better balance between regulation and competition. I urge businesses to comply with the Act and to bring us their concerns about others’ conduct. Finally, I ask consumers to vote every day with their wallets and voice their desire for increased competition throughout the country.

In today’s digital marketplace, it is not enough to observe the status quo. We must all work together to make this new culture of competition a reality. As Commissioner of Competition, I stand firmly by my oath and will strive to maintain and encourage competition in this great country of ours. Because a nation does not inherit a strong competitive marketplace, it creates it – by considering competition in the development of public policy, by engaging consumers, and by supporting a marketplace where businesses are free to get ahead by competing on their merits.

Thank you.


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