A fork in the river: making the right choices for Canadians
Remarks from Matthew Boswell, Commissioner of Competition
Canadian Bar Association Competition Law Fall Conference
October 26, 2023
(As prepared for delivery)
Good afternoon, everyone. I’m delighted to be here today.
I would like to begin by acknowledging that we are gathered here on the traditional unceded territory of the Algonquin Anishinaabeg People.
Also, less than a ten-minute walk from here are the Chaudière Falls, which has long been a traditional gathering place on the Ottawa River. And significantly, this is a place where (if you zoom out a little more) we have a confluence of three rivers ꟷ the Ottawa, the Rideau and the Gatineau.
I’m mentioning these local features because it relates to the context of my remarks here today.
Rivers are this vast land’s ancient highways for moving people, goods and ideas. They were the first prosperity engine here long before there was a Canada, when the iconic canoe was the principal mode of travel, transportation and trade.
But navigating a river isn’t just about being carried by the current ꟷ as the wisdom and experience of this land’s earliest inhabitants can teach us: rivers make us make choices.
I’m nearing the five-year mark in my term as Commissioner of Competition. In that time, we at the Bureau have had to make many choices. To adapt in a quickly evolving digital economy. To exercise caution in a global pandemic. To respond wisely to record-setting inflation. And to be thoughtful in our response to sophisticated, new challenges: including the disruptive arrival of AI and machine learning.
In that time, the Government of Canada also made important choices. To invest more funding for the Competition Bureau. To embark on a landmark review of competition law in Canada. And to take important steps toward prioritizing competition in our economy. That’s all happened against the backdrop of unprecedented interest in competition issues in our country. I’ll come back to that point in a moment.
We all want greater prosperity in a free-market economy. Today, the question on everyone’s lips—citizens, academics, media and Parliamentarians alike—is “what’s the right way to fully leverage competition to get there?”
We are at a crossroads. And the particular kind of crossing in front of us, to apply the analogy I introduced earlier, is that we are at a fork in a fast-moving river.
Navigating rivers can be tricky. Sometimes it means choosing difficult-to-navigate rapids to get around even tougher obstacles. And who would guess, for example, that a simple left-or-right choice on the small Divide Creek in B.C. will take you either to the Pacific or the Arctic Ocean. Sometimes a sudden split will resolve quickly back into a confluence. But other times, choosing one fork over another can have huge consequences. Especially when what’s ahead is uncertain.
Examining our performance on competition
As Canada’s Commissioner of Competition, I’m here today to make the case for making the right choices going forward on our journey to greater prosperity. Today, we’re all paddling hard in the right direction. We’re all thinking about competition in our economy. But what lies ahead?
For that, we must consult our maps and our compass, guided by an unshakeable conviction that a free-market economy is about opportunity and fair play. They are two parts of a sphere that comprise competition. One half is about celebrating and rewarding creativity and innovation. The other is about protecting the competitive process and the benefits it generates for consumers, businesses and our economy.
Thankfully, the current is already moving us forward. We welcomed amendments to the Competition Act last year, Parliament is currently considering others, and there are further changes on the horizon.
Make no mistake, however. This new, important work comes after a long period where—quite frankly—not enough was being done to value and nurture competition in Canada. We need to be honest about this, so we fully understand the choices we must make as a country going forward.
As I mentioned earlier, competition is a big deal for Canadians right now. A number of surveys over the last two years tell us citizens want more competition and better choices in the marketplace. One such poll found that 88% say we need more competition because – and I quote – “it’s too easy for big business to take advantage of Canadians.” Another poll showed that 92% of us believe that high market concentration is driving up the prices we pay across multiple sectors. That’s quite a consensus in a country as wide and diverse as Canada.
These polls tells us that an overwhelming number of people these days feel short-changed by competition. But do the facts match up with those feelings? We decided to find out.
The Bureau set out ambitiously to examine the data and measure our country’s overall performance on competition over the long term. We conducted an extensive analysis of data from Statistics Canada, tracking the evolution of competitive intensity in Canada’s economy between 2000 and 2020. Essentially a generation’s worth of economic activity.
Competitive intensity describes how hard those in a business feel they need to work to gain an advantage over their rivals. Working from that measure, this important research project—the first of its kind in Canada—was done with the assistance of Dr. Matthew Osborne of the University of Toronto and his research team.
Last week, we published our report. I’ll go over our key findings with you now.
I’ll start with the bottom-line answer to our original question. Yes, Canada’s competitive intensity has decreased over the last generation. That means both consumers and businesses have seen fewer of the benefits than they would in a more competitive marketplace: lower prices, better products and services, more choices, and a boost to innovation and productivity. Here are the big takeaways.
First, concentration rose in the most concentrated industries, and the number of highly concentrated industries increased. That indicator tells us about the relative size of firms in a particular industry. And it’s concerning.
Second, top firms are less and less challenged. On that point, we looked beyond concentration, because that doesn’t tell us whether firms remain the largest in their industry. So we looked at rank stability. This counts how many of the largest firms in an industry kept their position over time. We found rank stability rose over the review period. So top firms are less likely to be challenged in their position.
Third, fewer firms entered industries. Competition presumes new ones enter to challenge legacy ones, offering greater value and choice. That’s not happening as much as it should. Instead, we’ve seen declining entry rates across industries. It means these industries have become less dynamic over time.
Lastly, profits and markups went up. Businesses routinely holding the line on low prices is a good barometer of healthy competition. Again, that’s not happening the way it should. Instead, profits and markups rose…and this was particularly true in industries where profits and markups were already higher relative to others. Another troubling indicator that competitive intensity in Canada is on the decline.
I’ll pause here to say—as we do in the report—that our findings used data organized by business activity through the North American Industry Classification System, or NAICS. These NAICS industries don’t align with the usual practices of competition law analysis and enforcement.
We don’t define antitrust product and geographic markets for every industry in Canada, because that’s an impossible exercise. To borrow a map analogy: we’re not trying to build a street-level view here of every avenue in Canada’s $2 trillion-plus economy. But what we are doing is gaining a better understanding of the landscape of that marketplace under our collective feet.
We’re confident in our results because we relied on data highly representative of the Canadian economy. We took into account multiple indicators of competition. And frankly, because it’s our job to be able to draw accurate conclusions about competition from the evidence, and to make recommendations in the interest of good public policy-making to enhance competition.
So I’ll repeat: the facts tell us that over the last generation, competitive intensity is on the decline in Canada. That reality not only informs our work at the Competition Bureau as an independent law enforcement agency. It also contributes valuably to a much broader conversation we all need to keep having about Canada’s productivity and economic performance.
Making the right choices
To return to the analogy: The fork in the river is upon us. And the current is strong.
We know that competition encourages firms to innovate and invest in new products and processes to gain a competitive edge on rivals. It drives growth. It boosts our standard of living. And it spurs companies to be more competitive abroad.
This is why competitive intensity in our economy matters to all Canadians. We not only benefit from greater competition in the form of lower prices and more choice, but we all get a powerful boost from the greater prosperity that a more competitive economy creates.
So here we are, paddles in hand, ready to keep navigating this river. Equipped with the right map. Guided by the right values. Collectively in agreement about where we all want to end up. So what happens now?
Choosing wisely here means making full use of our informed understanding of that landscape that I spoke about. It means recognizing the links between competition and innovation on one hand, and our collective wealth and prosperity on the other. And it means taking effective action in the interest of all Canadians.
So how do we turn the tide on competitive intensity in our country? There are three fundamental ways. First, through a strong and modernized Competition Act, the law meant to maintain and encourage competition in Canada. Second, through a Competition Bureau that is properly equipped with the resources, skills, talent and priorities to protect and promote competition. And third, through a whole-of-government approach, at all levels of government, that ensures our public policies support competition, rather than hinder it.
Reforming Canada’s competition laws
With respect to the first, we can all have renewed confidence in where we find ourselves. Ongoing work by Parliamentarians is doing a lot to help correct our course. We must all be more emboldened to stay that course, and to continue to prioritize competition in our economy.
The Competition Act is, in a manner of speaking, our trusty canoe to move us over all kinds of conditions on a course towards greater competition in an economy powered by opportunity and fair play. Let’s take a moment to look more closely at how very important progress to modernize our competition laws is going to help us all.
We’re essentially building a better, stronger canoe. Made with modern materials, able to navigate skillfully not only in today’s waters, but also tomorrow’s. In February 2022, the Government of Canada announced the intention to undertake a review of the Competition Act. Since then, there have already been a number of targeted amendments to the Act. Those received Royal Assent last year. Next, a broad public consultation saw significant participation from a diverse set of stakeholders. That culminated in the publication of a comprehensive What We Heard Report.
Following this consultation, we’ve seen the introduction of a first set of proposed legislative amendments to the Competition Act in the form of Bill C-56. Among several important outcomes, it would, if enacted, repeal the efficiencies defense and give the Bureau the ability to obtain Court orders to compel information during market studies.
All of that is what we lawyers call a very big deal. It keeps us on the right course by beginning to modernize Canada’s competition laws. It helps give the Bureau more effective tools and authority needed to better protect and promote competition in this country. And it shows that Parliamentarians are prioritizing the role of competition in our economy in a way that we haven’t seen in decades.
The Bureau’s views on legislative reform are no secret. Under my watch, we’ve been transparent…and exhaustive…and blunt in our submission to the Government’s consultation. We’ve made more than fifty recommendations to modernize our laws.
We’re not the only ones who care about this. There’s an unspoken understanding on every street and a more unvarnished take at grocery checkout lines, gas stations and kitchen tables across this country that things need to change if we’re going to be serious about being an economy that values competition.
Look at what the Globe and Mail’s editorial board said in a recent piece entitled: A new era of competition law dawns in Canada – finally. Emphasis on finally. “The challenge now,” they write, “is to ensure this momentum leads a new legal framework that embodies a more modern view of how to best promote growth and productivity.”
We look forward to continuing on the path set forward by Parliament as it considers important legislative reform now and in the future.
Delivering results for all Canadians
That brings me to the second fundamental need: a competition authority that is ready and well-equipped to navigate whatever the river may bring.
Of course, legislative reform is foundational to promoting and protecting competition in Canada. But the Competition Bureau must also be up to the task to administer and enforce the law. I can assure you we remain ready.
In ensuring compliance with the law, we recognize the importance of providing good guidance, clarity of thought and predictability in all aspects of our work. As always, we will be carefully considering the impact of any Competition Act amendments on our enforcement approach. And we will update both our approach and guidance so that it’s in full accordance with any new laws and Parliament’s intent.
With the substantial budget increase granted by the Government of Canada in 2021, we are expanding and strengthening our team. We're recruiting individuals from diverse backgrounds to ensure we possess the necessary skills for today's economy. We are also continuing to build our investigation and litigation capacity to take timely and evidence-based enforcement action—including seeking injunctions—in both the traditional marketplace and the digital one.
We will be even more deliberate and thoughtful about our work. That means we’ll keep asking ourselves: “what’s the risk of not taking action”. We will continue to vigorously enforce the law and make principled, evidence-based decisions rooted in protecting the public interest in competition.
Being ready for the future is as much about equipping ourselves for the immediate challenges we can already see, as it is about positioning ourselves against consequences we cannot yet foresee.
On the emerging issues front, we see clearly what’s happening in terms of evolving business practices. We are wise to the risks of creeping acquisitions—including private equity roll-up strategies—and the harm they may pose to competition. We will also continue scrutinizing the conduct of gatekeeper platforms and we’ll take appropriate action if it harms competition.
With respect to deceptive marketing practices, we remain vigilant and ready to act. That includes our continued work on countering greenwashing, as well as pursuing those businesses that continue to engage in drip-pricing.
Protecting the consumer’s pocketbook doesn’t stop there. We have all seen the increased use of urgency cues in marketing representations, such as countdown clocks, “limited-time offers” or warnings about “only a few items left”. These representations must be truthful. Otherwise, they can create the false or misleading impression that consumers must purchase a product quickly, before a promotion ends or before all the items are sold. When, in fact, the promotion is quickly renewed, or replaced by another one, with plenty of items still available. In our recent settlement with The Dufresne Group and its affiliates, the company paid a $3.25 million penalty to resolve our concerns over their marketing practices in Canada, which included the use of countdown clocks and other misleading urgency cues.
On the topic of recent enforcement actions, you will also note from a number of our latest announcements that we are continuing to crack down on all types of criminal cartel conduct, from price-fixing to bid-rigging to territory allocation. That will always be a top priority for the Bureau.
Earlier, I mentioned how the future can bring consequences that aren’t always foreseen. So we must keep pace with emerging practices and technologies, particularly the growing application of AI and machine learning in everyday life. There are important questions that need to be asked about the entrenchment of dominant players who control the critical inputs that fuel AI. There’s also the very real risk posed by anti-competitive mergers or deliberately unethical conduct of these advanced tools to deceive consumers.
Our newly created Digital Enforcement and Intelligence Branch is at the heart of our work to better equip the Bureau for the challenges and complexities of the digital age.
This new Branch was created to bring new expertise to the Bureau, including data scientists and technologists with expertise in emerging tools and technologies. A goal in creating that Branch is to have internal experts who understand how firms are using data and technology now. They also will significantly help the Bureau leverage data and technology so that our investigations cover more ground in less time.
To that end, the Branch is driving our deeper understanding of competition issues around AI.
We’re actively connecting with experts and learning a lot quickly. Soon, we’ll publish a discussion paper for consultation with the public. That work, and the feedback we receive, will continue to hone our thinking even further.
Partnerships are vital, too. Last June, the Bureau joined forces with the Office of the Privacy Commissioner of Canada and the Canadian Radio-Television and Telecommunications Commission to create the Canadian Digital Regulators Forum.
Overall, emerging technologies bring new opportunities and challenges for the Competition Bureau. Our open-minded approach will translate into quickly gaining new expertise where it counts. So we can continue improving on how we fulfill our mandate, especially when faced with new competition issues.
A whole of government approach to competition
Of course, more needs to be done beyond modernizing our competition laws and re-equipping our federal law enforcement agency. That brings me to the third fundamental way to turn the tide on competition in Canada. To effect truly meaningful change, we need a whole-of-government approach to promoting competition. Siloed thinking and rigid structures won’t solve the problem. What does solve it is having municipal, provincial, territorial and federal levels all operating from the same powerful assumption: that we all build a better, stronger economy when government policies are designed to nurture competition, not to restrict it. We can do this if we choose to. If we continue to make competition a priority.
Government policy affects how businesses in Canada can compete. It directly influences the level of competitive intensity throughout the economy. Exploring this fact was the focus of Canada’s Competition Summit, which the Bureau hosted just a few weeks ago. There, we heard from thought leaders from business, academia, think tanks and other governments.
A key takeaway from our Summit was that Canada must seize opportunities for pro-competitive regulatory reform. The opportunities are there for the taking. We heard about the impact on competition of longstanding government policies such as foreign ownership restrictions, supply management and – of course – interprovincial trade barriers. We also heard about the vast potential and the need to accelerate open banking and data portability frameworks to unlock competition in a data-driven economy. We need to hardwire competition principles into government decision-making.
I’ve talked before about how, in the 1990s, Australia navigated a similar set of challenges to those Canada faces today. I come back to it often, because it’s a great model on many fronts. It teaches how to do rigorous analysis of data, how to look carefully at the findings, and how to make recommendations that translate into meaningful, lasting, positive competition for your country’s economy and its citizens.
The wise choices they made at their own fork in the river put thousands of dollars in the pockets of Australian households…even to this day. Australia began its whole-of-government competition policy reforms 30 years ago. And today, it’s recognized as the most significant, most successful economic reforms in that country’s history.
That recognition crystalized in a 2005 review of the impact of those earlier reforms. In the Australian Government’s Productivity Commission report, it identified a permanent 2.5 percent increase in the country’s GDP as a result of competition reform. Today, that would be close to $5,000 per household. And that was a conservative estimate, according to the report, because it didn’t capture (what it called) the dynamic efficiency gains of more competitive markets.
My point is that we stand to gain just as much here in Canada. Today, we have a choice on our hands on how best to significantly boost our economy and increase household wealth. The stakes are enormous. But so too are the opportunities.
We must stay the course
As we continue down the river, we must stay the course.
Some of you may recall the first time I spoke with you back in May of 2019 after being appointed Commissioner. Back then, I articulated my vision for the organization and I looked ahead at the challenging journey the Bureau needed to take to move forward. I spoke of the inevitability of both successes and failures along the way, but also of the certainty of change.
Looking back on the journey we’ve travelled together since then, I’m incredibly proud of the Competition Bureau team and all that we’ve accomplished together. Day in, day out, the amazing Bureau team has shown unwavering dedication and professionalism in their efforts to protect and promote competition for Canadians.
As Parliamentarians, policymakers and citizens continue to prioritize the importance of competition in our economy, I’m very hopeful about where we are headed. The course corrections we’ve seen on the legislative front have emboldened and reinvigorated us. And within the Bureau, our investments in our staff, skills and tools are positioning us to deliver more and better results for Canadians.
We are at a fork in the river, faced with important choices. But today, we are also better equipped than ever to make good choices, to make our economy in Canada stronger and more competitive, for the lasting benefit of all Canadians.
Thank you for inviting me to speak with you today and to share ideas about how we can continue constructively and see competition thrive in Canada…together.
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