Canadian Bar Association Competition Law Fall Conference
Ottawa, Ontario
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.
