Competitive markets and strong industry

The proposed Rogers-Shaw merger and Sobeys' takeover of Longo's has amplified calls for legislators to revisit competition policy in Canada, with an eye on fostering better competition in both physical and digital realms.

Canada's competition laws are overly tolerant of corporate dominance, which is not seen as being inherently problematic, and ill-suited to address competition issues in the information age. Our lax approach to competition fundamentally hampers the Competition Bureau's ability to protect and promote competitive markets.

Yet updating Canada's competition laws will prove to be a double-edged sword for our homegrown tech sector. On the one hand, having laws that vigorously protect competition will help everyday people by providing greater choice and better prices. More modern laws can also prevent startups from falling victim to abusive behaviour on the part of larger firms, and help promote innovation in the Canadian marketplace.

On the other hand, the outdated laws we have now allow technology companies to scale up with little regulatory burden and almost no scrutiny. Leaving competition legislation as is might actually support the country's nascent digital economy due to the low regulatory burden faced by domestic firms. Updating our laws could also risk unduly scrutinizing business strategies and merger and acquisition activity among digital firms.

The profound trade-offs of modernizing competition law, particularly in the digital sphere, highlights its inherently political nature. Reforming competition law means that we need to satisfy the various, and often conflicting, needs of consumers, workers, businesses and governments. The potential of causing a backlash or getting the reforms wrong make it tempting for us to bury our heads in the sand and abandon nascent efforts for reform.

In fact, we may not need to update our competition laws in order to take similar actions against Big Tech firms as the United States and the European Union, as we can benefit from the spillover effects of actions taken by those jurisdictions. For example, the Competition Bureau often acts as a second mover in these cases, mirroring the successful arguments made by competition authorities in the U.S. and EU in its own settlement negotiations.

Yet we cannot sidestep the issue of Canada's outdated competition laws because we cannot expect other competition authorities to address emerging competition issues in our own backyard.

Canada's Competition Bureau does not have the toolkit necessary to mitigate anticompetitive practices in the digital economy. While by no means Big Tech firms, Canada does have its own large, sophisticated technology companies that dominate in the e-commerce, insurance, grocery and data domains, such as Shopify, Manulife and Loblaw.

Much like other tech giants, Shopify's acquisition history shows it similarly snapping up rivals. A similar argument could be made about Montreal's MindGeek (the owner of PornHub), which has grown significantly through multiple acquisitions.

Separately, Loblaw's growing advertising and rewards platform gives it the power to privilege President's Choice products in searches, much like how Amazon prefers its Amazon Essentials products. Amazon has even been accused of using data from the sellers on its marketplace to create competing products and drive them out of the market. There may come a time in the near future when Loblaw is able to do something similar with its President's Choice and No Name brands.

Companies like Shopify, MindGeek and Loblaw are not inherently bad actors, but they have the unique ability to use consumer data to create substantial advantages for themselves — in much the same way as Facebook, Google and Amazon do, albeit on a smaller scale — which should not be ignored by regulators.

Canada must make moves to modernize its competition laws so that our domestic digital firms do not exploit consumers and undermine innovation in an effort to protect their growing dominance. The potential harms of digital dominance have been well-established.

In the 2017 article, Amazon's Antitrust Paradox, published in the Yale Law Journal, Lina Khan described Amazon as both a platform and a marketplace that can collect massive amounts of information on competitors, replicate their products, undercut them on price and then dominate the market. This creates a type of monopoly that has not been seen before.

At the same time, any reforms we make must allow Canadian startups to scale up without unnecessarily penalizing them and putting them at a disadvantage against foreign competitors. We can seek to find a better balance between facilitating the growth of impressive firms like Shopify, while also being mindful of the possible negative impacts of market dominance, particularly in the digital realm.

As a tool, competition policy should sufficiently police corporate behaviour and ensure that they are held accountable, so that no one private interest can control the market.

To do this, we don't need to mimic the laws of the U.S. or the EU. Rather, we should absorb broad lessons from other jurisdictions as we look ahead to consider a more proactive approach to competition policy. For instance, we should seek to learn from the U.S. and China, where regulators have cracked down on large digital firms that were previously lauded.

Indeed, while Canada has fallen behind, we can lead when it comes to considering a more thoughtful and proactive regulatory environment. Modernizing competition policy in Canada is not about copy-andpasting the approach taken by either the U.S. or the EU.

Rather, it is about identifying what aspects of their regulatory frameworks failed to consider the harms they are now retroactively addressing. The most important lesson Canadian policy-makers can learn is how difficult it is to retroactively change the policy environment in order to rationalize investigations against digital companies.

Canadians deserve a system that is going to strike a balance between innovation and accountability. This is our opportunity to modernize competition policy for a healthy digital ecosystem. Vass Bednar is the executive director of McMaster University's master of public policy in digital society program. Robin Shaban is principal at Vivic Research, an economic consulting firm that provides data-driven research for

policy-makers and advocates.