Senator Howard Weston is asking for submissions as he starts, “Examining the Competition Act in the Digital Era.” Senator Weston commissioned a paper by Edward Iocabucci on “examining the Canadian Competition Act in the Digital Era.” The MacDonald Laurier Institute recently released a report chiming in that everything is fine, and the Competition Act does not need to be updated. (Um, no).
I disagree with Iocabucci’s paper and the MacDonald Laurier Institute Paper, and I even disagree with the framing of the question posed by Senator Howard. Senator Howard asked for my opinion, and I will gladly share it!
This is my first draft of my submission for Senator Howard. I’m interested in any feedback, questions, clarification, or better ideas before I submit. The deadline for submissions is Dec 15th, 2021.
Thank you for starting the process of discussing updates and modifications to the Canadian Competition Act. The Competition Act needs to be updated to better meet the needs of individual Canadians in all parts of our country. This is even more important as we recover from the COVID-19 pandemic.
I disagree with the framing that we need to reform the Competition Act for the digital era. That is incorrect; we need to reform the Competition Act for Canadians. I live in Amherst, Nova Scotia, a rural part of the country that has historically had a large manufacturing base, supported rural farms, and has been a community full of thriving small and medium-sized businesses. I run a small business in my community.
My business and my community are not part of the digital economy. In fact, we have been left behind by the digital economy, and the digital economy is not coming to save me, my community, or any of the independent businesses and farms that still exist.
We need to leave the ‘digital economy’ framing behind and restore and improve upon the previous assumptions of the Combines Investigation Act that focused on promoting equal opportunities for businesses no matter what size or part of the country. We need to re-introduce and enforce the rules that prevent large businesses, both Canadian and international, from exploiting others through the use of anti-competitive behaviours such as predatory pricing, exploitation of workers, or price-fixing.
The size of the massive digital firms does create new issues that need to be resolved and dealt with. We must deal with data harvesting, the surveillance advertising industry, and privacy issues that have arisen because of the size of these companies.
I would argue that the largest digital companies, such as Amazon, Alphabet, and Facebook, only reached the size where they can create these systemic problems through anti-competitive acts. We are seeing the evidence of these behaviours as the American government proceeds through their investigations of the largest digital companies. We’ve seen that Amazon sold diapers significantly below cost to force diapers.com to sell their business. We’ve seen Amazon use self-preferencing to promote their own products over small and independent retailers. We’ve seen evidence of Alphabet and Facebook creating anti-competitive agreements around advertising markets. We’ve seen Alphabet run both sides of the digital advertising auction market. We’ve seen Uber, Lyft, DoorDash, and other ‘gig’ economy companies exploit workers for their own gain. These are just some that have been discovered so far. These are all behaviours and actions that we historically have identified as anti-competitive and sought to prevent through enforcement of the Combine’s Investigations Act or other regulations.
We do not need to update the Competition Act for the Digital Economy. We need to update and enforce the Competition Act for the Canadian economy and the Canadian people.
In 2020, the price of lumber tripled at the retail level. This significantly increased our cost to build new housing. I know a number of owners of hardware stores and other owners woodlots in Cumberland County. When I asked, they both told me their profit margin on sales did not change. The cost of a 2x4x8’ tripled from about $3.50 to $11.50. If the retailers and the producers did not make any more money, where did that extra $8 I spent go?
In 1932, at the height of the Great Depression, the price of bread increased significantly and the wheat producers on the Prairies did not receive any more for their wheat. In response to this the Canadian Parliament formed the Royal Commission on Price Spreads to investigate what allowed this to occur. The conclusion of this report is that consolidation in the Canadian economy allowed the monopolists to exploit consumers by raising prices and forcing the producers to accept less for their goods. Some solutions from this report was more robust combines investigation and reforms of the finance industry. The purpose of all these reforms was to act in the best interest of individual Canadians, and to protect their ability to make a living in a fair and open Canadian economy.
We need to move away from our current focus on consumer welfare and efficiency only and revert back to the goal of preventing anti-competitive behaviours and exploitation of Canadians. This will create a more fair economy so individual Canadians workers will not be exploited, and small and medium sized businesses can start and flourish. All of this will renew our small and rural towns, and provide opportunities for future generations.