Canada’s move to beef up the antitrust muscle could miss the root of the problem


TORONTO, June 5 (Reuters) – Waves of industry consolidation over decades have narrowed customer choice, from telecoms to banking, with Canadians paying the world’s most expensive mobile phone bills and shelling out more for day-to-day banking, say consumer advocates.

Now the government says enough is enough. It wants to give teeth to its antitrust regulations, just like the sweeping powers exercised by authorities in the United States, the European Union and Australia.

The proposed changes to the Competition Act come after more than a decade. This would include giving the antitrust body, the Competition Bureau Canada, the power to seek remedies in the case of a foreign merger if it affected competition in Canada.

Join now for FREE unlimited access to Reuters.com

Register

But lobby groups, including the influential Canadian Bar Association (CBA), have challenged the new proposals.

“Whether and why there are monopolies in markets are factually, legally and economically complex questions,” Omar Wakil, president and chairman of the ABC, said in an interview.

“So I don’t think you can just say there are monopolies and that’s because of a problem with the competition laws,” said Wakil, a partner at law firm Torys LLP.

Nearly a dozen consumer advocates, academics and policy experts contacted by Reuters said the government’s efforts to break up monopolies in Canada were much needed, but they argue the proposed changes to the rules would fall short. to repair the damage done to consumers by years of big mergers, because the new rules are unlikely to lead to the breakup of big business.

The ABC sent a letter to Canada’s Minister of Innovation, Science and Industry, François-Philippe Champagne, on May 18. The letter, which was seen by Reuters, called for the changes to be postponed until all stakeholders were consulted.

The government, for its part, says antitrust rules need to be updated to fix loopholes in the Competition Act to bring it into line with international “best practice”. This is just the beginning, a spokeswoman said.

“The government will undertake an in-depth review (of the Act)…to respond to the reality of the 21st century market,” said Laurie Bouchard, spokesperson for the office of the Minister of Innovation, Science and Industry. “Stakeholders will be invited to share their views on a wide range of topics as part of this review.”

MORE MUSCLE

In Canada, six major banks, including the Royal Bank of Canada (RY.TO) and the Toronto-Dominion Bank (TD.TO), control 80% of total assets in this industry, according to Reuters calculations. In contrast, the Big Five US banks control about 40% of assets.

The average monthly fee on a checking account is $11 in Canada, compared to $7 in the United States, according to a Reuters analysis. These averages exclude student accounts.

In Canadian telecommunications, the top three companies – Rogers Communications Inc (RCIb.TO), BCE Inc (BCE.TO) and Telus Corp (T.TO) – account for almost 90% of revenues. The two main grocers, Loblaw Companies Ltd (L.TO) and Sobeys Inc (SOBEF.UL), have a 50% market share, measured by number of stores. Sobeys is owned by Empire Company Ltd (EMPa.TO).

Consumer advocates have argued that the growth of big business in Canada is stifling new entrants.

Data from government agency Statistics Canada shows that foreign companies together held 15% of total industry-wide assets in Canada in 2019, up from 20% a decade ago.

As Canada embarks on digitizing its economy, new antitrust laws are needed to avoid the old economic model that created monopolies, according to Denise Hearn, senior researcher at the US nonprofit Economic Liberties project.

“Canada’s economy has become highly concentrated over the past decade,” said Hearn, who attributes this to the country’s weak competition laws and under-enforcement by the Competition Bureau.

Proposals to tighten antitrust regulations, introduced in the government’s federal budget in April, could be passed as early as this summer. The proposals provide for financial penalties and make it a criminal offense to violate certain provisions of antitrust law.

The changes would give the Competition Bureau the power to prosecute companies that abuse their dominant market position, engage in price-fixing or sign anti-poaching agreements that could hinder workers’ ability to negotiate better terms. employment.

INFLATION

In the past, the bureau’s regulatory battles have met with only limited success. Of more than 1,500 mergers reviewed by the bureau since 2009, only eight have been challenged. Of those eight cases, six have been lost or settled, according to a Reuters analysis of official data. The other two cases are pending.

The Competition Bureau is in the spotlight after blocking a high-profile deal last month involving Rogers’ planned C$20 billion ($15.8 billion) takeover of Shaw Communications (SJRb.TO), claiming it would discourage competition. Read more

Canadians paid the highest mobile phone bills in the world in 2021, according to a report by Rewheel, a Finnish telecommunications research company. A 4G and 5G mobile plan for 100 gigabytes was 13 times more expensive than in France, he specifies.

The proposed changes come as Canada, like the rest of the world, struggles with inflation that has hit a three-decade high. Competition Commissioner Matthew Boswell, for his part, says increased competition must be part of the solution to fighting inflation. “Open and competitive markets are key to controlling prices,” he said in a speech at the Center for International Governance Innovation in late May.

Amendments to the Competition Act would also give the Bureau the power to investigate cross-border mergers that could affect competition in Canada and to issue an order against a foreign party that does not Canada or against companies selling in Canada.

Some lawyers, however, say these changes may not have a legal basis to survive.

“I think the bureau and possibly the Canadian Department of Justice believe it’s possible that Canadian courts have jurisdiction to issue and enforce these orders,” said Neil Campbell, a partner at McMillan, a law firm. attorneys specializing in competition and antitrust litigation.

“I don’t think the application is likely to succeed when a foreign company has no assets/affiliates/operations in Canada,” he added.

($1 = 1.2656 Canadian dollars)

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Divya Rajagopal in Toronto Editing by Denny Thomas and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

Previous Cell Surveillance Camera Market 2022 Segmentation, Demand, Growth, Trend, Opportunity and Forecast to 2028
Next Is the weakness in shares of Orient Telecoms Plc (LON:ORNT) a sign that the market could be wrong given its strong financial outlook?