Canada must develop a clear and coherent plan for how to respond to the profound changes occurring in what is referred to variously as “the “digital age,” “the digital economy,” “digital markets” or just “digitization.”
This is the key takeaway from an intensifying debate that is expected to be debated in the House this session over what changes are needed to modernize the Competition Act. Depending on how it all plays out, the current confines of what is considered “competition” could be shattered with a radical transformation of the regulatory landscape.
Competition reform had been on the radar for some time but gained public attention when Commissioner of Competition Matthew Boswell sent a clear message last October to competition law practitioners that it was time, after 12 years, for a comprehensive review of the act to update it for the economy of the 21st century.
A week later, Senator Howard Wetston, who is an expert in competition policy and who sits with the Independent Senators Group, initiated a consultation process to which he invited interested parties to make submissions on the merits of amendments to the act. Attached to his invitation was an 84-page report prepared by Edward Iacobucci, another competition expert who is a former dean of the University of Toronto faculty of law. This report discussed some of the same issues identified by Boswell as well as other issues.
Further evidence that changes in the area of competition law are likely can be gleaned from the mandate letter issued to François-Philippe Champagne, minister of innovation, science and industry, in December.
A striking feature of each of these calls for reform is the vagueness with which the implied impetus for doing so – the emergence of the “digital economy” – is described. Both the commissioner and the report prepared for the Wetston consultation sidestep the question of what exactly is meant by “digital era.”
Already an ambiguous concept, this lack of attention is part of the reason why reaction to the proposals has varied and seems to be talking about two different worlds.
Canada’s competition law is due for an overhaul
The last major changes to the act, made in 2009 under the Conservative government, adopted some long-standing proposals for reform as well as many of the recommendations made by the Competition Policy Review Panel in its final report in 2008. At the time, the intent was to examine issues central to increasing Canada’s economic competitiveness.
As Boswell noted in October, the report was thorough but also a reflection of its time, mentioning the word “digital” only twice in more than 130 pages. Much has changed – economically, socially and politically – in Canada and the world since then.
Today, an increasing divide separates those who believe competition law should have a small, clearly delineated and predictable footprint that is easy to manage and those who argue that an effective competition policy must acknowledge, and balance, a wider range of considerations relevant to the economic well-being of Canadian society.
While this split has always existed, it has widened considerably because it now straddles a more existential question. What is the significance of the changes brought on by the mass digitization of information; the creation of technologies that have facilitated and fostered the adoption of digital business practices, products and services; and the emergence of increasingly sophisticated artificial intelligence?
A two-tiered debate
To make sense of the current discussion of amendments to the act, it is important to understand how it cuts across two distinct but connected issues.
Our newsletter about the public service.
Nominated for a Digital Publishing Award.
The first is about the goals of competition. Is it time to move beyond the narrow focus of economic efficiency that has dominated the evolution of competition law for the last 35 years? Though disagreement about this point is long standing, an increasingly loud and diverse chorus is challenging it now. These critics argue the rationale underpinning this limited version competition policy ignores the difficult but important questions of distributive fairness, sustainability, and diverse and inclusive participation in the economy.
They also point to a lack of enforcement heft to respond adequately to the novel ways, already recognized by the U.S. and Europe, that economic power can be concentrated and exercised, particularly with its potential to gatekeep and restrict market access, limit consumer autonomy and facilitate deceptive advertising, undermine privacy protections and interfere with the proper functioning of democratic institutions.
The second issue is about whether competition policy should be developed in relative isolation from other interrelated policy, such as privacy, consumer protection, data protection and media sustainability, to name just a few. This strikes at the heart of what many in competition circles seem determined to avoid – to acknowledge what is happening in our lived experiences and to turn our minds to a serious question: How do we foster human thriving, creativity and innovation in an environment of pervasive and unavoidable surveillance, collection and consolidation of control over huge amounts of personal and confidential data that fuels accelerating growth in use of artificial intelligence and technological change?
For supporters of maintaining the status quo, there is neither a compelling reason to substantially modify the Competition Act, nor a basis to reshape our approach to economic regulation. To them, the digital era is nothing more than the next phase of economic and social development.
Iacobucci argues that the basic structure and legal rules that frame competition law in Canada have worked well in the past and are sound. Though digital markets raise novel issues, there is no need for sweeping substantive reform. All that is required are a few “tweaks.”
The gist of this position is that competition law and policy should stick to its knitting and stay firmly anchored in economics. It should also stay away from subjective, non-quantifiable questions such as fairness, ensuring that competition is as “neutral” as possible.
Iacobucci goes so far as to say that competition policy could be further improved with a single goal of economic efficiency which would encourage business activity. In other words, the answer is focusing on making the overall economic pie bigger. Questions about what pie to make, who bakes it and how to share the pie among different groups in society should be left to other areas, such as taxation, social welfare programs and targeted economic development initiatives.
On the other side, you have the advocates for change. These include progressive thinkers and experts from fields outside of those conventionally focused on competition policy (including many of the recently published submissions made in response to the Wetston consultation). Sometimes derided as “hipster antitrust,” these voices are inspired by developments in the United States and in Europe, where significant cross-sectional policy and legislative changes are already well underway. They reflect the view that the digital era has reshaped the world – and hence the international economy – in ways that are fundamentally different from what came before.
To them, it makes no sense to talk of the “digital economy” as something separate and distinct from the economy at large because all interactions — personal, social, business, government — are affected. This blurring of so many aspects of our lives requires a new perspective not only of the purposes of the act, but also of how competition fits into the wider economic policy context. Old methods of regulating in specialized silos must give way to a coherent, co-ordinated and transversal approach to the challenges we face.
In an uncomfortable middle position, you have Boswell and the Competition Bureau. Their submission to the Wetston consultation advocates forcefully for substantial changes to the current act, but their blueprint for reform is anchored firmly within the existing footprint and goals of competition law. Specific references to the need for new and different tools are directed at a handful of specific issues. They are largely silent on the broader of question of how competition fits into a whole-of-government approach to regulating the new (digital) economy and what kind of co-operation is needed with other regulators, such as the privacy commissioner.
For policy-makers, it is important to recognize that digital information is an extremely valuable commercial resource in the economy of the 21st century, and that the harm caused by concentration of power over how it is collected, analysed and used is not restricted to price effects –the conventional metric used to assess competitive harm under Canadian law. As a recent report from the Competition and Markets Authority in the U.K. shows, Canada’s G7 and OECD peers have been grappling with issues such as how to scrutinize the behaviour and business models of firms in the new economic order characterized by network effects, multi-sided markets and access to data sets as a source of competitive advantage.
International co-ordination and collaboration will be a key factor. This is the case particularly for entities with durable and entrenched market power that engage in exploitative and exclusionary conduct, transcending borders and national and local laws. It includes of course the platform operators and producers of the technology that makes these systems work. At present, there is limited, uneven and jurisdictionally fragmented regulation of the new economy, although this is changing quickly. For its part, Canada has taken comparatively few concrete steps and is not keeping pace with as other key jurisdictions move forward with ambitious plans that transcend the traditional confines of competition law.
Against this backdrop, Canada stands at an important crossroads. The debate over the merits of Competition Act amendments seems poised to play an important role in the direction Canada takes as it determines how best to meet the challenges of the new (digital) economy.
This article is part of the Canada’s Competition Law is Overdue for an Overhaul special feature series.