Competition Bureau’s approach to antitrust law needs to catch up with the times

Tuesday, September 12, 2017

Even as Canada’s Competition Bureau heralds a focus on the digital economy as its number one priority for 2017-18, experts in the United States have questioned whether antitrust laws, such as the Sherman Act of 1890 and the Clayton Act of 1914, can really do the job that’s required in the modern economy.

The irony is that Canada’s first cartel law, the Combinations in Restraint of Trade Act, predates the Sherman Act by more than a year. So it’s hard not to ask the same question about Canada’s laws.

To be sure, our legislation has evolved, particularly with the major developments that have taken place since 2009. As well, Canadian and U.S. competition laws have significant differences. But the 2009 amendments, which were the most significant changes in more than two decades, went some way to harmonizing our laws with those of the United States.

The trend to harmonization continues on an international scale, as do collaboration efforts with competition authorities worldwide. Indeed, the Competition Bureau’s 2015-2018 Strategic Vision cites collaboration with international and domestic partners “to promote strong competition principles” as one of its five objectives.

The rhetoric aside, the fact remains that, in 1994, the top 100 companies in the U.S. accounted for 33 per cent of GDP. In 2013, the proportion had risen to 46 per cent. One need only mention Microsoft, Amazon, Apple, Google and Facebook to understand that these statistics mirror the rise of the digital economy.

Things aren’t much different here in Canada. Last November, Navdeep Bains, minister of Innovation, Science and Economic Development, told the International Institute of Communications that “the digital economy is the economy.”

Two months later, in January, speakers at a forum sponsored by the antitrust law section of the New York State Bar Association made it clear just how scary that proposition was. As reported in Corporate Counsel, Maurice Stucke, a University of Tennessee College of Law professor and former attorney with the U.S. Justice Department, said that companies like Amazon and Facebook know better than regulators how business combinations will affect the marketplace.

“They can assess trends now well before the government can,” Stucke said. “By controlling the underlying [data] platform, they can see what users are downloading, what are sort of the nascent threats and they can find a way to either acquire that or find a way to marginalize it [serious competition]. … They can find out what products are hot, and they can displace competitors with their own products. They can accurately predict what a nascent competitive threat is.”

In my view, if the day when these companies need to be dismantled isn’t here, it ought to arrive soon.  

But Timothy Wu, a professor at Columbia University Law School and panellist at the New York forum, noted that the last time the U.S. government broke up a dominant company was in 1984 when it targeted AT&T. The breakup found its origins in an antitrust action commenced by the Justice Department some 10 years earlier.

“Wu said it was no accident that the breakup of AT&T was followed by the dramatic emergence of the telecom sector as the most vibrant segment of the economy, including the Internet economy and ‘entire related submarkets that didn’t exist before because of the removal of AT&T,’ ” Corporate Counsel reported.

As mentioned earlier, the digital economy is currently a “key priority” for the Canada’s Competition Commissioner John Pecman and the bureau. To that end, the bureau, in its 2017-18 Annual Plan, proposes to “pursue high-impact enforcement cases against deceptive marketing practices.” It’s done well in this area, most significantly when it got Apple and three of Canada’s four major book publishers to sign a consent agreement that prohibited the practice of preventing competing retailers from selling e-books at a discount to Apple’s minimum price.

But is that drastic enough? The facts that gave rise to the Apple agreement demonstrated none of the unique problems that give rise to the issues militating against fair competition in the digital economy. If you ask me, banning controversial sales tactics by e-behemoths is merely sticking one’s finger in the dyke: the sea lives on, unchanged. Mammoth fines, including the European Commission’s recent 2.42 billion euro levy on Google, don’t seem to have been much of a deterrent to date.

Where the emphasis should be is on merger review, both pre-merger and post merger. Jason Furman, former chairman of the Council of Economic Advisers, told the New York forum that regulators’ emphasis in considering mergers has to move from price advantages benefitting consumers to longer term considerations including innovation, workers’ wages and future growth.

And if Stucke is correct, and companies like Amazon know more than the regulators because of their tremendous in-house databases, post-merger review becomes even more important.

It’s not that Canada is in any position to order the breakup of the offshore giants that dominate the global economy. It’s just that the historical hallmarks of competition policy, most notably price advantages to consumers, need to give way to the realities of a modern, globalized economy populated by broader considerations than those that gave rise to our competition laws. And they need to do so not only at the stratospheric level that the Googles and Amazons of this world occupy, but on the ground as well.

Rather than merely remedying what may be outdated evils, then, Canada’s competition policies should reflect the modern world. There’s nothing wrong with “high-impact enforcement,” but these days, it’s just not enough.

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