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Calibrating Competition Policy for the Digital Age
by Daniel Schwanen

Series:Commentary No. 636
ISBN 9781989483961
Publication year: 2023

Cdn: $12.00; US: $12.00
Language: English
26 pages
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New rules for Canada’s Competition Act should cast a wide net over all significant players involved in the digital provision of services to Canadians, according to a new report from the C.D. Howe Institute.

In Calibrating Competition Policy for the Digital Age, author and C.D. Howe Institute Vice President, Research, Daniel Schwanen reviews the challenges emerging business models can pose to our ability to ensure continued vigorous competition in Canada, and what that might mean for the current review of Canada’s Competition Act.

“A key goal of the reforms should be to deter anti-competitive practices by firms whose business models rely on gathering and leveraging large troves of data through digital technologies when those practices threaten competition, innovation or harm Canadian consumers,” explains Schwanen.

Achieving this goal will require Canada’s competition authorities to walk a fine line, says the author.

“While the focus of much of the debate has been on a few so-called ‘Big Tech’ companies, in reality each of these firms belongs to a unique competitive landscape, despite their common data and technology focus,” he says. “The network economies that stem from these can be the source of market power that can be misused and can discourage competition, but have also been the source of real benefits for Canadian users of their services. Whether competition authorities should address the former, perhaps at the expense of the latter, is an empirical matter that should be decided on a case by case basis.”

Besides, in many cases, new competitors or forms of competition are emerging, making a “winner-take-all” outcome that has spurred calls for an especially restrictive competition regime on these few large companies only, less than a foregone conclusion. Such a regime, soon to be in place in the EU, would risk depriving Canadians from the tangible benefits of the innovations and network economies that a growing number of technology adopters, emerging technologies and business models can offer them.

Instead, he says competition policy must be rooted in a vision of how to promote and distribute the benefits of innovation. Notably, Schwanen suggests adopting new rules and tools that are generally applicable across all firms and sectors would allow the Competition Bureau to gain more information about and quickly pivot its attention toward emerging issues.

Specifically, he says that basic elements of this approach should include:
  • Rewarding pro-competitive behaviour with the Competition Bureau instituting an objective way of identifying companies that should, from time to time, be targeted for special attention. Companies that have consistently run afoul of rules in a manner that harm competition or consumers, would be in this “penalty box,” whereas others would be allowed to experiment with innovations, or adjust their practices depending on market conditions, without worrying that their conduct will be singled out among their competitors;
  • Improving real-time monitoring of markets with new tools, possibly including AI and bots, to gauge market conditions within large online networks, platforms or marketplaces, such as being able to detect the possible causes and the impacts of price or quality changes online;
  • Enhancing the role of private litigation by providing more incentives for private parties to seek redress in court for anti-competitive behaviour that they can show has hurt both their business and competition itself;
  • Improving assessments of the state of competition pre-merger, with competition authorities responding to concerns about potential mergers by using, for example, available measures that can show whether a market is nearing a “tipping point” at which one company comes to dominate the market;
  • And approaching competition as part of a collaborative effort between relevant authorities – with the new federal AI and Data Commissioner playing a central role to ensure coherence of approaches between, for example, privacy and competition rules where they intersect or fostering innovative data governance regimes, leaving the door as open as possible to beneficial data- and technology-based innovation.
Daniel Schwanen is Vice President, Research, at the C.D. Howe Institute.
Calibrating Competition Policy for the Digital Age
Cdn: $12.00; US: $12.00
C.D. Howe Institute / Institut C.D. Howe BookID: 129879 Added: 2023.2.4