OTTAWA — Canada’s Competition Bureau is setting up a new digital division as regulators around the world grapple with the effects of algorithms and data on markets and consumer behaviour.

A major cash injection from the federal government will help fund the dedicated unit and other agency priorities. “The digital economy is incredibly fast-moving [and] dynamic,” said competition commissioner Matthew Boswell. “We’re staying as current as we can.”

Though policy experts have long called for the federal government to give the Competition Bureau more dedicated resources to investigate and punish anti-competitive behaviour, its finances have flatlined for years. In April’s budget, the Liberals allotted the agency $96 million in additional funding over five years and $27.5 million annually thereafter. The bureau spent $52.4 million in the 2019–20 fiscal year and had 382 full-time employees, according to its most recent annual report.

The bureau will use some of the fresh funding for a new Digital Enforcement and Intelligence Branch, led by Leila Wright, previously the deputy commissioner for competition promotion and advocacy.

The new unit will improve the bureau’s “understanding of how things are actually working in the digital economy,” Boswell said in an interview with The Logic, and ensure it’s spotting potential competition issues that may be harder to identify than in the brick-and-mortar business world.

Some of the agency’s existing market-intelligence staff will move over to the new branch to identify non-notifiable mergers that it may want to review, and to counter efforts to create cartels to fix prices or allocate share in markets. The agency said it’s too early to share specific staffing numbers.

Currently, companies must inform the bureau before closing deals in which the acquired firm’s Canadian assets or sales are over $93 million, or those of the combined business top $400 million. But tech transactions that fall under those thresholds could still involve large amounts of intangible property like data and IP, which are harder to value but could still give buyers a commanding position in a digital market.

The bureau is already “scanning the digital world [and] social media world” as part of its efforts to stop collusion, Boswell said. “We’ve been able to stop some proposed cartels in their tracks through our work and that type of intelligence.” The agency declined to provide any details of such cases, noting that it conducts investigations privately. It has also established digital screens to identify potential bid-rigging in procurement contracts using government data.

In speaking with The Logic, Boswell repeated calls for a review of the Competition Act, and for policymakers to consider competition policies as part of their economic recovery plans, citing modernizing actions in other parts of the world. Regulators in other countries have established similar tech-focused divisions. In November 2020, the U.K. government announced plans for a dedicated digital-markets unit under its competition authority, with a specific remit to regulate large ad-funded online platforms.

The new funding reflects the federal government’s focus on ensuring “a competitive marketplace that Canadians can trust,” said John Power, a spokesperson for Innovation Minister François-Philippe Champagne.

The digital branch builds on earlier efforts to equip the bureau to act in digital markets. In July 2019—shortly after Boswell was appointed commissioner permanently—it hired George McDonald from IBM as its first chief digital enforcement officer. He spearheaded the agency’s adoption of new technologies including AI and analytics tools, according to his LinkedIn profile, before departing for consulting giant EY in August 2021. Boswell told The Logic that McDonald had been part of a public-private job-exchange program that ended, praising the “great strides in our digital detection and enforcement work” during his tenure.

The bureau plans to bring in more technical expertise, including data scientists and engineers, who will help it figure out “to the extent we’re able to view and understand them, how algorithms are working in [the] economy, including on platforms [and] how that can impact competition,” Boswell said.

It’s also going to set up a new unit within the branch to track the outcomes of its enforcement work. If the bureau thinks a proposed merger or a company’s business practices are anti-competitive, it might seek a Competition Tribunal order or negotiate a consent agreement that could, for example, impose a code of conduct on the firm or require it to divest assets. It will also try to understand “whether the remedies that we’ve come up with, in the fast-moving digital economy, are working [and] whether we should use them on future cases,” Boswell said.

Policy experts have questioned the effectiveness of those measures, particularly in digital cases. In May 2020, the bureau announced a 10-year consent agreement with Facebook over third-party developers’ access to user data, fining the social media giant $9 million and requiring its senior management to ensure its corporate-compliance program met the bureau’s standards; the company disputed the commissioner’s conclusions in the case.

In an interview with The Logic, Jennifer Quaid, vice-dean of research in the civil-law section at the University of Ottawa, pointed out that the U.S. Federal Trade Commission settled with Facebook over some of the same practices in August 2012, before imposing a US$5-billion fine and a 20-year order for non-compliance in July 2019. By contrast, “there’s very little asked of Facebook in [the Competition Bureau’s] agreement,” she said, noting “there’s no obligation to make a compliance program that is in any way connected to Canada.” The country is effectively piggybacking on U.S. enforcement, she said.

According to Quaid, Canada’s “nervous” competition-enforcement culture, the longtime under-resourcing of the bureau, and its practice of using outside lawyers as part of enforcement actions mean it’s struggled to develop internal and institutional expertise. “I don’t think we’re starting in the same position as the Europeans and the Americans to even develop the tools for the digital economy,” she said.

Boswell said the bureau has set up a program, called the “innovation garage” to test ideas for enforcement in tech-influenced markets. It also plans to establish a small behavioural-economics unit within the new branch. Governments have typically tasked such teams—inspired by the U.K.’s “nudge” unit, set up in 2010—with providing insights to inform service delivery and policy. The bureau’s new unit will help it “to better understand how firms may be influencing consumer behavior in the market through various digital tools,” said Boswell.