OTTAWA — Canada must overhaul its competition law to address the ways companies are using hoards of data to ward off challengers and goose profits, according to a new study commissioned by the federal industry department.

The report is being released as the federal government starts to consider changes to competition rules, and amid debate on whether the country should follow other major economies updating their antitrust regimes for the digital age.

On Monday, Innovation Minister François-Philippe Champagne said he would “carefully evaluate potential ways to improve [the] operation” of the Competition Act, including “adapting the law to today’s digital reality to better tackle emerging forms of harmful behaviour in the digital economy.”

Updating competition policy to reflect data-driven markets and other emerging issues is “a conversation we needed to have ages ago,” said Robin Shaban, co-founder and senior economist of Ottawa-based Vivic Research, which will publish the paper on Wednesday. 

ISED is “currently reviewing” the report’s conclusions, which “do not necessarily reflect any position” of the government, said spokesperson Hans Parmar. Ottawa “believes that competition is a critical driver of dynamic and fair markets.”  

The study focuses on how companies’ collection and use of data impacts competition in markets. “Data can lead to dominance,” Shaban said in an interview with The Logic. Traditionally, a new challenger might try to undercut a large, established firm on price or provide a better product. But a startup is unlikely to have access to the same amount or quality of data that an incumbent has accumulated, and “may never be able to replicate [it],” said Shaban. “It’s a type of power I don’t think we’ve ever seen before in our economy.”

Data allows companies to turbocharge existing anti-competitive tactics and enables new ones, according to the report. Take self-preferencing, where retailers or platforms prioritize their own goods or services over those of third-party vendors that are also sold in the same place; grocery chains may do this with private-label brands, for example. That complements copycatting, in which a platform uses the data and insights it gathers from independent merchants’ transactions to decide which items to replicate and offer itself.

In April 2020, The Wall Street Journal reported Amazon employees had done this for products like car-trunk organizers. That August, Canada’s Competition Bureau announced it was investigating whether the e-commerce giant was influencing shoppers to buy its products rather than equivalents from other merchants who also sell via the online marketplace.  

“What entitlements do firms have [that] are forced to compete in environments where the platform owner is essentially spying on them?” said co-author Vass Bednar, executive director of McMaster University’s graduate program for public policy in digital society. The paper calls for regulators to study self-preferencing in the Canadian market, and consider banning it, as proposed laws in the U.S. and EU would do. 

The report also highlights the growing role of data in corporate dealmaking. Mergers that consolidate significant information holdings can give the combined firm “a competitive advantage that cannot realistically be challenged,” allowing it to “dominate or monopolize the market in the long run,” it states. Incumbents may also do “killer acquisitions,” buying out emerging competitors before they can pose a major challenge. 

Bednar, Shaban and co-author Ana Qarri, a McGill University law graduate, recommended regulators consider the role of data when examining deals, and in appropriate cases require that the combining firms keep their information separate.  

While the paper cites a number of cases involving Silicon Valley giants, the co-authors emphasized that data-based anti-competitive actions aren’t restricted to such firms, or to digital markets. And “if we focus on Big Tech and ignore the hometown [examples of] these behaviors, we do the country a big disservice,” said Bednar. For example, the study suggests requiring platforms to let third-party providers process payments for purchases made in app stores, and cites Google and Apple—both currently facing related antitrust scrutiny—but also Ottawa-headquartered Shopify. 

Innovation-economy and policy circles have long sought a reevaluation of the company’s antitrust laws, with competition commissioner Matthew Boswell telling The Logic in a December 2021 interview that a formal parliamentary review was “overdue.” Over the past year, Bednar and Shaban have written a series of other reports and op-eds on competition reform that have helped fuel a growing debate. And in October 2021, Sen. Howard Wetston, a former Bay Street lawyer and competition commissioner, launched a consultation on the act, a prelude to the anticipated review. 

Shaban, Bednar and Qarri’s study echoes Boswell’s call for such a “comprehensive review” of the act. But they also said antitrust regulators should collaborate with privacy and labour authorities, and consider how those issues affect competition policy. More broadly, they favour adopting a “per se” approach, in which enforcement agencies have only to prove that a firm’s actions are anti-competitive, not necessarily that it created negative outcomes like higher prices or less innovation.  

That’s a significant recommendation, said Denise Hearn, co-lead of the Access to Markets Initiative at the American Economic Liberties Project. The Toronto-born, Seattle-based policy advocate noted that U.S. policymakers are working to update the country’s antitrust regime to reflect market conditions like record M&A activity as well as the growth of gig work and intangible assets. “There’s a big fight going on now in the U.S., and Canada seems like it doesn’t even want to enter the ring,” she said.  

But others in competition-policy circles say Ottawa need not start from scratch, and should not overreact to digital dynamics. “In a market-driven economy, getting big through the competitive dynamics of collecting data is not bad in and of itself,” said Melanie Aitken, Canada’s competition commissioner from 2009 to 2012 and now co-head of Bennett Jones’s competition, antitrust and foreign-investment practice. “It is bad only if companies misuse that size and data in a way that is an abuse of dominance.” 

Self-preferencing may give consumers new options, while the startups taken over in so-called killer acquisitions might never have existed if investors knew they’d be unable to exit, noted Aitken. She supports reviewing legislation, and giving the bureau the resources it needs, but said the regulator “should only be addressing those ills that lend themselves to a Competition Act fix.”

“I don’t think competition tools are adequate or appropriately crafted to address all manner of things like labour-market [or] privacy issues,” she said. The “hipster antitrust” approach that wants “all ills to be cured by competition policy” ignores that the traditional system produces increased choice, price reductions and innovation, and risks disincentivizing innovation and diminishing productivity, she said. 

Champagne has not offered a timeline for his evaluation of the Competition Act.