Aaron, could you please tell us a bit about your background and how you became interested in competition law and digital-competition regulation?
I’m a lawyer by profession, but have taken a somewhat unconventional career path—I started as a litigator in a small general practice in my hometown outside Toronto, moved on to corporate law with one the world’s biggest law firms in London, Hong Kong, and Abu Dhabi, and then came back to Canada, where I moved through roles in polling and market research, lobbying, and tax advocacy. For the last three years, I’ve run the Domestic Policy Program at the Macdonald-Laurier Institute, an Ottawa-based think tank. Competition law—and especially the emergence of dominant digital players—has been one of my biggest files, primarily because it has become so politically salient in recent years.
Could you give us some context on the current debate around competition in Canada?
Canadians have long griped about high prices and poor service in certain sectors, particularly airlines and telecoms. But in recent years, just as in most other countries, cost-of-living concerns exploded due to the spike in inflation since the pandemic. Higher prices across the board have put a lot of pressure on governments to look at any potential underlying cause and that, of course, includes a lack of competition and the causes thereof.
Since the pandemic, the government’s efforts on competition have focused mainly on three sectors in particular—grocery retailers, “Big Tech,” and telecoms —and their actions have been a combination of political grandstanding (hauling grocery-store CEOs before the committee for a dressing down) and vilification (attacking Big Tech essentially for being big). At the same time, there’s been almost no attention paid to the single-biggest barrier to competition in many sectors, which are legal limitations on foreign ownership.
How do those limitations work, and what is the government’s justification for them? Can you give us an example of how limits on foreign ownership stifle competition?
Well, to take telecoms as an example, the law—specifically the Telecommunications Act—requires that any entity that has greater than a 10% market share must be Canadian-owned, in this case, defined as 80% of both voting shares and the board being Canadian. For airlines, Canadian ownership must be at least 51%. Recall, again, these are two of the sectors where there are regular complaints about high prices, poor service, and no choice for consumers. There are also restrictions in banking and insurance. We also have a cartel for dairy products, which is a whole other conversation!
The rationale for these is usually on national interest or security grounds, out of a claimed fear that foreign—especially American—behemoths will take over the entire sector. There might be arguments for that in certain sectors, such as defence, and perhaps certain natural resources. But for a lot of sectors, incumbent players tend to love these restrictions, as they shield them from global competition while also allowing them to wrap themselves in the flag. They are happy to conflate their own interest with the national interest whenever they can!
So what has Parliament done to address the alleged competition problems you mentioned?
Bill C-56, which became law last fall, brought about two major changes. First, it repealed S. 96 of the act, which was an exception to merger law known as the efficiencies defence. Basically, this provision meant that the anticompetitive effects of a merger could be weighed against cost savings. It was an explicit acknowledgment that there are tradeoffs involved in competition. So now, this has been removed as an explicit exception, although arguably such efficiencies can still be considered as “other factors” under S. 93 of the act.
The other big change was to the conditions required to prove abuse of dominance, by revising the applicable test. Before C-56, abuse of dominance could be proven only by establishing three elements: dominance in a line of business; the existence of an anticompetitive act (defined as “any act intended to have a predatory, exclusionary or disciplinary negative effect on a competitor, or to have an adverse effect on competition”); and evidence these actions negatively affected competition. C-56 changed this so that the test now requires demonstrating only that a firm is dominant and the existence of either an anticompetitive act or effect. In my view that creates a lot of uncertainty. If the previous version of the test was too complex, this one is an overcorrection and is too simplistic. Using criminal law as an analogy, this is akin to lowering the burden of proof from finding both actus reus (guilty act) and mens rea (guilty mind, or intent) to just either of the two on its own.
Forthcoming, we now have Bill C-59, which in its recently amended form is even more concerning. It massively expands the private right of action, without any of the kinds of corollary guardrails we see for things like class-action proceedings, so it could be a litigation bonanza. But even worse, C-59 would incorporate structural presumptions into Canadian competition law. This is a very bad idea, and I think it’s essentially evidence-free populism run amok.
First of all, the very premise is faulty, because concentration measures alone—as opposed to market power—are a poor proxy for the level of competition that prevails in a given market. I understand this can seem counterintuitive to a lot of people in the abstract, but in practice, it makes more sense: say you have one competitor, in particular, offering lower prices, higher quality, or newer cutting-edge products, so they end up breaking from the pack. They gain customers, and their market share rises. So this higher concentration is actually signaling more, rather than less, competition!
Then there’s the fact that the entire push to have structural presumptions codified in law seems premised on a misunderstanding of how structural presumptions work in the United States. They aren’t codified in the U.S., or any other advanced economy (except Germany, where the threshold is higher, at 40% instead of 30%). What the U.S. has is structural presumptions in enforcement guidelines, not in legislation. That allows courts more leeway to develop case law based on specific fact scenarios. This is a big difference. Codifying structural presumptions could lead to a lot of blocked mergers that should be permitted because they’d actually benefit consumers. It will also chill innovation, since some companies will likely view selling as an exit strategy. The whole thing seems like a power grab by the Competition Bureau, when it should instead be more focused on building better cases against anticompetitive mergers using the tools it already has.
Are these two bills antitrust bills, technically speaking?
Neither of these bills was a standalone antitrust bill. C-56 was paired with some tax changes. C-59 is “must-pass legislation” implementing a whole suite of measures from the government’s fall economic statement—sort of a half-year mini-budget—and so, the antitrust provisions haven’t gotten much scrutiny at all because there are so many different measures in the bill. So there’s a transparency and process issue here as well. These are major changes to competition law. We should at least be having a pretty robust discussion about them, but we aren’t.
Do you think these bills are likely to pass?
C-56 has already been passed into law. C-59 will also pass before the end of June, but it remains to be seen if some of the changes might be amended. We also have an election next year, and there’s a high chance we’ll get a change in government. That said, none of the major parties have been opposing these changes, so it’s not clear what difference that will make for competition policy.
In your opinion, what are the possible effects of this new approach? How will it affect innovation, startups, and Canada’s competitiveness?
I think we may inadvertently end up with something very bad here, very counterproductive. The government insists it wants a thriving ecosystem of startups, and to attract entrepreneurs to come here. But the disincentives are considerable. If you’re a prospective founder who is interested in maybe selling out someday, Canada is looking like a bleaker and bleaker place, because most of the players in a position to buy you out may be prohibited from doing so now, due to structural presumptions—or the limitations on foreign ownership.
Indeed, it’s just bizarre to me that no one wants to touch the foreign-ownership restrictions, which are the single biggest barrier to competition in some of our most oligopolistic sectors. This should be front and center!
Could you delve a bit deeper into the politics behind Bills C-56 and C-59? Who’s pushing for what?
So the governing center-left—or just left these days, if you ask a lot of people—Liberals have an agreement with a smaller left party, the NDP [New Democratic Party], to keep the Liberals in power. They get cagey when people call it a coalition and insist it isn’t one, but for practical purposes, it is. Beating up on big business has always been catnip for the NDP and, more recently, also for the Liberals, so they’ve been grandstanding a lot.
At the same time, the Conservatives—like many other right-leaning parties worldwide—have aggressively signaled their combativeness towards big business.
So that doesn’t really leave anyone in Parliament prepared to stand up and say “okay I know it’s cool to beat up on the big guys, but what if beating them up too hard is actually bad for consumers”? I’m not losing sleep over tech giants making less money, but I do worry about consumers being left worse off due to unintended consequences in this populist rush to “get” the big guys.
As for the lack of talk around foreign ownership, I assume that’s because, like a lot of politicians, Canadian ones want to have it both ways. They want to complain about the lack of competition, while refusing to allow it to come from outside our borders. In a smaller country like Canada, that’s a big problem, because we have limited capital. We need foreign capital if we want more robust competition!
You mentioned that “the whole thing seems like a power grab by the Competition Bureau.” What is the role of the Canadian Competition Bureau? Has it taken a stance?
First, some context. The bureau is an agency tasked with investigating and enforcing competition law. There is a separate Competition Tribunal that has a judicial function. The bureau is led by an individual who, I would suggest, is generally aligned with Lina Khan.
The bureau hasn’t been shy about advocating a particular point of view. In fact, I would argue it’s been so outspoken that it almost sounds like a third-party advocacy group, as opposed to a government agency. I question whether this is wise. It exposes the bureau to the charge of trying to empire-build: All the changes it’s pushing for mean more power for the bureau. That shouldn’t be what dictates our competition policy.
We’ve noticed a similar trend with other agencies, like the Federal Trade Commission in the United States or the European Commission in the EU.
On the one hand, it’s understandable that the people running these agencies would have a point of view. Perhaps they view sharing it as necessary, are just genuinely concerned about economic changes that are causing great disruption, and want to make sure they have the best tools to deal with the new reality. I’m just not sure that public advocacy by agencies is helpful, in terms of maintaining public trust. It’s no secret that we have a significant trust crisis in most institutions across the Western world, and departments and agencies are supposed to be seen as strictly impartial, implementing and executing the direction taken by democratically elected governments. If they’re seen as taking strong positions and essentially lobbying governments to support those positions, I think it makes it much harder for the public to see them as neutral, technocratic bodies.
You mentioned that the Competition Bureau has become more activist and that Canada’s approach to competition law has taken a populist turn. When did things start changing in Canada?
Only in the last few years—I would say at the same time as the rise in inflation. Once you had Lina Khan and her fellow travelers rise to prominence in the United States, you had a similar phenomenon here. As I said earlier, people have had gripes about airlines and telecoms for years. Canadians love to complain about high prices and poor customer service in those two sectors. And yet none of these changes are really impacting those sectors. The target is really Big Tech—which I also think is misguided, because the government keeps picking dumb fights with Big Tech and losing.
If Canadians complain about airlines and telecoms, why isn’t the bureau or the government going after them instead of, or in addition to, Big Tech? Or is it?
The bureau has gone after telecoms. There was a fair bit of hand-wringing over last year’s merger between Rogers, the largest telecoms player, and Shaw, a small player. Telecoms in Canada is dominated by three big players—Rogers, Bell, and Telus—that together have around 90% market share. The bureau tried to block the merger but the Competition Tribunal let it proceed. It even ordered the bureau to pay Rogers $13 million in costs, arguing that the bureau’s attempt to block the deal was unreasonable.
But the point is that this entire squabble would be pretty moot if the government just loosened restrictions on foreign ownership! The government has done a lot of grandstanding in these sectors, “demanding” lower cell-phone bills and passing a “passengers bill of rights” for air travel. But, of course, these things have nowhere near the impact that real competition would. Dropping or loosening foreign-ownership restrictions would almost certainly lead to American and European entrants into the market, causing a major shakeup. Of course, the incumbent oligopolies don’t like this prospect, and they employ a lot of Canadians and have a lot of lobbying clout. So it’s not surprising the government doesn’t want to create “instability” for them. We end up with lots of hand waving and tough talk on competition—to signal to the public that they’re on top of it!—without much substantive action.
You noted that the government keeps fighting Big Tech. Can you tell us about some of the other notable internet regulations the government has pursued and their effects?
Sometimes you get the sense that the government of Canada is determined to try to regulate the internet!
Bill C-11, the Online Streaming Act, became law in 2023. This bill basically redefined streaming services like Netflix and YouTube as “broadcasters.” As a result they are subject to the obligations imposed on broadcasters, like producing and promoting Canadian content, and they also fall under the purview of the Canadian Radio-Television and Telecommunications Commission (CRTC).
The whole thing was a bit strange, because it wasn’t clear what the problem was they were trying to solve with the bill. Canadians were producing lots of content. And you could easily search any of these platforms for Canadian content if you wanted it. A lot of the enabling regulations haven’t been worked out yet, so it’s still not clear what the final impact of this bill will be.
Next came C-18, the Online News Act. This got a fair bit of international attention. The government tried to get Meta and Google to pay for linking to news. Meta balked and just took news off their platform altogether. Google threatened to, and in the end, a deal was made where Google agreed to support news in Canada to the tune of $100 million, which was what they’d committed to do even before C-18. So the whole exercise was for naught, and the Trudeau government ended up looking ridiculous. Ironically, a lot of media—who were supposed to benefit from this influx of new cash—are worse off, because they lost a lot of the traffic Meta was driving to them for free. It certainly seems like the government was only listening to legacy news outlets and not new digital-first ones.
Now we have Bill C-63, the Online Harms Act, currently pending in Parliament. Parts of this one are unobjectionable, but mostly already covered by existing laws, such as protecting children from sexual exploitation online. But other parts are arguably pretty draconian. Bill C-63 proposes a pretty ambiguous line between speech that expresses “dislike,” which would remain legal, and “detestation,” which would be illegal hate speech. As if this wasn’t bad enough, they want to create a new body called a “Digital Safety Commissioner”—presumably because they wanted it to sound as Orwellian as possible. I can’t claim their motive with this bill is to squelch free speech on purpose, but they sure do seem pretty cavalier about the possibility that they might overreach, even accidentally—which, given their recent track record, you would have thought they’d have learned some lessons by now.
What about AI regulation?
I’m not convinced this government knows what they’re doing when it comes to AI. In the public mind, AI means ChatGPT and deepfake videos. They announced some funding for AI in the last budget, but within months, even those generally supportive suggested the targeting of the funding was out of date. Government is never speedy. When it comes to AI, by the time they pass a law, it’s going to be out of date. I suspect the government will ultimately just choose between aligning with either the American or the European regulatory regime. That said, with their current bill, C-27, the Artificial Intelligence and Data Act, they seem to be erring too much on the side of caution and, in so doing, they risk undermining Canada’s competitiveness in attracting new AI startups.
Is Canada planning digital-competition ex-ante regulation along the lines of the EU’s Digital Markets Act?
There is nothing as comprehensive as the DMA although, given how well their other attempts at internet regulation have gone, we should be grateful!
Do you think Canada should follow in the EU’s footsteps and pass such a regulation?
No. I think the DMA is thinly veiled anti-Americanism. I think it’s bad for consumers. And as Canada has discovered with Meta pulling out news for Canadian users, we’re a small market: if we make doing business here too much of a pain, some of the big players will just leave. The EU is a big market, so companies will grumble and comply—consumers may be worse off but the companies won’t leave. Canada doesn’t have that luxury.