Competition law reforms should ‘cast a wide net’ over players in data-driven digital economy: report

Canada should “cast a wide net” with Competition Act rules, ensuring they encompass not only Big Tech but all other players in the digital economy, said a new report from the C.D. Howe Institute.

In the report released Feb. 2, author Daniel Schwanen suggests Canada must “walk a fine line” between confronting the anti-competitiveness presented by new data-driven business models and sacrificing benefits from their innovation. Many large companies use consumer data and benefit from network economies, and Schwanen says Canada should not focus its policy only on the biggest four or five in the market.

“We really shouldn't base our entire approach to policy simply based on how we think the four, five, or six Big Tech companies are threatening competition,” he says. “Obviously, in some cases, they do. In some cases, they have. But so have other companies. There are many other large companies that use consumer data that benefit from network economies. There are many other types of two-sided markets.”

If Canada has policies specifically constraining Big Tech rather than encouraging competition across the board, it risks discouraging innovation and its tangible benefits, says Schwanen. Competition policy should be “rooted in a vision of how to promote and distribute the benefits of innovation.”

Schwanen is vice president of research at the C.D. Howe Institute.

The report lays out five elements of an approach, including new rules and tools, that would allow the Competition Bureau to “gain more information about and quickly pivot its attention to emerging issues.

The Bureau should institute an objective method of identifying companies that require special attention, said the report. Companies that consistently flout the rules should be targeted and isolated. In contrast, regulators should reward competitive behaviour by providing the leeway for good actors to “experiment with innovations, or adjust their practices depending on market conditions.”

The report also suggests that authorities use AI and bots to better monitor competition in various markets in real-time.

“I'm an enthusiastic proponent of new tools and new metrics that the Competition Bureau could and should use to assess the real-time state of competition in certain markets,” says Schwanen. “We talk a lot about artificial intelligence. I'm not sure why they wouldn't use artificial intelligence tools to try to figure out what's going on in online market transactions.”

He says that these tools would also help evaluate mergers for anti-competitive impacts, as competition policy is being directed toward scrutinizing mergers between Big Tech and small, innovative competitors.

The report recommends a more significant role for litigation through incentivizing private parties to challenge anti-competitive behaviour in court.

Schwanen notes that Canada’s recent Competition Act amendments included more rights and venues for private litigation. The report details how to incentivize that and how to disincentivize frivolous actions.

The report calls on the Bureau to improve competition assessments pre-merger by responding to concerns about potential mergers by using available measures which indicate whether a particular market is vulnerable to domination by one player.

The report also suggests Ottawa approach competition collaboratively with different authorities and the federal AI and Data Commissioner leading the way.