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Too much information?

Now that the Competition Bureau can compel the production of information for market studies, there are fears about what the cost will be to businesses forced to hand over massive volumes of data.

Too much information

When Matthew Boswell, Canada's Competition Commissioner, made public his study on competition in the grocery business last year, he had a major complaint. When he had sought data from supermarket chains on their business and pricing practices, he had to ask them to provide the information voluntarily. 

Some of the big retailers balked. "The level of cooperation varied significantly and was not fulsome," the report reads. "In many cases, the Bureau was not able to obtain complete and precise financial data, despite its repeated requests." 

The report indicated that the Bureau couldn't get information on such key data as profit margins on food and non-food products sold by supermarkets or the growth in popularity of private-label products, which are often lower priced but have higher profit margins for retailers. 

Canada has long been a laggard among the world's leading economies when it comes to giving competition authorities subpoena powers requiring businesses to provide data for market studies. The Organisation for Economic Development (OECD) has seen this as a shortcoming in Canada's economic toolbox and a contributor to lacklustre growth. 

In its March 2023 assessment of the Canadian economy, the OECD was blunt. "Lowering internal trade barriers and better competition policy would help improve (economic) performance." In particular, it called for giving the Bureau powers "to require provision of relevant information in the context of conducting studies."

Ori Schwartz, head of the Competition Division at the OECD's Directorate for Financial and Enterprise Affairs, says that allowing competition authorities to make mandatory requests for information is essential, particularly when markets aren't working well. 

"If you provide information voluntarily, there's the risk of you providing what suits your interests and not necessarily providing other information," Schwartz told CBA National.

All this changed with the passage by Parliament in late 2023 of Bill C-56, part of a troika of bills that constitutes the most extensive package of reforms to Canada's competition laws in a generation. (The final part of the package is still before Parliament but is expected to be passed soon.)

Yet these expanded powers have been greeted with concerns from competition experts that the powers could be abused by authorities and impose a heavy burden on business.

Joshua Krane, a partner and competition expert with McMillan LLP in Toronto, says there are a "lot of positives" in the Competition Law reforms, but he's worried about the impact of the market study provision. "The government has not clearly articulated why a market study power is necessary beyond the enforcement powers that the Bureau already has," he told CBA National.

John Pecman, who served as Competition Commissioner from 2013 to 2018, says the Competition Act has long needed "a facelift." Pecman, an economist who now serves as a senior business adviser with Fasken, says the Act "was out of step with other Western economies and their competition laws." But he also worries about the possibility of "over-reach" by authorities and that excessive use of these powers could impose heavy burdens on business.

"Where are the guardrails to stop confirmation bias, fishing expeditions, all the things you see in investigations where you have a closed team?" Pecman says.

According to Pecman, there's history to keep in mind. The now-defunct Restrictive Trade Practices Commission was given extensive research powers in the 1950s, which were used to conduct sometimes expansive inquiries. In the 1980s, the RTPC conducted a multi-year inquiry into competition in the petroleum industry. It spent 200 days hearing evidence from 200 witnesses, producing 50,000 pages of transcripts and a three-volume report.

The outcome was a slew of recommendations, few of which were implemented. There was a "huge cost to business," Pecman says. When the Competition Act was revised in 1986, these investigative powers were eliminated while the Commission was given greater merger control powers, a situation which continued until the passage of C-56.

Krane is also concerned that the industry minister can authorize a specific market study, which could politicize the process. A government faced with consumer concerns over higher food costs can simply order a market study of grocers to deal with that political pressure.

That could require companies to furnish massive volumes of data at a significant cost. Yet because the Bureau has little capacity to evaluate this information, it could end up as a fishing expedition," Krane says. "It will become an information collection exercise that will serve no other purpose than collecting information, so it's effectively a tax on business that serves no real purpose." 

The danger, says Pecman, is that the government may find it a "handy tool" to order a market study anytime there's public outrage about consumer-sensitive products like gasoline or bank fees. 

The political dimension of these changes was evident in an open letter from Industry Minister Fran├žois-Philippe Champagne to Commissioner Boswell in January of 2024, in which he linked public concern with high food prices to the recent changes in the Competition Act. Champagne noted his disappointment over the failure of grocers to fully cooperate with the 2023 study and said he hoped the situation had been rectified.

"The government put in place these new authorities as we believe this will give rise to meaningful enforcement actions as you carry your work forward. Recognizing that you have an independent mandate to execute, I am confident that these new powers will be used to confront abuses in the marketplace, addressing the clear concerns of Canadians."

The OECD's Schwartz says that in most countries, ministers can ask for market studies, but the important thing is that they can't influence the results. That's the job of the competition authorities and Schwartz says his experience tells him they act responsibly. "At the end of the day, competition authorities have a lot of power, and we have to trust them," in the same way we trust other levels of government.          

Schwartz admits these additional powers can be a "blessing but also a curse." Asking for a lot of information also creates the need to analyze it carefully. "The more you ask for, the more work there is for you later down the road. And from my experience, competition authorities are quite mindful of this double-edged sword that they hold."