Canada’s Competition Bureau says that competition between companies in the country has declined, leading businesses to push up prices to increase their profits.
In a newly published report, the agency said it used data covering most economic activity in Canada to use as indicators of competition between 2000 and 2020.
The findings determined that Canada’s “competitive intensity” — which describes how hard businesses need to work to gain an advantage over their rivals — has decreased.
The agency added that there are reasons “to be concerned” about Canada’s current state of competition and broke down the evidence with four key findings.
First, the Competition Bureau noted that the most concentrated industries also saw an increase in concentration.
“Concentration is a common way to measure competition. It tells us about the relative size of firms in an industry,” it stated.
“An industry is highly concentrated when a few large firms earn a large share of revenues compared to smaller firms.”
Secondly, it highlighted that rank stability has risen, meaning that firms already at the top are less likely to be challenged.
Fewer companies have also entered industries, noted the Competition Bureau. When new businesses enter an industry, it challenges existing firms to innovate, charge lower prices, offer better quality products, and tailor their offers to their customers’ demands, stated the report.
Lastly, the lack of competition has pushed profits and markups to increase.
“We found that firms’ profits and markups have both risen overall,” stated the Competition Bureau.
“We also found that these increases were generally greater for firms that were already earning higher profits and markups.”
The report says its findings reaffirm the need to protect and promote competition in the country and highlight the importance of modernizing competition laws.
Lack of competition has been a central issue in Canada’s grocery sector.
Last month, the federal government introduced targeted legislative amendments to the Competition Act with Bill C-56.
The proposed legislation of Bill C-56 has two parts.
First, it seeks to amend the Competition Act to increase and enhance competition, specifically when tackling Canada’s sky-high grocery prices.
The proposed amendments will give more power to the Competition Bureau, allowing it to investigate and enforce action when companies are involved in price fixing or price gouging. It would also work to end anti-competitive mergers that raise prices by removing the efficiencies defence.
Canada’s Industry Minister Francois-Philippe Champagne has recently pushed for Bill C-56 to be passed “as soon as possible” and called on his fellow parliamentarians to “move quickly” to see its impact on price stabilization and competition within Canada’s grocery sector.
Daily Hive has contacted the Competition Bureau for more information about which Canadian industries have seen less competition over the past 20 years.
Follow Channels and Categories